Badger Meter Inc. (NYSE:BMI) Q1 2018 Earnings Conference Call - Preliminary Transcript
Apr 18, 2018 • 11:00 am ET
Thank you sir. (Operator Instructions). And our first question will come from the line of Nathan Jones with Stifel. Your line is now open.
Good morning everyone.
Let's start on with some of the margin pressure there. A number of items that you guys called out that impacted gross margins in the quarter from higher brass cost, closing the facility in Scottsdale, lower volume. Is there any way you can parse out in a little bit more detail what the impact of each of those main buckets was on the margins?
Well, this is Rick. The margins were down about 300 basis points. And really, this is a rough cut, and this is how we're looking at it. Copper is probably about 100 of those basis points downward. The Scottsdale closure was about another 100 basis points. The impact of the lower volumes on our capacity utilization was probably a couple of 100 basis points. So that's about 400. And then offsetting that somewhat were the price increases coming back by about 100 basis points. That's just -- that's the rough cut on the margin. There's probably a 1,000 little things in there also, but those are the main ones that jump out.
No, I think that's very helpful. Could you then comment on -- you talked about realizing about 100 basis points of price there, but also that your rates in January 1, you still got backlog to ship from December that those prices were in at. Now that we're probably going to get a full quarter and a second quarter of realizing those price increases, does that 100 go 200 basis points? Does it go to 300 basis points?
This is Rich. I don't think it reaches 300, but it does go closer to the 200 mark. I'm hoping that we're going to pick up about 200 basis points when everything gets fully integrated through our order log.
Does that show up in 2Q? Or does it take until 3Q to hit the full run rate?
More of it will show up in Q2. The full impact will be in Q3. But to be honest with you, as you start the second quarter, a lot of what's ordered for the second quarter came in the first quarter under the new prices. Yes, there's some lagging business yet from longer-term orders that came in last year, I just don't have it quantified right now.
But we don't do any contracts anymore that go more than a year without the price escalators in them. So really, by the end of the year, everything's in there, but I would say the vast majority of it is in there by the end of the second quarter.
Okay. That helps a lot of (inaudible) queue.
Thank you. And our next question will come from the line of Richard Eastman with RWB. Your line is now open.
Yes. Good morning.
Just a couple of things I wanted to run by you.