Badger Meter CEO ‘disappointed’ in companies tying raises to tax cuts

Badger Meter Inc. headquarters
Badger Meter Inc.'s headquarters in Brown Deer.

Last updated on May 14th, 2019 at 04:04 am

The chief executive of Brown Deer-based Badger Meter Inc. says he’s “disappointed” in business leaders who have announced pay increases tied to the recent decrease in the federal corporate income tax rate.

“Frankly, I’m disappointed when a company says that ‘because of lower taxes, we’re going to increase everybody’s pay,’” Rich Meeusen, Badger Meter chairman, chief executive officer and president, said. “I guess they were saying that in the past they were underpaying their people and now they are going to pay them fairly.”

Badger Meter Inc. headquarters
Badger Meter Inc.’s headquarters in Brown Deer.

Meeusen was asked during Badger Meter’s first quarter earnings call if the company has felt pressure from employees to raise wages or pay bonuses because of tax reform.

“Obviously the question was asked,” Meeusen said. “We feel that we pay our people competitively. We pay them at market. We have very little turnover in our facilities, which would tend to say that our compensation and our benefits, takes as a package, are very good and we see no reason to adjust that.”

He also said that when corporate taxes increased in the early 1990s under President Bill Clinton people didn’t want to see their pay cut.

“I don’t think my employees want their pay linked to the corporate tax rate,” he said.

The company estimated after its fourth quarter earnings the federal tax cuts would drop its effective tax rate from 35 or 36 percent to around 24 percent.

On the broader question of being able to attract workers, Meeusen acknowledged certain positions, particularly in engineering, are difficult to fill. He said the company is working closely with universities and technical schools on internships to help attract future employees.

“We’re pretty comfortable that we’ve got a really good workforce,” he said.

Badger Meter released its first quarter results Tuesday. The company reported a first quarter revenue record of $105 million, up 3.4 percent from the same period last year.

Net income, however, was down by 13.8 percent to $7.5 million and earnings fell from 30 to 26 cents per diluted share.

The company attributed the decline to acquisition costs and weather hampering sales in the early half of the quarter.

Gross margins decreased from 38 percent to 35 percent. Chief financial officer Rick Johnson said lower volume contributed about 200 basis points of the decline while costs related to closing a facility in Arizona and moving work to Racine added another 100 basis points. Higher copper prices and pricing increases that started in January offset each other.

“There’s probably a thousand little things in there, but those are the main ones that jump out,” Johnson said.

Meeusen said the company had a bad quarter, but the business is susceptible to some uneven periods and he doesn’t see the poor performance continuing. He noted many of the company’s costs are fixed and it is difficult to adapt quickly while also being positioned for better quarters in the future.

“If we believe this downturn was a trend … we would have taken a lot of other hard actions to right-size the operation,” he said.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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