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NewsBot Date: October 17, 2006 05:46:00 AM
BMI News Badger Meter Reports Third Quarter Results; Announces Decision to Close Its French Subsidiary
MILWAUKEE--(BUSINESS WIRE)--Badger Meter, Inc. (AMEX:BMI) today announced results for the third
quarter and nine months ended September 30, 2006. The company also
announced plans to close its subsidiary in Nancy, France. The shutdown
is expected to result in total after-tax charges of approximately $6 to
$8 million, of which $3.7 million was recognized in the third quarter.
Third Quarter Highlights
Net sales were a record $62,980,000 for the third quarter of 2006, a
16.2% increase from sales of $54,194,000 for the same period in 2005.
The company reported a net loss of $519,000 for the third quarter of
2006, compared to net earnings of $3,811,000 for the comparable prior
period. This decrease was due principally to shutdown charges related
to the French subsidiary and the continuing impact of high metal costs.
The net loss per share was $0.04 for the third quarter of 2006,
compared to net earnings of $0.27 per diluted share for the third
quarter of 2005.
Per share amounts have been restated to reflect a 2-for-1 stock split
on June 15, 2006 in the form of a 100% stock dividend.
Nine Months Highlights
Net sales for the first nine months of 2006 were $186,421,000, a 12.3%
percent increase from sales of $166,058,000 for the same period in
2005.
Net earnings were $7,761,000 for the first three quarters of 2006, a
32.7% decrease from earnings of $11,526,000 for the comparable prior
period. This decrease was principally due to shutdown charges related
to the French subsidiary and the continuing impact of high metal costs.
Diluted earnings per share were $0.55 for the first nine months of
2006, a 32.9% decrease from earnings of $0.82 per diluted share for
the first nine months of 2005.
Operations Review
“Revenues set a new record for the third
quarter. We achieved double-digit increases in sales of automatic meter
reading (AMR) products, with continuing strong sales of our Orion®
proprietary mobile radio frequency AMR system driving this performance.
Sales of commercial products for the utility market also increased at
double-digit rates and sales of industrial products increased for the
quarter. The industrial product sales were boosted by the positive
customer response to the introduction of our new line of Magnetoflow®
meters,” said Richard A. Meeusen, chairman,
president and chief executive officer of Badger Meter.
“Excluding shutdown charges of $3,742,000 or
$0.26 per diluted share related to the French operations, we earned
$3,223,000 or $0.22 per diluted share in the third quarter. Our margins
continue to be negatively impacted by the cost of metals. We are
beginning to see the impact of price increases we implemented in August,
although it will take several quarters to affect the broader customer
base,” said Meeusen.
Shutdown of French Operation
The company also announced that it finalized its decision on October 16,
2006 to shut down its subsidiary in Nancy, France. Badger Meter acquired
the French subsidiary, MecaPlus Equipements, in June 2002. At the time,
MecaPlus was one of Badger Meter’s largest
customers for automotive fluid meters. MecaPlus purchases lubrication
meters and assembles them with other equipment such as oil tanks, hoses,
reels and other components, into lubrication systems for use in
measuring and dispensing automotive fluids such as oil, grease and
transmission fluid. The French operation currently has 41 employees.
“The performance of the French operations has
been disappointing for some time, due to the weak automotive fluid meter
market in France and difficulty in gaining acceptance of new products.
We explored other options for this business, but in the end, the
shutdown and orderly liquidation of the assets was the only viable
alternative,” said Meeusen.
“The French subsidiary generates about 5% of
total Badger Meter sales, but incurred after tax losses of $2.9 million
in calendar 2005 and $6.3 million (including the shutdown charges) for
the first nine months of 2006. Without these charges, net earnings and
diluted earnings per share would have been $16.2 million and $1.15,
respectively, for calendar 2005 and $14.0 million and $0.99 for the
first nine months of 2006. While the shutdown will negatively impact net
earnings over the short term, we believe this decision is in the best
long-term interest of our company and our shareholders,”
said Meeusen.
Meeusen said $3.7 million of the estimated $6 to $8 million in charges
related to the closing were recognized in the third quarter. “Our
goal is to have the shutdown substantially completed by the end of 2006,”
said Meeusen. Included in the $6 to $8 million range is $2.0 to $3.3
million for increased reserves against current assets, $1.6 to $1.8
million impairment of long-lived assets, and $2.4 to $2.9 million of
severance and other exit costs, of which the latter are expected to
affect future cash flows. The remaining $3.6 to $5.1 million is expected
to be non-cash charges.
Meeusen said Badger Meter will continue to sell its automotive fluid
meters and metering equipment in the U.S. and Europe through its other
facilities and distribution channels.
Summary
“With the decision on the French subsidiary
behind us, we look forward to focusing our time and resources on the
faster growing and more profitable areas of our business, such as
automatic meter reading,” said Meeusen. As
part of this strategy, Meeusen noted that the company’s
new facility in Nogales, Mexico, is now in full production, with the
second phase of the expansion scheduled to begin in early 2007. “The
new facility has already improved manufacturing efficiency and helped to
reduce costs,” said Meeusen.
“We are pleased with the improvement in sales
through the first nine months of the year. Aside from the operating
losses and shutdown charges related to the French operation, we are
hopeful that the downward pressure on copper costs and our price
increases will provide some relief on margins in the fourth quarter and
beyond. In addition, we are continuing to invest in developing new
products and product enhancements to facilitate our future growth,”
Meeusen added.
Use of Non-GAAP Financial Information
To supplement the consolidated financial statements presented in
accordance with generally accepted accounting principles (GAAP), the
company used certain non-GAAP earnings and earnings per share financial
information on a pro forma basis. Management believes these non-GAAP
financial measures provide useful information by excluding from reported
results the effects of the charges associated with the French shutdown
and the operating losses from the French operations, both of which will
be shown as discontinued operations once the liquidation process is
completed. These non-GAAP financial measures are provided because it is
believed they provide information about the results from continuing
operations and enhance investors' overall understanding of the company’s
current financial performance. Non-GAAP performance measures should be
considered in addition to, and not as a substitute for, results prepared
in accordance with GAAP. Reconciliations between GAAP and non-GAAP
financial measures are included in this press release.
About Badger Meter
Badger Meter is a leading marketer and manufacturer of flow measurement
and control technology, developed both internally and with other
companies, as well as the leader in providing digital connectivity to
leading AMR technologies. Its products are used to measure and control
the flow of liquids in a variety of applications.
Certain statements contained in this news release, as well as other
information provided from time to time by Badger Meter, Inc. (the “Company”)
or its employees, may contain forward looking statements that involve
risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements.The
words “anticipate,”“believe,”“estimate,”“expect,”“think,”“should” and “objective”
or similar expressions are intended to identify forward looking
statements.All such forward looking statements are based on the
Company’s then current views and assumptions
and involve risks and uncertainties that include, among other things:
the continued shift in the Company’s
business from lower cost, local read meters toward more expensive,
value-added automatic meter reading (AMR) systems;
the success or failure of newer Company products, including the
Orion® radio frequency mobile AMR system,
the absolute digital encoder (ADE™) and the
Galaxy® fixed network AMR system;
changes in competitive pricing and bids in both the domestic and
foreign marketplaces, and particularly in continued intense price
competition on government bid contracts for lower cost, local read
meters;
the actions (or lack thereof) of the Company’s
competitors;
changes in the Company’s relationships
with its alliance partners, primarily its alliance partners that
provide AMR connectivity solutions, and particularly those that sell
products that do or may compete with the Company’s
products;
changes in the general health of the United States and foreign
economies, including housing starts in the United States and overall
industrial activity;
increases in the cost and/or availability of needed raw materials
and parts, including recent increases in the cost of brass housings as
a result of increases in the commodity prices for copper and zinc at
the supplier level and resin as a result of increases in petroleum and
natural gas prices;
the ability to shut down its French operations in an orderly
fashion and to maximize the value of the related assets;
changes in foreign economic conditions, particularly currency
fluctuations between the United States dollar and the euro;
the loss of certain single-source suppliers; and
changes in laws and regulations, particularly laws dealing with the
use of lead (which can be used in the manufacture of certain meters
incorporating brass housings) and Federal Communications Commission
rules affecting the use and/or licensing of radio frequencies
necessary for AMR products.
All of these factors are beyond the Company’s
control to varying degrees.Shareholders, potential investors and
other readers are urged to consider these factors carefully in
evaluating the forward looking statements and are cautioned not to place
undue reliance on such forward looking statements.The forward
looking statements made in this document are made only as of the date of
this document and the Company assumes no obligation, and disclaims any
obligation, to update any such forward looking statements to reflect
subsequent events or circumstances.
