2013 ANNUAL REPORT
Water utilities and industries worldwide
need timely, accurate data to operate and
manage their systems and processes.
Badger Meter is continually developing
innovative flow measurement and control
products that meet these needs and offer
added benefits that provide Clearly Better
solutions for our customers.
B E T T E R DATA . B E T T E R M A N AG E M E N T.
CLEARLY Badger Meter is a leading innovator
in flow measurement and control
instrumentation, serving water
and gas utilities, municipalities
and industries worldwide.
F L O W
I N S T R U M E N TAT I O N
MARKETS SERVED:
Industrial process
Building automation / HVAC
Chemical and petrochemical
Oil and gas
Water and wastewater
Test and measurement
Aerospace
Research and development
Pharmaceutical
Food and beverage
Power generation
Mining
Semiconductor
M U N I C I P A L
W AT E R
MARKETS SERVED:
Water utilities
MEASURE Our products accurately and
reliably measure whatever moves through a
pipe or pipeline — including water, air, steam,
oil, and other liquids and gases.
MONITOR Our products and solutions give
customers the tools to improve visibility and
understanding of what is happening within
their systems.
CONTROL Optimized operational
management starts with the highest quality
measurement and monitoring solutions from
Badger Meter.
B A D G E R M E T E R
S A L E S M I X 2 0 1 3
Municipal Water
Industrial Flow Products
Specialty Products
S P E C I A LT Y
P R O D U C T S
MARKETS SERVED:
Gas utilities
Construction
69.2%
27.3%
3.5%
sales mix pg 1
D e a r s h a r e h o l d e r s ,
Very few things in life are clearly better. During the
made a decision to close its U.S. production facility in
Olympics, I watched my son adjusting the video mode of
mid-2013 and exit the mechanical water meter business
his 60-inch television to “sports viewing,” after which he
in North America. This represented a major opportunity
proudly proclaimed it was clearly better. I couldn’t tell the
for Badger Meter, since we were selected by Elster as
difference, but it was certainly an improvement over the
the recommended supplier for its former customers. We
12-inch television of my childhood where we had replaced
were able to capture many of those accounts, generating
the broken antenna with a wire coat hanger and had to
increased sales and profits in the second half of the year.
change the channels with needle-nosed pliers. Improving
We expect to continue to benefit from this opportunity
the picture usually consisted of a well-placed smack on the
in 2014 and beyond.
side of the set.
We also believe we will see strong demand for our line
On the other hand, when we look at Badger Meter’s financial
of flow instrumentation products. We are benefitting
position, competitive strength and new technologies,
from the addition of the Racine Federated products in
I believe we can see they are clearly better in many ways.
2012, as well as new products developed during the past
Clearly better fINANCIAL pOSITION.
Our 2013 sales reached a record $334 million, a 4.5%
increase over 2012. We are particularly pleased that these
record sales were achieved after a very weak first quarter
of 2013, which was negatively impacted by unusual winter
weather conditions. In fact, we saw record sales in each of
the three quarters of 2013 after that weaker first quarter.
Our earnings were down 12.2% for the year compared
to 2012, again attributable to that weaker first quarter.
Following that quarter, we not only had record sales but
also record earnings in the last two quarters of 2013,
showing the continued strength of both our markets and
our competitive position.
We generated over $34 million in cash from operations in
2013. This enabled us to reinvest in our business, acquire
year. Our technologies are used in applications where
flow measurement and control are critical, in markets
such as industrial process, manufacturing, commercial
fluid, building automation and precision engineering.
We continue to expand our global distribution channels
with these world-class flow technologies.
Clearly better TEChNOLOGy.
For almost 10 years, we have marketed our best-selling
ORION® water utility technologies for either drive-by or
fixed network systems. However, many utilities did not want
to commit to one technology or the other. Therefore, in early
2013 we introduced the first truly simultaneous drive-by
fixed network product in the water utility market, ORION SE.
This system allows utilities to switch from drive-by to
fixed network and back without changing or reprogramming
the radio transceiver. We have been very pleased with the
Aquacue, Inc. for $13.8 million, increase our dividend for the
market acceptance of the ORION SE technology.
21st consecutive year, and pay down our debt to achieve
a debt to capitalization ratio of 26.3% at the end of the
year. Our financial position continues to provide a strong
platform for the future growth of our business.
Clearly better MARkET OppORTUNITIES.
We believe that 2013 also moved us into a clearly better
competitive position in the North American water meter
market. One of our major competitors, Elster AMCO,
2
Richard A. Meeusen
Chairman, President & Chief
Executive Officer
We also recently addressed another issue for our utility
CLEARLy STRONG fUTURE.
customers: excessive infrastructure required by some
network systems, as well as meters located in “hard to
read” areas of a utility’s service territory where traditional
fixed network radio signals cannot effectively transmit.
In January 2014, we introduced a new, cutting-edge
water meter technology, the ORION Cellular Endpoint.
This radio was developed using proprietary technology
obtained when we purchased Aquacue, Inc. in April 2013.
With this product, we are the first major water meter
manufacturer to introduce a cost-effective cellular
radio for use in both residential and commercial water
metering applications. This radio eliminates the need for
any network infrastructure, since it uses existing cellular
CLEARLY
BETTER
We believe that the ORION SE and ORION Cellular
technology, along with BEACON AMA, position our
water utility products for strong growth in our North
American markets. In addition, we expect to see continued
opportunities for both our meters and our meter reading
technologies in the global markets. For example, our
E-Series® ultrasonic water meters were recently selected
by a water utility in the Middle East, with orders totaling
over $6 million to be shipped during 2014 and into 2015.
We continue to invest in our research and development
efforts to assure a strong flow of new products in the
future. During 2013, our spending on research and
development hit a record $10.5 million, driving the new
2 01 3 S A L E S
By C AT E G O R y
Municipal Water
Non-Municipal Water
Industrial Flow Products
Specialty Products
69.2%
10.6%
16.7%
3.5%
networks. It also addresses hard-to-read meters since
products that help us maintain our technology leadership
the cellular coverage extends over a larger territory than
in our markets.
most fixed network systems.
Like that 12-inch television from my childhood compared
We bundled this radio with a managed offering that
to today’s large-screen HD TV technology, Badger Meter
we call BEACON Advanced Metering Analytics (AMA).
has transitioned from manual meter reading to cloud-based
BEACON AMA goes beyond simple radio frequency
cellular technology with solid-state meters. We offer
meter reading to a managed system that includes any
clearly better meters and a clearly better way to read them
combination of ORION SE fixed network and ORION
and analyze the data — without the need for a coat hanger
Cellular endpoints, as well as a powerful cloud-based
or needle-nosed pliers!
software platform that offers industry-leading analytics.
With this system, the utility is not only able to analyze
its metering data, but can also allow end customers to
view and manage their own water usage activity through
home computer and mobile devices. We believe our utility
customers will find this capability a key benefit in their
water conservation efforts.
We believe we are positioned to provide our customers with
a clearly better value proposition, while also driving clearly
better shareholder value in the coming years.
Thank you for your continued confidence and support.
Richard A. Meeusen
Chairman, President & Chief Executive Officer
3
Smart meters are
the fastest growing
segment of the water
meter replacement
market in North America
Software as a service is
the largest and fastest-
growing category in
cloud computing
Approximately 40% of the
U.S. water metering market
has been converted to
automated meter reading
30%
16%
In the U.S. water metering
market, Badger Meter has
a 30% share of meters and
a 16% share of AMR/AMI
technologies
40%
61%
By 2030, it is projected
that demand for water will
exceed supply by 40% and
close to half of the world’s
population will be living in
water-stressed areas
Approximately 61% of
cell phone users own a
smartphone which they
could use to access their
water usage if offered
by the utility
The great philosopher Sir Francis Bacon
once said, “Knowledge is power.” Municipal
water utility managers across North America
know that fast, easy access to information
about their water supply system can produce
powerful results.
The ability to generate revenue, identify and fix problems, respond
to customer inquiries, address billing disputes and meet regulatory
requirements places many demands on utility managers. Meter
reading data holds the key to better understanding and management
of their water systems. And with the increasing global focus on water
conservation, more and more utilities want their customers to be able
to view and better understand their personal water usage activity.
Badger Meter has been “making water visible” for more than 100
years. We offer a complete line of accurate and reliable residential
and commercial water metering products. Recent innovations include
a sophisticated, first-in-the-market meter reading system utilizing
cellular technology and an expanded line of ultrasonic flow meters.
4
BETTER VISIBILITY BEACON AMA is a Clearly Better
system that makes water visible
for utilities
of all sizes.
BEACON ADvANCED METERING ANALyTICS
E-SERIES® ULTRASONIC METER
We were the first in the industry to introduce a
While there are many ways to measure flow, they all
combination drive-by and fixed network meter reading
have one thing in common: obtaining accurate data. Our
system, ORION® SE. Building on that success, in early 2014
E-Series® ultrasonic meters use solid-state, high frequency
we launched BEACON Advanced Metering Analytics (AMA),
sound waves to measure flows. With no mechanical moving
which includes the first cost-effective cellular-based water
parts, the ultrasonic technology virtually eliminates wear
meter reading product that can be deployed system wide.
and tear, resulting in improved accuracy and long-term
reliability. E-Series meters are ideal for less-than-optimal
water conditions, for example, where there is a presence
of sand, suspended particles or pressure fluctuations.
We expanded the E-Series line in 2013 with a new,
engineered polymer version that is a lower-cost
alternative to the original stainless steel product.
And because E-Series meters can be used outside
North America, they provide growth opportunities
in water metering for Badger Meter around the globe.
BEACON AMA responds to key water utility needs. The
foundation of the system is its cloud-based software
analytics platform featuring a customizable dashboard
that provides actionable information utility managers
need to understand and monitor their water operations
and improve customer service. Integrated consumer
engagement tools enable end customers to view
and manage their water usage activity via computer,
smartphone or tablet, helping utilities with their water
conservation efforts.
Using existing cellular networks reduces the
need for costly infrastructure, and as a managed
system, Badger Meter handles the network,
software and maintenance, freeing up utility
managers to focus on operating their utility.
With its many features and benefits, BEACON
AMA is a Clearly Better system that makes
water visible for utilities of all sizes.
BEACON Advanced Metering Analytics enables
end-water customers to view and manage their water
usage activity via computer, smartphone or tablet.
5
Increased Visibility Enhanced Customer Service Focus on Water Management Future-Proof Technology Chemical production is just
one of the markets for our flow
instrumentation products.
#5
P
O
10T
Ranked number 5 in
market share for flow
meter sales into the
processing industry in
the Americas
Among the top 10
market share in the
electromagnetic,
positive displacement,
turbine, ultrasonic and
variable area flow meter
technology categories
fLOw INSTRUMENTATION
pRODUCTS
Participate in fast-growing
end markets including oil
and gas, power and energy,
refining and petrochemicals,
and chemical
Portfolio includes both
high-volume and high-
growth applications
Provide customers
with essential data for
controlling, managing
and optimizing their
applications
In the automotive industry,
Oval Gear meters are used to
measure fluids including engine
oil, engine coolant, transmission
fluid and wiper fluid.
BETTER
TEChNOLOGy
You can’t manage what you don’t measure.
This simple concept drives the need for our
flow instrumentation products. Accurate
information about their processes and systems
helps customers improve efficiency, save
energy and reduce costs.
Our flow instrumentation products measure and control whatever
moves through a pipeline – water, air, steam, oil, and other liquids
and gases. We offer both mechanical and electronic metering
technologies — a competitive advantage for us in the market.
Built through organic growth and acquisitions, our flow instrumentation
portfolio includes some of the most recognized brand names in the
industry, including Hedland®, Dynasonics®, Cox® and Research Control®.
Customers rely on Badger Meter for application-specific solutions that
deliver accurate, timely and dependable flow data and control
essential for product quality, cost control, safer operations and
regulatory compliance. The Research Control valve, Oval Gear
meter and Vision Turbine flow meter are three examples of how
we are continually working to develop products that provide
Clearly Better solutions for our customers.
6
Vision Turbine
meters have a role
in the trend toward
“smarter” appliances.
Badger Meter flow instrumentation
products provide customers with
essential data for controlling, managing
and optimizing their applications.
vISION TURBINE METER
The Vision Turbine meter, developed by Remag AG, which
RESEARCh CONTROL® vALvE
was acquired by Badger Meter in 2011, has a role in the
While the Research Control valve has been one of our
trend toward “smarter” appliances. It measures the exact
core flow instrumentation products for decades, its role
amount of water used in products such as commercial
in industrial processes is continually changing. Our valves
steam cookers and coffee and bakery machines, as well
control the flow of liquids, gas and steam in process
as washing machines, dishwashers, cooling plants and
industries such as chemical, petrochemical, bio-tech,
solar applications. Originally sold only in Europe, we are
food and beverage, and pharmaceutical, as well as general
now expanding sales of the Vision Turbine meter into
industrial applications and research. They are custom
engineered using a combination of size, configuration,
pressure, temperature and materials tailored to provide
the information needed in each specific application.
Our valves are especially known for their ability to
control low flows and to fit into small spaces. We
expanded the product line in 2013 with a new digital
valve positioner that monitors control variables as
well as fugitive emissions. With a proven reputation
for precise performance and durability, our Research
Control valves are used in producing many of the consumer
products we enjoy today.
North America.
OvAL GEAR METER
Customers who need to accurately measure denser liquids
in critical processes frequently choose our industrial Oval
Gear meters. Designed for rugged environments, our
Oval Gear meters are used in markets including chemicals,
petrochemicals, water and wastewater, oils and diesel
fuel, pulp and paper, paints and coatings, and printing.
Positive displacement meters like industrial Oval Gear
meters are the only meters that directly measure actual
volume — other technologies calculate volume by using
the flow rate.
We recently added a new electronic display monitor to
the product line, enabling users to connect the meters
to a control system network for remote monitoring and
process automation. The monitor design and technology
came from the Racine Federated product line we acquired
in 2012. This is an excellent example of how we are taking
advantage of the synergies from acquisitions to expand
our capabilities and provide more and better information
for our customers.
Our Research Control® valves are known for their
ability to control low flows and fit into small spaces.
7
december 31,
operations (dOLLARs iN ThOUs ANds)
Net sales
Net earnings
diluted per common share amounts
diluted earnings
Cash dividends
Net book value
Year-end financial position (dOLLARs iN ThOUs ANds)
Total assets
Total debt
shareholders’ equity
debt as a percent of total debt and equity
Net earnings as a percent of ending equity
other
Number of employees
Number of shareholders:
in employee plans
of record
2013
2012
% change
$334,122
$ 24,617
$ 1.70
$ 0.70
$ 13.64
$316,058
$ 70,045
$196,563
26.3%
12.5%
1,360
518
969
$319,660
$ 28,032
$ 1.95
$ 0.66
$ 11.96
$290,453
$ 66,730
$171,247
28.0%
16.4%
1,366
563
981
4.5
(12.2)
(12.8)
6.1
14.0
8.8
5.0
14.8
(6.1)
(23.8)
(0.4)
(8.0)
(1.2)
0.7
shares outstanding at december 31
14,411,876
14,314,029
p E Rf o Rm a n c E
sales
earnings
.
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8
DATA
BOARD OF DIRECTORS
EXECUTIvE OFFICERS
Richard A. Meeusen
Chairman, President and
Chief Executive Officer,
Badger Meter, Inc.
Ronald h. Dix (3)
Retired Senior Vice President -
Administration,
Badger Meter, Inc.
Andrew J. policano (3)
Chaired Professor and
Center Director, Paul Merage
School of Business,
University of California - Irvine
Steven J. Smith (1, 2)
Chairman and Chief Executive Officer,
Journal Communications, Inc.
Thomas J. fischer (1, 3)
Consultant in Corporate Financial
and Accounting Matters;
Retired Partner, Arthur Andersen LLP
Todd J. Teske (1, 2)
Chairman, President and
Chief Executive Officer,
Briggs & Stratton Corporation
Gale E. klappa (1, 2)
Chairman and Chief Executive Officer,
Wisconsin Energy Corporation
Gail A. Lione (2, 3)
Adjunct Professor, Marquette
University School of Law;
Retired President, The Harley-Davidson
Foundation; and former Executive
Vice President, General Counsel and
Secretary, Harley-Davidson, Inc.
Committees of the Board
1. Audit and Compliance
2. Compensation
3. Corporate Governance
Richard A. Meeusen
Chairman, President and
Chief Executive Officer
Richard E. Johnson
Sr. Vice President – Finance,
Chief Financial Officer
and Treasurer
fred J. Begale
Vice President –
Engineering
william R. Bergum
Vice President –
General Counsel and Secretary
Gregory M. Gomez
Vice President –
Business Development
horst Gras
Vice President –
International Operations
Raymond G. Serdynski
Vice President -
Manufacturing
Beverly L. Smiley
Vice President –
Corporate Controller
kimberly k. Stoll
Vice President –
Sales and Marketing
CORpOR ATE INFORMATION
Badger Meter, Inc., headquarters
4545 W. Brown Deer Road
P.O. Box 245036
Milwaukee, Wisconsin 53224-9536
(414) 355-0400
www.badgermeter.com
Domestic facilities
Milwaukee, Wisconsin
Racine, Wisconsin
Tulsa, Oklahoma
Scottsdale, Arizona
Los Gatos, California
foreign facilities
Stuttgart, Germany
Nogales, Sonora, Mexico
Brno, Czech Republic
Bern, Switzerland
Independent Registered public Accounting firm
Ernst & Young LLP, Milwaukee, Wisconsin
Transfer Agent
American Stock Transfer & Trust Company, LLC
New York, New York
(877) 248-6415
www.amstock.com
Listing of Common Stock
New York Stock Exchange
Symbol—BMI
form 10-k Report/Shareholder Information
A copy of the company’s fiscal 2013 Form 10-K annual report (without
exhibits) as filed with the Securities and Exchange Commission is
included in this report. Shareholder information, including news
releases and Form 10-K, are available on the company’s website:
www.badgermeter.com. Shareholders who hold their stock in nominee
or “street” name can receive shareholder information directly from the
company by being placed on our mailing list. Please direct inquiries to:
Shareholder Relations, Badger Meter, Inc., P.O. Box 245036,
Milwaukee, WI 53224-9536, or call (414) 355-0400.
Annual Meeting
Shareholders are encouraged to attend the 2014 annual meeting
at 8:30 a.m. on Friday, April 25, 2014, at the Global Water Center,
247 W. Freshwater Way, Milwaukee, Wisconsin 53204.
forward Looking Statements
Certain statements contained in this document, as well as other information
provided from time to time by 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. Please see page one of the enclosed Form 10-K for a list of
words or expressions that identify such statements.
Automatic Dividend Reinvestment and Stock purchase plan
Badger Meter’s Dividend Reinvestment and Stock Purchase Plan is
a convenient way to acquire shares of company stock. To receive a
prospectus describing the plan and an enrollment card, please contact
our plan administrator, American Stock Transfer at (877) 248-6415, or
visit their Web site at: www.amstock.com.
Direct Registration System
Shareholders of Badger Meter common stock can now hold their shares in
uncertificated/book entry form at the Transfer Agent. Current shareholders
who wish to transfer their existing shares to Direct Registration, should mail
their stock certificates to American Stock Transfer per the instructions
on their website at www.amstock.com. For more information, please call
American Stock Transfer, (877) 248-6415.
Certifications
The company filed as exhibits to its fiscal 2013 Form 10-K the
certifications of the Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act. The company also
submitted to the New York Stock Exchange during 2013 the Annual
CEO Certification required by Section 303A.12(a) of the New York Stock
Exchange Listed Company Manual.
Trademarks
Trademarks appearing in this document are the property of their
respective entities.
©2014 Badger Meter, Inc. All rights reserved.
BADGER METER, INC.
4545 W. BROWN DEER ROAD
P.0. BOX 245036
MILWAUKEE, WISCONSIN
53224-9536
WWW.BADGERMETER.COM