Rick Johnson - SVP, Finance; and CFO Rich Meeusen - Chairman, President and CEO

Richard Eastman - Robert W. Baird Chip Moore - Canaccord Genuity Ryan Connors - Boenning & Scattergood Richard Verdi - Ladenburg Kevin Bennett - Sterne Agee Chris Kovacs - Levin Capital Strategies Chris Bamman - Sidoti & Company

Thank you very much. Good morning, everyone and welcome to Badger Meter's first quarter conference call.

I want to thank all of you for joining us. As usual, I'll begin by stating that we will make a number of forward-looking statements on our call today.

Certain statements contained in this presentation, as well as other information provided from time-to-time by the company or its employees may contain forward-looking statements that involve risk and uncertainties that could cause actual results to differ materially from those in these forward-looking statements. Please see yesterday's earnings release for a list of words or expressions that identify such statements and the associated risk factors.

Let me reiterate some of our guidelines. For competitive reasons, we do not comment on specific individual product line profitability other than in general terms, nor do we disclose components of cost of sales, for example, copper.

More importantly, we continue our practice of not providing specific guidance on future earnings. We believe specific guidance does not serve the long-term interest of our shareholders.

Now on to results. Yesterday after the market closed, we released our first quarter 2016 results.

We are pleased to report that the first quarter of 2016 started much stronger than we anticipated. We had record sales for any quarter in our history and for the first time topped the $100 million mark in sale.

Sales totaled $100.6 million which was $17 million or 20.2% higher than the first quarter of 2015 when sales were $83.6 million. This increase was the net result of higher sales of municipal water products somewhat offset by lower sales of flow instrumentation products.

Municipal water product sales represented 76.9% of sales in this quarter compared to 69.9% in the first quarter of 2015. These sales increased $18.9 million or 32.3% to $77.4 million in the first quarter of 2016 from $58.5 million last year.

The increase was due primarily to higher volumes of residential and commercial meters, modestly higher prices and the inclusion of incremental revenue associated with the purchase of United Utilities assets which we acquired in August of 2015. An important takeaway from this call is that we believe some of this increase was due to the milder weather experienced this year as a result of El Nino, which resulted in some water utilities placing orders in the first quarter that we normally would receive in the second quarter.

Especially gratifying to us is the increase in sales in a number of our flagship products including E-Series Ultrasonic meters and BEACON AMA with ORION cellular radio products. Rich will have some additional comments on those in a moment.

Flow instrumentation products represented 23.1% sales for the first quarter of 2016 compared to 30.1% last year. These sales decreased $1.9 million or 7.6% to $23.2 million from $25.1 million in the same period last year.

The decrease is due in part to lower sales of Blancett turbine meters to oil and gas customers. You recall that last year we were impacted by oil and gas but had not yet seen the full impact in the first quarter of 2015.

The weakness in the oil and gas industry has continued into this year. We are also seeing lower sales as a result of one large customer curtailing its meter purchases and the general softness in the economy.

Gross margin as a percent of sales was 38.8% in the first quarter of this year compared to 36% in the first quarter of last year. Much of the increase was driven by higher volumes of municipal water product and its impact on factory utilization and the incremental profit associated with United Utilities.

Also to a lesser extent brass cost continued to be lower than they were at this time last year. These factors were offset somewhat by product mix as we incur lower sales of flow instrumentation products which generally carry higher margin.

In addition, we incurred higher warranty and customer after sales cost. Selling, engineering and administration expenses for the first quarter increased $3.2 million or 13.9% to $26.2 million from $23 million during the same period last year.

The increase is due primarily to higher employee incentive compensation and software amortization cost. Our effective tax rate for the first quarter was 36.3% compared to 37.2% in the first quarter of 2015.

Last year's first quarter included a discrete charge for settlement of a tax audit. If you remove that charge we are comparable between years.

Again, a reminder that interim estimates are tied to an estimate of the overall annual rate that will vary depending upon the states that we sell into for the remainder of the year and the relationship of our foreign and domestic earnings. As a result of all these, net earnings increased to nearly $8 million or $0.55 per diluted share compared to $4.2 million or $0.29 per diluted share in the first quarter of last year.

There were no significant variations other than seasonal factors in our balance sheet. We continue to generate cash from operations and reduced debt in the first quarter of 2016 by over $10 million.

Our debt as a percent of total capitalization was 20.4% at March 31, 2016. With that background I'll now turn the call over to Rich Meeusen, Badger Meter's Chairman, President and CEO who'll have some additional comments.

Rich?

Thanks, Rick. I want to thank all of you who’ve joined us on this call.

We are obviously pleased with the strong first quarter results. As Rick mentioned, our strong municipal sales more than offset a continued weakness in our flow instrumentation sales.

There were several factors contributing to the municipal sector strength. First, we are continuing to see strong market acceptance of our flagship products, BEACON AMA with the ORION cellular radios and the E-Series Ultrasonic water meters.

Sales of ORION cellular radios increased four fold in this quarter over the first quarter last year as customers continued to see the value in using our cellular technology both for meter reading and through our BEACON AMA software for system analytics. Regarding the E-Series Ultrasonic water meters, first quarter 2016 sales were 2.5x greater than the same quarter last year.

Our customers are continuing to move to this latest technology -- this latest metering technology and we are in a strong competitive position because only Badger Meter and one other company are offering a full range of electronic water meters in North America. We also continue to ship these meters to customers in the Middle East and view that market as a significant opportunity for future growth.

Both BEACON cellular and the E-Series meters are the result of a long-term technology strategy and product development effort that have been our focus over the past several years. I am particularly proud of our team's foresight in determining the key products that are now driving our growth as well as the team's successful efforts in implementing those plans.

We are clearly seeing the benefits of all those years of hard work. Also impacting 2016 is the American Water contract that we announced during the first quarter.

We are seeing shipments ramp up as the contract moves towards full implementation. In addition to new products and the American Water sales, our first quarter results also benefited from the milder winter in most of North America.

This allowed our municipal customers to begin their meter replacement program earlier than usual. We saw significant increase in March sales as customers were able to accelerate purchases that normally would have fallen in the second quarter.

We estimate that this acceleration represented between $3 million and $4 million in municipal sales that moved from the second quarter into the first quarter. As a result, we are anticipating an offsetting impact in our second quarter sales.

In fact, we've already seen this expected softness in orders during the first two weeks of this quarter. Although, we do not give formal guidance, this is where everybody sits up and pays attention suddenly, although we do not give any formal guidance I will say that we have not increased our original internal full year plan for 2016 to reflect the strong first quarter given the pull ahead of second quarter sales and the possibility of continued weakness in the flow instrumentation business.

However, on an overall basis we continue to expect a solid 2016. Flow instrumentation product sales have remained weak as the oil and gas industry is not rebounding.

In addition, late last year one large customer moved their industrial metering program in-house which contributed about $0.5 million in sales during the first quarter of last year. We do not expect to see this program to return in 2016 although we are pursuing several other programs to replace this volume.

We are also making progress on the development of new products and expansion of our sales channels which we expect to benefit our flow instrumentation sales in the coming quarters. Looking at the first quarter on an overall basis, balancing stronger municipal sales with weaker flow instrumentation sales.

This is a very solid start to the year and we expect to see continued strong results over the balance of 2016. And with that we'll take your questions.

Great. Well, thank you.

Rich, could you maybe add any color at all to the incremental revenue contribution from United Utilities, American Water? And then also maybe the third item is just -- there was maybe $2 million of this Itron catch-up still in backlog at year-end?

Could you just give us any sense of the incremental contribution from those three items in the quarter?

Right. And I will say that the Itron catch-up did benefit the quarter.

We did pick up that couple million. So we saw that come in.

United Utilities, I am looking at my people one between $1 million and $2 million in sales in the first quarter that got added although the margin impact is little bit stronger. We get some benefit of the margin but we are talking about their additional -- their addition to our top line.

And on American Water we talked about this Rich and we decided we are not going to report quarterly on our sales to American Water. With that contract we have some pretty strong confidentiality wording in there where they want to approve any types of discussion of that sort so I am just not comfortable going forward reporting each quarter what the sales to one customer were.

So we are going to pass on that and simply say that American Water did contribute to the quarter.

Okay. Fair enough.

And just looking at the dynamics in the quarter from a revenue perspective with the weakness on industrial flow side and yet the better volumes to lower brass prices, is there -- when you look at the gross margin delivered in the first quarter assuming there are some seasonal ramp in Q2 in volumes, is there any reason that the gross margin should back up south of 38% going forward for the second and third quarter?

It's a good question. And I would say that we are expecting second and third quarter volumes to be greater than first quarter in the municipal area.

Flow instrumentation is still a crapshoot as to what's happening with the market there. But the only negative that I see on margins Rich is that copper prices are coming back up.

They hit a low about $2.10 a pound and they are back up over $2.20 now. So at some point that's going to have a little bit of an impact.

But frankly no I think we can continue to expect some -- to see decent margins as we go through the next couple of quarters.

Thank you. Just follow up on that last question I guess on margins.

I think you called out some modestly higher pricing on the muni side. Maybe you can give us a little more color there?

Well, I wasn't necessarily calling a higher pricing. Okay, you did it.

Thank you. No, what I was talking about going forward I am not expecting higher pricing in the second and third quarter than what we saw in the first quarter, okay, to be clear.

Got you, but for Q1 I guess was that an increase or where we are seeing those higher prices?

And I will say the bigger impact for this quarter was volume which creates a lot of absorption to the factory.

Okay. It sounds like we might have some audio -- I don't know.

I was having a hard time hearing you. I guess on flow, maybe -- you called out the customer, the industrial customer that went away.

That $500,000 run rate Q1 last year is that a similar headwind for the next three quarters or so?

Yes. It is.

Okay. And then just lastly on E-Series and BEACON some nice growth, maybe you can give us a little more on traction there?

I am not sure what else I can give you. What I will say is that both of those products have seen a faster market acceptance than any products we've ever introduced in our history.

One of the hallmarks of the municipal water industry is that when you do introduce a new product, it takes years for you to get market acceptance. A lot of utilities will say give us a few of them we will try them out and maybe in a year or two we might consider buying.

With the BEACON cellular we went with our starter packages in 2014, in 2014, and a lot of customers picked up those starter packages. Other customers jumped in right away.

In 2015, we saw them jumping in even more and now in 2016 we are seeing very strong results for those products.

And this is Rick. And a thing I'll add also is that in municipal water we saw increases against virtually every product that we had with the exception of plastic meters.

And the only reason we didn't see there is that we went back and looked at last year and we had a huge order for plastic meters to a particular customer. And so I mean this is kind of broad based increase also in addition to the new product.

And when Rick said we had huge orders to plastic meters to particular customers, it was primarily Mexico. Mexico predominantly orders plastic meters and so those -- we had some large Mexican sales in the first quarter of last year plastic meters that didn't come in the first quarter of this year.

Great, thank you. And yes congrats to everybody on a great quarter.

I wanted to actually I had some audio issues as well so I apologize if some of this has been covered but wanted to kind of follow up -- .

We want to make sure everybody can hear us. So go ahead Ryan, thank you.

Yes. So, yes, basically wanted to kind of drill down on the new product side a little bit.

And obviously you are talking about huge growth rates for BEACON and E-Series but these are new products coming off of very low bases so can you just -- I know you don't want to comment on individual product profitability but can you just give us some sense for the top line materiality there? Whether we've kind of reached the point where they really moving the needle or when we might reach that point?

Just give us some perspective on that.

I'll say -- let me say that and I am looking at the numbers here. On the E-Series and on cellular, each of those products right now, the cellular radios and this is just radios without the meters okay is representing now and I am just -- let me eye this up for a second.

Bear with us, it is a small print.

Right. I am looking at it representing and I am just talking about roughly about 25% of our radio sales right now.

Okay so that's a level it has reached. And the E-Series, that looks to me like it has reached about 40% of our sales, of our meter sales.

Net sales of our meter sales and so when you look at it that way you can see how -- I don't want to talk about specific dollar sales or specific unit sales. But you can start to get a feel for how significant they are.

And what the saturation rate is.

Okay. And so by-- okay, good, that's helpful.

And then just kind of following on the same topic because obviously you had a very timely and compelling series of product launches in last few years but always the customer thinks moving forward. What is the product pipeline look like for you right now?

Maybe now without identifying specific products but do you feel like you are going to be able to continue that momentum? I know we've got a big show coming up in Chicago.

And there are other things you have on the pipeline that will enable you to sustain that lead you've built versus some of the competition?

We have a very full product pipeline, the technology roadmap. And we are continuing to invest a consistent amount of money into R&D that we have in the past.

So we are not seeing ourselves cutting R&D at all. Obviously, we are continuing to invest in the BEACON analytic software and its capabilities.

We are continuing to invest with any kind of cellular product you got to stay up on the new technology that are being offered in the cellular world. So we are focused on that.

And on the meters themselves, yes, it is same sort of thing, we got some new metering products that were we hoped to be introducing soon and some new features. So without being able to go into detail because obviously my competitors are listening, we do have a full line.

Now what I will say is that we spent a lot of years and time developing the cellular products and developing the E-Series products. So it isn't like we are going to go from cellular tomorrow to having chips implanted in everybody's brain to read their water meters next day.

Cellular is really the cutting edge and will be for a while.

I might come up with something better than that.

Okay. There might-- Rick says there might have been a better example.

Okay, satellite technology for reading meters who knows. But my only point is for a while now cellular technology is going to be the leading thing.

And we will continue invest heavily in the cellular technology because of the benefit it gives the customer. Our water utility customers have repeatedly said they don't want a lot of infrastructure.

They don't want a lot of devices up on power. That's very hard for them to maintain.

Water utilities have backhoes, they don't have bucket trucks. And so minimal infrastructure is important to them.

And that's what the cellular technology gives them. And then with the BEACON analytics, more and more the water utilities are saying we want to be able to provide better data to our consumers so that they are encouraged to conserve water.

And that's what EyeOnWater and products like that do. So we see ourselves investing more and expanding those product lines as we go forward.

Okay. That's great stuff.

And then one last one if I could. There has just been some talk about some mega deal some elephants out there as the municipal market recovers that there could be some big cities do some pretty substantial rollouts on the AMR or AMI side.

But yes it is very tough to substantiate that independently although there are some of that talk out there. What's your comment on that?

Are there some of those things -- are there some of those RFPs out there or is that a little over blown?

We are seeing them, okay. We are not seeing the RFPs at this point.

We are seeing RFIs request for information which is what a lot of the municipalities do before they get to be RFP stage. They are not asking for quotes or asking what are your products capable of.

And so you are right about one thing Ryan. I think although this economy is a slow growth and kind of slugging along, everybody seems to be adapting to a slow growth economy.

And so a lot of the cities that just had things on hold are saying, we can't wait forever. At some point we have to start making decisions.

And so even if the economy is not going to go gangbusters, we should start looking at making these kinds of investments. So we have over the last year seen more RFIs coming out of some of the larger cities.

They are out there. The cities don't necessarily want it public so I am not going to name cities.

But those are RFIs usually turned into RFPs and that can be coming down the road. Now on the other hand that Ryan I don't know what Flint means to all of these.

A lot of cities are very worried about what happened at Flint with the lead in the services. Will they refocus their direction from metering over to led services?

I don't know. And I think everybody still trying to figure out what that really means.

The other -- one additional comment on elephant is even when you win an elephant, I remember Chicago from eight -nine years ago, it is not a full impact in a given year. Sometimes it is done over five, six, seven years.

And it doesn't have the impact everybody thinks it's going to have financially because it is the equivalent of giving a different city every year for the seven years so keep that in mind also.

Hi. Good morning, Rick and Rich.

And congrats on the great quarter here and thanks for taking my call. Pretty much all my questions have been answered but I just have two simple ones left.

First, the vendor issue you guys had last year, how many quarters do you expect to catch up from that vendor issue to positively impact the top line and Rick you had mentioned it was about $2 million this quarter. Can we expect $2 million a quarter going forward?

No. This is Rick.

I think for the most of work caught up at this point.

Okay, great. And then for Rich you had mentioned the energy environment to crapshoot, I get that but I am wondering what type of feeling are you getting from oil and gas customers?

Do you feel the bottom with them is near or do you feel it's nowhere in sight?

I am going to say that I feel the bottom is near but I am also going to say that I said that three months ago. And I really thought the bottom was near and it wasn't.

So if I knew for sure I'd be playing the oil and gas market and I wouldn't be sitting here. It does seem like it can't go much lower.

It seems like things can't slowdown much more. But even in the first quarter we saw another decrease in our oil and gas products.

So last year we were basically doing about $1 million a month, it dropped down to $0.5 million. So I thought well that's got to be the bottom surely and we are seeing more decrease.

Now the decreases are single digit but still it is a surprise to us.

Thank you. Good morning, Rich and Rick.

How are you all? First question kind of similar to the conversation you were having on Ryan couple of questions ago.

If we look at this quarter and I guess try to back out United Utilities, American Water and the weather and what not just and think about kind of the core public utility spending, can you comment on what you are seeing there and have you seen that step up over the last either several months and what do you think about that going forward?

I think we are seeing an improvement in the utility spending. Now part of that is being driven by the new products we are offering.

And there are lots of utilities they are saying yes I want to get involved in these new products. It is time to make a decision.

And I think part of it is that the market is overall a little bit stronger. But you are right if you strip away some of these unusual impacts in the quarter that $100 million in sales we have for the quarter comes down a little bit if you assume that $4 million you got pulled in from the second quarter and there were some carryover from last year.

And it still is a good quarter but it is not perhaps as great as it first look at first blush. And now I am going to do a Donald Trump and go off script here and say something that weren't vetted, so I may get myself in trouble.

I am just worrying everyone around the table is rolling their eyes now. Because of what I have seen happened to the stock prices this morning.

Our stock price jumped 13% and opened, it is up over 10% right now. We had a conversation yesterday about the risk of overreacting.

Our stock price often overreacts on good news and often overreacts on bad news. And it tends to swing both ways.

Part of the problem is we are in a lumpy business. And we constantly say we are in a lumpy business.

This quarter is a classic example where in the last two weeks of the quarter we had some timidities they just called and said you know that product that we wanted in April can you get it to us now. And all of a sudden $4 million swings into March and that puts about $0.08 on our earnings per share.

So instead of our $0.55 without that, we'd probably be down around $0.48, still a great quarter but not the $0.55 you saw. So we worry about the market seeing the lumpiness in our business and every time there is a lump up or lump down projecting that out for the full year.

So I was very careful in the press release to say that we internally are not changing our full year projection based on the first quarter. The first quarter was good.

It was strong. We have an internal full year projection which we've not shared with the market because we don't give guidance.

That we put together coming into this year and we still think that's a good number. But that means if we had a very strong first quarter, internally we pull some of the future quarter's down to balance it out and keep the same full year number.

And so we were trying to get that message across the market to understand that there is lumpiness. And our quarters can swing, our results can swing from one quarter to another and we just want the market to understand that.

So that's where we are. I guess that isn't the response to any particular question you had, I just wanted to get that out there.

Fair enough. Let me ask I guess this question and just if I think about a random public utility that's going to replace a 100,000 meters in 2016 and we got to start early so we did more in the first quarter.

Am I still going to replace the 100,000 in 2016 or maybe I can do a 120,000 assuming the rest of the year plays out?

You know and this you raised a very important point. You are probably still going to do the 100,000.

And the reason is because the municipal budget was set for that 100,000. That's what they have set aside, that's what they plan to replace.

So when we've seen utilities start their programs earlier they tend to finish them earlier. We've also seen utilities start their programs later and then weather permitting they will go later into the fall replacing the meters.

So that is kind of a governor on our business if you will that it tends to adjust that way. So budget is tending to drive that more than the time available to replace the meters.

That makes perfect sense. And then one last question for Rick on the SG&A line we stepped up couple of million bucks from the fourth quarter level and I am curious if there were some one time items there or $26 million is kind of the new run rate going forward?

Assuming this level of sales I think that's the new run rate. I mean we put some -- with new software that went into effect in the first quarter of this year so amortization was up in that.

Then we've got higher incentives just simply because of the increase of sales level so.

Hi. And congratulation on the quarter.

Just quick question on the gross margin. I mean I think if I look back last year you had this couple quarters where you were pretty close to around the $100 million of revenue as well in Q2, Q3 specifically.

I think your gross margin was closer to like the 36% level and we had obviously very nice step up herein Q1. Can you just -- I understand you mentioned some of the utilization comments but given the revenue levels were somewhat similar can you help me kind of bridge that 300 basis points of improvement?

Well, I am not going to do the numbers for you but I mean the thing on margin is that on any given quarter it's also depends upon the particular mix. And as you heard this quarter were more heavily weighted towards technology products which generally carry higher margin.

Again, I don't remember specifics about the second and third quarter of last year. But I mean product mix, brass prices last year we got dinged by FX because we buy the radio boards in euros.

We don't see some of that effect this year. I mean there is just a multiple of multitude of things that affect the margin including slow moving obsolete warranty charges and the like.

So on any given quarter we try and highlight what we think are the key drivers but it varies quarter-to-quarter depending upon the particular sales in that quarter.

Okay. I appreciate that.

And then I guess just a follow up thing on Rich's question earlier. So the commentary was or the expectation is we shouldn't see too much of a deviation from this and I guess that kind of assumes that we kind of higher technology mix throughout the year.

Yes. Right now we are anticipating that we will continue to see a higher technology mix throughout the year.

That could change like I say we are in a lumpy business and all of a sudden you could have one customer that's putting in a cellular system that decides to slow down there for whatever reason, decides to slowdown their implementation. For example, right now there are many communities in Texas that are under water.

And that can cause a slowdown. So you could have reasons why there could be slowdown from one quarter to another.

But right now we are anticipating that we will continue to see a strong technology mix for the rest of the year.

Good morning, gentlemen. Actually you have done a good job of answering all my questions.

So at this point I don't have any just yet. Thank you.

Hi. Thanks for taking the follow up here.

Rick or Rich just could you maybe just comment for a second or two, with the E-Series growth on the meter side, is it surprising that you get the same absorption benefit from the growth in the E-Series versus more of the standard meters? I mean, is that brass and polymer?

And I presume that you still outsource the casting, so the absorption benefits are more on the assembly and machining? Is there any --?

The absorption benefits are fairly comparable. And the reason I say that is because on both mechanical meters and the electronic meters, the ultrasonic meters, we outsource casting so that's consistent between both.

We are now -- we are now machining the E-Series casting in house but we don't machine the mechanical casting in house. So we actually pick up there all right but then the mechanical meters have more plastic molded internal components than what the E-Series has and we do those in house.

So those two kind of balance each other out. The machining of E-Series castings for the molding of the internal components for the mechanical meters balance each other out.

And beyond that it is all of the assembly and test which is where the bulk of the work is and they both contribute to that. So I would tend to say that they are probably about equal to be honest about it.

So as we swing as our sales swing from mechanical meters over to electronic meters I don't think we are going to see a big difference in our absorption.

Yes. And do you export all the e-meter products that are going to the Middle East?

Is that --?

Yes. We do, yes from here.

Okay. So that growth --

With on exception, okay, we also make larger magnetic meters that are the big commercial meters. The E-Series meters go up to about 2 inch size and over that you are up into magnetic meters.

And those are all made in Czech Republic. So those are bought from the Czech Republic to the US or to the Middle East.

But the growth in the Middle East on the E-Series side, which looked pretty significant last year into the Middle East, that absorption --.

That is also come out of US, yes.

Yes. Okay.

Okay, very good. And just on the industrial flow side, obviously customer in-houses some of the product here.

Could you just maybe offer what industry that that customer is in? And then also what does the contribution margin look like now from the industrial flow products with the lower volumes and this step-down?

I mean, are we able to manage the costs there proportionately?

Yes. First off the customer was in the egg business.

So we do a lot of meters that either go in irrigation or on egg equipment. And so -- and that is unusual for some of these egg equipment makers.

A lot of them are looking at ways to reduce cost by bringing processes in-house. And this is one that -- it's a product we developed with them and for a while we made it and now they decided to produce it in-house.

And that's their decision. Our margins on our industrial have always been larger -- have always been higher than our margin on the municipal side because the volumes are smaller and the nature of the products.

Yes, the margins -- the fully loaded margins with the overhead have gone down as we've seen the volume go down. When you go from a $1 million a month in oil and gas meters down to $0.5 million a month in oil and gas meters, it is not easy for us to rid of an eight of plant.

So even though we've done a pretty good job on cutting cost, there are some absorption problems there. And they are having a negative -- it is having a negative impact on margins.

Although flow instrumentation's gross margin as a general are still higher than municipal water. If not as much higher they have been in the past.

Okay. But again some levers that we can pick up, ultimately when volumes go up.

Yes. Ultimately if we don't see a rebound and I mean that's a good point Rich.

If we don't see a rebound in oil and gas in the next couple of quarters. If we don't see rebound in some of these areas, we are going to have taken harder looks at some of our overhead costs in those areas.

Yes, okay. And just -- I got a note for Rick that that's an awfully nice tax rate that you contributed.

Thank you, Rich.

You are welcome. Thanks.

But you understand Rich, before you go, before you complimenting him and go through his head somehow, in the first quarter of last year there was a tax --

$75,000 tax charge

A tax charge in there and in the first quarter of this year there was a credit. $17,000 credit, so it did swing a little bit.

So he doesn't get credit for that.

Well, what matters is the year-end. Thank you.

Yes. All right.

Take care.

Thank you. So, again, we felt this was a very strong quarter.

There were certain lumpy items that needed even stronger than normal but with all those lumpy items, we still beat our expectations for the quarter. The sales were strong.

The result was strong. Our performance was good.

So we are very pleased with that. And we are still very optimistic about a strong year going forward.

And I wanted to thank you all for joining us today.