Badger Meter Annual Report 2019

FY2019 Annual Report · Badger Meter

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2019 BADGER METER
ANNUAL REPORT

OUR
COMPANY

Badger Meter (NYSE:BMI) is an
innovator in flow measurement, control
and communications solutions, serving water
utilities, municipalities, and commercial and
industrial customers worldwide. Our products
measure water, wastewater, oil, chemicals, and other
fluids, and are known for accuracy, long-lasting
durability and for providing valuable and timely
measurement data. Our smart solutions allow
users to optimize, use and minimize waste
of one of the world’s most precious
resources.

2019

% Change

$ 424,625

$ 62,148

$ 47,177

$ 1.61

$ 0.64

$ 421,893

$ 44,391

$ 331,068

$ 73,218

1,567

29,118,532

(2.1)

4.5

5.0

4.5

14.3

41.6

$0.64

PERFORMANCE DATA

December 31,

Operations (dollars in thousands)

Net Sales

Adjusted Operating Earnings (1)

Adjusted Net Earnings (1)

Diluted per Common Share Amounts

Adjusted Diluted Earnings (1)

Cash Dividends

Year-End Financial Position (dollars in thousands)

Total Assets

Net Cash (Debt) (2)

Shareholders’ Equity

Other

Free Cash Flow (1)

Number of Employees

Shares Outstanding at December 31

2018

$ 433,732

$ 59,444

$ 44,933

$ 1.54

$ 0.56

$ 392,691

$ (4,974)

$ 303,503

$ 51,707

1,531

29,118,571

(1) See last page for reconciliation of GAAP to non-GAAP measures, including adjusted operating earnings, net earnings, diluted earnings per share and free cash flow.

(2) Net cash (debt) equals cash and cash equivalents less short term debt and any long term debt.

$500

$400

$300

$200

$100

$424.6

Net Sales
(in millions)

$50

$45

$40

$35

$30

$25

$20

$15

$10

$47.2

Adjusted Net Earnings (1)
(in millions)

$1.75

$1.50

$1.25

$1.00

$0.75

$0.50

$0.25

$1.61

$0.70

$0.60

$0.50

$0.40

$0.30

$0.20

$0.10

Adjusted Diluted EPS (1)

Dividends per Share

2019 BADGER METER ANNUAL REPORT | 1

OUR PRODUCTS

MUNICIPAL WATER

Badger Meter is a market leading manufacturer setting the standard for flow measurement technology
products for nearly 115 years. Our wide range of smart metering solutions are used to measure and
control the flow of liquids in a diverse array of applications. We serve municipalities, water utilities,

and residential, commercial and industrial customers worldwide.

Badger Meter works with municipalities to help increase operational efficiency,

effectiveness and responsiveness. Our end-to-end solutions provide actionable

information through data analytics from an interconnected and interoperable network
of sensors and devices that empower people and organizations to efficiently use

and conserve water.

Utilities are leveraging highly reliable and secure infrastructure-free cellular

networks to make their meter reading more efficient, scalable and

interoperable for the long term. We offer fully integrated smart water
solutions to utilities that provide real-time access to detailed water

usage data and leak detection so they can improve efficiency and

reduce water loss.

At Badger Meter we believe choice matters. We offer a
comprehensive product line for residential, commercial and fire
service applications. Our meter families, Recordall®, E-Series® and
ModMAG®, are available in a range of metering technologies, materials
and sizes. We have the right product for the application and all our meters

are designed for accuracy and long service life.

Badger Meter high resolution LCD Encoders are fully electronic, solid-state, field programmable

and use industry standard ASCII communication protocols to provide high resolution encoded

output. Tamper-resistant features such as magnetic sensors and tamper indicators provide utilities with

increased security.

The newest member of the time-tested ORION® family of products, our ORION Cellular LTE-M endpoints
utilize the existing Internet of Things (IoT) cellular infrastructure to efficiently and securely deliver meter reading
data to the utility. This innovative technology eliminates the need for standard utility-owned fixed network Advanced

2 | 2019 BADGER METER ANNUAL REPORT

Metering Infrastructure (AMI), allows for rapid deployment
and decreases ongoing maintenance (part of our BEACON®
Advanced Metering Analytics (AMA) solution).

Our smart water solutions work in tandem with BEACON
AMA. A cloud-based software suite that offers a wide choice
of managed, traditional fixed network, mobile, and consumer
engagement solutions to meet any meter reading and reporting
needs. Integrated EyeOnWater® consumer engagement tools
provide utility customers with access to their consumption data,
allowing them to view their usage activity and gain a greater
understanding and control of the water they consume.

Badger Meter. We help protect the world’s most
precious resources.

FLOW INSTRUMENTATION
Badger Meter Flow Instrumentation products and solutions provide technology to
measure and control whatever moves through a pipe or pipeline—including
water, wastewater, air, steam, oil, other liquids and gases. And we apply our
expertise to further enhance our products’ ease-of-use, accuracy and
effectiveness. An industry leader in both mechanical and electrical flow
metering technologies, Badger Meter offers one of the broadest flow
control and measurement portfolios in the industry.

Customers can rely on Badger Meter Flow Instrumentation for
application-specific solutions that deliver accurate, timely
and dependable flow data and control essential for
product quality, cost management, safer and more
sustainable operations, and regulatory compliance.

2019 BADGER METER ANNUAL REPORT | 3

A MESSAGE TO OUR SHAREHOLDERS

Kenneth C. Bockhorst

Chairman, President and Chief Executive Officer

TO MY FELLOW SHAREHOLDERS
I am pleased with our accomplishments and results for 2019, my ﬁ rst full year at the helm of
the tremendous Badger Meter organization. An imperative for me during this ﬁ rst year was to
preserve the legacy of trusted solutions, broad offerings and innovation earned since Badger
Meter’s founding in 1905. As we embark on this, our 115th year in business, I am proud of the
adaptability and enthusiasm of my colleagues—from the most seasoned to newest—that have
kept to that imperative and produced the solid progress we made on our strategies in 2019.

While we hold leading positions in our core markets, I have challenged our teams to remain steadfast with our culture of
innovation. When it comes to new products, we are accelerating development with new engineering resources along with software
and analytics capabilities. In 2019, we launched several key new products including the ORION Cellular LTE-M endpoint, which
provides increased reads, two-way communication and unparalleled coverage, all while maintaining robust battery life. This
infrastructure free and scalable technology is advancing the way utilities operate and providing ultimate fl exibility for our customers.

Our product portfolio has been further energized by the introduction of our fi rst series of meters utilizing our industry leading
D-Flow ultrasonic technology. In 2019, we launched the three- and four-inch commercial size meters with superior low-fl ow
accuracy along with pressure and temperature sensing capability. These features enhance our ability to detect conditions
associated with water loss and leak conditions that are critical for utilities to manage.

Our investment in software technology produced enhancements to BEACON Advanced Metering Analytics, the integrated
technology platform for smart water monitoring, which leverages our growing portfolio of smart products and solutions.

These products and technologies will support our diverse customers, as many of them begin their transformational journeys into

4 | 2019 BADGER METER ANNUAL REPORT

leveraging real-time data analytics to help manage their utility operations. We believe our broad combination of solutions and
capabilities has positioned us to thrive on that journey.

As our customers address these critically important water challenges, we recognize our responsibility to become more efficient
as we manufacture the products they need. Our approach to sustainability is centered around minimizing our water and energy
footprint and making smart products that enable efficiency and positively impact the environment. In 2019, we established an
Environmental, Social & Governance (ESG) Steering Committee to prioritize, drive and monitor our efforts to help preserve the
world’s most precious resources. A few of our critical accomplishments include:

•

Establishing an Environmental Policy – with a goal to reduce waste and emissions, minimize adverse
environmental impacts and promote resource conservation at all of our operations worldwide.

Formalizing a Human Rights Policy – to affirm our commitment to respect and support internationally
recognized human rights and freedoms and not be complicit in human rights abuses.

• Creating a Supplier Code of Conduct and scorecard – that outlines the expectations of our suppliers to

fully comply with applicable laws and regulations and to adhere to internationally recognized environmental,
social and corporate governance standards.

FINANCIAL RESULTS
From a financial perspective, 2019 was characterized by the unevenness often experienced in our industry. Our total sales
declined 2% from the prior year as the launch of new products led to an “innovation pause” in the first half of the year and tepid
global industrial demand negatively impacted our flow instrumentation sales. However, customer acceptance of our newly
launched products, combined with a backdrop of steady municipal spending led to a 1% increase in domestic water utility sales for
the year, with accelerating growth experienced in the second half of the year. We continue to see the migration to “smart” meters
that include radio technology, and have experienced above average growth in our newer technologies in the ultrasonic meter and
cellular radio categories.

Our adjusted earnings per share improved 5% year-over-year to $1.61 from $1.54 in the prior year (excluding the impact of
non-recurring pension settlement and executive transition charges in the prior year). This was largely due to improved gross
margins associated with favorable product and software service mix, positive price/cost dynamics and early benefits of our
continuous improvement activities.

Free Cash
Flow Conversion
155%

EPS
Growth
5%

EBITDA
Margin
20%

2019 BADGER METER ANNUAL REPORT | 5

We generated exceptional free cash flow of $73 million representing a free cash flow to adjusted net
earnings conversion ratio of 155%. Setting a goal and establishing processes to reduce primary

working capital as a percent of sales—by tighter management of our receivable collections, inventory

requirements and accounts payable—was a critical factor in this impressive cash conversion
outcome. We remain focused on these same items as we move into 2020 and beyond.

As a result, our balance sheet is strong, with ample financial flexibility to invest in both

organic and acquisition growth opportunities while delivering a steady, growing dividend

to our shareholders.

The accelerating growth in the back half of 2019 is expected to continue,

with solid momentum building into 2020. Municipal spending, recent order
rates and backlog remain conducive to growth, and we see continued

acceptance of our newer technologies in meters, radios and software.

LOOKING AHEAD

We have multiple avenues for growth as we look ahead to 2020
and beyond. Our North American market growth is supported
by a solid base of municipal spending and the continuing
conversion to smart meters. Badger Meter is well positioned

to benefit from the advancement of smart water applications
that provide actionable information through data analytics from an

interconnected and interoperable network of sensors and devices.
Smart water applications help actively monitor and dynamically optimize a
customers’ operations. By leveraging our participation in AT&T’s Smart City
Alliance, we extend our credibility in cellular technology and can demonstrate
the benefits of our broad, smart water solutions to decision makers throughout the
municipal channel and their consultants. We will also further leverage our cellular and
analytics solutions to drive sustainable Software as a Service (SaaS) revenues. Finally,
selectively investing in the talent and structure to support attractive international markets,

such as the Middle East, is another laneway for growth.

Creating a culture of continuous improvement - from the shop floor to all our processes - serves to
make us more efficient and fuels savings to invest in growth. For example, we are working to improve

our SQDC—or safety, quality, delivery and cost—metrics. We have improved execution across our
operating environments, in our R&D projects and within our working capital management. These efforts
will continue to be a differentiator and value driver for Badger Meter. Establishing metrics and targets, driving

accountability and providing the training and resources to move the needle are part of a cultural change

that is well underway.

6 | 2019 BADGER METER ANNUAL REPORT

Finally, we continue to build relationships and have dialogue with potential tuck-in acquisition candidates. We have a variety of
interesting product extensions and software enhancements that help to collect and transform reliable and robust data into
insights that can be used by our customers to more effectively run their operations. While it is impossible to predict the
timing of these types of transactions, our teams and capital are at the ready.

FINAL THOUGHTS
As we begin this 115th year of our operations, it is evident that our strong position and the abundant
opportunities ahead of us are only possible due to the energy and commitment of our management and
employee teams. I want to express my appreciation for your dedication and hard work.

Last, but certainly not least, I want to thank our customers, suppliers and shareholders for their
support, confi dence and commitment to Badger Meter.

Sincerely –

Ken Bockhorst
Chairman, President and
Chief Executive Offi cer

2019 BADGER METER ANNUAL REPORT | 7

CORPORATE INFORMATION

BOARD OF DIRECTORS
Todd A. Adams 1
President and Chief Executive Officer,

Gale E. Klappa 2, 3
Executive Chairman, WEC Energy Group

James W. McGill 2
Retired Executive, Eaton Corporation

Glen E. Tellock 1
President and Chief Executive Officer,

Rexnord Corporation

Kenneth C. Bockhorst
Chairman, President and Chief Executive

Officer, Badger Meter, Inc.

Thomas J. Fischer 1, 3
President, Fischer Financial Consulting LLC

and Retired Managing Partner,

Arthur Andersen LLP

Gail A. Lione 2, 3
Senior Counsel, Dentons; Adjunct Professor,

Tessa M. Meyers 3
Regional President – North America,

Georgetown University School of Law;

Rockwell Automation

Retired President, The Harley-Davidson

Foundation; and former Executive Vice

President, General Counsel and Secretary,

Harley-Davidson, Inc.

James F. Stern 1, 2
Executive Vice President, General Counsel

and Secretary, A. O. Smith Corporation

1. Audit and Compliance

2. Compensation

3. Corporate Governance

Lakeside Foods

Todd J. Teske (Lead Director) 2, 3
Chairman, President and Chief Executive

Officer, Briggs & Stratton Corporation

Committees of the Board:

EXECUTIVE OFFICERS
Kenneth C. Bockhorst
Chairman, President and

William R.A. Bergum
Vice President – General Counsel

Gregory M. Gomez
Vice President – Global Flow Instrumentation

Kimberly K. Stoll
Vice President – Sales and Marketing

Chief Executive Officer

and Secretary

and International Utility

Fred J. Begale
Vice President – Engineering

Karen Bauer
Vice President – Investor Relations,

Corporate Strategy and Treasurer

Trina L. Jashinsky
Vice President – Human Resources

William J. Parisen
Vice President – Global Operations

Daniel R. Weltzien
Vice President – Controller

Robert A. Wrocklage
Senior Vice President – Chief Financial

Officer

OTHER
Badger Meter, Inc. Headquarters
4545 West Brown Deer Road
P.O. Box 245036
Milwaukee, Wisconsin 53224-9536
(414) 355-0400
www.badgermeter.com

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

BMI
LISTED
NYSE

Form 10-K Report/Shareholder Information
The 2019 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.

Forward Looking Statements
Any forward looking statements contained in this document are subject to various risks
and uncertainties, the most important of which are outlined in the Form 10-K.

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 website at www.amstock.com.

Trademarks
Trademarks appearing in this document are the property of their respective entities.

Investor Relations
Financial analysts and investors should direct inquires to:
Karen Bauer
Vice President – Investor Relations, Corporate Strategy and Treasurer
kbauer@badgermeter.com
(414) 371-7276

8 | 2019 BADGER METER ANNUAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-06706

BADGER METER, INC.

(Exact name of registrant as specified in its charter)

Wisconsin
(State or other jurisdiction
of incorporation or organization)

4545 W. Brown Deer Road
Milwaukee, Wisconsin
(Address of principal executive offices)

39-0143280
(I.R.S. Employer
Identification No.)

53233
(Zip code)

(414) 355-0400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock
(Title of each class)

BMI
(Trading Symbol)

New York Stock Exchange
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer

☒
☐
☐

Smaller reporting company
Emerging growth company

☐
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity: As of June 30, 2019, the aggregate market value of the shares of Common Stock held by non-
affiliates of the Registrant was approximately $1.72 billion. For purposes of this calculation only, (i) shares of Common Stock are deemed to have a market value of
$59.69 per share, the closing price of the Common Stock as reported on the New York Stock Exchange on June 28, 2019, and (ii) each of the Company's executive
officers and directors is deemed to be an affiliate of the Company.

As of February 4, 2020, there were 29,113,242 shares of Common Stock outstanding with a par value of $1 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement for the 2020 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission under
Regulation 14A within 120 days after the end of the registrant's fiscal year, are incorporated by reference from the definitive Proxy Statement into Part III of this Annual
Report on Form 10-K.

Special Note Regarding Forward Looking Statements

Certain statements contained in this Annual Report on Form 10-K, 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,” “could” 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. Some risks and uncertainties that could cause actual results to differ materially from those expressed or implied in
forward looking statements include those described in Item 1A of this Annual Report on Form 10-K for the year ended December 31,
2019.

ITEM 1.

BUSINESS

PART I

Badger Meter, Inc. (the “Company”) is a leading innovator, manufacturer and marketer of products incorporating flow

measurement, control and communication solutions serving markets worldwide. The Company was incorporated in 1905.

Throughout this 2019 Annual Report on Form 10-K, the words “we,” “us” and “our” refer to the Company.

Available Information

The Company's internet address is http://www.badgermeter.com. The Company makes available free of charge through its
website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those
reports, on the same day they are electronically filed with, or furnished to, the Securities and Exchange Commission. The Company is
not including the information contained on or available through its website as a part of, or incorporating such information by reference
into, this Annual Report on Form 10-K.

Market Overview, Products, Systems and Solutions

Badger Meter is an innovator in flow measurement, control and related communication solutions, serving water utilities,
municipalities, and commercial and industrial customers worldwide. The Company’s products measure water, oil, chemicals and
other fluids, and are known for accuracy, long-lasting durability and for providing valuable and timely measurement data through
various methods. The Company’s product lines fall into two categories: sales of water meters, radios and related technologies to
municipal water utilities (municipal water) and sales of meters, valves and other products for industrial applications in water,
wastewater, and other industries (flow instrumentation). The Company estimates that nearly 90% of its products are used in water
related applications.

Municipal water, the largest sales category, is comprised of either mechanical or static (ultrasonic) water meters along with
the related radio and software technologies and services used by municipal water utilities as the basis for generating their water and
wastewater revenues. The largest geographic market for the Company’s municipal water products is North America, primarily the
United States, because most of the Company's meters are designed and manufactured to conform to standards promulgated by the
American Water Works Association. The majority of water meters sold by the Company continue to be mechanical in nature;
however, ultrasonic meters are an increasing percentage of the water meters sold by the Company and in the industry, due to a variety
of factors, including their ability to maintain measurement accuracy over their useful life. Providing ultrasonic water meter
technology, combined with advanced radio technology, provides the Company with the opportunity to sell into other geographical
markets, for example the Middle East and Europe.

The flow instrumentation product line includes meters and valves sold worldwide to measure and control fluids going
through a pipe or pipeline including water, air, steam, oil, and other liquids and gases. These products are used in a variety of
industries and applications, with the Company’s primary market focus being water/wastewater; heating, ventilating and air
conditioning (HVAC); oil and gas; and chemical and petrochemical. Flow instrumentation products are generally sold to original
equipment manufacturers as the primary flow measurement device within a product or system, as well as through manufacturers’
representatives.

Municipal water meters (both residential and commercial) are generally classified as either manually read meters or remotely
read meters via radio technology. A manually read meter consists of a water meter and a register that provides a visual totalized meter
reading. Meters equipped with radio technology (endpoints) receive flow measurement data from battery-powered encoder registers
attached to the water meter, which is encrypted and transmitted via radio frequency to a receiver that collects and formats the data
appropriately for water utility usage and billing systems. These remotely read systems are classified as either automatic meter reading
(AMR) systems, where a vehicle equipped for meter reading purposes, including a radio receiver, computer and reading software,
collects the data from utilities’ meters; or advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network
(either fixed or cellular) of data collectors or gateway receivers that are able to receive radio data transmission from the utilities’

Special Note Regarding Forward Looking Statements

Certain statements contained in this Annual Report on Form 10-K, 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,” “could” 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. Some risks and uncertainties that could cause actual results to differ materially from those expressed or implied in

forward looking statements include those described in Item 1A of this Annual Report on Form 10-K for the year ended December 31,

PART I

Badger Meter, Inc. (the “Company”) is a leading innovator, manufacturer and marketer of products incorporating flow

measurement, control and communication solutions serving markets worldwide. The Company was incorporated in 1905.

Throughout this 2019 Annual Report on Form 10-K, the words “we,” “us” and “our” refer to the Company.

2019.

ITEM 1.

BUSINESS

Available Information

The Company's internet address is http://www.badgermeter.com. The Company makes available free of charge through its

website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those

reports, on the same day they are electronically filed with, or furnished to, the Securities and Exchange Commission. The Company is

not including the information contained on or available through its website as a part of, or incorporating such information by reference

into, this Annual Report on Form 10-K.

Market Overview, Products, Systems and Solutions

Badger Meter is an innovator in flow measurement, control and related communication solutions, serving water utilities,

municipalities, and commercial and industrial customers worldwide. The Company’s products measure water, oil, chemicals and

other fluids, and are known for accuracy, long-lasting durability and for providing valuable and timely measurement data through

various methods. The Company’s product lines fall into two categories: sales of water meters, radios and related technologies to

municipal water utilities (municipal water) and sales of meters, valves and other products for industrial applications in water,

wastewater, and other industries (flow instrumentation). The Company estimates that nearly 90% of its products are used in water

related applications.

Municipal water, the largest sales category, is comprised of either mechanical or static (ultrasonic) water meters along with

the related radio and software technologies and services used by municipal water utilities as the basis for generating their water and

wastewater revenues. The largest geographic market for the Company’s municipal water products is North America, primarily the

United States, because most of the Company's meters are designed and manufactured to conform to standards promulgated by the

American Water Works Association. The majority of water meters sold by the Company continue to be mechanical in nature;

however, ultrasonic meters are an increasing percentage of the water meters sold by the Company and in the industry, due to a variety

of factors, including their ability to maintain measurement accuracy over their useful life. Providing ultrasonic water meter

technology, combined with advanced radio technology, provides the Company with the opportunity to sell into other geographical

markets, for example the Middle East and Europe.

The flow instrumentation product line includes meters and valves sold worldwide to measure and control fluids going

through a pipe or pipeline including water, air, steam, oil, and other liquids and gases. These products are used in a variety of

industries and applications, with the Company’s primary market focus being water/wastewater; heating, ventilating and air

conditioning (HVAC); oil and gas; and chemical and petrochemical. Flow instrumentation products are generally sold to original

equipment manufacturers as the primary flow measurement device within a product or system, as well as through manufacturers’

representatives.

The ORION® branded family of radio endpoints provides water utilities with a range of industry-leading options for meter

reading. These include ORION Migratable (ME) for AMR meter reading, ORION (SE) for traditional fixed network applications, and
ORION Cellular for an infrastructure-free meter reading solution. ORION Migratable makes the migration to fixed network easier for
utilities that prefer to start with mobile reading and later adopt fixed network communications, allowing utilities to choose a solution
for their current needs and be positioned for their future operational changes. ORION Cellular eliminates the need for utility-owned
fixed network infrastructure, allows for gradual or full deployment, and decreases ongoing maintenance.

Critical to the water metering ecosystem is information and analytics. The Company’s BEACON® Advanced Metering

Analytics (AMA) software suite improves the utilities’ visibility of their water and water usage. BEACON AMA is a secure, cloud-
hosted software suite that includes a customizable dashboard, and has the ability to establish alerts for specific conditions. It also
allows for consumer engagement tools that permit end water users (such as homeowners) to view and manage their water usage
activity. Benefits to the utility include improved customer service, increased visibility through faster leak detection, the ability to
promote and quantify the effects of its water conservation efforts, and easier compliance reporting.

Water meter replacement and the adoption and deployment of new technology comprise the majority of water meter product

sales, including radio products. To a much lesser extent, housing starts also contribute to the new product sales base. Over the last
decade, there has been a growing trend in the conversion from manually read water meters to meters with radio technology. This
conversion rate is accelerating, with the Company estimating that approximately 60% of water meters installed in the United States
have been converted to a radio solution technology.

The Company’s net sales and corresponding net earnings depend on unit volume and product mix, with the Company
generally earning higher average selling prices and margins on meters equipped with radio technology, and higher margins on
ultrasonic compared to mechanical meters. The Company’s proprietary radio products (i.e. ORION) generally result in higher
margins than remarketed, non-proprietary technology products. The Company also sells registers and endpoints separately to
customers who wish to upgrade their existing meters in the field.

Flow instrumentation products are used in flow measurement and control applications across a broad industrial spectrum,

occasionally leveraging the same technologies used in the municipal water category. Specialized communication protocols that
control the entire flow measurement process and mandatory certifications drive these markets. The Company provides both standard
and customized flow instrumentation solutions.

The industries served by the Company’s flow instrumentation products face accelerating demands to contain costs, reduce

product variability, and meet ever-changing safety, regulatory and sustainability requirements. To address these challenges, customers
must reap more value from every component in their systems. This system-wide scrutiny has heightened the focus on flow
instrumentation in industrial process, manufacturing, commercial fluid, building automation and precision engineering applications
where flow measurement and control are critical.

A leader in both mechanical and static (ultrasonic) flow metering technologies for industrial markets, the Company offers one

of the broadest flow measurement, control and communication portfolios in the market. This portfolio carries respected brand names
including Recordall®, Hedland®, Dynasonics®, Blancett®, and Research Control®, and includes eight of the ten major flow meter
technologies. Customers rely on the Company for application-specific solutions that deliver accurate, timely and dependable flow
data and control essential for product quality, cost control, safer operations, regulatory compliance and more sustainable operations.

The Company's products are sold throughout the world through employees, resellers and representatives. Depending on the
customer mix, there can be a moderate seasonal impact on sales, primarily relating to higher sales of certain municipal water products
during the spring and summer months. No single customer accounts for more than 10% of the Company's sales.

Competition

The Company faces competition for both its municipal water and flow instrumentation product lines. The competition varies
from moderate to strong depending upon the products involved and the markets served. Major competitors for municipal water meters
include Xylem, Inc. (“Sensus”), Roper Technologies, Inc. (“Neptune”), Master Meter, Inc. and Mueller Water Products, Inc. Together
with Badger Meter, it is estimated that these companies sell in excess of 90% of the water meters in the North American market, which
has historically been somewhat insulated from penetration by other competitors due to the nature of the mechanical technology used.
As static metering technology continues to gain traction in the North American market, additional competitors include firms such as
Kamstrup A/S, Diehl Metering GmbH and Itron, Inc., although these competitors lack brand recognition and product breadth and do
3
not have extensive water utility channel distribution to effectively reach the more than 50,000 water utilities in the United States,
which impedes their ability to compete. In addition, as previously noted, the technology acceptance overall also provides competitive
opportunities for Badger Meter outside North America.

meters. AMI systems eliminate the need for utility personnel to drive through service territories to collect data from the meters. These

systems provide utilities with more frequent and diverse data from their meters at specified intervals.

The ORION® branded family of radio endpoints provides water utilities with a range of industry-leading options for meter

reading. These include ORION Migratable (ME) for AMR meter reading, ORION (SE) for traditional fixed network applications, and

ORION Cellular for an infrastructure-free meter reading solution. ORION Migratable makes the migration to fixed network easier for

utilities that prefer to start with mobile reading and later adopt fixed network communications, allowing utilities to choose a solution

for their current needs and be positioned for their future operational changes. ORION Cellular eliminates the need for utility-owned

fixed network infrastructure, allows for gradual or full deployment, and decreases ongoing maintenance.

Critical to the water metering ecosystem is information and analytics. The Company’s BEACON® Advanced Metering

Analytics (AMA) software suite improves the utilities’ visibility of their water and water usage. BEACON AMA is a secure, cloud-

hosted software suite that includes a customizable dashboard, and has the ability to establish alerts for specific conditions. It also

allows for consumer engagement tools that permit end water users (such as homeowners) to view and manage their water usage

activity. Benefits to the utility include improved customer service, increased visibility through faster leak detection, the ability to

promote and quantify the effects of its water conservation efforts, and easier compliance reporting.

Water meter replacement and the adoption and deployment of new technology comprise the majority of water meter product

sales, including radio products. To a much lesser extent, housing starts also contribute to the new product sales base. Over the last

decade, there has been a growing trend in the conversion from manually read water meters to meters with radio technology. This

conversion rate is accelerating, with the Company estimating that approximately 60% of water meters installed in the United States

have been converted to a radio solution technology.

The Company’s net sales and corresponding net earnings depend on unit volume and product mix, with the Company

generally earning higher average selling prices and margins on meters equipped with radio technology, and higher margins on

ultrasonic compared to mechanical meters. The Company’s proprietary radio products (i.e. ORION) generally result in higher

margins than remarketed, non-proprietary technology products. The Company also sells registers and endpoints separately to

customers who wish to upgrade their existing meters in the field.

Flow instrumentation products are used in flow measurement and control applications across a broad industrial spectrum,

occasionally leveraging the same technologies used in the municipal water category. Specialized communication protocols that

control the entire flow measurement process and mandatory certifications drive these markets. The Company provides both standard

and customized flow instrumentation solutions.

The industries served by the Company’s flow instrumentation products face accelerating demands to contain costs, reduce

product variability, and meet ever-changing safety, regulatory and sustainability requirements. To address these challenges, customers

must reap more value from every component in their systems. This system-wide scrutiny has heightened the focus on flow

instrumentation in industrial process, manufacturing, commercial fluid, building automation and precision engineering applications

where flow measurement and control are critical.

A leader in both mechanical and static (ultrasonic) flow metering technologies for industrial markets, the Company offers one

of the broadest flow measurement, control and communication portfolios in the market. This portfolio carries respected brand names

including Recordall®, Hedland®, Dynasonics®, Blancett®, and Research Control®, and includes eight of the ten major flow meter

technologies. Customers rely on the Company for application-specific solutions that deliver accurate, timely and dependable flow

data and control essential for product quality, cost control, safer operations, regulatory compliance and more sustainable operations.

The Company's products are sold throughout the world through employees, resellers and representatives. Depending on the

customer mix, there can be a moderate seasonal impact on sales, primarily relating to higher sales of certain municipal water products

during the spring and summer months. No single customer accounts for more than 10% of the Company's sales.

Competition

The Company faces competition for both its municipal water and flow instrumentation product lines. The competition varies
from moderate to strong depending upon the products involved and the markets served. Major competitors for municipal water meters
include Xylem, Inc. (“Sensus”), Roper Technologies, Inc. (“Neptune”), Master Meter, Inc. and Mueller Water Products, Inc. Together
with Badger Meter, it is estimated that these companies sell in excess of 90% of the water meters in the North American market, which
has historically been somewhat insulated from penetration by other competitors due to the nature of the mechanical technology used.
As static metering technology continues to gain traction in the North American market, additional competitors include firms such as
Kamstrup A/S, Diehl Metering GmbH and Itron, Inc., although these competitors lack brand recognition and product breadth and do
not have extensive water utility channel distribution to effectively reach the more than 50,000 water utilities in the United States,
which impedes their ability to compete. In addition, as previously noted, the technology acceptance overall also provides competitive
opportunities for Badger Meter outside North America.

The Company's primary competitors for municipal water radio products in North America are Itron, Inc., Hubbel, Inc.
4
(Aclara Technologies), Neptune and Sensus. The vast majority of the Company’s radio sales are of its own proprietary radio systems
(ORION and GALAXY®); however, the Company may also resell other radio products as part of an overall smart meter solution (e.g.
Aclara, Itron®).

A number of the Company's competitors in certain markets have greater financial resources than the Company. The

Company, however, believes it currently provides the leading technologies in water meters and water-dedicated radio solutions and
analytics. As a result of significant research and development activities, the Company enjoys favorable patent positions and trade
secret protections for several of its technologies, products and processes.

There are many competitors in the flow instrumentation markets due to the various end markets and applications served.

They include, among others, Emerson Electric Company, Krohne Messtechnik GmbH, Endress+Hauser AG, Yokogawa Electric
Corporation and Cameron International. With a broad portfolio consisting of products utilizing eight of the ten major flow meter
technologies, the Company is well positioned to compete in niche, specialized applications within these markets, primarily focused on
the water/wastewater, HVAC, oil & gas and chemical/petrochemical end markets.

Backlog

The Company's total backlog of unshipped orders at December 31, 2019 and 2018 was $27.2 million and $29.9 million,

respectively. The backlog is comprised of firm orders and signed contractual commitments, or portions of such commitments that call
for shipment within 12 months. Backlog can be significantly affected by the timing of orders for large projects and the amounts can
vary due to the timing of work performed.

Raw Materials and Components

Raw materials used in the manufacture of the Company's products include purchased castings made of metal or alloys (such
as brass, which uses copper as its main component, aluminum, stainless steel and cast iron), plastic resins, glass, microprocessors and
other electronic subassemblies, and components. There are multiple sources for these raw materials and components, but the
Company relies on single suppliers for certain brass castings, resins and electronic subassemblies. The Company believes these items
would be available from other sources, but that the loss of certain suppliers may result in a higher cost of materials, delivery delays,
short-term increases in inventory and higher quality control costs in the short term. The Company carries business interruption
insurance on key suppliers. The Company's purchases of raw materials are based on production schedules, and as a result, inventory
on hand is generally not exposed to price fluctuations. World commodity markets and currency exchange rates may also affect the
prices of material purchased in the future. The Company does not hold significant amounts of precious metals.

Research and Development

Expenditures for research and development activities related to the development of new products, the improvement of

existing products and manufacturing process improvements were $11.9 million in 2019, $11.1 million in 2018 and $10.6 million in
2017. Research and development activities are primarily sponsored by the Company. The Company also engages from time to time in
joint research and development with other companies and organizations.

Intangible Assets

The Company owns or controls several trade secrets and many patents, trademarks and trade names in the United States and

other countries that relate to its products and technologies. No single patent, trademark, trade name or trade secret is material to the
Company's business as a whole.

Environmental Protection

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances

with respect to these specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site
disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the
Company and such amounts could be material. Expenditures for compliance control provisions and regulations during 2019, 2018 and
2017 were not material.

Employees

The Company and its subsidiaries employed 1,567 persons at December 31, 2019. Approximately 108 of these employees

are covered by a collective bargaining agreement with District 10 of the International Association of Machinists. The Company is

currently operating under a three-year contract with the union, which expires on October 31, 2022. The Company believes it has good

relations with the union and all of its employees.

The Company's primary competitors for municipal water radio products in North America are Itron, Inc., Hubbel, Inc.

(Aclara Technologies), Neptune and Sensus. The vast majority of the Company’s radio sales are of its own proprietary radio systems

(ORION and GALAXY®); however, the Company may also resell other radio products as part of an overall smart meter solution (e.g.

Aclara, Itron®).

A number of the Company's competitors in certain markets have greater financial resources than the Company. The

Company, however, believes it currently provides the leading technologies in water meters and water-dedicated radio solutions and

analytics. As a result of significant research and development activities, the Company enjoys favorable patent positions and trade

secret protections for several of its technologies, products and processes.

There are many competitors in the flow instrumentation markets due to the various end markets and applications served.

They include, among others, Emerson Electric Company, Krohne Messtechnik GmbH, Endress+Hauser AG, Yokogawa Electric

Corporation and Cameron International. With a broad portfolio consisting of products utilizing eight of the ten major flow meter

technologies, the Company is well positioned to compete in niche, specialized applications within these markets, primarily focused on

the water/wastewater, HVAC, oil & gas and chemical/petrochemical end markets.

The Company's total backlog of unshipped orders at December 31, 2019 and 2018 was $27.2 million and $29.9 million,

respectively. The backlog is comprised of firm orders and signed contractual commitments, or portions of such commitments that call

for shipment within 12 months. Backlog can be significantly affected by the timing of orders for large projects and the amounts can

Backlog

vary due to the timing of work performed.

Raw Materials and Components

Raw materials used in the manufacture of the Company's products include purchased castings made of metal or alloys (such

as brass, which uses copper as its main component, aluminum, stainless steel and cast iron), plastic resins, glass, microprocessors and

other electronic subassemblies, and components. There are multiple sources for these raw materials and components, but the

Company relies on single suppliers for certain brass castings, resins and electronic subassemblies. The Company believes these items

would be available from other sources, but that the loss of certain suppliers may result in a higher cost of materials, delivery delays,

short-term increases in inventory and higher quality control costs in the short term. The Company carries business interruption

insurance on key suppliers. The Company's purchases of raw materials are based on production schedules, and as a result, inventory

on hand is generally not exposed to price fluctuations. World commodity markets and currency exchange rates may also affect the

prices of material purchased in the future. The Company does not hold significant amounts of precious metals.

Expenditures for research and development activities related to the development of new products, the improvement of

existing products and manufacturing process improvements were $11.9 million in 2019, $11.1 million in 2018 and $10.6 million in

2017. Research and development activities are primarily sponsored by the Company. The Company also engages from time to time in

joint research and development with other companies and organizations.

Research and Development

Intangible Assets

The Company owns or controls several trade secrets and many patents, trademarks and trade names in the United States and

other countries that relate to its products and technologies. No single patent, trademark, trade name or trade secret is material to the
Company's business as a whole.

Environmental Protection

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances

Employees

The Company and its subsidiaries employed 1,567 persons at December 31, 2019. Approximately 108 of these employees

are covered by a collective bargaining agreement with District 10 of the International Association of Machinists. The Company is
currently operating under a three-year contract with the union, which expires on October 31, 2022. The Company believes it has good
relations with the union and all of its employees.

Information about the Company’s Executive Officers

The following table sets forth certain information regarding the Executive Officers of the Registrant.

Name

Kenneth C. Bockhorst
Robert A. Wrocklage
Karen M. Bauer
Fred J. Begale
William R. A. Bergum
Gregory M. Gomez
Trina L. Jashinsky
William J. Parisen
Kimberly K. Stoll
Daniel R. Weltzien

Position

Chairman, President and Chief Executive Officer
Senior Vice President — Chief Financial Officer
Vice President — Investor Relations, Corporate Strategy and Treasurer
Vice President — Engineering
Vice President — General Counsel and Secretary
Vice President — Global Flow Instrumentation and International Utility
Vice President — Human Resources
Vice President — Global Operations
Vice President — Sales and Marketing
Vice President — Controller

Age at
2/28/2020
47
41
52
55
55
55
57
53
53
41

There are no family relationships between any of the executive officers. Officers are elected annually at the first meeting of

the Board of Directors held after each annual meeting of the shareholders. Each officer holds office until his or her successor has been
elected or until his or her death, resignation or removal. There is no arrangement or understanding between any executive officer and
any other person pursuant to which he or she was elected as an officer.

Mr. Bockhorst was elected President in April 2018, Chief Executive Officer in January 2019 and Chairman in January 2020
after serving as Senior Vice President - Chief Operating Officer for the Company from October 2017 to April 2018. Prior to joining
the Company, Mr. Bockhorst was Executive Vice President of the Energy segment, preceded by President of Hydratight and Global
Vice President Operations of Enerpac, all within Actuant Corporation (now Enerpac Tool Group) from March 2011 to October 2017.

Mr. Wrocklage was elected Vice President – Chief Financial Officer and Treasurer in 2019 and Senior Vice President – Chief

Financial Officer in January 2020 after serving as Vice President - Finance for the Company from August 2018 to December 2018.
Prior to joining the Company, Mr. Wrocklage spent ten years with Actuant Corporation (now Enerpac Tool Group), holding various
corporate and business unit financial leadership roles, most recently as Vice President - Corporate Controller and Chief Accounting
Officer.

Ms. Bauer was elected Vice President - Investor Relations, Corporate Strategy and Treasurer effective June 2019. She joined

Badger Meter in July 2018 as Director, Investor Relations and Corporate Strategy. In her role she also oversees the Company’s ESG
(Environmental, Social & Governance) initiatives. Prior to joining Badger Meter, she served at Actuant Corporation (now Enerpac
Tool Group), most recently as Director, Investor Relations & Communications.

Mr. Begale has served as Vice President - Engineering for more than five years.

Mr. Bergum has served as Vice President - General Counsel and Secretary for more than five years.

Mr. Gomez was elected Vice President – Flow Instrumentation and International Utility in March 2019. Mr. Gomez served as

Vice President - Business Development and Flow Instrumentation from April 2017 to March 2019, Vice President - Flow
Instrumentation from September 2014 to April 2017, and Vice President - Business Development from December 2010 to September
2014.
5

Ms. Jashinsky was elected Vice President - Human Resources in October 2016. Prior to joining the Company, Ms. Jashinsky

was Vice President of Human Resources at Gannett Company, Inc. from February 2015 to July 2016, Senior Vice President Human
Resources at Fiserv, Inc. from March 2014 to February 2015, and Vice President - Global Corporate Human Resources at Johnson

Controls, Inc. from May 2010 to February 2014.

Mr. Parisen was elected Vice President - Global Operations in June 2019. He joined Badger Meter in August 2018 as Senior

Director, Global Supply Chain. Prior to joining Badger Meter, he was employed at Actuant Corporation (now Enerpac Tool Group)

where he most recently held the position of Vice President - Global Operations for the Industrial and Energy segments.

Ms. Stoll has served as Vice President - Sales and Marketing for more than five years.

Mr. Weltzien was elected Vice President – Controller in March 2019. Prior to joining the Company, Mr. Weltzien spent eight

years with Actuant Corporation (now Enerpac Tool Group), holding various corporate and business unit financial leadership roles,

most recently as Senior Director of Finance for its Hydratight business unit.

Information about the Company’s Executive Officers

The following table sets forth certain information regarding the Executive Officers of the Registrant.

Chairman, President and Chief Executive Officer

Senior Vice President — Chief Financial Officer

Position

Vice President — Investor Relations, Corporate Strategy and Treasurer

Vice President — Engineering

William R. A. Bergum

Vice President — General Counsel and Secretary

Vice President — Global Flow Instrumentation and International Utility

Name

Kenneth C. Bockhorst

Robert A. Wrocklage

Karen M. Bauer

Fred J. Begale

Gregory M. Gomez

Trina L. Jashinsky

William J. Parisen

Kimberly K. Stoll

Daniel R. Weltzien

Vice President — Human Resources

Vice President — Global Operations

Vice President — Sales and Marketing

Vice President — Controller

Age at

2/28/2020

There are no family relationships between any of the executive officers. Officers are elected annually at the first meeting of

the Board of Directors held after each annual meeting of the shareholders. Each officer holds office until his or her successor has been

elected or until his or her death, resignation or removal. There is no arrangement or understanding between any executive officer and

any other person pursuant to which he or she was elected as an officer.

Mr. Bockhorst was elected President in April 2018, Chief Executive Officer in January 2019 and Chairman in January 2020

after serving as Senior Vice President - Chief Operating Officer for the Company from October 2017 to April 2018. Prior to joining

the Company, Mr. Bockhorst was Executive Vice President of the Energy segment, preceded by President of Hydratight and Global

Vice President Operations of Enerpac, all within Actuant Corporation (now Enerpac Tool Group) from March 2011 to October 2017.

Mr. Wrocklage was elected Vice President – Chief Financial Officer and Treasurer in 2019 and Senior Vice President – Chief

Financial Officer in January 2020 after serving as Vice President - Finance for the Company from August 2018 to December 2018.

Prior to joining the Company, Mr. Wrocklage spent ten years with Actuant Corporation (now Enerpac Tool Group), holding various

corporate and business unit financial leadership roles, most recently as Vice President - Corporate Controller and Chief Accounting

Officer.

Ms. Bauer was elected Vice President - Investor Relations, Corporate Strategy and Treasurer effective June 2019. She joined

Mr. Begale has served as Vice President - Engineering for more than five years.

Mr. Bergum has served as Vice President - General Counsel and Secretary for more than five years.

Mr. Gomez was elected Vice President – Flow Instrumentation and International Utility in March 2019. Mr. Gomez served as

Ms. Jashinsky was elected Vice President - Human Resources in October 2016. Prior to joining the Company, Ms. Jashinsky

Mr. Parisen was elected Vice President - Global Operations in June 2019. He joined Badger Meter in August 2018 as Senior

Director, Global Supply Chain. Prior to joining Badger Meter, he was employed at Actuant Corporation (now Enerpac Tool Group)
where he most recently held the position of Vice President - Global Operations for the Industrial and Energy segments.

Ms. Stoll has served as Vice President - Sales and Marketing for more than five years.

Mr. Weltzien was elected Vice President – Controller in March 2019. Prior to joining the Company, Mr. Weltzien spent eight

years with Actuant Corporation (now Enerpac Tool Group), holding various corporate and business unit financial leadership roles,
most recently as Senior Director of Finance for its Hydratight business unit.

Foreign Operations and Export Sales

The Company sells its products through employees, resellers and representatives throughout the world. Additionally, the
Company has a sales, distribution and manufacturing facility in Neuffen, Germany; sales and customer service offices in Mexico,
Singapore, China, United Arab Emirates and Slovakia; manufacturing facilities in Nogales, Mexico, Brno, Czech Republic and Bern,
Switzerland; and a development facility in Luleå, Sweden. The Company exports products from the United States that are
manufactured in Milwaukee, Wisconsin; Racine, Wisconsin and Tulsa, Oklahoma.

Information about the Company's foreign operations and export sales is included in Note 9 “Industry Segment and
Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2019 Annual Report on Form 10-K.

Financial Information about Industry Segments

The Company operates in one industry segment as an innovator, manufacturer and marketer of products incorporating flow

measurement, control and communication solutions. Information about the Company's sales, operating earnings and assets is included
in the Consolidated Financial Statements and in Note 9 “Industry Segment and Geographic Areas” in the Notes to Consolidated
Financial Statements in Part II, Item 8 of this 2019 Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

Shareholders, potential investors and other readers are urged to consider the significant business risks described below in

addition to the other information set forth or incorporated by reference in this 2019 Annual Report on Form 10-K, including the
“Special Note Regarding Forward Looking Statements” at the front of this 2019 Annual Report on Form 10-K. If any of the events
contemplated by the following risks actually occur, our financial condition or results of operations could be materially adversely
affected. The following list of risk factors may not be exhaustive. We operate in a continually changing business, economic and
geopolitical environment, and new risk factors may emerge from time to time. We can neither predict these new risk factors with
certainty nor assess the precise impact, if any, on our business, or the extent to which any factor, or combination of factors, may
adversely impact our results of operations. While there is much uncertainty, we do analyze the risks we face, perform a probability
assessment of their impacts and attempt to soften their potential impact when and if possible.

Competitive pressures in the marketplace could decrease our revenues and profits.

Competitive pressures in the marketplace for our products could adversely affect our competitive position, leading to a

possible loss of market share or a decrease in prices, either of which could result in decreased revenues and profits. We operate in an
environment where competition varies from moderate to strong and a number of our competitors have greater financial resources. Our
competitors also include alliance partners that sell products that do or may compete with our products. The principal elements of
competition for our most significant product applications, residential and commercial water meters for the municipal water utility
market (with various radio technology systems), are price, product technology, quality and service. The competitive environment is
also affected by the movement toward radio technologies and away from manually read meters, the demand for replacement units and,
to some extent, such things as global economic conditions, the timing and size of governmental programs such as stimulus fund
programs, the ability of municipal water utility customers to authorize and finance purchases of our products, our ability to obtain
financing, housing starts in the United States, and overall economic activity. For our flow instrumentation products, the competitive
6
environment is affected by the general economic health of various industrial sectors particularly in the United States and Europe.

The inability to develop technologically advanced products could harm our future success.

We believe that our future success depends, in part, on our ability to develop technologically advanced products that meet or

exceed appropriate industry standards. Although we believe that we currently have a competitive advantage in this area, maintaining

such advantage will require continued investment in research and development, sales, marketing and manufacturing capabilities.

There can be no assurance that we will have sufficient resources to make such investments or that we will be able to make the

technological advances necessary to maintain such competitive advantage. If we are unable to maintain our competitive advantage,

our future financial performance may be adversely affected. We are not currently aware of any emerging standards, technologies or

new products that could render our existing products obsolete in the near term. The municipal water industry is continuing to see the

adoption of static water meters. Static water metering has lower barriers to entry that could affect the competitive landscape in North

America. We believe we have a competitive product, if the adoption rate for static meters were to accelerate, we believe competitors

lack brand recognition and product breadth and do not have extensive water utility channel distribution to effectively reach the more

than 50,000 water utilities in the United States.

Foreign Operations and Export Sales

The Company sells its products through employees, resellers and representatives throughout the world. Additionally, the

Company has a sales, distribution and manufacturing facility in Neuffen, Germany; sales and customer service offices in Mexico,

Singapore, China, United Arab Emirates and Slovakia; manufacturing facilities in Nogales, Mexico, Brno, Czech Republic and Bern,

Switzerland; and a development facility in Luleå, Sweden. The Company exports products from the United States that are

manufactured in Milwaukee, Wisconsin; Racine, Wisconsin and Tulsa, Oklahoma.

Information about the Company's foreign operations and export sales is included in Note 9 “Industry Segment and

Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2019 Annual Report on Form 10-K.

Financial Information about Industry Segments

The Company operates in one industry segment as an innovator, manufacturer and marketer of products incorporating flow

measurement, control and communication solutions. Information about the Company's sales, operating earnings and assets is included

in the Consolidated Financial Statements and in Note 9 “Industry Segment and Geographic Areas” in the Notes to Consolidated

Financial Statements in Part II, Item 8 of this 2019 Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

Shareholders, potential investors and other readers are urged to consider the significant business risks described below in

addition to the other information set forth or incorporated by reference in this 2019 Annual Report on Form 10-K, including the

“Special Note Regarding Forward Looking Statements” at the front of this 2019 Annual Report on Form 10-K. If any of the events

contemplated by the following risks actually occur, our financial condition or results of operations could be materially adversely

affected. The following list of risk factors may not be exhaustive. We operate in a continually changing business, economic and

geopolitical environment, and new risk factors may emerge from time to time. We can neither predict these new risk factors with

certainty nor assess the precise impact, if any, on our business, or the extent to which any factor, or combination of factors, may

adversely impact our results of operations. While there is much uncertainty, we do analyze the risks we face, perform a probability

assessment of their impacts and attempt to soften their potential impact when and if possible.

Competitive pressures in the marketplace could decrease our revenues and profits.

Competitive pressures in the marketplace for our products could adversely affect our competitive position, leading to a

possible loss of market share or a decrease in prices, either of which could result in decreased revenues and profits. We operate in an
environment where competition varies from moderate to strong and a number of our competitors have greater financial resources. Our
competitors also include alliance partners that sell products that do or may compete with our products. The principal elements of
competition for our most significant product applications, residential and commercial water meters for the municipal water utility
market (with various radio technology systems), are price, product technology, quality and service. The competitive environment is
also affected by the movement toward radio technologies and away from manually read meters, the demand for replacement units and,
to some extent, such things as global economic conditions, the timing and size of governmental programs such as stimulus fund
programs, the ability of municipal water utility customers to authorize and finance purchases of our products, our ability to obtain
financing, housing starts in the United States, and overall economic activity. For our flow instrumentation products, the competitive
environment is affected by the general economic health of various industrial sectors particularly in the United States and Europe.

The inability to develop technologically advanced products could harm our future success.

We believe that our future success depends, in part, on our ability to develop technologically advanced products that meet or
exceed appropriate industry standards. Although we believe that we currently have a competitive advantage in this area, maintaining
such advantage will require continued investment in research and development, sales, marketing and manufacturing capabilities.
There can be no assurance that we will have sufficient resources to make such investments or that we will be able to make the
technological advances necessary to maintain such competitive advantage. If we are unable to maintain our competitive advantage,
our future financial performance may be adversely affected. We are not currently aware of any emerging standards, technologies or
new products that could render our existing products obsolete in the near term. The municipal water industry is continuing to see the
adoption of static water meters. Static water metering has lower barriers to entry that could affect the competitive landscape in North
America. We believe we have a competitive product, if the adoption rate for static meters were to accelerate, we believe competitors
lack brand recognition and product breadth and do not have extensive water utility channel distribution to effectively reach the more
than 50,000 water utilities in the United States.

The inability to obtain adequate supplies of raw materials and component parts at favorable prices could decrease our profit
margins and negatively impact timely delivery to customers.

We are affected by the availability and prices for raw materials and component parts, including purchased castings made of

metal or alloys (such as brass, which uses copper as its main component, aluminum, stainless steel and cast iron), plastic resins, glass,
microprocessors and other electronic subassemblies, and components that are used in the manufacturing process. The inability to
obtain adequate supplies of raw materials and component parts for our products at favorable prices could have a material adverse
effect on our business, financial condition or results of operations by decreasing profit margins and by negatively impacting timely
deliveries to customers. In the past, we have been able to offset price increases in raw materials and component parts by increased
sales prices, active materials management, product engineering programs and the diversity of materials used in the production
processes. However, we cannot be certain that we will be able to accomplish this in the future. Since we do not control the actual
production of these raw materials and component parts, there may be delays caused by an interruption in the production or
transportation of these materials for reasons that are beyond our control. World commodity markets and inflation may also affect raw
material and component part prices.

Economic conditions could cause a material adverse impact on our sales and operating results.

As a supplier of products and software, the majority of which are to water utilities, we may be adversely affected by global

economic conditions, delays in governmental programs created to stimulate the economy, and the impact of government budget cuts or
partial shutdowns of governmental operations that affect our customers, including independent distributors, large city utilities, public
and private water companies and numerous smaller municipal water utilities. These customers may delay capital projects, including
non-critical maintenance and upgrades, or may not have the ability to authorize and finance purchases during economic downturns or
instability in world markets. We also sell products for other applications to reduce our dependency on the municipal water market. A
significant downturn in this market could cause a material adverse impact on sales and operating results. Therefore, a downturn in
general economic conditions, as well as in the municipal water market, and delays in the timing or amounts of possible economic
stimulus fund programs, government budget cuts or partial shutdowns of governmental operations, or the availability of funds to
municipalities could result in a reduction in demand for our products and services and could harm the business.

Economic impacts due to leadership or policy changes in the countries where we do business could negatively affect our
profitability.

We may be affected by adjustments to economic and trade policies, such as taxation, changes to or withdrawal from

international trade agreements, or the like, when countries where we produce or sell our products change leadership or economic
policies. These types of changes, as well as any related regulatory changes, could significantly increase our costs and adversely affect
our profitability and financial condition.

Global and regional economic and political conditions could adversely affect our business.

In June 2016, voters in the United Kingdom approved the United Kingdom’s exit from the European Union (“Brexit”), and

on January 31, 2020, the United Kingdom withdrew from the European Union. There is now a transition period during which
businesses and others prepare for the new post-Brexit rules to take effect on January 1, 2021. The ongoing negotiations of the future
trading relationship between the United Kingdom and the European Union during the transition period have yet to provide clarity on
what the outcome will be for the United Kingdom or Europe. As a result, Brexit continues to be the source of significant economic
uncertainty in the United Kingdom and in Europe, the Middle East, and Asia, which may negatively impact our business results in
7
those regions. In addition, changes related to Brexit could result in disruptions to trade and free movement of goods, services and
people to and from the United Kingdom, increased foreign exchange volatility with respect to the British pound and additional legal,
political and economic uncertainty, all of which could potentially disrupt the markets we serve, the tax jurisdictions in which we
operate, adversely change tax benefits or liabilities in these or other jurisdictions and may cause us to lose customers, suppliers and

employees. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United

Kingdom determines which European Union laws to replace or replicate. Any of these effects could adversely affect our business and

results of operations.

Climate change, unusual weather and other natural phenomena could adversely affect our business.

Climate changes and weather conditions may affect, or cause volatility in, our financial results. Drought conditions could

drive higher demand for smart water solutions that advance conservation efforts in residential and commercial applications. Our sales

also may be adversely affected by unusual weather, weather patterns or other natural phenomena that could have an impact on the

timing of orders in given periods, depending on the particular mix of customers being served by us at the time. The unpredictable

nature of weather conditions and climate change therefore may result in volatility for certain portions of our business, as well as the

operations of certain of our customers and suppliers.

The inability to obtain adequate supplies of raw materials and component parts at favorable prices could decrease our profit

margins and negatively impact timely delivery to customers.

We are affected by the availability and prices for raw materials and component parts, including purchased castings made of

metal or alloys (such as brass, which uses copper as its main component, aluminum, stainless steel and cast iron), plastic resins, glass,

microprocessors and other electronic subassemblies, and components that are used in the manufacturing process. The inability to

obtain adequate supplies of raw materials and component parts for our products at favorable prices could have a material adverse

effect on our business, financial condition or results of operations by decreasing profit margins and by negatively impacting timely

deliveries to customers. In the past, we have been able to offset price increases in raw materials and component parts by increased

sales prices, active materials management, product engineering programs and the diversity of materials used in the production

processes. However, we cannot be certain that we will be able to accomplish this in the future. Since we do not control the actual

production of these raw materials and component parts, there may be delays caused by an interruption in the production or

transportation of these materials for reasons that are beyond our control. World commodity markets and inflation may also affect raw

material and component part prices.

Economic conditions could cause a material adverse impact on our sales and operating results.

As a supplier of products and software, the majority of which are to water utilities, we may be adversely affected by global

economic conditions, delays in governmental programs created to stimulate the economy, and the impact of government budget cuts or

partial shutdowns of governmental operations that affect our customers, including independent distributors, large city utilities, public

and private water companies and numerous smaller municipal water utilities. These customers may delay capital projects, including

non-critical maintenance and upgrades, or may not have the ability to authorize and finance purchases during economic downturns or

instability in world markets. We also sell products for other applications to reduce our dependency on the municipal water market. A

significant downturn in this market could cause a material adverse impact on sales and operating results. Therefore, a downturn in

general economic conditions, as well as in the municipal water market, and delays in the timing or amounts of possible economic

stimulus fund programs, government budget cuts or partial shutdowns of governmental operations, or the availability of funds to

municipalities could result in a reduction in demand for our products and services and could harm the business.

Economic impacts due to leadership or policy changes in the countries where we do business could negatively affect our

profitability.

We may be affected by adjustments to economic and trade policies, such as taxation, changes to or withdrawal from

international trade agreements, or the like, when countries where we produce or sell our products change leadership or economic

policies. These types of changes, as well as any related regulatory changes, could significantly increase our costs and adversely affect

our profitability and financial condition.

Global and regional economic and political conditions could adversely affect our business.

In June 2016, voters in the United Kingdom approved the United Kingdom’s exit from the European Union (“Brexit”), and

on January 31, 2020, the United Kingdom withdrew from the European Union. There is now a transition period during which
businesses and others prepare for the new post-Brexit rules to take effect on January 1, 2021. The ongoing negotiations of the future
trading relationship between the United Kingdom and the European Union during the transition period have yet to provide clarity on
what the outcome will be for the United Kingdom or Europe. As a result, Brexit continues to be the source of significant economic
uncertainty in the United Kingdom and in Europe, the Middle East, and Asia, which may negatively impact our business results in
those regions. In addition, changes related to Brexit could result in disruptions to trade and free movement of goods, services and
people to and from the United Kingdom, increased foreign exchange volatility with respect to the British pound and additional legal,
political and economic uncertainty, all of which could potentially disrupt the markets we serve, the tax jurisdictions in which we
operate, adversely change tax benefits or liabilities in these or other jurisdictions and may cause us to lose customers, suppliers and
employees. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United
Kingdom determines which European Union laws to replace or replicate. Any of these effects could adversely affect our business and
results of operations.

Climate change, unusual weather and other natural phenomena could adversely affect our business.

Climate changes and weather conditions may affect, or cause volatility in, our financial results. Drought conditions could

drive higher demand for smart water solutions that advance conservation efforts in residential and commercial applications. Our sales
also may be adversely affected by unusual weather, weather patterns or other natural phenomena that could have an impact on the
timing of orders in given periods, depending on the particular mix of customers being served by us at the time. The unpredictable
nature of weather conditions and climate change therefore may result in volatility for certain portions of our business, as well as the
operations of certain of our customers and suppliers.

Geopolitical crisis, including terrorism or pandemics, could adversely affect our business.

Our operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political

instability, and widespread outbreak of an illness or other health issue. The occurrence of any of these events could have an adverse
effect on our business results and financial condition.

Failure to manufacture quality products could have a material adverse effect on our business.

If we fail to maintain and enforce quality control and testing procedures, our products will not meet required performance
standards. Product quality and performance are a priority for us since our products are used in various applications where precise
control of fluids is essential. Although we believe our products are perceived as high quality, any future production and/or sale of
substandard products could seriously harm our reputation, resulting in both a loss of current customers to competitors and damage to
our ability to attract new customers. In addition, if any of our products prove to be defective, we may be required to participate in a
recall involving such products or incur warranty related expenses. A successful claim brought against us with respect to a defective
product in excess of available insurance coverage, if any, or a requirement to participate in a major product recall, could have a
material adverse effect on our business, results of operations or financial condition.

Litigation against us could be costly, time consuming to defend and could adversely affect our profitability.

From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of business. For example,

we may be subject to workers' compensation claims, employment/labor disputes, customer and supplier disputes, product liability
claims, intellectual property disputes and contractual disputes related to warranties arising out of the conduct of our business.
Litigation may result in substantial costs and may divert management's attention and resources, which could adversely affect our
profitability or financial condition.

If our technology products do not operate as intended, our business could be materially and adversely affected.

We sell and install software products, including some that are provided in “the cloud,” that may contain unexpected design

defects or may encounter unexpected complications during installation or when used with other technologies utilized by the customer.
A failure of our technology products to operate as intended and in a seamless fashion with other products or a failure or breach of a
cloud network could materially and adversely affect our results of operations, financial position and cash flows.

Our expanded role as a prime contractor brings certain risks that could have a material adverse effect to our business.

The Company periodically assumes the role of prime contractor for providing complete technology systems, installation and

project management to governmental entities, which brings with it added risks, including but not limited to, our responsibility for
managing subcontractor performance and project timelines and the potential for expanded warranty and performance obligations.
While we have managed a number of these types of arrangements, it is possible to encounter a situation where we may not be able to
perform to the expectations of the governmental entity, and thus incur additional costs that could affect our profitability or harm our
reputation.

Disruptions and other damages to our information technology and other networks and operations, and breaches in data
8
security or cybersecurity attacks could have a negative financial impact and damage our reputation.

our business in order to maximize our revenue, effectiveness and efficiency. Unauthorized parties gaining access to digital systems

and networks for purposes of misappropriating assets or sensitive financial, personal or business information, corrupting data, causing

operational disruptions and other cyber-related risks could adversely impact our customer relationships, business plans and our

reputation. In some cases, we are dependent on third-party technologies and service providers for which there is no certainty of

uninterrupted availability or through which hackers could gain access to sensitive and/or personal information. These potential

disruptions and cyber-attacks could negatively affect revenues, costs, customer demand, system availability and our reputation.

Further, as the Company pursues its strategy to grow through acquisitions and to pursue newer technologies that improve our

operations and cost structure, the Company is also expanding and improving its information technologies, resulting in a larger

technological presence and corresponding exposure to cybersecurity risk. Certain new technologies present new and significant

cybersecurity safety risks that must be analyzed and addressed before implementation. If we fail to assess and identify cybersecurity

risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks.

Geopolitical crisis, including terrorism or pandemics, could adversely affect our business.

Our operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political

instability, and widespread outbreak of an illness or other health issue. The occurrence of any of these events could have an adverse

effect on our business results and financial condition.

Failure to manufacture quality products could have a material adverse effect on our business.

If we fail to maintain and enforce quality control and testing procedures, our products will not meet required performance

standards. Product quality and performance are a priority for us since our products are used in various applications where precise

control of fluids is essential. Although we believe our products are perceived as high quality, any future production and/or sale of

substandard products could seriously harm our reputation, resulting in both a loss of current customers to competitors and damage to

our ability to attract new customers. In addition, if any of our products prove to be defective, we may be required to participate in a

recall involving such products or incur warranty related expenses. A successful claim brought against us with respect to a defective

product in excess of available insurance coverage, if any, or a requirement to participate in a major product recall, could have a

material adverse effect on our business, results of operations or financial condition.

Litigation against us could be costly, time consuming to defend and could adversely affect our profitability.

From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of business. For example,

we may be subject to workers' compensation claims, employment/labor disputes, customer and supplier disputes, product liability

claims, intellectual property disputes and contractual disputes related to warranties arising out of the conduct of our business.

Litigation may result in substantial costs and may divert management's attention and resources, which could adversely affect our

profitability or financial condition.

If our technology products do not operate as intended, our business could be materially and adversely affected.

We sell and install software products, including some that are provided in “the cloud,” that may contain unexpected design

defects or may encounter unexpected complications during installation or when used with other technologies utilized by the customer.

A failure of our technology products to operate as intended and in a seamless fashion with other products or a failure or breach of a

cloud network could materially and adversely affect our results of operations, financial position and cash flows.

Our expanded role as a prime contractor brings certain risks that could have a material adverse effect to our business.

The Company periodically assumes the role of prime contractor for providing complete technology systems, installation and

Disruptions and other damages to our information technology and other networks and operations, and breaches in data
security or cybersecurity attacks could have a negative financial impact and damage our reputation.

Our ability to serve customers, as well as increase revenues and control costs, depends in part on the reliability of our
sophisticated technologies, system networks and cloud-based software. We use information technology and other systems to manage
our business in order to maximize our revenue, effectiveness and efficiency. Unauthorized parties gaining access to digital systems
and networks for purposes of misappropriating assets or sensitive financial, personal or business information, corrupting data, causing
operational disruptions and other cyber-related risks could adversely impact our customer relationships, business plans and our
reputation. In some cases, we are dependent on third-party technologies and service providers for which there is no certainty of
uninterrupted availability or through which hackers could gain access to sensitive and/or personal information. These potential
disruptions and cyber-attacks could negatively affect revenues, costs, customer demand, system availability and our reputation.

Further, as the Company pursues its strategy to grow through acquisitions and to pursue newer technologies that improve our

operations and cost structure, the Company is also expanding and improving its information technologies, resulting in a larger
technological presence and corresponding exposure to cybersecurity risk. Certain new technologies present new and significant
cybersecurity safety risks that must be analyzed and addressed before implementation. If we fail to assess and identify cybersecurity
risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks.

If we are not able to protect our proprietary rights to our software and related products, our ability to market our software
products could be hindered and our results of operations, financial position and cash flows could be materially and adversely
affected.

We rely on our agreements with customers, confidentiality agreements with employees, and our trademarks, trade secrets,

copyrights and patents to protect our proprietary rights. These legal protections and precautions may not prevent misappropriation of
9
our proprietary information. In addition, substantial litigation regarding intellectual property rights exists in the software industry, and
software products may increasingly be subject to third-party infringement claims. Such litigation and misappropriation of our
proprietary information could hinder our ability to market and sell products and services and our results of operations, financial
position and cash flows could be materially and adversely affected.

Changes in environmental or regulatory requirements could entail additional expenses that could decrease our profitability.

We are subject to a variety of laws in various countries and markets, such as those regulating lead or other material content in

certain of our products, the handling and disposal of certain electronic materials, the use and/or licensing of radio frequencies
necessary for radio products, data privacy and protection, as well as customs and trade practices. We cannot predict the nature, scope
or effect of future environmental or regulatory requirements to which our operations might be subject or the manner in which existing
or future laws will be administered or interpreted. Currently, the cost of complying with existing laws is included as part of our on-
going expenses and does not have a material effect on our business or financial position, but a change in the future could adversely
affect our profitability.

Risks related to foreign markets could decrease our profitability.

Since we sell products worldwide as well as manufacture products in several countries, we are subject to risks associated with

doing business internationally. These risks include such things as changes in foreign currency exchange rates, changes in political or
economic conditions of specific countries or regions, potentially negative consequences from changes in tax laws or regulatory
requirements, differing labor regulations, and the difficulty of managing widespread operations.

An inability to attract and retain skilled employees could negatively impact our growth and decrease our profitability.

Our success depends on our continued ability to identify, attract, develop and retain skilled personnel throughout our

organization. Current and future compensation arrangements, including benefits, may not be sufficient to attract new employees or
retain existing employees, which may hinder our growth.

Violations or alleged violations of laws that impose requirements for the conduct of the Company’s overseas operations,
including the Foreign Corrupt Practices Act (FCPA) or other anti-corruption laws, trade sanctions and sanctioned parties
restrictions could adversely affect our business.

In foreign countries where we operate, a risk exists that our employees, third party partners or agents could engage in

business practices prohibited by applicable laws and regulations, such as the FCPA. Such anti-corruption laws generally prohibit
companies from making improper payments to foreign officials, require companies to keep accurate books and records, and maintain
appropriate internal controls. Our policies mandate strict compliance with such laws and we devote resources to ensure compliance.
However, we operate in some parts of the world that have experienced governmental corruption, and, in certain circumstances, local
9
customs and practice might not be consistent with the requirements of anti-corruption laws. We remain subject to the risk that our
employees, third party partners or agents will engage in business practices that are prohibited by our policies and violate such laws and
regulations. Violations by us or a third party acting on our behalf could result in significant internal investigation costs and legal fees,
civil and criminal penalties, including prohibitions on the conduct of our business and reputational harm.

We may also be subject to legal liability and reputational damage if we violate U.S. trade sanctions administered by the U.S.

Treasury Department’s Office of Foreign Assets Control (OFAC), the European Union, the United Nations and trade sanction laws,

such as the Iran Threat Reduction and Syria Human Rights Act of 2012. Our policies mandate strict compliance with such laws and

we devote resources to ensure compliance.

Failure to successfully identify, complete and integrate acquired businesses or products could adversely affect our operations.

As part of our business strategy, we continue to evaluate and may pursue selected business or product acquisition

opportunities that we believe may provide us with certain operating and financial benefits. There can be no assurance that we will

identify or complete transactions with suitable acquisition candidates in the future. If we complete any such acquisitions, they may

require integration into our existing business with respect to administrative, financial, sales, marketing, manufacturing and other

functions to realize these anticipated benefits. If we are unable to successfully integrate a business or product acquisition, we may not

realize the benefits identified in our due diligence process, and our financial results may be negatively impacted. Additionally,

significant unexpected liabilities may arise during or after completion of an acquisition.

If we are not able to protect our proprietary rights to our software and related products, our ability to market our software

products could be hindered and our results of operations, financial position and cash flows could be materially and adversely

affected.

We rely on our agreements with customers, confidentiality agreements with employees, and our trademarks, trade secrets,

copyrights and patents to protect our proprietary rights. These legal protections and precautions may not prevent misappropriation of

our proprietary information. In addition, substantial litigation regarding intellectual property rights exists in the software industry, and

software products may increasingly be subject to third-party infringement claims. Such litigation and misappropriation of our

proprietary information could hinder our ability to market and sell products and services and our results of operations, financial

position and cash flows could be materially and adversely affected.

Changes in environmental or regulatory requirements could entail additional expenses that could decrease our profitability.

We are subject to a variety of laws in various countries and markets, such as those regulating lead or other material content in

certain of our products, the handling and disposal of certain electronic materials, the use and/or licensing of radio frequencies

necessary for radio products, data privacy and protection, as well as customs and trade practices. We cannot predict the nature, scope

or effect of future environmental or regulatory requirements to which our operations might be subject or the manner in which existing

or future laws will be administered or interpreted. Currently, the cost of complying with existing laws is included as part of our on-

going expenses and does not have a material effect on our business or financial position, but a change in the future could adversely

affect our profitability.

Risks related to foreign markets could decrease our profitability.

Since we sell products worldwide as well as manufacture products in several countries, we are subject to risks associated with

doing business internationally. These risks include such things as changes in foreign currency exchange rates, changes in political or

economic conditions of specific countries or regions, potentially negative consequences from changes in tax laws or regulatory

requirements, differing labor regulations, and the difficulty of managing widespread operations.

An inability to attract and retain skilled employees could negatively impact our growth and decrease our profitability.

Our success depends on our continued ability to identify, attract, develop and retain skilled personnel throughout our

organization. Current and future compensation arrangements, including benefits, may not be sufficient to attract new employees or

retain existing employees, which may hinder our growth.

Violations or alleged violations of laws that impose requirements for the conduct of the Company’s overseas operations,

including the Foreign Corrupt Practices Act (FCPA) or other anti-corruption laws, trade sanctions and sanctioned parties
restrictions could adversely affect our business.

In foreign countries where we operate, a risk exists that our employees, third party partners or agents could engage in

business practices prohibited by applicable laws and regulations, such as the FCPA. Such anti-corruption laws generally prohibit
companies from making improper payments to foreign officials, require companies to keep accurate books and records, and maintain
appropriate internal controls. Our policies mandate strict compliance with such laws and we devote resources to ensure compliance.
However, we operate in some parts of the world that have experienced governmental corruption, and, in certain circumstances, local
customs and practice might not be consistent with the requirements of anti-corruption laws. We remain subject to the risk that our
employees, third party partners or agents will engage in business practices that are prohibited by our policies and violate such laws and
regulations. Violations by us or a third party acting on our behalf could result in significant internal investigation costs and legal fees,
civil and criminal penalties, including prohibitions on the conduct of our business and reputational harm.

We may also be subject to legal liability and reputational damage if we violate U.S. trade sanctions administered by the U.S.

Treasury Department’s Office of Foreign Assets Control (OFAC), the European Union, the United Nations and trade sanction laws,
such as the Iran Threat Reduction and Syria Human Rights Act of 2012. Our policies mandate strict compliance with such laws and
we devote resources to ensure compliance.

Failure to successfully identify, complete and integrate acquired businesses or products could adversely affect our operations.

As part of our business strategy, we continue to evaluate and may pursue selected business or product acquisition
opportunities that we believe may provide us with certain operating and financial benefits. There can be no assurance that we will
identify or complete transactions with suitable acquisition candidates in the future. If we complete any such acquisitions, they may
require integration into our existing business with respect to administrative, financial, sales, marketing, manufacturing and other
functions to realize these anticipated benefits. If we are unable to successfully integrate a business or product acquisition, we may not
realize the benefits identified in our due diligence process, and our financial results may be negatively impacted. Additionally,
significant unexpected liabilities may arise during or after completion of an acquisition.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

The principal facilities utilized by the Company at December 31, 2019 are listed below. The Company owns all such

facilities except as noted. The Company believes that its facilities are generally well maintained and have sufficient capacity for its
current needs.

Location
Los Gatos, California, USA
Centennial, Colorado, USA
Nashville, Tennessee, USA
West Sacramento, California, USA
San Marcos, Texas, USA
Tulsa, Oklahoma, USA
Milwaukee, Wisconsin, USA
Racine, Wisconsin, USA
Brno, Czech Republic
Neuffen, Germany
Nogales, Mexico
Luleå, Sweden
Bern, Switzerland

Principal use

Software development
Distribution
Distribution
Distribution
Distribution
Manufacturing
Manufacturing and offices
Manufacturing and offices
Manufacturing
Manufacturing and offices
Manufacturing
Electronic development
Manufacturing

Approximate
area
(square feet)

3,600 (1)
12,000
8,400 (2)
11,400 (3)
14,800 (4)
59,500
324,200
134,300 (5)
27,800
24,700
181,300

7,000 (6)
16,800 (7)

(1) Leased facility. Lease term expires November 30, 2021.
(2) Leased facility. Lease term expires June 30, 2022.
(3) Leased facility. Lease term expires October 31, 2024.
(4) Leased facility. Lease term expires November 30, 2021.
(5) Leased facility. Lease term expires December 31, 2025.
(6) Leased facility. Lease term expires June 30, 2025.
(7) Building is owned, but land is leased from the government, as required. Lease term expires October 18, 2021.

ITEM 3.

LEGAL PROCEEDINGS

In the normal course of business, the Company is named in legal proceedings from time to time. There are currently no

material legal proceedings pending with respect to the Company.

The Company is subject to contingencies related to environmental laws and regulations. Information about the Company's
compliance with environmental regulations is included in Part I, Item 1 of this 2019 Annual Report on Form 10-K under the heading
“Environmental Protection.”

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND

PART II

ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND
The Company’s Common Stock is traded on the New York Stock Exchange (NYSE Trading Symbol: BMI). At February 3,

The Company’s Common Stock is traded on the New York Stock Exchange (NYSE Trading Symbol: BMI). At February 3,
2020, there were approximately 788 holders of the Company’s Common Stock. Other information required by this Item is set forth in
Note 2 “Common Stock” and Note 10 “Unaudited: Quarterly Results of Operations, Common Stock Price and Dividends” in the Notes
The Company’s Common Stock is traded on the New York Stock Exchange (NYSE Trading Symbol: BMI). At February 3,
to Consolidated Financial Statements in Part II, Item 8 of this 2019 Annual Report on Form 10-K.

2020, there were approximately 788 holders of the Company’s Common Stock. Other information required by this Item is set forth in
Note 2 “Common Stock” and Note 10 “Unaudited: Quarterly Results of Operations, Common Stock Price and Dividends” in the Notes
to Consolidated Financial Statements in Part II, Item 8 of this 2019 Annual Report on Form 10-K.
2020, there were approximately 788 holders of the Company’s Common Stock. Other information required by this Item is set forth in
Note 2 “Common Stock” and Note 10 “Unaudited: Quarterly Results of Operations, Common Stock Price and Dividends” in the Notes
The following information in Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be
The following information in Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be
to Consolidated Financial Statements in Part II, Item 8 of this 2019 Annual Report on Form 10-K.
“filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934,
“filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934,
as amended, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be deemed to be
as amended, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be deemed to be
The following information in Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
“filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934,
amended, except to the extent the Company specifically incorporates it by reference into such a filing.
amended, except to the extent the Company specifically incorporates it by reference into such a filing.
as amended, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
The following graph compares on a cumulative basis the yearly percentage change since January 1, 2015 in (a) the total
amended, except to the extent the Company specifically incorporates it by reference into such a filing.
shareholder return on the Company’s Common Stock with (b) the total return on the Russell 2000® Index, and (c) the total return of
shareholder return on the Company’s Common Stock with (b) the total return on the Russell 2000® Index, and (c) the total return of
the peer group made up of 14 companies, including the Company, in similar industries and with similar market capitalization. The
the peer group made up of 14 companies, including the Company, in similar industries and with similar market capitalization. The
The following graph compares on a cumulative basis the yearly percentage change since January 1, 2015 in (a) the total
Russell 2000® Index is a trademark of the Frank Russell Company, and is used herein for comparative purposes in accordance with
Russell 2000® Index is a trademark of the Frank Russell Company, and is used herein for comparative purposes in accordance with
shareholder return on the Company’s Common Stock with (b) the total return on the Russell 2000® Index, and (c) the total return of
Securities and Exchange Commission regulations.
Securities and Exchange Commission regulations.
the peer group made up of 14 companies, including the Company, in similar industries and with similar market capitalization. The
Russell 2000® Index is a trademark of the Frank Russell Company, and is used herein for comparative purposes in accordance with
The graph assumes $100 invested on December 31, 2014. It further assumes the reinvestment of dividends. The returns of
Securities and Exchange Commission regulations.
each component company in the peer groups have been weighted based on such company's relative market capitalization.

The graph assumes $100 invested on December 31, 2014. It further assumes the reinvestment of dividends. The returns of

The following graph compares on a cumulative basis the yearly percentage change since January 1, 2015 in (a) the total

each component company in the peer groups have been weighted based on such company's relative market capitalization.

The graph assumes $100 invested on December 31, 2014. It further assumes the reinvestment of dividends. The returns of

each component company in the peer groups have been weighted based on such company's relative market capitalization.

December 31

Badger Meter, Inc.

December 31

Russell 2000 Index
Badger Meter, Inc.

Russell 2000 Index

Peer Group
Russell 2000 Index

Peer Group

2016

2018

2017

2014

2016

2014

2015

2014

0.03 % 27.71 % 30.94 %

Return %
Cumulative $ $ 100.00 $ 100.03 $ 127.75 $ 167.28 $ 174.14 $ 232.39
Return %
Cumulative $ $ 100.00 $ 95.59 $ 115.95 $ 132.94 $ 118.30 $ 148.49
Return %
Cumulative $ $ 100.00 $ 92.70 $ 123.38 $ 148.19 $ 118.28 $ 159.07

2018
2015
Return %
4.10 % 33.45 %
0.03 % 27.71 % 30.94 %
Cumulative $ $ 100.00 $ 100.03 $ 127.75 $ 167.28 $ 174.14 $ 232.39
2018
2016
2015
2017
Return %
Return %
-4.41 % 21.31 % 14.65 % -11.01 % 25.52 %
Cumulative $ $ 100.00 $ 95.59 $ 115.95 $ 132.94 $ 118.30 $ 148.49
Cumulative $ $ 100.00 $ 100.03 $ 127.75 $ 167.28 $ 174.14 $ 232.39
Return %
Return %
-7.30 % 33.10 % 20.10 % -20.18 % 34.49 %
Cumulative $ $ 100.00 $ 92.70 $ 123.38 $ 148.19 $ 118.28 $ 159.07
Cumulative $ $ 100.00 $ 95.59 $ 115.95 $ 132.94 $ 118.30 $ 148.49
Return %
Cumulative $ $ 100.00 $ 92.70 $ 123.38 $ 148.19 $ 118.28 $ 159.07

-7.30 % 33.10 % 20.10 % -20.18 % 34.49 %
-4.41 % 21.31 % 14.65 % -11.01 % 25.52 %

-4.41 % 21.31 % 14.65 % -11.01 % 25.52 %
4.10 % 33.45 %
0.03 % 27.71 % 30.94 %

-7.30 % 33.10 % 20.10 % -20.18 % 34.49 %

2019
4.10 % 33.45 %

2019

12
12

The Peer Group consists of A. O. Smith Corp. (AOS), Badger Meter, Inc. (BMI), CIRCOR International, Inc. (CIR), ESCO

Technologies Inc. (ESE), Franklin Electric Co, Inc. (FELE), Gorman-Rupp Company (GRC), Itron, Inc. (ITRI), Lindsay Corporation
(LNN), Perma-Pipe International Holdings, Inc. (PPIH), Mueller Water Products (MWA), Northwest Pipe Company (NWPX),
Rexnord Corporation (RXN), Helios Technologies (SNHY) and Watts Water Technologies, Inc. (WTS).

In February 2017, the Board of Directors authorized the repurchase of up to 400,000 shares of the Company’s Common
Stock through February 2020. The following table provides information about the Company's purchases during the quarter ended
December 31, 2019 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

October 1, 2019 - October 31, 2019
November 1, 2019 - November 30, 2019
December 1, 2019 - December 31, 2019
Total as of December 31, 2019

Total number
of shares
purchased

Average price
paid per share

Total number
of shares
purchased as
part of a
publicly
announced
program

Maximum
number of
shares that
may yet be
purchased
under the
program

— $
—
29,297
29,297

—
—
63.09

267,221
267,221
296,518
296,518

132,779
132,779
103,482
103,482

On February 14, 2020, the Board of Directors approved a new share repurchase authorization of up to 400,000 shares of the

Company’s Common Stock through February 2023.

ITEM 6.

SELECTED FINANCIAL DATA

BADGER METER, INC.

Years ended December 31,

$
$

$
$
$
$
$

(In thousands
except per share data)
Operating results
Net sales
Research and
development
Earnings before
income taxes
Net earnings
Net earnings to sales
Per Common share (1)
Basic earnings per share $
Diluted earnings per
share
Cash dividends
declared:
Common Stock
Price range - high
Price range - low
Closing price
Book value *
Shares outstanding at
year- end (1)
Common Stock
Financial position
Primary working
capital *
Primary working
capital as a percent
of net sales *
Net cash provided by
operations
Capital expenditures
Total assets
Short-term and current
portion of long-term
debt
Long-term debt
Shareholders' equity
Debt as a percent of
total debt and equity *
Return on shareholders'
equity *
Price/earnings ratio *

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

$ 424,625 433,732 402,440 393,761 377,698 364,768 334,122 319,660 262,915 276,634

11,930

11,095

10,596

10,597

10,645

9,496

10,504

9,567

8,086

7,164

61,607
47,177
11.1 %

35,852
27,790
6.4 %

54,833
34,571
8.6 %

49,844
32,295
8.2 %

41,152
25,938
6.9 %

44,912
29,678
8.1 %

38,009
24,617
7.4 %

43,471
28,032
8.8 %

27,349
19,161
7.3 %

44,438
28,662

10.4 %

1.63

0.96

1.20

1.12

0.90

1.04

0.86

0.98

0.64

0.96

1.61

0.95

1.19

1.11

0.90

1.03

0.85

0.98

0.64

0.96

0.64
66.64
47.59
64.93
11.37

0.56
57.12
41.00
49.21
10.42

0.49
52.10
34.40
47.80
9.53

0.43
39.36
26.40
36.95
8.80

0.39
32.94
25.82
29.30
8.00

0.37
30.46
23.24
29.68
7.41

0.35
28.18
20.94
27.25
6.82

0.33
24.30
14.65
23.71
5.98

0.30
22.74
13.43
14.72
5.93

0.26
22.75
16.29
22.11
5.60

29,119

29,050

28,922

28,824

28,628

30,246

30,096

$ 111,790 124,635 114,781 119,169 116,084 109,682

92,518

91,030

79,239

77,586

26.4 %

28.7 %

28.5 %

30.3 %

30.7 %

30.1 %

27.7 %

28.5 %

30.1 %

28.0 %

80,714
7,496

18,396
$
$
9,238
$ 421,893 392,691 391,727 349,699 355,480 341,158 316,058 290,453 218,910 215,864

60,350
8,643

34,802
8,202

35,831
19,766

31,317
5,336

49,751
15,069

56,185
10,596

35,735
12,332

34,818
14,311

4,480
n/a

12,878
$
$
n/a
$ 331,068 303,503 277,452 256,209 232,275 214,331 196,563 171,247 179,281 168,383

18,060
n/a

66,730
n/a

71,360
n/a

44,550
n/a

37,950
n/a

75,927
n/a

70,045
n/a

1,790
n/a

1.3 %

5.6 %

13.8 %

12.9 %

23.5 %

26.2 %

26.3 %

28.0 %

1.0 %

7.1 %

14.2 %
40.3

9.2 %
51.8

12.5 %
40.2

12.6 %
33.3

11.2 %
32.6

13.8 %
28.8

12.5 %
32.1

16.4 %
24.3

10.7 %
23.2

17.0 %
23.2

(1) All per share amounts and number of shares outstanding have been restated to reflect the 2016 2-for-1 stock split for the periods

presented.

* Description of calculations as of the applicable year end:

Book value per share equals total shareholders' equity at year-end divided by the number of common shares outstanding.

Primary working capital equals receivables plus inventories minus payables.

Primary working capital as a percent of net sales equals receivables plus inventories minus payables, divided by net sales.

Debt as a percent of total debt and equity equals total debt (the sum of short-term debt, current portion of long-term debt and
long-term debt) divided by the sum of total debt and total shareholders' equity at year-end.

Return on shareholders' equity equals net earnings divided by total shareholders' equity at year-end.

Price/earnings ratio equals the year-end closing stock price for common stock divided by diluted earnings per share.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

BUSINESS DESCRIPTION AND OVERVIEW

Municipal water, the largest sales category, is comprised of either mechanical or static (ultrasonic) water meters along with
the related radio and software technologies and services used by municipal water utilities as the basis for generating their water and
wastewater revenues. The largest geographic market for the Company’s municipal water products is North America, primarily the
United States, because most of the Company's meters are designed and manufactured to conform to standards promulgated by the
American Water Works Association. The majority of water meters sold by the Company continue to be mechanical in nature;
however, ultrasonic meters are an increasing portion of the water meters sold by the Company and in the industry due to a variety of
factors, including their ability to maintain a high level of measurement accuracy over their useful life. Providing ultrasonic water
meter technology, combined with advanced radio technology, provides the Company with the opportunity to sell into other
geographical markets, for example the Middle East and Europe.

The flow instrumentation product line includes meters and valves sold worldwide to measure and control fluids going
through a pipe or pipeline including water, air, steam, oil, and other liquids and gases. These products are used in a variety of
industries and applications, with the Company’s primary market focus being water/wastewater; heating, ventilating and air
conditioning (HVAC); oil and gas, and chemical and petrochemical. Flow instrumentation products are generally sold to original
equipment manufacturers as the primary flow measurement device within a product or system, as well as through manufacturers’
representatives.

The ORION branded family of radio endpoints provides water utilities with a range of industry-leading options for meter

Critical to the water metering ecosystem is information and analytics. The Company’s BEACON Advanced Metering

Water meter replacement and the adoption and deployment of new technology comprise the majority of water meter product

sales, including radio products. To a much lesser extent, housing starts also contribute to the new product sales base. Over the last
decade, there has been a growing trend in the conversion from manually read water meters to meters with radio technology. This
conversion rate is accelerating, with the Company estimating that approximately just over 60% of water meters installed in the United
States have been converted to a radio solution technology.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

BUSINESS DESCRIPTION AND OVERVIEW

Badger Meter is an innovator in flow measurement, control and related communication solutions, serving water utilities,

municipalities, and commercial and industrial customers worldwide. The Company’s products measure water, oil, chemicals and

other fluids, and are known for accuracy, long-lasting durability and for providing valuable and timely measurement data through

various methods. The Company’s product lines fall into two categories: sales of water meters, radios and related technologies to

municipal water utilities (municipal water) and sales of meters, valves and other products for industrial applications in water,

wastewater, and other industries (flow instrumentation). The Company estimates that nearly 90% of its products are used in water

related applications.

Municipal water, the largest sales category, is comprised of either mechanical or static (ultrasonic) water meters along with

the related radio and software technologies and services used by municipal water utilities as the basis for generating their water and

wastewater revenues. The largest geographic market for the Company’s municipal water products is North America, primarily the

United States, because most of the Company's meters are designed and manufactured to conform to standards promulgated by the

American Water Works Association. The majority of water meters sold by the Company continue to be mechanical in nature;

however, ultrasonic meters are an increasing portion of the water meters sold by the Company and in the industry due to a variety of

factors, including their ability to maintain a high level of measurement accuracy over their useful life. Providing ultrasonic water

meter technology, combined with advanced radio technology, provides the Company with the opportunity to sell into other

geographical markets, for example the Middle East and Europe.

The flow instrumentation product line includes meters and valves sold worldwide to measure and control fluids going

through a pipe or pipeline including water, air, steam, oil, and other liquids and gases. These products are used in a variety of

industries and applications, with the Company’s primary market focus being water/wastewater; heating, ventilating and air

conditioning (HVAC); oil and gas, and chemical and petrochemical. Flow instrumentation products are generally sold to original

equipment manufacturers as the primary flow measurement device within a product or system, as well as through manufacturers’

representatives.

Municipal water meters (both residential and commercial) are generally classified as either manually read meters or remotely

read meters via radio technology. A manually read meter consists of a water meter and a register that provides a visual totalized meter

reading. Meters equipped with radio technology (endpoints) receive flow measurement data from battery-powered encoder registers

attached to the water meter, which is encrypted and transmitted via radio frequency to a receiver that collects and formats the data

appropriately for water utility usage and billing systems. These remotely read systems are classified as either automatic meter reading

(AMR) systems, where a vehicle equipped for meter reading purposes, including a radio receiver, computer and reading software,

collects the data from utilities’ meters; or advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network

(either fixed or cellular) of data collectors or gateway receivers that are able to receive radio data transmission from the utilities’

meters. AMI systems eliminate the need for utility personnel to drive through service territories to collect data from the meters. These

systems provide the utilities with more frequent and diverse data from their meters at specified intervals.