-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C4IQpmabOF0Yu3uE+ckAiJyE8mwsViE6E+vYCYFFt9iUDZPhcKN9Ope25jsJiDUK dxXTXrY8Wk5RQpqGy2zCqQ== 0000950124-98-002332.txt : 19980427 0000950124-98-002332.hdr.sgml : 19980427 ACCESSION NUMBER: 0000950124-98-002332 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980424 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BADGER METER INC CENTRAL INDEX KEY: 0000009092 STANDARD INDUSTRIAL CLASSIFICATION: TOTALIZING FLUID METERS & COUNTING DEVICES [3824] IRS NUMBER: 390143280 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06706 FILM NUMBER: 98600495 BUSINESS ADDRESS: STREET 1: 4545 WEST BROWN DEER ROAD STREET 2: C/O CORPORATE SECRETARY CITY: MILWAUKEE STATE: WI ZIP: 53223-0099 BUSINESS PHONE: 4143715887 FORMER COMPANY: FORMER CONFORMED NAME: BADGER METER MANUFACTURING CO DATE OF NAME CHANGE: 19710729 10-Q 1 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ---------------- Commission File Number 1-6706 ------ BADGER METER, INC. ------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0143280 --------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4545 West Brown Deer Road, Milwaukee, Wisconsin 53223 - ----------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (414) 355-0400 -------------- None ------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 22, 1998 - ----------------------------- ----------------------------- Common Stock, $1.00 par value 2,503,982 Class B Common Stock, $.10 par value 1,125,570 2 BADGER METER, INC. INDEX
Page No. -------- Part I. Financial Information: Item 1 Financial Statements: Consolidated Condensed Balance Sheets - - March 31, 1998 and December 31, 1997 3 Consolidated Condensed Statements of Operations - - Three Months Ended March 31, 1998 and 1997 4 Consolidated Condensed Statements of Cash Flows - - Three Months Ended March 31, 1998 and 1997 5 Notes to Consolidated Condensed Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information: Item 6(a) Exhibits 9 Item 6(b) Reports on Form 8-K 9 Exhibit Index 11
-2- 3 Part I - Financial Information ------------------------------ BADGER METER, INC. Item 1 Financial Statements - ------ -------------------- CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands)
Assets March 31, December 31, ------ 1998 1997 (Unaudited) Current assets: Cash $ 958 $ 1,055 Receivables 18,721 19,193 Inventories: Finished goods 4,386 4,095 Work in process 10,686 10,871 Raw materials and purchased parts 6,465 6,632 ----------- ----------- Total inventories 21,537 21,598 Prepaid expenses 783 693 ----------- ----------- Total current assets 41,999 42,539 Property, plant and equipment, at cost 66,738 64,407 Less accumulated depreciation (41,713) (40,423) ----------- ----------- 25,025 23,984 Intangible assets, at cost less accumulated amortization 617 650 Prepaid pension 6,606 6,751 Deferred income taxes 2,261 2,264 Deferred charges and other assets 5,751 6,109 ----------- ----------- Total assets $ 82,259 $ 82,297 =========== =========== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Short-term debt $ 8,780 $ 11,245 Payables 7,639 7,196 Accrued compensation and employee benefits 4,001 5,339 Other accrued liabilities 3,749 3,630 Income and other taxes 1,896 1,259 ----------- ----------- Total current liabilities 26,065 28,669 Accrued non-pension postretirement benefits 7,630 7,807 Other accrued employee benefits 3,691 3,426 Long-term debt 812 928 Shareholders' equity: Common Stock 3,303 3,240 Class B Common Stock 112 112 Capital in excess of par value 9,832 8,315 Reinvested earnings 34,109 33,057 Less: Employee benefit stock (814) (917) Treasury stock, at cost (2,481) (2,340) ----------- ----------- Total shareholders' equity 44,061 41,467 ----------- ----------- Total liabilities and shareholders' equity $ 82,259 $ 82,297 =========== ===========
See accompanying notes to consolidated condensed financial statements. -3- 4 BADGER METER, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in Thousands Except Share Amounts) (Unaudited)
Three Months Ended March 31, --------- 1998 1997 ---- ---- Net sales $ 33,499 $ 31,702 Operating costs and expenses: Cost of sales 20,056 20,224 Marketing and administrative 8,619 7,447 Research and engineering 2,087 1,851 ----------- ----------- 30,762 29,522 ----------- ----------- Operating earnings 2,737 2,180 Interest expense 144 101 ----------- ----------- Earnings before income taxes 2,593 2,079 Provision for income taxes 996 769 ----------- ----------- Net earnings $ 1,597 $ 1,310 =========== =========== Per share amounts: * Net earnings: Basic $ .44 $ .37 =========== =========== Diluted $ .41 $ .35 =========== =========== Dividends declared - Common Stock $ .15 $ .11 =========== =========== Dividends declared - Class B Common Stock $ .14 $ .10 =========== =========== Weighted-average shares used in computation: Basic 3,613,471 3,557,737 Impact of dilutive stock options 301,208 204,982 ----------- ----------- Diluted 3,914,679 3,762,719 =========== ===========
* Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share does not necessarily equal the total for the year. See accompanying notes to consolidated condensed financial statements. -4- 5 BADGER METER, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Three Months Ended March 31, 1998 1997 ---- ---- Operating activities: Net earnings $ 1,597 $ 1,310 Adjustments to reconcile net earnings to net cash provided by (used for) operations: Depreciation 1,290 960 Amortization 33 57 Noncurrent employee benefits 336 221 Deferred income taxes 3 5 Changes in: Receivables 472 (4,353) Inventory 61 (640) Current liabilities other than short-term debt (139) 481 Prepaid expenses (90) (173) ----------- ---------- Total adjustments 1,966 (3,442) ----------- ---------- Net cash provided by (used for) operations 3,563 (2,132) ----------- ---------- Investing activities: Property, plant and equipment (2,331) (1,138) Other - net 358 (55) ----------- ---------- Net cash provided by (used for) investing activities (1,973) (1,193) ----------- ---------- Financing activities: Bank borrowings (repayments) (2,581) 3354 Dividends (545) (380) Stock options and ESSOP 1,580 352 Treasury stock transactions (141) (587) ----------- ---------- Net cash provided by (used for) financing activities (1,687) 2,739 ----------- ----------- Increase (decrease) in cash (97) (586) Beginning of year 1,055 1,123 ----------- ----------- End of period $ 958 $ 537 =========== ============ Supplemental disclosures of cash flow information: Cash paid (refunded) during the period for: Income taxes $ 699 $ 61 =========== ============ Interest $ 168 $ 96 =========== ============
See accompanying notes to consolidated condensed financial statements. -5- 6 BADGER METER, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated condensed financial position at March 31, 1998 and the results of operations for the three-month periods ended March 31, 1998 and 1997 and the cash flows for the three-month periods ended March 31, 1998 and 1997. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the 1997 data to conform with the 1998 presentation. 2. The consolidated condensed balance sheet at December 31, 1997, was derived from amounts included in the Annual Report to Shareholders which was incorporated by reference in the company's annual report on Form 10-K for the year ended December 31, 1997. Refer to the footnotes in those reports for a description of the accounting policies, which have been continued without change, and additional details of the company's financial condition. The details in those notes have not changed except as a result of normal transactions in the interim. 3. During the three months ended March 31, 1998, the company repurchased 3,822 shares of common stock for an aggregate purchase price of $141,000. 4. In February of 1998, the company entered into an interest rate swap agreement which fixes the interest rate on $5 million of commercial paper at 5.7% for three years. 5. The company continues to address the year 2000 software issues as discussed in the company's Annual Report to Shareholders for the year ended December 31, 1997. All upgrades are expected to be completed by the end of 1998 and management does not expect to incur any significant costs in excess of normal software upgrade costs. -6- 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition Sales increased 5.5% in the first quarter of 1998 compared to the fourth quarter of 1997. However, receivables decreased 2.5%, or $472,000, from the December 31, 1997 balance due to improved collections and lower international sales, which tend to have extended payment terms. Inventories remained stable during the quarter, as increased production requirements were balanced through efficient inventory management. Prepaid expenses increased $90,000 during the quarter due to annual insurance payments and intangible assets decreased $33,000 due to regular patent amortization. Property, plant and equipment (at cost) increased $2,331,000 due to regular payments in connection with the Milwaukee facility expansion plus other equipment purchases. Prepaid pension decreased $145,000 due to the recording of normal pension expense with no funding payments required during the quarter due to the overfunded status of the plan. Deferred charges and other assets decreased 6%, or $358,000, due to a partial return of funds deposited in escrow in connection with the acquisition of a fire service product line. The acquisition of a fire service product line will be completed in the second quarter of 1998, at which time the remaining amount in deferred charges will be allocated to the inventory, equipment and intangibles accounts. Payables increased 6%, or $443,000, due to increases in general trade payables since December 31, 1997. Accrued compensation and employee benefits decreased 25%, or $1,338,000, due primarily to payments of 1997 incentive compensation during the first quarter of 1998. Other accrued liabilities increased 3%, or $119,000, due primarily to additional reserves for after-sale costs. Income and other taxes payable increased $637,000 due to tax accruals related to increased profits and timing of estimated tax payments. Accrued non-pension postretirement benefits decreased $177,000 since December 31, 1997 and other accrued employee benefits increased $265,000 due to timing of benefit payments. Long-term debt decreased $116,000 due primarily to a $100,000 regular payment made on the debt related to the Employee Savings and Stock Ownership Plan ("the ESSOP"). Short-term debt decreased $2,465,000 since December 31, 1997. Cash generated by net earnings and proceeds from the sale of stock to the ESSOP was sufficient to fund working capital needs, fixed asset additions, increased dividend requirements and debt reductions during the first quarter. As of March 31, 1998, the company had approximately $38,000,000 of credit lines with domestic and foreign banks of which $8,780,000 was in use. This compares to $5,943,000 in use at March 31, 1997 and $11,245,000 at December 31, 1997. The company believes that the present lines of credit are adequate to meet operating requirements. Results of Operations Net sales for the first quarter of 1998 increased 5.7%, or $1,797,000, over sales for the first quarter of 1997. Higher sales of valves and lubrication meters contributed to the increase, as well as increased sales of residential water meters. Strong domestic water meter sales resulted from shipments of residential water meters to the City of Philadelphia for integration with the Itron automated meter reading system. These and other domestic sales offset a decrease in international water meter sales for the quarter. Gross profit margins increased from 36.2% in first quarter 1997 to 40.1% in first quarter 1998 due to favorable pricing and greater plant utilization resulting from increased manufacturing efficiencies. Marketing and administrative costs increased 15.7% for the first quarter of 1998 as compared to the first quarter of 1997 due to general wage and cost increases, plus additional staffing to support increased sales. Research and engineering expenses increased 12.7% for the first quarter of 1998 compared to the same quarter of 1997 due to increased staffing and other costs associated with continued product development initiatives. Interest expense increased between the periods due to higher debt balances. -7- 8 The effective tax rate increased from 37% for the first quarter of 1997 to 38.4% for the first quarter of 1998 due to reduced tax benefits on lower international sales and other changes in tax credit estimates. Earnings for the first quarter of 1998 were $1,597,000, an increase of 21.9% over first quarter 1997 earnings of $1,310,000, due primarily to increased sales and improved margins. The percentage increases in earnings per share were lower due to the impact of dilutive options and increased shares outstanding. Other Matters The company is subject to contingencies relative to environmental laws and regulations. Currently, the company is in the process of addressing litigation alleging a violation of California's environmental regulation Proposition 65. The company does not believe the ultimate resolution of these claims will have a material adverse effect on the company's financial position or results of operations. No other risks or uncertainties were identified that could have a material impact on operations and no long-lived assets have become permanently impaired in value. -8- 9 Part II - Other Information --------------------------- Item 6 Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibits: (27.0) Financial Data Schedule (b) Reports on Form 8-K: There were no reports on Form 8-K filed for the three months ended March 31, 1998. -9- 10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BADGER METER, INC. Dated: April 22, 1998 By /S/ Richard A. Meeusen -------------------------------------- Richard A. Meeusen Vice President - Finance and Treasurer Chief Financial Officer By /S/ Beverly L.P. Smiley -------------------------------------- Beverly L.P. Smiley Corporate Controller -10- 11 EXHIBIT INDEX ------------- Page Number (27.0) Financial Data Schedule -11- EX-27 2 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH 10-Q. 1,000 3-MOS DEC-31-1998 MAR-31-1998 958 0 18,721 0 21,537 41,999 66,738 (41,713) 82,259 26,065 0 0 0 934 43,127 82,259 33,499 33,499 20,056 30,762 0 0 144 2,593 996 1,597 0 0 0 1,597 .44 .41
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