Badger Meter Annual Report 2021

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FY2021 Annual Report · Badger Meter

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2021 BADGER METER
ANNUAL REPORT

2021 BADGER METER ANNUAL REPORT | 1

OUR
COMPANY

With more than a century of water

technology innovation, Badger Meter
(NYSE:BMI) is a global provider

of industry leading water solutions

encompassing flow measurement,

quality and other system parameters.

These offerings provide our customers

with the data and analytics essential to

optimize their operations and contribute

to the sustainable use and protection of
the world’s most precious resource.

2 | 2021 BADGER METER ANNUAL REPORT

2020

2021

% Change

PERFORMANCE DATA

December 31,

Operations (dollars in thousands)

Net Sales

Operating Earnings

Net Earnings

Diluted per Common Share Amounts

Diluted Earnings

Cash Dividends

Year-End Financial Position (dollars in thousands)

Total Assets
Net Cash (Debt)(1)

Shareholders’ Equity

Other
Free Cash Flow(2)

Number of Employees

$ 425,544

$ 65,156

$ 49,343

$ 1.69

$ 0.70

$ 471,217

$ 72,273

$ 361,259

$ 80,519

1,602

$ 505,198

$ 78,723

$ 60,884

$ 2.08

$ 0.76

$ 530,818

$ 87,174

$ 403,070

$ 80,764

1,837

$600

$500

$400

$300

$200

$100

$70

$505.2

$60

$60.9

$50

$40

$30

$20

$10

'17

'18

'19

'20

'21

Adjusted Net Earnings (2)
(in millions)

'17

'18

'19

'20

'21

Net Sales
(in millions)

$2.40

$2.00

$1.60

$1.20

$0.80

$0.40

$0.00

$2.08

'17

'18

'19

'20

'21

$0.80

$0.60

$0.40

$0.20

$0.00

Adjusted Diluted EPS (2)

Dividends per Share

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

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

2021 BADGER METER ANNUAL REPORT | 3

18.7

20.8

23.4

23.1

8.6

$0.76

'17

'18

'19

'20

'21

OUR SOLUTIONS

Badger Meter offers a wide range of smart water solutions that contribute to the sustainable use and protection of the world’s most
precious resource. For more than a century, cities and businesses have utilized our innovative and trusted offerings to enhance
operational efficiency and conserve water while making it more affordable, clean and resilient.

UTILITY WATER SOLUTIONS
SMART WATER IS BADGER METER
Utilities across the globe are implementing smart water technology to streamline processes, increase operational efficiencies and
save water. Our end-to-end smart water solutions provide actionable data and analytics from a connected network of instruments,
sensors and devices, empowering users to resourcefully use and conserve water.

Utilities are leveraging our highly reliable, infrastructure-free cellular network offerings to make their data communication more
efficient, scalable and secure. We offer fully integrated smart water solutions that provide near real-time access to detailed water
usage data and leak detection, so utilities can improve efficiency, reduce water loss and enhance event management.

Our smart water portfolio also includes real-time water quality
monitoring solutions through the combined offerings of
Badger Meter’s s::can and Analytical Technology, Inc. (ATi)
companies. The combination of optical and electrochemical
sensing instruments provides online, inline and reagent-free
solutions enabling distributed and real-time water quality
monitoring. By monitoring a variety of parameters within the
water distribution network, utilities increase water protection
and security.

CHOICE MATTERS

Choice matters when it comes to selecting a smart water solution. Badger Meter offers a

comprehensive product line for residential, commercial and fire service applications. Our

experts help utilities choose the technology that best fits their needs.

One of our leading meter families—E-Series® Ultrasonic meters—continues to evolve

with advanced technology and an expanding size range. Because these meters have
no moving parts, they provide greater extended low-flow accuracy and are virtually

maintenance free. We pride ourselves on having the right product for any application.

EMPOWERED INSIGHTS

Our ORION® Cellular endpoints utilize existing cellular infrastructure to

efficiently and securely deliver data to the utility. This proven, innovative
technology eliminates the need for standard utility-owned fixed network
infrastructure, allows for rapid and flexible deployment, and decreases
ongoing maintenance when paired with our BEACON® Software as a

Service (SaaS) solution.

4 | 2021 BADGER METER ANNUAL REPORT

BEACON SaaS offers a comprehensive and tailorable digital software solution
that combines data, communications and analytics to enable our customers to be
more efficient, effective and sustainable throughout the water eco-system.

The integrated EyeOnWater® consumer engagement tool gives utility customers the
power to manage their water use through easy-to-understand consumption graphs and
configurable leak notifications, providing timely, visual access to their water usage behavior.

CLIMATE CHANGE
RESILIENCY

Changing weather patterns
are causing extreme weather
events throughout the country.
In February 2021, Monroe,
Louisiana, experienced back-
to-back winter storms, which
left thousands of customers
with frozen pipes and burst
lines. Normally, crews would be
deployed into the field to find
the leak site—but BEACON
SaaS allowed the city to find
issues remotely and alert
customers without delay. In fact,
identifying a single leak after the
storm saved the city more than
400,000 gallons of water.

COMMERCIAL & INDUSTRIAL SOLUTIONS
Our flow instrumentation offerings provide application-specific solutions focused on water,
wastewater and HVAC/sustainability. These product and software solutions deliver accurate,
timely and dependable data essential for product quality, cost management, regulatory
compliance and safe, sustainable operations.

From real-time industrial effluent monitoring for waste water compliance and source water
monitoring for efficient drinking water treatment to ESG-focused water stewardship programs,
we build solutions utilizing our AquaCUE® SaaS digital software solutions, leading metering
technologies, and low-maintenance water quality monitoring solutions.

2021 BADGER METER ANNUAL REPORT | 5

A MESSAGE TO OUR SHAREHOLDERS

I am incredibly pleased with our record performance
in 2021 and our progress in enabling customers to
preserve and protect the world’s most precious

resource. We surpassed a meaningful milestone
in 2021, with sales exceeding the $500 million

mark for the first time.

Kenneth C. Bockhorst
Chairman, President and

Chief Executive Officer

There is no question that the operating environment of the past two years has been the most challenging of my career. The
public health and economic crisis brought on by the pandemic persists, while elevated demand has led to raw material volatility,
supply chain constraints, transportation complexities and widespread inflation. Amid these varied challenges, we experienced
extraordinary demand for our solutions and our team operated with steadiness and agility, adapting to ever-evolving conditions.
This effective execution during complicated and uncertain times led to our strong performance. These results clearly demonstrate
the resiliency of Badger Meter’s business and the market benefits of our innovative water technology portfolio.

The underlying drivers of demand, including technology adoption, continue to strengthen. Many of the secular demand themes
have been in place for some time—aging infrastructure and workforce, regulation and compliance, and conservation being among
them. Additional dynamics in the current environment include the “great resignation,” accelerating retirements, climate change/
severe weather events and cyber/data security.

To address these challenges, extracting value from real-time data will be critical for utility, wastewater and industrial operators
alike. Upgrading to analytics-based software like BEACON SaaS, which will interface flow data, along with pressure, temperature
and water quality, as well as integrate with other legacy data sources, will streamline how data is consumed and understood.
This in turn will empower utilities to find greater levels of efficiency within their operations. BEACON SaaS is a tailorable digital
solution, allowing utilities to adopt and evolve based on their readiness, issues, priorities and budgets. We are also expanding the
functionality of our EyeOnWater software app that enhances consumer engagement.

These digital solutions are enabled by our proven, industry-leading ORION Cellular endpoint with 15-minute interval data, two-way
communication, unparalleled coverage and robust battery life. This infrastructure-free solution provides the benefits of flexibility
and functionality.

We successfully integrated the strategic acquisitions of s::can and ATi in 2021, establishing the foundation for our water quality
monitoring portfolio. Incorporating real-time water quality parameters from a low maintenance, reagent-free solution, adds to the
benefits of security, resiliency and efficiency we can provide across the entire water cycle—including source water, wastewater
treatment plants and drinking water distribution networks.

6 | 2021 BADGER METER ANNUAL REPORT

ADVANCING OUR COMMITMENT TO ENVIRONMENTAL, SOCIAL
AND GOVERNANCE (ESG)
Managing the ESG risks and opportunities facing Badger Meter is fundamental to the resiliency of our
business and our ability to adapt and grow. Our strategy is designed to proactively identify and mitigate
ESG risks and capture opportunities that benefit our stakeholders. In 2021, we continued to make
progress on our ESG journey. In summary:

• We advanced ESG initiatives and disclosures throughout our business by incorporating

ESG criteria into our annual performance “SMART” goals, emphasizing employee safety,
minimizing regrettable turnover and establishing our first greenhouse gas (GHG) emissions
reduction target. Goals are cascaded throughout the organization to ensure alignment and
accountability.

Safety remains a top ESG priority. Our global Total Case Incident Rate (TCIR)
was 0.75 in 2021, compared to 0.65 in 2020 and 0.98 in 2019. Lost time
incidents declined in 2021, with an uptick in ergonomic events, which will be
a focus area for education and improvement going forward. While we are
proud of our performance relative to industry averages, we recognize
there is more work to be done, as zero remains our ultimate target. We
will continue to work toward enhancing our company-wide environmental,
health and safety practices so safety remains paramount for everyone.

Consistent with the broader labor market, our regrettable turnover increased
to 9.6% in 2021, compared to 4.3% in 2020 and 7.6% in 2019. Increased labor
competition in the U.S. was the primary driver of the increase. We implemented a
global engagement survey in 2021 as part of our continuous improvement process
to enable positive change and increased employee engagement.

° GHG emission intensity declined year-over-year in 2021, the first year of our “15%
reduction by 2030” goal. Efficient lighting and equipment projects were the primary
drivers of the decrease in intensity.

• We made enhancements to our periodic ESG reporting to stakeholders, increasing transparency and

comparability of our reporting in alignment with the Sustainability Accounting Standards Board (SASB),
the Global Reporting Initiative (GRI) and United Nations Sustainable Development Goals (SDGs).

• We issued a Report on Board Diversity, providing greater visibility into our diversity journey. Badger Meter is
committed to continuous improvement in fostering diversity and inclusion at the Company and on its Board of
Directors. The report outlines our actions and ongoing commitments regarding our diversity approach and the
concrete actions we continue to undertake.

2021 BADGER METER ANNUAL REPORT | 7

Embedding material ESG practices and thinking into the business increases accountability and separates good
intentions from meaningful actions. Our ESG strategy is shaped by ongoing stakeholder engagement to help

determine the critical issues that may affect our business—and where we can make a difference. Maintaining
a close understanding of these issues will remain key to ensuring that we deliver on our vision to preserve

and protect the world’s most precious resource.

RECORD FINANCIAL RESULTS
Despite the many and varied macro-economic headwinds of 2021, including supply chain shortages,
logistics challenges and inflation, it was our best year ever for sales and earnings, surpassing a

sales milestone of $500 million.

Strong demand for our innovative smart water solutions, combined with disciplined operating

execution, enabled us to differentiate our performance, enhance our competitive position and

deliver for our customers.

19%

21.1%

23%

133%

Sales
Growth

EBITDA
Margin

EPS
Growth

Free
Cash Flow
Conversion

•

Total sales in 2021 were $505.2 million, an increase of 19% compared to $425.5 million in
2020. Sales into the utility water sector grew 21%. Excluding the sales impact of the s::can
and ATi water quality acquisitions, core utility water sales growth was 9%, illustrating the
continued market adoption of smart water AMI solutions and BEACON SaaS offerings. Flow
instrumentation sales increased 11% over the COVID-impacted 2020.

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) of $106.5 million(1)
increased 18% year-over-year, despite supply chain disruptions that impacted operations
as well as widespread inflation. Favorable product and acquisition mix, higher volumes and
pricing actions enabled us to maintain strong EBITDA margins at 21.1%. (1)

•

Fiscal 2021 EPS was $2.08, a 23% increase from the $1.69 delivered in 2020.

• We generated free cash flow of $80.8 million(1), representing 133%(1) conversion of
net earnings into cash due to our strong earnings foundation and solid working
capital management.

8 | 2021 BADGER METER ANNUAL REPORT

(1) See last page for reconciliation of GAAP to Non-GAAP financial metrics.

DISCIPLINED CAPITAL ALLOCATION DRIVING
LONG-TERM RETURNS
Badger Meter maintains a clear and consistent capital allocation framework. In addition to a strong balance
sheet, we generate excellent cash flow, which we will continue to deploy in a disciplined manner, driving
strong returns for our shareholders. Our priorities include organic growth, dividends and accretive
acquisitions.

•

In 2021, we increased our annual dividend per share by 11%, marking 29 consecutive years
of annual dividend per share increases. This use of cash is aligned with our balanced capital
allocation objectives.

• We deployed $44 million in early January 2021 for ATi, the second of two accretive,
strategic acquisitions that extend and augment our offerings in the water sector with
real-time water quality monitoring technologies.

Moving forward, we will continue to generate and deploy cash efficiently to accelerate
growth and create strong returns for shareholders, including actively identifying and
pursuing strategic acquisitions.

FINAL THOUGHTS
Looking ahead to fiscal 2022, I am filled with confidence. We have a proven strategy
and playbook, incredible momentum and a winning culture. Badger Meter is staying
on offense, looking to extend our leadership position in smart water solutions. I have
always been proud of the hard work, focus and commitment of our employees. During
this exceptional time in our history, our team will be remembered for nimbleness, agility and
commitment to serving customers. We know 2022 will present new challenges, but it will also
present great opportunities. Badger Meter is poised to accelerate our market leadership and
provide strong shareholder returns while protecting the world’s most precious resource.

Sincerely –

Ken Bockhorst
Chairman, President and
Chief Executive Officer

2021 BADGER METER ANNUAL REPORT | 9

CORPORATE INFORMATION

BOARD OF DIRECTORS
Todd A. Adams2
Chairman, President and Chief Executive

Gale E. Klappa (Lead Director)2, 3
Executive Chairman, WEC Energy Group

Tessa M. Meyers1,3
Global Vice President – Software and Control,

Committees of the Board:

1. Audit and Compliance

Officer, Zurn Water Solutions

Kenneth C. Bockhorst
Chairman, President and Chief Executive

Officer, Badger Meter, Inc.

Henry F. Brooks1
President – Power and Controls,

Collins Aerospace

Gail A. Lione2, 3
Senior Counsel, Dentons; Retired Executive,

Harley-Davidson, Inc.

James W. McGill2
Retired Executive, Eaton Corporation

Rockwell Automation

James F. Stern1, 3
Executive Vice President, General Counsel

and Secretary, A. O. Smith Corporation

Glen E. Tellock1
Retired Chief Executive Officer,

Lakeside Foods

2. Compensation and Human Resources

3. Corporate Governance and Sustainability

EXECUTIVE OFFICERS
Kenneth C. Bockhorst
Chairman, President and

William R.A. Bergum
Vice President – General Counsel

Chief Executive Officer

and Secretary

Gregory M. Gomez
Vice President – Global Flow Instrumentation,

International Water and Business

Development

Karen M. Bauer
Vice President – Investor Relations,

Corporate Strategy and Treasurer

Fred J. Begale
Vice President – Engineering

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

Sheryl L. Hopkins
Vice President – Human Resources

William J. Parisen
Vice President – Global Operations

Kimberly K. Stoll
Vice President – Sales and Marketing

Matthew L. Stuyvenberg
Vice President – Water Quality

Daniel R. Weltzien
Vice President – Controller

Robert A. Wrocklage
Senior Vice President – Chief

Financial Officer

Form 10-K Report/Shareholder Information
The 2021 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.

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

10 | 2021 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, 2021
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
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 the last business day of the registrant’s most recently completed second fiscal quarter: As
of June 30, 2021, the aggregate market value of the shares of Common Stock held by non-affiliates of the Registrant was approximately $2.85 billion. For purposes of
this calculation only, (i) shares of Common Stock are deemed to have a market value of $98.12 per share, the closing price of the Common Stock as reported on the
New York Stock Exchange on June 30, 2021, and (ii) each of the Company's executive officers and directors is deemed to be an affiliate of the Company.

As of February 2, 2022, there were 29,249,448 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 2022 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,
2021.

ITEM 1.

BUSINESS

PART I

Badger Meter, Inc. (the “Company”) is a leading innovator, manufacturer and marketer of products incorporating flow
measurement, quality, control and other system solutions serving markets worldwide. The Company was incorporated in 1905.

Throughout this 2021 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

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water
solutions encompassing flow measurement, quality and other system parameters. These offerings provide customers with the data and
analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most precious
resource. The Company’s flow measurement products measure water 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 water quality
monitoring solutions include optical sensing and electrochemical instruments that provide real-time, on-demand data parameters. The
Company’s product lines fall into two categories: sales of water meters, radios, software and related technologies, and water quality
monitoring solutions to water utilities (utility water) and sales of meters and other sensing instruments, valves, software and other
solutions for industrial applications in water, wastewater, and other industries (flow instrumentation). The Company estimates that
over 90% of its products are used in water related applications.

Utility 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 water utilities as the basis for generating their water and wastewater
revenues, enabling operating efficiencies and engaging with their end consumers. It further comprises other sensor technology used in
the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used to detect leaks in the
distribution piping system and to monitor various water quality parameters throughout the distribution system. The largest geographic
market for the Company’s utility 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, static 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, Europe and Southeast Asia.

The flow instrumentation product line primarily serves water applications throughout the broader industrial markets. This

product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids going
through a pipe or pipeline including water, air, steam, 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)
and corporate sustainability. 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.

Utility 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
2

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, quality, control and other system solutions serving markets worldwide. The Company was incorporated in 1905.

Throughout this 2021 Annual Report on Form 10-K, the words “we,” “us” and “our” refer to the Company.

2021.

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

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water

solutions encompassing flow measurement, quality and other system parameters. These offerings provide customers with the data and

analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most precious

resource. The Company’s flow measurement products measure water 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 water quality

monitoring solutions include optical sensing and electrochemical instruments that provide real-time, on-demand data parameters. The

Company’s product lines fall into two categories: sales of water meters, radios, software and related technologies, and water quality

monitoring solutions to water utilities (utility water) and sales of meters and other sensing instruments, valves, software and other

solutions for industrial applications in water, wastewater, and other industries (flow instrumentation). The Company estimates that

over 90% of its products are used in water related applications.

Utility 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 water utilities as the basis for generating their water and wastewater

revenues, enabling operating efficiencies and engaging with their end consumers. It further comprises other sensor technology used in

the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used to detect leaks in the

distribution piping system and to monitor various water quality parameters throughout the distribution system. The largest geographic

market for the Company’s utility 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, static 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, Europe and Southeast Asia.

The flow instrumentation product line primarily serves water applications throughout the broader industrial markets. This

Utility 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
3
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 the 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 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 (ME) for migratable 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.

Information and analytics are critical to the water metering ecosystem. The Company’s BEACON® software suite improves

utility visibility to their water and water usage. BEACON 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. There continues
to be a growing trend in the conversion from manually read water meters to meters with radio technology, and for AMR systems to be
upgraded to AMI. The Company estimates that approximately 70% of water meters installed in the United States have been converted
to some form of radio solution technology.

In addition to our water utility flow measurement solutions, the Company provides various water quality monitoring

solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters including turbidity, pH,
chlorine, nitrates and approximately 40 others. Utilizing these solutions, water quality can be monitored continually or periodically
throughout the network from its original source to the point in which it is recycled and returned. Real-time water quality parameters
enhance the scope of actionable data for water utilities to improve operational security, awareness and efficiency.

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 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 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®, ModMag®, 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.

In addition, the Company provides various water quality monitoring solutions utilizing optical sensors and electrochemical

instruments that measure a variety of parameters providing industrial customers with both process and discharge water quality
monitoring capabilities.

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 the 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 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 (ME) for migratable 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.

Information and analytics are critical to the water metering ecosystem. The Company’s BEACON® software suite improves

utility visibility to their water and water usage. BEACON 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. There continues

to be a growing trend in the conversion from manually read water meters to meters with radio technology, and for AMR systems to be

upgraded to AMI. The Company estimates that approximately 70% of water meters installed in the United States have been converted

to some form of radio solution technology.

In addition to our water utility flow measurement solutions, the Company provides various water quality monitoring

solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters including turbidity, pH,

chlorine, nitrates and approximately 40 others. Utilizing these solutions, water quality can be monitored continually or periodically

throughout the network from its original source to the point in which it is recycled and returned. Real-time water quality parameters

enhance the scope of actionable data for water utilities to improve operational security, awareness and efficiency.

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 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 flow metering technologies for industrial markets, the Company offers one of the

In addition, the Company provides various water quality monitoring solutions utilizing optical sensors and electrochemical

instruments that measure a variety of parameters providing industrial customers with both process and discharge water quality
monitoring capabilities.

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 utility 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 utility 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 utility water meters
include Xylem, Inc. (“Sensus”) and Roper Technologies, Inc. (“Neptune”). Together with Badger Meter, it is estimated that these
companies sell in excess of 85% of the water meters in the North American market. The remaining market share is comprised of
competitors such as Master Meter, Inc., Mueller Water Products, Inc., Kamstrup A/S and Diehl Metering GmbH depending on the
metering technology.

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

Technologies), Neptune and Sensus.

The Company’s primary competitors for water quality monitoring solutions vary depending on the products and
offerings. Traditional water quality monitoring relies on reagents or test kits, along with lab samples with waiting time for results.
The number and scale of competition can be extensive. The Company’s online, real-time water quality monitoring capabilities
generally compete with smaller, specialized firms.

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 and HVAC.

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 $14.7 million in 2021, $11.6 million in 2020 and $11.9 million in
2019. 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

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 utility 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 utility 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 utility water meters

include Xylem, Inc. (“Sensus”) and Roper Technologies, Inc. (“Neptune”). Together with Badger Meter, it is estimated that these

companies sell in excess of 85% of the water meters in the North American market. The remaining market share is comprised of

competitors such as Master Meter, Inc., Mueller Water Products, Inc., Kamstrup A/S and Diehl Metering GmbH depending on the

metering technology.

Technologies), Neptune and Sensus.

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

The Company’s primary competitors for water quality monitoring solutions vary depending on the products and

offerings. Traditional water quality monitoring relies on reagents or test kits, along with lab samples with waiting time for results.

The number and scale of competition can be extensive. The Company’s online, real-time water quality monitoring capabilities

generally compete with smaller, specialized firms.

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 and HVAC.

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 $14.7 million in 2021, $11.6 million in 2020 and $11.9 million in

2019. 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

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 2021, 2020 and
2019 were not material.

Government Regulations

The Company’s operations worldwide are subject to various federal, state, local and foreign laws and regulations. Whether at
the federal, state, or local level, the intent of these laws and regulations is to protect product safety, public health and the environment.
Similar laws and regulations have been adopted by government authorities in other countries in which we manufacture, distribute, and
sell our products.

The Company believes that its operations, including its manufacturing locations, are in substantial compliance with all

applicable government laws and regulations, including those related to environmental, consumer protection, international trade, labor
and employment, human rights, tax, anti-bribery and competition matters. Any additional measures to maintain compliance are not
expected to materially affect the Company's capital expenditures, competitive position, financial position or results of operations.

There are currently no legislative or administrative regulations pending which we anticipate will have a substantial adverse

impact on the Company's revenues, earnings or cash flows. However, if new or amended laws or regulations impose significant
operational restrictions and compliance requirements upon the Company or its products, the Company's business, capital expenditures,
results of operations, financial condition and competitive position could be negatively impacted. Refer to Part I, Item 1A. “Risk
Factors” of this 2021 Annual Report on Form 10-K for further information.

Human Capital Resources

Our employees are our greatest strength and are critical to the achievement of our vision and successful execution of our

strategies. We are committed to recruiting, developing and retaining top talent, in addition to fostering an inclusive environment where
all employees can thrive.

The Company and its subsidiaries employed 1,837 persons at December 31, 2021. Approximately 100 of those 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 below information strives to provide further details on our core values, key programs and initiatives that we utilize to

attract develop and retain a diverse and engaged workforce:

Core Values. Living our core values is at the heart of Badger Meter’s culture. Our culture prioritizes trust, responsibility,

collaboration, excellence and a customer focus. The first of these, trust, calls for us to act honestly, ethically and with integrity. We
maintain a formal ethics and compliance program that encourages doing the right thing. As part of this program, all ethical and legal
concerns brought forth by employees are fully investigated and resolved. Employee training is used to reinforce our values
companywide, with participation in trainings related to ethics at nearly 100%. In addition to trust, our values include a focus on
diversity, continuous improvement and environmental responsibility.

Recruitment, Development and Retention. In addition to market competitive compensation and benefits, we focus on open,
two-way communication, training and development and early talent programs, among other activities to attract and retain key talent:

• We offer employee assistance and work life benefits to all global employees. Our comprehensive benefits include
healthcare, disability and life insurance, paid time off, and leave programs, as well as retirement savings plans.

• We offer flexible, remote work and part-time arrangements, as business roles permit.
• Consistent with the broader labor market, our regrettable turnover increased to 9.6% in 2021, compared to 4.3% in 2020,

and 7.6% in 2019. Increased labor competition in the US was the primary driver of the increase.

• We implemented a baseline global engagement survey in 2021 as part of our continuous improvement process to enable
positive change and increase employee engagement. We will utilize feedback received from the survey to identify
meaningful actions targeted at fostering improvement in employee engagement, including pulse surveys to monitor
effectiveness of action plans.

Diversity, Equity and Inclusion. We believe that developing a diverse and inclusive business makes us and society stronger,

energizes our growth through customer engagement and helps us attract and retain talent:

• We maintain a Human Rights policy, Equal Employment Opportunity policy and partner with a variety of recruiting and

hiring agencies focused on diverse candidates.

•

In 2021, 36% of our executive officer group was diverse (three women, one Latino).

• We monitor pay equity on an ongoing basis, taking action to make adjustments where warranted.

Company and such amounts could be material. Expenditures for compliance control provisions and regulations during 2021, 2020 and

2019 were not material.

Government Regulations

The Company’s operations worldwide are subject to various federal, state, local and foreign laws and regulations. Whether at

the federal, state, or local level, the intent of these laws and regulations is to protect product safety, public health and the environment.

Similar laws and regulations have been adopted by government authorities in other countries in which we manufacture, distribute, and

sell our products.

The Company believes that its operations, including its manufacturing locations, are in substantial compliance with all

applicable government laws and regulations, including those related to environmental, consumer protection, international trade, labor

and employment, human rights, tax, anti-bribery and competition matters. Any additional measures to maintain compliance are not

expected to materially affect the Company's capital expenditures, competitive position, financial position or results of operations.

There are currently no legislative or administrative regulations pending which we anticipate will have a substantial adverse

impact on the Company's revenues, earnings or cash flows. However, if new or amended laws or regulations impose significant

operational restrictions and compliance requirements upon the Company or its products, the Company's business, capital expenditures,

results of operations, financial condition and competitive position could be negatively impacted. Refer to Part I, Item 1A. “Risk

Factors” of this 2021 Annual Report on Form 10-K for further information.

Human Capital Resources

all employees can thrive.

Our employees are our greatest strength and are critical to the achievement of our vision and successful execution of our

strategies. We are committed to recruiting, developing and retaining top talent, in addition to fostering an inclusive environment where

The Company and its subsidiaries employed 1,837 persons at December 31, 2021. Approximately 100 of those 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 below information strives to provide further details on our core values, key programs and initiatives that we utilize to

attract develop and retain a diverse and engaged workforce:

Core Values. Living our core values is at the heart of Badger Meter’s culture. Our culture prioritizes trust, responsibility,

collaboration, excellence and a customer focus. The first of these, trust, calls for us to act honestly, ethically and with integrity. We

maintain a formal ethics and compliance program that encourages doing the right thing. As part of this program, all ethical and legal

concerns brought forth by employees are fully investigated and resolved. Employee training is used to reinforce our values

companywide, with participation in trainings related to ethics at nearly 100%. In addition to trust, our values include a focus on

diversity, continuous improvement and environmental responsibility.

Recruitment, Development and Retention. In addition to market competitive compensation and benefits, we focus on open,

two-way communication, training and development and early talent programs, among other activities to attract and retain key talent:

• We offer employee assistance and work life benefits to all global employees. Our comprehensive benefits include

healthcare, disability and life insurance, paid time off, and leave programs, as well as retirement savings plans.

• We offer flexible, remote work and part-time arrangements, as business roles permit.

• Consistent with the broader labor market, our regrettable turnover increased to 9.6% in 2021, compared to 4.3% in 2020,

and 7.6% in 2019. Increased labor competition in the US was the primary driver of the increase.

Diversity, Equity and Inclusion. We believe that developing a diverse and inclusive business makes us and society stronger,

energizes our growth through customer engagement and helps us attract and retain talent:

• We maintain a Human Rights policy, Equal Employment Opportunity policy and partner with a variety of recruiting and

hiring agencies focused on diverse candidates.
In 2021, 36% of our executive officer group was diverse (three women, one Latino).

•
• We monitor pay equity on an ongoing basis, taking action to make adjustments where warranted.
• Badger Meter is a signatory to the Equality Act, supporting LGBTQ rights.
• We actively participate as part of the Metropolitan Milwaukee Association of Commerce (MMAC) Diversity Pledge, a

commitment to increasing diversity representation in the workforce.

The following provides certain employee demographic details aligned with the Sustainability Accounting Standards Board
(SASB) and the Global Reporting Initiative (GRI) reporting frameworks:

• Employee Rights, Health and Safety. The safety and health of our employees is a top priority. In addition to on-the-job
safety, we take a holistic view of employee health and well-being, including our multifaceted wellness program, B|Well,
which aims to provide information, activities and support for smart and healthy choices.
Safety, as measured by our global Total Case Incident Rate (TCIR), was 0.75 in 2021, compared to 0.65 in 2020, and
0.98 in 2019. Our goal is zero. Lost time incidents declined in 2021, with an increase in ergonomic events, which will be
a focus area for education and improvement going forward.

•

• We maintain robust COVID-19 health and safety measures including flexible/hybrid work schedules, robust on-site

safety protocols, manufacturing modifications to accommodate social distancing.

• Badger Meter’s Human Rights Policy outlines our commitment to respecting and supporting internationally recognized

human rights and freedoms.

• We provide an Employee Assistance Program (EAP) and mental health coverage.

Community and Social Activities. Through both financial contributions and volunteer efforts of our employees, Badger Meter

supports programs and organizations that address water conservation and quality, education and community concerns which are all
vital to community sustainability.

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
Sheryl L. Hopkins
William J. Parisen
Kimberly K. Stoll
Matthew L. Stuyvenberg
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 — Water Quality
Vice President — Controller

Age at
2/28/2022
49
43
54
57
57
57
54
55
55
39
43

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
6
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.

• Badger Meter is a signatory to the Equality Act, supporting LGBTQ rights.

• We actively participate as part of the Metropolitan Milwaukee Association of Commerce (MMAC) Diversity Pledge, a

commitment to increasing diversity representation in the workforce.

The following provides certain employee demographic details aligned with the Sustainability Accounting Standards Board

(SASB) and the Global Reporting Initiative (GRI) reporting frameworks:

• Employee Rights, Health and Safety. The safety and health of our employees is a top priority. In addition to on-the-job

safety, we take a holistic view of employee health and well-being, including our multifaceted wellness program, B|Well,

which aims to provide information, activities and support for smart and healthy choices.

•

Safety, as measured by our global Total Case Incident Rate (TCIR), was 0.75 in 2021, compared to 0.65 in 2020, and

0.98 in 2019. Our goal is zero. Lost time incidents declined in 2021, with an increase in ergonomic events, which will be

a focus area for education and improvement going forward.

• We maintain robust COVID-19 health and safety measures including flexible/hybrid work schedules, robust on-site

safety protocols, manufacturing modifications to accommodate social distancing.

• Badger Meter’s Human Rights Policy outlines our commitment to respecting and supporting internationally recognized

human rights and freedoms.

• We provide an Employee Assistance Program (EAP) and mental health coverage.

Community and Social Activities. Through both financial contributions and volunteer efforts of our employees, Badger Meter

supports programs and organizations that address water conservation and quality, education and community concerns which are all

vital to community sustainability.

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

Sheryl L. Hopkins

William J. Parisen

Kimberly K. Stoll

Matthew L. Stuyvenberg

Daniel R. Weltzien

Chairman, President and Chief Executive Officer

Senior Vice President — Chief Financial Officer

Position

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 — Water Quality

Vice President — Controller

Age at

2/28/2022

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. 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. Mr. Gomez has given notice of his plans to retire effective September 30, 2022.

Ms. Hopkins was elected Vice President - Human Resources in October 2020. Prior to joining the Company, Ms. Hopkins
served as Vice President of Human Resources for ADVENT from April 2019 to October 2020 and Senior Vice President of Human
Resources for Runzheimer International from July 2010 to March 2018. Previously, she held roles of increasing responsibility at
Eaton Corporation and other multinational public companies.

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. Stuyvenberg was elected Vice President – Water Quality in January 2022. Mr. Stuyvenberg joined Badger Meter in April

2007 as Mechanical Engineer of Applied Research and has since held roles of increasing responsibility, including Manager of
Mechanical Engineering and Director of Utility Engineering.

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 sales, distribution and manufacturing facilities in Neuffen, Germany and Vienna, Austria; sales and customer service
offices in Mexico, United Kingdom, Singapore, China, United Arab Emirates and other similar locations throughout the world;
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,
Tulsa, Oklahoma and Collegeville, Pennsylvania.

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 2021 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 2021 Annual Report on Form 10-K.

Risk Management

The Company’s Enterprise Risk Management (ERM) process aims to identify and address significant and material risks. The
ERM process assesses, manages, and monitors risks consistent with the integrated risk framework in the Enterprise Risk Management-
Integrated Framework (2017) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We
7
believe that risk-taking is an inherent aspect of the execution of our strategy. Our goal is to manage risks pragmatically as opposed to
avoiding risks altogether. We can mitigate risks and their impact on our Company only to a limited extent.

A group of executives prioritizes identified risks and assigns an executive to address each major identified risk area and lead

action plans to manage each risk. Our Board of Directors provides oversight of the ERM process and reviews the significant identified

risks. The Audit Committee of the Board of Directors also reviews significant financial risk exposures and the steps management has

taken to monitor, manage and mitigate them wherever possible. Our other Board committees also play a role in risk management, as

detailed in their respective charters.

Our goal is to proactively manage risks using a structured approach in combination with strategic planning, with the intent to

preserve and enhance shareholder value. However, the risks set forth Item 1A. Risk Factors and elsewhere in this Annual Report on

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. Mr. Gomez has given notice of his plans to retire effective September 30, 2022.

Ms. Hopkins was elected Vice President - Human Resources in October 2020. Prior to joining the Company, Ms. Hopkins

served as Vice President of Human Resources for ADVENT from April 2019 to October 2020 and Senior Vice President of Human

Resources for Runzheimer International from July 2010 to March 2018. Previously, she held roles of increasing responsibility at

Eaton Corporation and other multinational public companies.

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. Stuyvenberg was elected Vice President – Water Quality in January 2022. Mr. Stuyvenberg joined Badger Meter in April

2007 as Mechanical Engineer of Applied Research and has since held roles of increasing responsibility, including Manager of

Mechanical Engineering and Director of Utility Engineering.

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 sales, distribution and manufacturing facilities in Neuffen, Germany and Vienna, Austria; sales and customer service

offices in Mexico, United Kingdom, Singapore, China, United Arab Emirates and other similar locations throughout the world;

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,

Tulsa, Oklahoma and Collegeville, Pennsylvania.

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 2021 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

Risk Management

The Company’s Enterprise Risk Management (ERM) process aims to identify and address significant and material risks. The
ERM process assesses, manages, and monitors risks consistent with the integrated risk framework in the Enterprise Risk Management-
Integrated Framework (2017) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We
believe that risk-taking is an inherent aspect of the execution of our strategy. Our goal is to manage risks pragmatically as opposed to
avoiding risks altogether. We can mitigate risks and their impact on our Company only to a limited extent.

A group of executives prioritizes identified risks and assigns an executive to address each major identified risk area and lead
action plans to manage each risk. Our Board of Directors provides oversight of the ERM process and reviews the significant identified
risks. The Audit Committee of the Board of Directors also reviews significant financial risk exposures and the steps management has
taken to monitor, manage and mitigate them wherever possible. Our other Board committees also play a role in risk management, as
detailed in their respective charters.

Our goal is to proactively manage risks using a structured approach in combination with strategic planning, with the intent to

preserve and enhance shareholder value. However, the risks set forth Item 1A. Risk Factors and elsewhere in this Annual Report on
Form 10-K and other risks and uncertainties could unfavorably affect us and cause our results to vary materially from recent results or
from our anticipated future results.

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 2021 Annual Report on Form 10-K, including the
“Special Note Regarding Forward Looking Statements” at the front of this 2021 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.

PRODUCTS, TECHNOLOGY AND SERVICES

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

We believe 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. Our radios operate on networks which are changing as
part of the natural evolution of technology. The pace of that change is largely outside of the Company’s control and the sun-setting of
a network may have an adverse impact on the Company. 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.

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. Our products have an extended expected life and we offer long warranty coverages. 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.

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

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

may encounter unexpected complications when used with other technologies utilized by the customer. A failure of our software
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

other services 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 routinely manage 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.

Form 10-K and other risks and uncertainties could unfavorably affect us and cause our results to vary materially from recent results or

from our anticipated future results.

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 2021 Annual Report on Form 10-K, including the

“Special Note Regarding Forward Looking Statements” at the front of this 2021 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.

PRODUCTS, TECHNOLOGY AND SERVICES

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

We believe 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. Our radios operate on networks which are changing as

part of the natural evolution of technology. The pace of that change is largely outside of the Company’s control and the sun-setting of

a network may have an adverse impact on the Company. 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.

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. Our products have an extended expected life and we offer long warranty coverages. 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.

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

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

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

other services 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 routinely manage 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.

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,

9
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 and other components 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.

BUSINESS CONDITIONS

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 and could have a material adverse effect on our business, results
of operations and financial condition.

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,
microprocessors and other electronic subassemblies, and components that are used in the manufacturing process, and we are
experiencing supply chain disruptions and related challenges throughout the supply chain.

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 continued delays in the production or
transportation of these materials for reasons that are beyond our control. World commodity markets and the ongoing inflationary
environment are affecting, and may continue to affect, raw material and component part prices. In addition, we rely on single suppliers
for microprocessors, castings and components in several of our product lines and the loss of such suppliers could temporarily disrupt
operations in the short term.

The global coronavirus (COVID-19) pandemic, or other global public health pandemics, could have a material adverse effect
on our business, results of operations and financial condition.

The COVID-19 pandemic, or other global health pandemics, and virus containment measures taken by federal and state

governments have resulted in, and could in the future, result in, business slowdowns or shutdowns, weakened economic conditions,
economic uncertainty, and volatility in the financial markets and could interfere with the ability of our employees, suppliers, and
customers to perform our and their respective responsibilities and obligations relative to the conduct of our business and operations.

The extent to which the COVID-19 or any future pandemic impacts our business operations in future periods will depend on

multiple factors that cannot be accurately predicated at this time, such as the duration and scope of any pandemic, future spikes of
infections (including the spread of variants or mutant strains, and the degree of transmissibility and severity thereof), the extent and
effectiveness of containment actions, the disruption caused by such actions, and the impact of these and other factors on our
employees, suppliers and customers. If we are not able to respond to and manage the impact of such events effectively, we could
experience a material adverse effect on our business, results of operations and overall financial performance.

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 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 annual federal funding

and periodic 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.

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 and other components 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.

BUSINESS CONDITIONS

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 and could have a material adverse effect on our business, results

of operations and financial condition.

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,

microprocessors and other electronic subassemblies, and components that are used in the manufacturing process, and we are

experiencing supply chain disruptions and related challenges throughout the supply chain.

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 continued delays in the production or

transportation of these materials for reasons that are beyond our control. World commodity markets and the ongoing inflationary

environment are affecting, and may continue to affect, raw material and component part prices. In addition, we rely on single suppliers

for microprocessors, castings and components in several of our product lines and the loss of such suppliers could temporarily disrupt

operations in the short term.

The global coronavirus (COVID-19) pandemic, or other global public health pandemics, could have a material adverse effect

on our business, results of operations and financial condition.

The COVID-19 pandemic, or other global health pandemics, and virus containment measures taken by federal and state

The extent to which the COVID-19 or any future pandemic impacts our business operations in future periods will depend on

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 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 annual federal funding
and periodic 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.

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. See the separate risk factor specific to the global COVID-19 pandemic.

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. Increased labor competition from accelerated retirements, wage inflation and
scarcity of labor may negatively impact costs and negatively impact employee engagement, productivity and efficiency.

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 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.

GOVERNMENT REGULATION

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
10
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.

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, recycling and disposal of certain electronic and other 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

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. See the separate risk factor specific to the global COVID-19 pandemic.

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. Increased labor competition from accelerated retirements, wage inflation and

scarcity of labor may negatively impact costs and negatively impact employee engagement, productivity and efficiency.

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 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.

GOVERNMENT REGULATION

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.

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, recycling and disposal of certain electronic and other 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.

GENERAL

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.

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.

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.

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.

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, legal, 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.

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.

GENERAL

profitability.

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

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.

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.

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.

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

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, legal, 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 Company has sales, development, distribution and manufacturing facilities and customer service offices as noted in Part
12
I, Item 1 of this 2021 Annual Report on Form 10-K under the heading “Foreign Operations and Export Sales.” The principal facilities
utilized by the Company at December 31, 2021 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
Milwaukee, Wisconsin, USA
Racine, Wisconsin, USA
Nogales, Mexico

(1) Leased facility. Lease term expires December 31, 2025.

ITEM 3.

LEGAL PROCEEDINGS

Principal use
Manufacturing and offices
Manufacturing and offices
Manufacturing

Approximate
area
(square feet)
324,200
134,300
181,300

(1)

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 2021 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 EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s Common Stock is traded on the New York Stock Exchange (NYSE Trading Symbol: BMI). At February 2,

2022, there were approximately 553 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 Annual Report on Form 10-K.

The following information in Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be

“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
incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates it by reference into such a filing.

The following graph compares on a cumulative basis the yearly percentage change since January 1, 2017 in (a) the total

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 19 companies, including the Company, in similar industries, employment markets 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 Securities and Exchange Commission regulations.

The graph assumes $100 invested on December 31, 2016. 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.

Badger Meter, Inc.

Russell 2000 Index

Peer Group

December 31

2016

2018

2019

2020

2021

2017
30.94 %

Return %
4.10 % 33.45 % 46.39 % 14.12 %
Cumulative $ $ 100.00 $ 130.94 $ 136.31 $ 181.90 $ 266.28 $ 303.90
14.65 % -11.01 % 25.52 % 19.96 % 14.82 %
Return %
Cumulative $ $ 100.00 $ 114.65 $ 102.02 $ 128.06 $ 153.63 $ 176.39
Return %
16.06 % -19.75 % 43.65 % 14.76 % 27.05 %
Cumulative $ $ 100.00 $ 116.06 $ 93.15 $ 133.80 $ 153.55 $ 195.09

The peer group consists of Evoqua Water Technologies Corp. (AQUA), Badger Meter, Inc. (BMI), Brady Corporation (BRC),
CIRCOR International, Inc. (CIR), CTS Corporation (CTS), Enerpac Tool Group Corp. (EPAC), ESCO Technologies Inc. (ESE), The
Gorman-Rupp Company (GRC), Helios Technologies, Inc. (HLIO), Itron, Inc. (ITRI), Kadant Inc. (KAI), Lindsay Corporation
(LNN), Mueller Water Products, Inc. (MWA), Douglas Dynamics, Inc. (PLOW), Strattec Security Corporation (STRT), SPX Flow,
Inc. (FLOW), Standex International Corporation (SXI), Watts Water Technologies, Inc. (WTS) and Zurn Water Solutions Corporation
(ZWS).

In February 2020, the Board of Directors authorized the repurchase of up to an additional 400,000 shares of the Company’s

Common Stock through February 2023. The following table provides information about the Company's purchases under this
repurchase program during the quarter ended December 31, 2021 of equity securities that are registered by the Company pursuant to
Section 12 of the Exchange Act.

October 1, 2021 - October 31, 2021
November 1, 2021 - November 30, 2021
December 1, 2021 - December 31, 2021
Total as of December 31, 2021

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

— $
—
—
—

—
—
—

54,953
54,953
54,953
54,953

345,047
345,047
345,047
345,047

ITEM 6. RESERVED

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

Current Business Trends – COVID-19

In December 2019, a novel coronavirus disease (“COVID-19”) was reported and in January 2020, the World Health
Organization (“WHO”) declared it a Public Health Emergency of International Concern. On March 11, 2020, the WHO characterized
COVID-19 as a pandemic.

Beginning in the second quarter of 2020, the Company implemented remote work arrangements for non-production
personnel, adopted robust safety, social distancing and temperature screening protocols throughout its manufacturing sites and enacted
other measures to be able to deliver products to meet customer orders on a timely basis. While the pandemic has had varying levels of
impact to demand trends since its inception, to date it has not materially affected our ability to maintain business operations, including
the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures.

Throughout 2021, the Company continued to operate under various return-to-work protocols for non-production personnel

and our manufacturing operations continued to follow safety and COVID-19 protocols. The introduction of vaccines in the Company’s
primary geographic markets have aided its utility water and flow instrumentation customers in returning to more normal operations.
On July 6, 2021, all US based non-production employees returned to the office on a hybrid basis following vaccination rollouts across
the United States. Customer order rates have improved; however, global electronics and other component shortages, along with
logistics constraints, have resulted in manufacturing interruptions which limited the Company’s output throughout 2021. These varied
and wide-spread component availability and supply chain issues continue to inhibit the Company’s ability to fully satisfy the increase
in demand for certain products. In addition, cost inflation of materials and other expenses has become more pervasive. The Company
continues to pursue pricing initiatives to offset inflationary cost pressures where possible. The Company’s primary competitors are
also experiencing lead time extensions, inflation, and pricing dynamics, and therefore the Company does not believe its competitive
position has been negatively impacted. While the Company is navigating this dynamic and fluid environment through operational
agility to support customers, these disruptions increased the Company’s backlog to record levels in 2021 and are likely to increase the
unevenness of sales patterns in 2022.

It remains difficult to estimate the severity and duration of the impact of the COVID-19 pandemic on the Company’s

business, financial position or results of operations. The magnitude of the impact will be determined by the duration and span of the
pandemic, subsequent COVID-19 variants and their severity along with operational disruptions including those resulting from
government actions, delivery interruptions due to component supply availability or global logistics constraints and the overall impact
on the economy. The Company is monitoring the ongoing situation and keeps the Board of Directors informed of developments.

Long Term Business Trends

Across the globe, increasing regulations and a focus on sustainability are driving companies and utilities to better manage

critical resources like water. Some customers measure fluids to identify leaks and/or misappropriation for cost control or add
measurement points to help automate manufacturing. Other customers employ measurement to comply with government mandates
and laws including those associated with process and discharge water quality monitoring. The Company provides flow measurement
technology to primarily measure water, but also other fluids, gases and steams. This technology is critical to provide baseline usage
data and to quantify reductions as customers attempt to reduce consumption. For example, once water usage metrics are better
understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where
it is most viable. With the Company’s technology, customers have found costly leaks, pinpointed equipment in need of repair, and
identified areas for process improvements.

Increasingly, customers in the utility water market are interested in more frequent and diverse data collection and the use of

water metering and quality analytics to evaluate water distribution activity. Specifically, AMI technology enables water utilities to
capture readings from each meter at more frequent and variable intervals. There are more than 50,000 water utilities in the United
States and the Company estimates that approximately 70% of their respective connections have converted to a radio solution. The
Company believes it is well positioned to meet this continuing conversion trend with its comprehensive radio and software solutions.

In addition, certain water utilities are converting from mechanical to static meters. Ultrasonic water metering maintains a

high level of measurement accuracy over the life of the meter, reducing a utility’s non-revenue water. The Company has over a
decade of proven reliability in the market with its ultrasonic meters and has recently launched its next generation of ultrasonic
metering with its D-Flow technology, which the Company believes increases its competitive differentiation.

For over 117 years, the Company has offered innovative flow metering and control solutions for smart water management,

smart buildings and smart industrial processes. The acquisitions of s::can and ATi, leading providers of water quality monitoring

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

ITEM 6. RESERVED

OPERATIONS

Current Business Trends – COVID-19

In December 2019, a novel coronavirus disease (“COVID-19”) was reported and in January 2020, the World Health

Organization (“WHO”) declared it a Public Health Emergency of International Concern. On March 11, 2020, the WHO characterized

COVID-19 as a pandemic.

Beginning in the second quarter of 2020, the Company implemented remote work arrangements for non-production

personnel, adopted robust safety, social distancing and temperature screening protocols throughout its manufacturing sites and enacted

other measures to be able to deliver products to meet customer orders on a timely basis. While the pandemic has had varying levels of

impact to demand trends since its inception, to date it has not materially affected our ability to maintain business operations, including

the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures.

Throughout 2021, the Company continued to operate under various return-to-work protocols for non-production personnel

and our manufacturing operations continued to follow safety and COVID-19 protocols. The introduction of vaccines in the Company’s

primary geographic markets have aided its utility water and flow instrumentation customers in returning to more normal operations.

On July 6, 2021, all US based non-production employees returned to the office on a hybrid basis following vaccination rollouts across

the United States. Customer order rates have improved; however, global electronics and other component shortages, along with

logistics constraints, have resulted in manufacturing interruptions which limited the Company’s output throughout 2021. These varied

and wide-spread component availability and supply chain issues continue to inhibit the Company’s ability to fully satisfy the increase

in demand for certain products. In addition, cost inflation of materials and other expenses has become more pervasive. The Company

continues to pursue pricing initiatives to offset inflationary cost pressures where possible. The Company’s primary competitors are

also experiencing lead time extensions, inflation, and pricing dynamics, and therefore the Company does not believe its competitive

position has been negatively impacted. While the Company is navigating this dynamic and fluid environment through operational

agility to support customers, these disruptions increased the Company’s backlog to record levels in 2021 and are likely to increase the

unevenness of sales patterns in 2022.

It remains difficult to estimate the severity and duration of the impact of the COVID-19 pandemic on the Company’s

business, financial position or results of operations. The magnitude of the impact will be determined by the duration and span of the

pandemic, subsequent COVID-19 variants and their severity along with operational disruptions including those resulting from

government actions, delivery interruptions due to component supply availability or global logistics constraints and the overall impact

on the economy. The Company is monitoring the ongoing situation and keeps the Board of Directors informed of developments.

Long Term Business Trends

Across the globe, increasing regulations and a focus on sustainability are driving companies and utilities to better manage

critical resources like water. Some customers measure fluids to identify leaks and/or misappropriation for cost control or add

measurement points to help automate manufacturing. Other customers employ measurement to comply with government mandates

and laws including those associated with process and discharge water quality monitoring. The Company provides flow measurement

technology to primarily measure water, but also other fluids, gases and steams. This technology is critical to provide baseline usage

data and to quantify reductions as customers attempt to reduce consumption. For example, once water usage metrics are better

understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where

it is most viable. With the Company’s technology, customers have found costly leaks, pinpointed equipment in need of repair, and

identified areas for process improvements.

Increasingly, customers in the utility water market are interested in more frequent and diverse data collection and the use of

water metering and quality analytics to evaluate water distribution activity. Specifically, AMI technology enables water utilities to

capture readings from each meter at more frequent and variable intervals. There are more than 50,000 water utilities in the United

States and the Company estimates that approximately 70% of their respective connections have converted to a radio solution. The

Company believes it is well positioned to meet this continuing conversion trend with its comprehensive radio and software solutions.

In addition, certain water utilities are converting from mechanical to static meters. Ultrasonic water metering maintains a

For over 117 years, the Company has offered innovative flow metering and control solutions for smart water management,

smart buildings and smart industrial processes. The acquisitions of s::can and ATi, leading providers of water quality monitoring

solutions, add real-time water quality parameters to the Company’s capabilities and enhances the scope of actionable data for its
customers to help measure, conserve and protect water. The combined solutions from Badger Meter, s::can and ATi offer technology
that measures both the quantity and quality of water.

Finally, the concept of “Smart Cities” is one avenue to affect efficient city operations, conserve resources and improve
service and delivery. Smart water solutions (“Smart Water”) are those that provide actionable information through data analytics from
an interconnected and interoperable network of sensors and devices that help people and organizations efficiently use and conserve
water. Badger Meter is well positioned to benefit from the advancement of Smart Water applications. With its strong relationship
with AT&T, among others, Badger Meter stays abreast of emerging cellular technology changes which the Company believes is the
premier infrastructure-free AMI solution.

Revenue and Product Mix

As the industry continues to evolve, the Company has been at the forefront of innovation across metering, radio and software
technologies in order to meet its customers’ increasing expectations for accurate and actionable data. As technologies such as ORION
Cellular and BEACON AMA managed solutions have become more readily adopted, the Company’s revenue from Software as a
Service (SaaS) has increased significantly, albeit from a small base, and is margin accretive.

In addition, the Company has expanded its smart water offering with the addition of online water quality monitoring
solutions, adding real-time water quality parameters to augment the scope of actionable data for water utility and industrial customers
to optimize their operations.

The Company also seeks opportunities for additional revenue enhancement. For instance, the Company has made inroads

into the Middle East market with its ultrasonic meter technology and is pursuing other geographic expansion opportunities.
Additionally, the Company is periodically asked to oversee and perform field installation of its products for certain customers. In
these cases, the Company assumes the role of general contractor and either performs the installation or hires installation
subcontractors and supervises their work.

Acquisitions

Effective January 1, 2021, the Company acquired 100% of the outstanding stock of ATi, headquartered in Collegeville,

Pennsylvania, a provider of water quality monitoring systems.

The total purchase consideration for ATi, net of cash acquired, was $44.0 million. The Company's allocation of the purchase
price at December 31, 2021 included $3.9 million of receivables, $3.9 million of inventory, $2.5 million of other assets, $21.0 million
of intangibles and $16.4 million of goodwill that is deductible for tax purposes. The intangible assets acquired are primarily customer
relationships, developed technology and trademarks with estimated average useful lives of 12 to 15 years. The Company also
assumed $1.4 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7 million of other liabilities as part of the
acquisition. The allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of
acquisition.

As of December 31, 2021, the Company had completed its analysis for estimating the fair value of the assets acquired with

no additional adjustments. This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial
Statements.

Effective November 2, 2020, the Company acquired 100% of the outstanding stock of s::can headquartered in Vienna,

Austria. s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of parameters in
water and wastewater utilizing in-line monitoring systems and other applications.

The total purchase consideration for s::can, net of cash acquired, was $30.5 million, inclusive of $1.3 million of working

capital adjustments. The Company's allocation of the purchase price at December 31, 2021 included $2.6 million of receivables, $4.3
million of inventory, $1.2 million of other assets, $12.7 million of intangibles and $17.7 million of goodwill that is not deductible for
tax purposes. The intangible assets acquired are primarily customer relationships and developed technology with an estimated average
useful life of 12 years. The Company also assumed $3.5 million of accounts payable, $3.2 million of deferred tax liabilities and $1.3
million of other liabilities as part of the acquisition. The allocation of the purchase price to the assets acquired was based upon the
estimated fair values at the date of acquisition.

As of December 31, 2021, the Company had completed its analysis for estimating the fair value of the assets acquired with

no additional adjustments. This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial
Statements.

solutions, add real-time water quality parameters to the Company’s capabilities and enhances the scope of actionable data for its

customers to help measure, conserve and protect water. The combined solutions from Badger Meter, s::can and ATi offer technology

that measures both the quantity and quality of water.

Finally, the concept of “Smart Cities” is one avenue to affect efficient city operations, conserve resources and improve

service and delivery. Smart water solutions (“Smart Water”) are those that provide actionable information through data analytics from

an interconnected and interoperable network of sensors and devices that help people and organizations efficiently use and conserve

water. Badger Meter is well positioned to benefit from the advancement of Smart Water applications. With its strong relationship

with AT&T, among others, Badger Meter stays abreast of emerging cellular technology changes which the Company believes is the

premier infrastructure-free AMI solution.

Revenue and Product Mix

As the industry continues to evolve, the Company has been at the forefront of innovation across metering, radio and software

technologies in order to meet its customers’ increasing expectations for accurate and actionable data. As technologies such as ORION

Cellular and BEACON AMA managed solutions have become more readily adopted, the Company’s revenue from Software as a

Service (SaaS) has increased significantly, albeit from a small base, and is margin accretive.

In addition, the Company has expanded its smart water offering with the addition of online water quality monitoring

solutions, adding real-time water quality parameters to augment the scope of actionable data for water utility and industrial customers

to optimize their operations.

The Company also seeks opportunities for additional revenue enhancement. For instance, the Company has made inroads

into the Middle East market with its ultrasonic meter technology and is pursuing other geographic expansion opportunities.

Additionally, the Company is periodically asked to oversee and perform field installation of its products for certain customers. In

these cases, the Company assumes the role of general contractor and either performs the installation or hires installation

subcontractors and supervises their work.

Acquisitions

Effective January 1, 2021, the Company acquired 100% of the outstanding stock of ATi, headquartered in Collegeville,

Pennsylvania, a provider of water quality monitoring systems.

The total purchase consideration for ATi, net of cash acquired, was $44.0 million. The Company's allocation of the purchase

price at December 31, 2021 included $3.9 million of receivables, $3.9 million of inventory, $2.5 million of other assets, $21.0 million

of intangibles and $16.4 million of goodwill that is deductible for tax purposes. The intangible assets acquired are primarily customer

relationships, developed technology and trademarks with estimated average useful lives of 12 to 15 years. The Company also

assumed $1.4 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7 million of other liabilities as part of the

acquisition. The allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of

As of December 31, 2021, the Company had completed its analysis for estimating the fair value of the assets acquired with

no additional adjustments. This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial

acquisition.

Statements.

Effective November 2, 2020, the Company acquired 100% of the outstanding stock of s::can headquartered in Vienna,

Austria. s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of parameters in

water and wastewater utilizing in-line monitoring systems and other applications.

The total purchase consideration for s::can, net of cash acquired, was $30.5 million, inclusive of $1.3 million of working

As of December 31, 2021, the Company had completed its analysis for estimating the fair value of the assets acquired with

no additional adjustments. This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial
Statements.

RESULTS OF OPERATIONS

Net Sales

Net sales in 2021 increased $79.7 million, or 18.7%, to $505.2 million from $425.5 million in 2020. Sales into the utility

water market were $415.3 million, an increase of 20.6% over the prior year’s $344.3 million. The acquisitions of s::can and ATi
increased sales $40.7 million compared to 2020. The remaining increase of $39.0 million was attributable to higher sales of the
Company’s water meter, radio and software products including ORION Cellular endpoints as well as increased BEACON SaaS
revenue associated with data collection and software analytics. These favorable trends more than offset the supply chain shortages of
certain components which limited sales of certain products throughout 2021 and contributed to the record backlog level throughout
2021. Sales of products into the global flow instrumentation end markets were $89.9 million, 10.7% higher than the prior year’s $81.2
million due to the stabilization of industrial demand globally and across the array of end markets served.

Net sales in 2020 increased $0.9 million, or less than 1%, to $425.5 million from $424.6 million in 2019. Sales into the
utility water market were $344.3 million, an increase of 4% over the prior year’s $330.7 million. The increase was attributable to
higher sales of advanced technology products including ORION Cellular endpoints, E-Series Ultrasonic water meters as well as
increased BEACON SaaS revenue associated with data collection and software analytics. It also included approximately $2.5 million
of sales related to s::can, acquired on November 2, 2020. These favorable trends more than offset the short term decline in orders that
occurred in April and May 2020 from the stay-at-home orders throughout much of the United States in response to COVID-19. Sales
of products into the global flow instrumentation end markets were $81.2 million, 13.6% lower than the prior year’s $94.0 million due
to significantly reduced activity across the array of industrial end markets served and also the result of widespread COVID-19 shelter-
in-place and lockdown restrictions.

Operating Earnings

Operating earnings in 2021 were $78.7 million, or 15.6% of sales, compared to $65.2 million, or 15.3% of sales, in 2020.
Gross margin increased $37.2 million, and as a percent of sales increased from 39.5% in 2020 to 40.7% in 2021. The gross margin
improvement was due to higher volumes, improved sales mix as noted above, acquisition mix and strategic pricing actions that offset
inflationary cost pressures from material input costs. Selling, engineering and administration (“SEA”) expenses were $126.8 million
or 25.1% of sales compared to $103.1 million or 24.2% of sales in the prior year. The acquired businesses added $16.9 million of SEA
expenses. The remaining $6.8 million increase was primarily due to higher personnel costs including increased headcount and higher
incentive compensation and benefits.

Operating earnings in 2020 were $65.2 million, or 15.3% of sales, compared to $62.1 million, or 14.6% of sales, in 2019.

Gross margin increased $4.7 million, and as a percent of sales increased from 38.5% in 2019 to 39.5% in 2020. The improvement was
due to higher volumes and improved sales mix as noted above, along with favorable pricing actions. These benefits were modestly
offset by a net increase in warranty provisions year-over-year, including a $3.5 million cellular network sunset provision recorded in
the fourth quarter of 2020. Selling, engineering and administration (“SEA”) expenses were $103.1 million or 24.2% of sales
compared to $101.4 million or 23.9% of sales in the comparable prior year period. The increase was primarily due to higher
personnel, research and development and business optimization investments, as well as the inclusion of s::can. These increases were
partially offset by the net benefit of COVID-19 cost reduction actions and lower pandemic-impacted expenses such as travel and
convention costs.

Interest (Income) Expense, Net

Net interest income was less than $0.1 million in 2021, net interest expense was less than $0.1 million in 2020 and was $0.3

million in 2019. Changes in net interest (income) expense over these periods were due to the repayment of borrowings using cash
from operations.

Income Taxes

There were no significant variations in income taxes as a percentage of earnings before income taxes which were 22.6%,

24.1% and 23.4% for 2021, 2020 and 2019, respectively.

Earnings and Diluted Earnings per Share

For 2021, the increase in operating earnings resulted in net earnings of $60.9 million compared to $49.3 million in 2020. On

a diluted basis, earnings per share were $2.08 in 2021 compared to $1.69 in 2020.

For 2020, the increase in operating earnings and lower interest expense, resulted in net earnings of $49.3 million compared to

$47.2 million in 2019. On a diluted basis, earnings per share were $1.69 in 2020 compared to $1.61 in 2019.

RESULTS OF OPERATIONS

Net Sales

Net sales in 2021 increased $79.7 million, or 18.7%, to $505.2 million from $425.5 million in 2020. Sales into the utility

water market were $415.3 million, an increase of 20.6% over the prior year’s $344.3 million. The acquisitions of s::can and ATi

increased sales $40.7 million compared to 2020. The remaining increase of $39.0 million was attributable to higher sales of the

Company’s water meter, radio and software products including ORION Cellular endpoints as well as increased BEACON SaaS

revenue associated with data collection and software analytics. These favorable trends more than offset the supply chain shortages of

certain components which limited sales of certain products throughout 2021 and contributed to the record backlog level throughout

2021. Sales of products into the global flow instrumentation end markets were $89.9 million, 10.7% higher than the prior year’s $81.2

million due to the stabilization of industrial demand globally and across the array of end markets served.

Net sales in 2020 increased $0.9 million, or less than 1%, to $425.5 million from $424.6 million in 2019. Sales into the

utility water market were $344.3 million, an increase of 4% over the prior year’s $330.7 million. The increase was attributable to

higher sales of advanced technology products including ORION Cellular endpoints, E-Series Ultrasonic water meters as well as

increased BEACON SaaS revenue associated with data collection and software analytics. It also included approximately $2.5 million

of sales related to s::can, acquired on November 2, 2020. These favorable trends more than offset the short term decline in orders that

occurred in April and May 2020 from the stay-at-home orders throughout much of the United States in response to COVID-19. Sales

of products into the global flow instrumentation end markets were $81.2 million, 13.6% lower than the prior year’s $94.0 million due

to significantly reduced activity across the array of industrial end markets served and also the result of widespread COVID-19 shelter-

in-place and lockdown restrictions.

Operating Earnings

Operating earnings in 2021 were $78.7 million, or 15.6% of sales, compared to $65.2 million, or 15.3% of sales, in 2020.

Gross margin increased $37.2 million, and as a percent of sales increased from 39.5% in 2020 to 40.7% in 2021. The gross margin

improvement was due to higher volumes, improved sales mix as noted above, acquisition mix and strategic pricing actions that offset

inflationary cost pressures from material input costs. Selling, engineering and administration (“SEA”) expenses were $126.8 million

or 25.1% of sales compared to $103.1 million or 24.2% of sales in the prior year. The acquired businesses added $16.9 million of SEA

expenses. The remaining $6.8 million increase was primarily due to higher personnel costs including increased headcount and higher

incentive compensation and benefits.

Operating earnings in 2020 were $65.2 million, or 15.3% of sales, compared to $62.1 million, or 14.6% of sales, in 2019.

Gross margin increased $4.7 million, and as a percent of sales increased from 38.5% in 2019 to 39.5% in 2020. The improvement was

due to higher volumes and improved sales mix as noted above, along with favorable pricing actions. These benefits were modestly

offset by a net increase in warranty provisions year-over-year, including a $3.5 million cellular network sunset provision recorded in

the fourth quarter of 2020. Selling, engineering and administration (“SEA”) expenses were $103.1 million or 24.2% of sales

compared to $101.4 million or 23.9% of sales in the comparable prior year period. The increase was primarily due to higher

personnel, research and development and business optimization investments, as well as the inclusion of s::can. These increases were

partially offset by the net benefit of COVID-19 cost reduction actions and lower pandemic-impacted expenses such as travel and

convention costs.

Interest (Income) Expense, Net

Net interest income was less than $0.1 million in 2021, net interest expense was less than $0.1 million in 2020 and was $0.3

million in 2019. Changes in net interest (income) expense over these periods were due to the repayment of borrowings using cash
from operations.

Income Taxes

There were no significant variations in income taxes as a percentage of earnings before income taxes which were 22.6%,

24.1% and 23.4% for 2021, 2020 and 2019, respectively.

Earnings and Diluted Earnings per Share

For 2021, the increase in operating earnings resulted in net earnings of $60.9 million compared to $49.3 million in 2020. On

a diluted basis, earnings per share were $2.08 in 2021 compared to $1.69 in 2020.

For 2020, the increase in operating earnings and lower interest expense, resulted in net earnings of $49.3 million compared to

$47.2 million in 2019. On a diluted basis, earnings per share were $1.69 in 2020 compared to $1.61 in 2019.

LIQUIDITY AND CAPITAL RESOURCES

The main sources of liquidity for the Company are cash from operations and borrowing capacity. In addition, depending on

18
market conditions, the Company may access the capital markets to strengthen its capital position and to provide additional liquidity for
general corporate purposes.

Primary Working Capital

We use primary working capital (PWC) as a percentage of sales as a key metric for working capital efficiency. We define this
metric as the sum of receivables and inventories less payables, divided by annual net sales. The following table shows the components
of our PWC (in thousands):

Receivables
Inventories
Payables

Primary Working Capital

12/31/2021

12/31/2020

$
65,866
99,611
(41,859 )
123,618

PWC%
13.1%
19.7%
-8.3%
24.5%

$
61,689
81,586
(34,923 )
108,352

PWC%
14.5%
19.2%
-8.2%
25.5%

Overall, PWC increased $15.3 million compared to the previous year-end and includes the PWC acquired in connection with
the ATi acquisition. Receivables at December 31, 2021 were $65.9 million compared to $61.7 million at the end of 2020. Excluding
$3.9 million of ATi receivables, an increase of $0.3 million was due to robust collection efforts while growing sales. The Company
believes its receivables balance is fully collectible. Inventories at December 31, 2021 were $99.6 million compared to $81.6 million at
the end of 2020. Excluding $3.9 million of ATi inventory, inventory increased $14.1 million, due to component cost inflation and
higher safety stock levels associated with varied component shortages. Payables at December 31, 2021 were $41.9 million compared
to $34.9 million at the end of 2020. Excluding the impact of ATi payables, the remaining increase is attributed to payments timing and
the increased inventory levels at year end.

Cash Provided by Operations

Cash provided by operations in 2021 was $87.5 million compared to $89.6 million in 2020. The decrease from 2020 was

driven primarily by increased operating earnings offset by increased working capital requirements as described above. Operating cash
flow was more than adequate to fund acquisitions ($45.3 million, net of cash acquired), capital expenditures of $6.7 million and
dividends of $22.2 million.

Cash provided by operations in 2020 was $89.6 million compared to $80.7 million in 2019. The increase from 2019 was

driven primarily by improved working capital management as well as higher operating earnings. Operating cash flow was more than
adequate to fund the acquisition of s::can ($29.1 million, net of cash acquired), capital expenditures of $9.1 million and dividends of
$20.3 million and $3.1 million in share repurchases to partially offset equity compensation dilution. The remaining cash flow was
used to reduce short term borrowings and add to cash balances.

Capital expenditures were $6.7 million, $9.1 million and $7.5 million in fiscal 2021, 2020 and 2019, respectively. Capital
expenditures for fiscal 2022 are expected to be in the $9.0-11.0 million range, but could vary depending on timing of R&D projects,
growth opportunities and the amount of assets purchased.

The Company had no short-term borrowings as of the end of 2021 or 2020. At the end of 2021, the Company was in a net

cash position of $87.2 million.

The Company’s financial condition remains strong. On July 8, 2021, the Company entered into a new credit agreement,

replacing its prior facility which was set to expire in September 2021. The credit agreement includes a $150.0 million multi-currency
line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the
Company’s financial flexibility including an increase feature, acquisition holiday and favorable financial covenants. The Company
was in compliance with all covenants as of December 31, 2021. The Company believes that its operating cash flows, available
18
borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital
expenditures and the development of new products. The Company had $157.1 million of unused credit lines available at December
31, 2021.

CONTRACTUAL OBLIGATIONS

The Company's significant contractual obligations as of December 31, 2021 are discussed in Note 12 “Leases” in the Notes to

Consolidated Financial Statements in Part II, Item 8 of this 2021 Annual Report on Form 10-K. There are no material undisclosed

guarantees. As of December 31, 2021 the Company had no additional material purchase obligations other than those created in the

general corporate purposes.

Primary Working Capital

of our PWC (in thousands):

Receivables

Inventories

Payables

Primary Working Capital

LIQUIDITY AND CAPITAL RESOURCES

The main sources of liquidity for the Company are cash from operations and borrowing capacity. In addition, depending on

market conditions, the Company may access the capital markets to strengthen its capital position and to provide additional liquidity for

We use primary working capital (PWC) as a percentage of sales as a key metric for working capital efficiency. We define this

metric as the sum of receivables and inventories less payables, divided by annual net sales. The following table shows the components

12/31/2021

12/31/2020

65,866

99,611

(41,859 )

123,618

PWC%

13.1%

19.7%

-8.3%

24.5%

61,689

81,586

(34,923 )

108,352

PWC%

14.5%

19.2%

-8.2%

25.5%

Overall, PWC increased $15.3 million compared to the previous year-end and includes the PWC acquired in connection with

the ATi acquisition. Receivables at December 31, 2021 were $65.9 million compared to $61.7 million at the end of 2020. Excluding

$3.9 million of ATi receivables, an increase of $0.3 million was due to robust collection efforts while growing sales. The Company

believes its receivables balance is fully collectible. Inventories at December 31, 2021 were $99.6 million compared to $81.6 million at

the end of 2020. Excluding $3.9 million of ATi inventory, inventory increased $14.1 million, due to component cost inflation and

higher safety stock levels associated with varied component shortages. Payables at December 31, 2021 were $41.9 million compared

to $34.9 million at the end of 2020. Excluding the impact of ATi payables, the remaining increase is attributed to payments timing and

the increased inventory levels at year end.

Cash Provided by Operations

Cash provided by operations in 2021 was $87.5 million compared to $89.6 million in 2020. The decrease from 2020 was

driven primarily by increased operating earnings offset by increased working capital requirements as described above. Operating cash

flow was more than adequate to fund acquisitions ($45.3 million, net of cash acquired), capital expenditures of $6.7 million and

dividends of $22.2 million.

Cash provided by operations in 2020 was $89.6 million compared to $80.7 million in 2019. The increase from 2019 was

driven primarily by improved working capital management as well as higher operating earnings. Operating cash flow was more than

adequate to fund the acquisition of s::can ($29.1 million, net of cash acquired), capital expenditures of $9.1 million and dividends of

$20.3 million and $3.1 million in share repurchases to partially offset equity compensation dilution. The remaining cash flow was

used to reduce short term borrowings and add to cash balances.

The Company had no short-term borrowings as of the end of 2021 or 2020. At the end of 2021, the Company was in a net

cash position of $87.2 million.

The Company’s financial condition remains strong. On July 8, 2021, the Company entered into a new credit agreement,

replacing its prior facility which was set to expire in September 2021. The credit agreement includes a $150.0 million multi-currency
line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the
Company’s financial flexibility including an increase feature, acquisition holiday and favorable financial covenants. The Company
was in compliance with all covenants as of December 31, 2021. The Company believes that its operating cash flows, available
borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital
expenditures and the development of new products. The Company had $157.1 million of unused credit lines available at December
31, 2021.

CONTRACTUAL OBLIGATIONS

The Company's significant contractual obligations as of December 31, 2021 are discussed in Note 12 “Leases” in the Notes to

Consolidated Financial Statements in Part II, Item 8 of this 2021 Annual Report on Form 10-K. There are no material undisclosed
guarantees. As of December 31, 2021 the Company had no additional material purchase obligations other than those created in the
ordinary course of business related to inventory and property, plant and equipment, which generally have terms of less than 90 days.
The Company also has long-term obligations related to its postretirement plans which are discussed in detail in Note 7 “Employee
Benefit Plans” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2021 Annual Report on Form 10-
K. Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.3 million in 2022
based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

We believe the following accounting estimates are the most critical to the understanding of our financial statements as they

could have the most significant effect on our reported results and require subjective or complex judgments by management.
Accounting principles generally accepted in the United States require us to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods
reported. These estimates are based on our best judgment about current and future conditions, but actual results could differ from those
estimates. Refer to Note 1 in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2021 Annual Report on Form 10-
K for information regarding our significant accounting policies.

Acquisition – Analytical Technology, Inc. (“ATi”)

The accounting for a business combination requires the purchase price for the acquisition to be allocated to the identifiable
assets of the acquired entity at fair value. Any unallocated portion is recognized as goodwill. We engaged an independent third-party
valuation specialist to assist with the fair value calculation of the intangible assets acquired, including trade names, customer
relationships and technologies. This required the use of several assumptions and estimates including the projected financial and cash
flow results of ATi, customer attrition rate, forecasted cash flows attributable to existing customers and the discount rate for intangible
assets. Although we believe the assumptions and estimates made were reasonable and appropriate, these estimates require judgment
and are based in part on historical experience and information obtained from management. More information regarding this business
combination is contained in Note 3 in the Consolidated Financial Statements.

Warranty and After-Sale Costs

Our products carry warranties that generally range from one to twenty years and are based on terms that are generally

accepted in the market. We provide for the estimated cost of product warranty at the time of sale. The product warranty provision is
estimated based upon warranty loss experience using actual historical failure rates and estimated costs of product replacement. The
variables used in the calculation of the provision are reviewed at least annually. At times, warranty issues may arise which are beyond
the scope of our historical experience. We provide for any such warranty issues as they become known and estimable. The
introduction of additional technology, such as our ORION cellular radios, electronic meters and registration, have generally caused our
annual warranty claims rates to increase over time. While our warranty costs have historically been within calculated estimates, it is
possible that future warranty costs could differ significantly from those estimates. At December 31, 2021 and 2020, our reserve for
product warranties was $12.9 million and $11.6 million, respectively.

OTHER MATTERS

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 with environmental control provisions and regulations
during 2021, 2020 and 2019 were not material.

See the “Special Note Regarding Forward Looking Statements” at the front of this Annual Report on Form 10-K and Part I,

Item 1A “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of risks and
uncertainties that could impact the Company's financial performance and results of operations.

MARKET RISKS

In the ordinary course of business, the Company is exposed to various market risks. The Company operates in an

environment where competition varies from moderate to strong. The Company believes it currently provides the leading technology

in water meters and radio systems for water utilities. A number of the Company's competitors in certain markets have greater financial

resources. Competitors also include alliance partners that sell products that do or may compete with our products. As the global water

metering market begins to shift to adopt static metering technology, the number of competitors may increase. We believe new static

metering market entrants lack brand recognition and product breadth and do not have the appropriate utility sales channels to

meaningfully compete in the North American market. In addition, the market's level of acceptance of the Company's newer product

offerings, including the BEACON AMA system, may have a significant effect on the Company's results of operations. As a result of

significant research and development activities, the Company enjoys favorable patent positions for several of its products.

ordinary course of business related to inventory and property, plant and equipment, which generally have terms of less than 90 days.

The Company also has long-term obligations related to its postretirement plans which are discussed in detail in Note 7 “Employee

Benefit Plans” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2021 Annual Report on Form 10-

K. Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.3 million in 2022

based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

We believe the following accounting estimates are the most critical to the understanding of our financial statements as they

could have the most significant effect on our reported results and require subjective or complex judgments by management.

Accounting principles generally accepted in the United States require us to make estimates and assumptions that affect the reported

amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods

reported. These estimates are based on our best judgment about current and future conditions, but actual results could differ from those

estimates. Refer to Note 1 in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2021 Annual Report on Form 10-

K for information regarding our significant accounting policies.

Acquisition – Analytical Technology, Inc. (“ATi”)

The accounting for a business combination requires the purchase price for the acquisition to be allocated to the identifiable

assets of the acquired entity at fair value. Any unallocated portion is recognized as goodwill. We engaged an independent third-party

valuation specialist to assist with the fair value calculation of the intangible assets acquired, including trade names, customer

relationships and technologies. This required the use of several assumptions and estimates including the projected financial and cash

flow results of ATi, customer attrition rate, forecasted cash flows attributable to existing customers and the discount rate for intangible

assets. Although we believe the assumptions and estimates made were reasonable and appropriate, these estimates require judgment

and are based in part on historical experience and information obtained from management. More information regarding this business

combination is contained in Note 3 in the Consolidated Financial Statements.

Warranty and After-Sale Costs

Our products carry warranties that generally range from one to twenty years and are based on terms that are generally

accepted in the market. We provide for the estimated cost of product warranty at the time of sale. The product warranty provision is

estimated based upon warranty loss experience using actual historical failure rates and estimated costs of product replacement. The

variables used in the calculation of the provision are reviewed at least annually. At times, warranty issues may arise which are beyond
the scope of our historical experience. We provide for any such warranty issues as they become known and estimable. The
introduction of additional technology, such as our ORION cellular radios, electronic meters and registration, have generally caused our
annual warranty claims rates to increase over time. While our warranty costs have historically been within calculated estimates, it is
possible that future warranty costs could differ significantly from those estimates. At December 31, 2021 and 2020, our reserve for
product warranties was $12.9 million and $11.6 million, respectively.

OTHER MATTERS

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 with environmental control provisions and regulations
during 2021, 2020 and 2019 were not material.

See the “Special Note Regarding Forward Looking Statements” at the front of this Annual Report on Form 10-K and Part I,

MARKET RISKS

In the ordinary course of business, the Company is exposed to various market risks. The Company operates in an
environment where competition varies from moderate to strong. The Company believes it currently provides the leading technology
in water meters and radio systems for water utilities. A number of the Company's competitors in certain markets have greater financial
resources. Competitors also include alliance partners that sell products that do or may compete with our products. As the global water
metering market begins to shift to adopt static metering technology, the number of competitors may increase. We believe new static
metering market entrants lack brand recognition and product breadth and do not have the appropriate utility sales channels to
meaningfully compete in the North American market. In addition, the market's level of acceptance of the Company's newer product
offerings, including the BEACON AMA system, may have a significant effect on the Company's results of operations. As a result of
significant research and development activities, the Company enjoys favorable patent positions for several of its products.

The Company's ability to generate operating income and to increase profitability depends somewhat on the general conditions

of the United States and foreign economies, including to some extent such things as the length and severity of global economic
downturns; the timing and size of governmental programs such as annual federal funding and periodic stimulus fund programs, as well
as the impact of government budget cuts or partial shutdowns of governmental operations; international or civil conflicts that affect
international trade; the ability of municipal water utility customers to authorize and finance purchases of the Company's products; the
Company's ability to obtain financing; housing starts in the United States; and overall industrial activity. In addition, changes in
governmental laws and regulations, particularly laws dealing with the content or handling of materials, customs or trade practices,
may impact the results of operations. These factors are largely beyond the Company's control and depend on the economic condition
and regulatory environment of the geographic region of the Company's operations.

The Company relies on single suppliers for certain castings and components in several of its product lines. Although

alternate sources of supply exist for these items, the loss of certain suppliers could temporarily disrupt operations in the short term.
The Company attempts to mitigate these risks by working closely with key suppliers, purchasing minimal amounts from alternative
suppliers and by purchasing business interruption insurance where appropriate.

The Company's foreign currency risk relates to the sales of products to foreign customers and purchases of material from
foreign vendors. The Company uses lines of credit with U.S. and European banks to offset currency exposure related to European
receivables and other monetary assets. The Company believes the effect of a change in foreign currency rates will not have a material
adverse effect on the Company's financial position or results of operations, either from a cash flow perspective or on the financial
statements as a whole.

The Company typically does not hold or issue derivative instruments and has a policy specifically prohibiting the use of such

instruments for trading purposes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this Item is set forth in Part II, Item 7 “Management's Discussion and Analysis of Financial

Condition and Results of Operations” under the heading “Market Risks” in this 2021 Annual Report on Form 10-K.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

20
BADGER METER, INC.

Management's Annual Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial

reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company's internal control over

financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of

changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of

December 31, 2021 using the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission (2013 Framework). Based on this assessment, the Company's management believes that,

as of December 31, 2021, the Company's internal control over financial reporting was effective based on those criteria.

Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements

included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the

effectiveness of the Company's internal control over financial reporting.

The Company's ability to generate operating income and to increase profitability depends somewhat on the general conditions

of the United States and foreign economies, including to some extent such things as the length and severity of global economic

downturns; the timing and size of governmental programs such as annual federal funding and periodic stimulus fund programs, as well

as the impact of government budget cuts or partial shutdowns of governmental operations; international or civil conflicts that affect

international trade; the ability of municipal water utility customers to authorize and finance purchases of the Company's products; the

Company's ability to obtain financing; housing starts in the United States; and overall industrial activity. In addition, changes in

governmental laws and regulations, particularly laws dealing with the content or handling of materials, customs or trade practices,

may impact the results of operations. These factors are largely beyond the Company's control and depend on the economic condition

and regulatory environment of the geographic region of the Company's operations.

The Company relies on single suppliers for certain castings and components in several of its product lines. Although

alternate sources of supply exist for these items, the loss of certain suppliers could temporarily disrupt operations in the short term.

The Company attempts to mitigate these risks by working closely with key suppliers, purchasing minimal amounts from alternative

suppliers and by purchasing business interruption insurance where appropriate.

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. The Company does not hold significant amounts of precious metals. The price and

availability of raw materials is influenced by economic and industry conditions, including supply and demand factors that are difficult

to anticipate and cannot be controlled by the Company. Commodity risk is managed by keeping abreast of economic conditions and

locking in purchase prices for quantities that correspond to the Company's forecasted usage.

The Company's foreign currency risk relates to the sales of products to foreign customers and purchases of material from

foreign vendors. The Company uses lines of credit with U.S. and European banks to offset currency exposure related to European

receivables and other monetary assets. The Company believes the effect of a change in foreign currency rates will not have a material
adverse effect on the Company's financial position or results of operations, either from a cash flow perspective or on the financial
statements as a whole.

The Company typically does not hold or issue derivative instruments and has a policy specifically prohibiting the use of such

instruments for trading purposes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this Item is set forth in Part II, Item 7 “Management's Discussion and Analysis of Financial

Condition and Results of Operations” under the heading “Market Risks” in this 2021 Annual Report on Form 10-K.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

BADGER METER, INC.

Management's Annual Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company's internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of

December 31, 2021 using the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework). Based on this assessment, the Company's management believes that,
as of December 31, 2021, the Company's internal control over financial reporting was effective based on those criteria.

Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements

included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the
effectiveness of the Company's internal control over financial reporting.

BADGER METER, INC.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Badger Meter, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Badger Meter, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria

established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Badger Meter, Inc. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)

(PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, and the related consolidated
statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended
December 31, 2021, and the related notes and our report dated February 23, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform

the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material

weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin
February 23, 2022

BADGER METER, INC.
BADGER METER, INC.
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Badger Meter, Inc.
To the Shareholders and the Board of Directors of Badger Meter, Inc.
Opinion on the Financial Statements
Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Badger Meter, Inc. (the Company) as of December 31,
We have audited the accompanying consolidated balance sheets of Badger Meter, Inc. (the Company) as of December 31,

2021 and 2020, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each
2021 and 2020, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each
of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial
of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period
Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated February 23, 2022 expressed an unqualified opinion thereon.
framework) and our report dated February 23, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion

on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the
critical audit matters do not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
critical audit matters do not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures
communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures
to which they relate.
to which they relate.

Description of the
Description of the
Matter
Matter

Warranty and After-Sale Costs Reserve
Warranty and After-Sale Costs Reserve

As described in Note 1 to the consolidated financial statements, the Company estimates and records provisions
As described in Note 1 to the consolidated financial statements, the Company estimates and records provisions
for warranties and other after-sale costs. Warranty provisions are recorded in the period of sale, using
for warranties and other after-sale costs. Warranty provisions are recorded in the period of sale, using
historical claims data revised for recent trending and expectations to estimate future warranty costs. After-sale
historical claims data revised for recent trending and expectations to estimate future warranty costs. After-sale
costs represent costs expected to be incurred related to specifically identified product issues as well as
costs represent costs expected to be incurred related to specifically identified product issues as well as
activities outside the written warranty policy and are estimated by the Company based on the individual facts
activities outside the written warranty policy and are estimated by the Company based on the individual facts
and circumstances. The Company’s accrued liability was $12.9 million as of December 31, 2021, representing
and circumstances. The Company’s accrued liability was $12.9 million as of December 31, 2021, representing
its best estimate of the expected warranty and after-sale costs.
its best estimate of the expected warranty and after-sale costs.
Auditing management's estimates for warranty and after-sale costs involved significant auditor judgment
Auditing management's estimates for warranty and after-sale costs involved significant auditor judgment
because the reserve for warranty and after-sale costs requires the Company to estimate future claims. The
because the reserve for warranty and after-sale costs requires the Company to estimate future claims. The
calculation to estimate future claims includes a number of inputs and assumptions, the most significant of
calculation to estimate future claims includes a number of inputs and assumptions, the most significant of
which include the number and type of claims, an evaluation of warranty trends, consideration of product
which include the number and type of claims, an evaluation of warranty trends, consideration of product
developments, and estimates of future costs to replace or repair specifically identified items.
developments, and estimates of future costs to replace or repair specifically identified items.

24
24

How We Addressed
the Matter in Our
How We Addressed
Audit
the Matter in Our
Audit

We evaluated the design and tested the operating effectiveness of internal controls over the Company's
We evaluated the design and tested the operating effectiveness of internal controls over the Company's

warranty and after-sale costs reserve process, including management's assessment of the assumptions and data
underlying the projection of future warranty and after-sale costs.
warranty and after-sale costs reserve process, including management's assessment of the assumptions and data
underlying the projection of future warranty and after-sale costs.
Our substantive audit procedures included, among others, evaluating the significant assumptions discussed
above and the accuracy and completeness of the underlying data used in management's warranty and after-
Our substantive audit procedures included, among others, evaluating the significant assumptions discussed
sales costs reserve calculation. We evaluated the historical activity used to develop the lag calculation,
above and the accuracy and completeness of the underlying data used in management's warranty and after-
including reviewing the data for any developing trends in the claims data, considered the impact of product
sales costs reserve calculation. We evaluated the historical activity used to develop the lag calculation,
developments on the calculation, and evaluated the cost build up for any specific reserve items, including
including reviewing the data for any developing trends in the claims data, considered the impact of product
procedures to support the completeness of the number and type of products impacted and the estimated future
developments on the calculation, and evaluated the cost build up for any specific reserve items, including
cost to repair or replace the products. We assessed the historical accuracy of management's estimates by
procedures to support the completeness of the number and type of products impacted and the estimated future
comparing the warranty and after-sale costs reserve in prior years to the actual claims paid in the subsequent
cost to repair or replace the products. We assessed the historical accuracy of management's estimates by
years. We assessed management’s methodology and tested the valuation of the warranty and after-sale costs
comparing the warranty and after-sale costs reserve in prior years to the actual claims paid in the subsequent
reserve by developing an independent expectation for the reserve based on the historical amounts recorded as
years. We assessed management’s methodology and tested the valuation of the warranty and after-sale costs
a percentage of sales and compared our expectation to the amount recorded by management. We evaluated the
reserve by developing an independent expectation for the reserve based on the historical amounts recorded as
completeness of the reserve estimate for known warranty claims or product issues based on our review of
a percentage of sales and compared our expectation to the amount recorded by management. We evaluated the
after-sales costs and through inquiries of operational and executive management and evaluated whether
completeness of the reserve estimate for known warranty claims or product issues based on our review of
specific product issues were appropriately considered in the determination of the warranty and after-sale costs
after-sales costs and through inquiries of operational and executive management and evaluated whether
reserve.
specific product issues were appropriately considered in the determination of the warranty and after-sale costs
reserve.

Accounting for Acquisitions – Valuation of Analytical Technology, Inc. Intangible Assets
Accounting for Acquisitions – Valuation of Analytical Technology, Inc. Intangible Assets
Description of the
Matter
Description of the
Matter

As discussed in Note 3 to the financial statements, during 2021, the Company completed its acquisition of
Analytical Technology, Inc. (“ATi”) for consideration of $44 million, net of cash acquired. The transaction was
As discussed in Note 3 to the financial statements, during 2021, the Company completed its acquisition of
accounted for using the guidance under ASC 805, Business Combinations.
Analytical Technology, Inc. (“ATi”) for consideration of $44 million, net of cash acquired. The transaction was
accounted for using the guidance under ASC 805, Business Combinations.
Auditing the Company's accounting for its acquisition of ATi was complex due to the significant estimation
uncertainty in the Company’s determination of the fair value of identified intangible assets of $21.0 million,
Auditing the Company's accounting for its acquisition of ATi was complex due to the significant estimation
which principally consisted of developed technology, customer relationships, and trademarks. The significant
uncertainty in the Company’s determination of the fair value of identified intangible assets of $21.0 million,
estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying
which principally consisted of developed technology, customer relationships, and trademarks. The significant
assumptions about the future performance of the acquired business. The significant assumptions used to
estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying
estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of
assumptions about the future performance of the acquired business. The significant assumptions used to
the forecasted results (including revenue growth rates, attrition rates and royalty rates). These assumptions are
estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of
forward looking and could be affected by future economic and market conditions.
the forecasted results (including revenue growth rates, attrition rates and royalty rates). These assumptions are
forward looking and could be affected by future economic and market conditions.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company's
controls over its accounting for acquisitions. For example, we tested controls over the estimation process
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company's
supporting the measurement of developed technology, customer relationships, and trademark intangible assets,
controls over its accounting for acquisitions. For example, we tested controls over the estimation process
including management’s review of the significant assumptions used in the valuation models.
supporting the measurement of developed technology, customer relationships, and trademark intangible assets,
including management’s review of the significant assumptions used in the valuation models.
To test the estimated fair value of the developed technology, customer relationships, and trademark intangible
assets, our audit procedures included, among others, evaluating the Company's valuation methodology, and
To test the estimated fair value of the developed technology, customer relationships, and trademark intangible
testing the significant assumptions discussed above including the completeness and accuracy of the underlying
assets, our audit procedures included, among others, evaluating the Company's valuation methodology, and
data supporting the significant assumptions and estimates. We compared the revenue growth rates to third-party
testing the significant assumptions discussed above including the completeness and accuracy of the underlying
industry projections and to the historical performance of the acquired business. We involved our valuation
data supporting the significant assumptions and estimates. We compared the revenue growth rates to third-party
specialists to assist with our evaluation of the methodology used by the Company and significant assumptions
industry projections and to the historical performance of the acquired business. We involved our valuation
included in the fair value estimates. For example, we evaluated the discount rates by comparing them to
specialists to assist with our evaluation of the methodology used by the Company and significant assumptions
discount rate ranges that were independently developed using publicly available market data for comparable
included in the fair value estimates. For example, we evaluated the discount rates by comparing them to
peers. We also compared the customer attrition rates to historical customer retention rates and the royalty rate to
discount rate ranges that were independently developed using publicly available market data for comparable
relevant comparable licensing agreements.
peers. We also compared the customer attrition rates to historical customer retention rates and the royalty rate to
relevant comparable licensing agreements.

How We
Addressed the
How We
Matter in Our
Addressed the
Audit
Matter in Our
Audit

/s/ Ernst & Young LLP
/s/ Ernst & Young LLP
We have served as Badger Meter, Inc.’s auditor since 1927.
We have served as Badger Meter, Inc.’s auditor since 1927.
Milwaukee, Wisconsin
February 23, 2022
Milwaukee, Wisconsin
February 23, 2022

25
25

BADGER METER, INC.

Consolidated Balance Sheets

December 31,

2021

2020

(In thousands)

Assets

Current assets:

Cash
Receivables
Inventories:

Finished goods
Work in process
Raw materials

Total inventories

Prepaid expenses and other current assets

Total current assets
Property, plant and equipment, at cost:

Land and improvements
Buildings and improvements
Machinery and equipment

Less accumulated depreciation

Net property, plant and equipment

Intangible assets, at cost less accumulated amortization
Other assets
Deferred income taxes
Goodwill
Total assets

Liabilities and Shareholders’ Equity

Current liabilities:

Payables
Accrued compensation and employee benefits
Warranty and after-sale costs
Other current liabilities

Total current liabilities

Other long-term liabilities
Deferred income taxes
Accrued non-pension postretirement benefits
Other accrued employee benefits
Commitments and contingencies (Note 6)
Shareholders’ equity:

Common Stock, $1 par; authorized 40,000,000 shares; issued
37,221,098 shares in 2021 and 2020
Capital in excess of par value
Reinvested earnings
Accumulated other comprehensive income
Less: Treasury stock, at cost; 7,971,367 shares in 2021 and
8,075,280 shares in 2020

Total shareholders’ equity

Total liabilities and shareholders’ equity

87,174 $
65,866

25,991
24,747
48,873
99,611
8,709
261,360

9,183
71,103
136,510
216,796
(138,746 )
78,050
64,176
15,390
7,529
104,313
530,818 $

41,859 $
20,644
12,868
6,775
82,146
29,804
5,385
5,214
5,199

37,221
49,224
353,535
136

(37,046 )
403,070
530,818 $

72,273
61,689

24,881
16,841
39,864
81,586
8,140
223,688

9,156
69,700
138,548
217,404
(134,699 )
82,705
53,598
17,428
5,090
88,708
471,217

34,923
14,617
11,617
6,879
68,036
26,381
5,696
5,789
4,056

37,221
44,964
314,850
1,313

(37,089 )
361,259
471,217

See accompanying notes.

BADGER METER, INC.

Consolidated Statements of Operations

2021

Years ended December 31,
2020
(In thousands except per share amounts)

2019

Net sales
Cost of sales
Gross margin
Selling, engineering and administration
Operating earnings
Interest (income) expense, net
Other pension and postretirement costs
Earnings before income taxes
Provision for income taxes
Net earnings
Earnings per share:

Basic
Diluted

Shares used in computation of earnings per share:

Basic
Impact of dilutive securities
Diluted

$
$

505,198 $
299,714
205,484
126,761
78,723
(20 )
120
78,623
17,739
60,884 $

425,544 $
257,295
168,249
103,093
65,156
30
145
64,981
15,638
49,343 $

2.09 $
2.08 $

1.70 $
1.69 $

29,144
194
29,338

29,052
178
29,230

424,625
261,097
163,528
101,380
62,148
253
288
61,607
14,430
47,177

1.63
1.61

29,028
192
29,220

See accompanying notes.

BADGER METER, INC.

Consolidated Statements of Comprehensive Income

Net earnings
Other comprehensive income :

Foreign currency translation adjustment
Pension and postretirement benefits, net of tax

Comprehensive income

2021

Years ended December 31,
2020
(In thousands)

2019

60,884 $

49,343 $

47,177

(1,516 )
339
59,707 $

1,096
(208 )
50,231 $

(58 )
(97 )
47,022

See accompanying notes.

BADGER METER, INC.

Consolidated Statements of Cash Flows

Operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash
provided by operations:

Depreciation
Amortization
Deferred income taxes
Noncurrent employee benefits
Stock-based compensation expense
Changes in:

Receivables
Inventories
Payables
Prepaid expenses and other current assets
Other liabilities

Total adjustments

Net cash provided by operations
Investing activities:

Property, plant and equipment additions
Proceeds from company owned life insurance plans
Acquisitions, net of cash acquired
Net cash used for investing activities
Financing activities:

Net decrease in short-term debt
Payment of contingent acquisition consideration
Dividends paid
Proceeds from exercise of stock options
Purchase of common stock for treasury stock
Issuance of treasury stock

Net cash used for financing activities
Effect of foreign exchange rates on cash
Increase in cash
Cash and cash equivalents — beginning of year
Cash and cash equivalents — end of year
Supplemental disclosures of cash flow information:

Cash paid during the year for:

Income taxes
Interest

2021

Years ended December 31,
2020
(In thousands)

2019

60,884 $

49,343 $

47,177

11,291
16,571
(3,055 )
(234 )
2,330

(1,240 )
(13,633 )
7,005
(8,281 )
15,872
26,626
87,510

(6,746 )
596
(45,273 )
(51,423 )

—
—
(22,155 )
2,036
(460 )
72
(20,507 )
(679 )
14,901
72,273
87,174 $

12,253
12,963
(3,082 )
206
1,415

3,036
5,129
(391 )
(3,522 )
12,228
40,235
89,578

(9,059 )
—
(29,134 )
(38,193 )

(4,600 )
(1,001 )
(20,340 )
1,058
(3,116 )
180
(27,819 )
(164 )
23,402
48,871
72,273 $

11,569
12,577
(1,524 )
(40 )
1,214

5,451
(1,220 )
11,642
(7,732 )
1,600
33,537
80,714

(7,496 )
—
—
(7,496 )

(13,500 )
(2,555 )
(18,595 )
1,961
(5,207 )
187
(37,709 )
276
35,785
13,086
48,871

19,981 $
118 $

17,995 $
91 $

13,066
268

$
$

See accompanying notes.

BADGER METER, INC.

Consolidated Statements of Shareholders’ Equity

Common
Stock at $1
par value*

Capital in
excess of
par value

Years ended December 31,
Accumulated
other
comprehensive
income
Reinvested
earnings
(loss)
(In thousands except per share amounts)

Employee
benefit
stock

Treasury
stock

Total

$ 37,198 $ 38,082 $ 257,313 $
— 47,177

—

580 $
—

(306 ) $ (29,364 ) $ 303,503
— 47,177

—

—
—
—
2
—
—
—
—

—
—
—
—
— (18,611 )
—
—
—
—
—
37,200 41,956 285,879
— 49,343

1,708
401
1,214
—
551

—

—
—
—
21
—
—
—
—

—
—
—
—
— (20,372 )
—
—
—
—
—
37,221 44,964 314,850
— 60,884

877
280
1,415
—
436

—

—
—
—
—
—
—
—

—
—
—
—
— (22,199 )
—
—
—
—
$ 37,221 $ 49,224 $ 353,535 $

1,622
2,330
—
308

(97 )
(58 )
—
—
—
—
—
—
425
—

(208 )
1,096
—
—
—
—
—
—
1,313
—

339
(1,516 )
—
—
—
—
—
136 $

—
—
—
—
152
—
—
—

(97 )
—
—
(58 )
— (18,611 )
1,961
553
1,214
(5,207 )
633
(154 ) (34,238 ) 331,068
— 49,343

251
—
—
(5,207 )
82

—

—
—
—
—
154

(208 )
—
—
1,096
— (20,372 )
1,058
160
434
—
1,415
—
(3,116 )
(3,116 )
—
—
541
105
— (37,089 ) 361,259
— 60,884
—

339
—
—
—
(1,516 )
—
— (22,199 )
—
2,036
—
2,330
—
(460 )
—
—
397
— $ (37,046 ) $ 403,070

414
—
(460 )
89

Balance, December 31, 2018
Net earnings
Pension and postretirement benefits
(net of $16 tax effect)
Foreign currency translation
Cash dividends of $0.64 per share
Stock options exercised
ESSOP transactions
Stock-based compensation
Purchase of common stock for treasury stock
Issuance of treasury stock (72 shares)
Balance, December 31, 2019
Net earnings
Pension and postretirement benefits
(net of $69 tax effect)
Foreign currency translation
Cash dividends of $0.70 per share
Stock options exercised
ESSOP transactions
Stock-based compensation
Purchase of common stock for treasury stock
Issuance of treasury stock (22 shares)
Balance, December 31, 2020
Net earnings
Pension and postretirement benefits
(net of ($112) tax effect)
Foreign currency translation
Cash dividends of $0.76 per share
Stock options exercised
Stock-based compensation
Purchase of common stock for treasury stock
Issuance of treasury stock (19 shares)
Balance, December 31, 2021

* Each common share of stock equals $1 par value; therefore, the number of common shares is the same as the dollar value.

See accompanying notes.

BADGER METER, INC.
BADGER METER, INC.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements

Note 1 Basis of Presentation and Accounting Policies
Note 1 Basis of Presentation and Accounting Policies
Profile
Profile

With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water
With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water
solutions encompassing flow measurement, quality and other system parameters. These offerings provide customers with the
solutions encompassing flow measurement, quality and other system parameters. These offerings provide customers with the
data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most
data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most
precious resource. The Company’s flow measurement products measure water and other fluids and are known for accuracy,
precious resource. The Company’s flow measurement products measure water 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
long-lasting durability and for providing valuable and timely measurement data through various methods. The Company’s
water quality monitoring solutions include optical sensing and electrochemical instruments that provide real-time, on-demand
water quality monitoring solutions include optical sensing and electrochemical instruments that provide real-time, on-demand
data parameters. The Company’s product lines fall into two categories: sales of water meters, radios, software and related
data parameters. The Company’s product lines fall into two categories: sales of water meters, radios, software and related
technologies, and water quality monitoring solutions to water utilities (utility water) and sales of meters and other sensing
technologies, and water quality monitoring solutions to water utilities (utility water) and sales of meters and other sensing
instruments, valves, software and other solutions for industrial applications in water, wastewater, and other industries (flow
instruments, valves, software and other solutions for industrial applications in water, wastewater, and other industries (flow
instrumentation). The Company estimates that over 90% of its products are used in water related applications.
instrumentation). The Company estimates that over 90% of its products are used in water related applications.

Utility water, the largest sales category, is comprised of either mechanical or static (ultrasonic) water meters along
Utility 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 water utilities as the basis for generating their water and
with the related radio and software technologies and services used by water utilities as the basis for generating their water and
wastewater revenues, enabling operating efficiencies and engaging with their end consumers. It further comprises other sensor
wastewater revenues, enabling operating efficiencies and engaging with their end consumers. It further comprises other sensor
technology used in the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used
technology used in the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used
to detect leaks in the distribution piping system and to monitor various water quality parameters throughout the distribution
to detect leaks in the distribution piping system and to monitor various water quality parameters throughout the distribution
system. The largest geographic market for the Company’s utility water products is North America, primarily the United States,
system. The largest geographic market for the Company’s utility 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
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,
Water Works Association. The majority of water meters sold by the Company continue to be mechanical in nature; however,
static meters are an increasing percentage of the water meters sold by the Company and in the industry, due to a variety of
static 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
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
technology, combined with advanced radio technology, provides the Company with the opportunity to sell into other
geographical markets, for example the Middle East, Europe and Southeast Asia.
geographical markets, for example the Middle East, Europe and Southeast Asia.

The flow instrumentation product line primarily serves water applications throughout the broader industrial markets.
The flow instrumentation product line primarily serves water applications throughout the broader industrial markets.
This product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of
This product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of
fluids going through a pipe or pipeline including water, air, steam, and other liquids and gases. These products are used in a
fluids going through a pipe or pipeline including water, air, steam, 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
variety of industries and applications, with the Company’s primary market focus being water/wastewater, heating, ventilating
and air conditioning (HVAC) and corporate sustainability. Flow instrumentation products are generally sold to original
and air conditioning (HVAC) and corporate sustainability. 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
equipment manufacturers as the primary flow measurement device within a product or system, as well as through
manufacturers’ representatives.
manufacturers’ representatives.
Consolidation
Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All

intercompany transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform
intercompany transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform
to current year presentation.
to current year presentation.
Receivables
Receivables

Receivables consist primarily of trade receivables. The Company does not require collateral or other security and
Receivables consist primarily of trade receivables. The Company does not require collateral or other security and

evaluates the collectability of its receivables based on a number of factors. An allowance for doubtful accounts is recorded for
evaluates the collectability of its receivables based on a number of factors. An allowance for doubtful accounts is recorded for
significant past due receivable balances based on a review of the past due items and the customer's ability and likelihood to pay,
significant past due receivable balances based on a review of the past due items and the customer's ability and likelihood to pay,
as well as applying a historical write-off ratio to the remaining balances. Changes in the Company's allowance for doubtful
as well as applying a historical write-off ratio to the remaining balances. Changes in the Company's allowance for doubtful
accounts are as follows:
accounts are as follows:

2021
2021
2020
2020
2019
2019

552 $
552 $
224
224
360
360

$
$

31
31

Balance at
beginning
Balance at
of year
beginning
of year

Provision and
reserve
Provision and
adjustments
reserve
adjustments

Write-offs less
recoveries
Write-offs less
recoveries

Balance at end
of year
Balance at end
of year

(In thousands)
(In thousands)
191 $
191 $
356
356
(132 )
(132 )

(46 ) $
(46 ) $
(28 )
(28 )
(4 )
(4 )

697
697
552
552
224
224

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out
method. The Company estimates and records provisions for obsolete and excess inventories. Changes to the Company's
obsolete and excess inventories reserve are as follows:

2021
2020
2019

Property, Plant and Equipment

Balance at
beginning
of year

Net additions
charged to
earnings

Disposals

Balance at end
of year

6,400 $
5,440
4,131

(In thousands)
1,329 $
2,964
2,663

(1,651 ) $
(2,004 )
(1,354 )

6,078
6,400
5,440

Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the

respective assets by the straight-line method. The estimated useful lives of assets are: for land improvements, 15 years; for
buildings and improvements, 10 to 39 years; and for machinery and equipment, 3 to 20 years.

Capitalized Software and Hardware

Capitalized internal use software and hardware included in other assets in the Consolidated Balance Sheets were $5.6

million and $6.0 million at December 31, 2021 and 2020, respectively. These amounts are amortized on a straight-line basis
over the estimated useful lives of the software and/or hardware, ranging from 1 to 5 years. Amortization expense recognized
for the years ending December 31, 2021, 2020 and 2019 was $4.5 million, $3.7 million and $3.1 million, respectively.

Long-Lived Assets

Property, plant and equipment and identifiable intangible assets are reviewed for impairment whenever events or

changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted
cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between
the fair value and carrying value of the asset or group of assets.

Intangible Assets

Intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from 5 to 20 years.

The Company does not have any intangible assets deemed to have indefinite lives. Amortization expense was $10.0 million in
2021 and $7.2 million in 2020 and 2019. Amortization expense expected to be recognized is $8.7 million in 2022 and $8.1 in
2023, $8.0 million in 2024, $7.7 million in 2025, $6.6 million in 2026 and $25.1 million thereafter. The carrying value and
accumulated amortization by major class of intangible assets are as follows:

Technologies
Intellectual property
Non-compete agreements
Licenses
Customer lists
Customer relationships
Trade names
Total intangibles

December 31, 2021

December 31, 2020

Gross carrying
amount

Accumulated
amortization

Gross carrying
amount

Accumulated
amortization

58,789 $
10,169
748
650
8,083
39,202
16,050
133,691 $

(In thousands)

34,254 $
2,744
506
543
4,501
19,663
7,304
69,515 $

52,536 $
10,000
931
650
8,023
28,630
12,136
112,906 $

30,598
1,833
413
526
3,846
16,146
5,946
59,308

Goodwill

Goodwill is tested for impairment annually during the fourth quarter or more frequently if an event indicates that the

goodwill might be impaired. Potential impairment is identified by comparing the fair value of a reporting unit with its carrying
value. No adjustments were recorded to goodwill as a result of these tests during 2021, 2020 and 2019. Goodwill was $104.3
million at December 31, 2021, $88.7 million in 2020 and $71.3 million in 2019. The increase from 2020 to 2021 resulted from
the acquisition of ATi, headquartered in Collegeville, Pennsylvania in 2021. The increase from 2019 to 2020 resulted from the
acquisition of s::can, headquartered in Vienna, Austria in 2020. These acquisitions are further described in Note 3
“Acquisitions”.

Warranty and After-Sale Costs

The Company estimates and records provisions for warranties and other after-sale costs in the period in which the sale

is recorded, based on a lag factor and historical warranty claim experience. After-sale costs represent a variety of activities
outside of the written warranty policy, such as investigation of unanticipated issues after the customer has installed the product
or analysis of water quality issues. Changes in the Company's warranty and after-sale costs reserve are as follows:

2021
2020
2019

Research and Development

Balance at
beginning
of year

Provision of
acquired
business

Net
additions
charged to
earnings
(In thousands)

Costs
incurred

Balance at
end
of year

11,617 $
5,583
4,206

— $
500
—

5,856 $
7,855
6,616

(4,605 ) $
(2,321 )
(5,239 )

12,868
11,617
5,583

Research and development costs are charged to expense as incurred and amounted to $14.7 million in 2021, $11.6

million in 2020 and $11.9 million in 2019.

Healthcare

The Company estimates and records provisions for healthcare claims incurred but not reported, based on medical cost

trend analysis, reviews of subsequent payments made and estimates of unbilled amounts.

Accumulated Other Comprehensive Income

Components of accumulated other comprehensive income at December 31, 2021 are as follows:

Pension and
postretirement
benefits

Foreign currency

Total

Balance at beginning of period
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income,
net of tax of ($112)
Net current period other comprehensive income (loss), net
Accumulated other comprehensive income

(In thousands)

55 $
—

1,258 $
(1,516 )

339
339
394 $

—
(1,516 )
(258 ) $

1,313
(1,516 )

339
(1,177 )
136

Reclassifications out of accumulated other comprehensive income during 2021 are immaterial.

Components of accumulated other comprehensive income at December 31, 2020 are as follows:

Pension and
postretirement
benefits

Foreign currency
(In thousands)

Total

Balance at beginning of period
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income,
net of tax of $69
Net current period other comprehensive (loss) income, net
Accumulated other comprehensive income

263 $
—

(208 )
(208 )
55 $

162 $
1,096

—
1,096
1,258 $

425
1,096

(208 )
888
1,313

Reclassifications out of accumulated other comprehensive income during 2020 were immaterial.

Use of Estimates

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”)

requires management to make estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Fair Value Measurements of Financial Instruments

The carrying amounts of cash, receivables and payables in the financial statements approximate their fair values due to

the short-term nature of these financial instruments. Included in other assets are insurance policies on various individuals who
were associated with the Company. The carrying amounts of these insurance policies approximate their fair value.

Subsequent Events

The Company evaluates subsequent events at the date of the balance sheet as well as conditions that arise after the

balance sheet date but before the financial statements are issued. The effects of conditions that existed at the balance sheet date
are recognized in the financial statements. Events and conditions arising after the balance sheet date but before the financial
statements are issued are evaluated to determine if disclosure is required to keep the financial statements from being
misleading. To the extent such events and conditions exist, if any, disclosures are made regarding the nature of events and the
estimated financial effects for those events and conditions. For purposes of preparing the accompanying consolidated financial
statements and the notes to these financial statements, the Company evaluated subsequent events through the date the
accompanying financial statements were issued.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for
income taxes by removing certain exceptions to the general principles in Topic 740 and modifies the existing guidance to enable
more consistent application. This guidance is effective for fiscal years beginning after December 15, 2020, including interim
periods within that fiscal year with early adoption being permitted. The Company adopted ASU No. 2019-12 on January 1, 2021,
the impact of which was not significant to the Company.

Note 2 Common Stock

Common Stock

The authorized common stock of the Company as of December 31, 2021 consisted of 40,000,000 shares of common

stock, $1 par value, of which 37,221,098 were issued and outstanding as of December 31, 2021 and 2020, respectively.

Stock Options

There were no anti-dilutive options in 2021 and 2020. Stock options to purchase 54,139 shares in 2019 were not

included in the computation of dilutive securities because their inclusion would have been anti-dilutive.

Note 3 Acquisitions

Acquisitions are accounted for under the purchase method, and accordingly, the results of operations were included in

the Company's financial statements from the date of acquisition. The acquisitions did not have a material impact on the
Company's consolidated financial statements or the notes thereto.

Effective January 1, 2021, the Company acquired 100% of the outstanding stock of ATi, headquartered in

Collegeville, Pennsylvania, a provider of water quality monitoring systems.

The total purchase consideration for ATi, net of cash acquired, was $44.0 million. The Company's allocation of the

purchase price at December 31, 2021 included $3.9 million of receivables, $3.9 million of inventory, $2.5 million of other
assets, $21.0 million of intangibles and $16.4 million of goodwill that is deductible for tax purposes. The intangible assets
acquired are primarily customer relationships, developed technology and trademarks with estimated average useful lives of 12
to 15 years. The Company also assumed $1.4 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7
million of other liabilities as part of the acquisition. The allocation of the purchase price to the assets acquired was based upon
the estimated fair values at the date of acquisition. As of December 31, 2021, the Company had completed its analysis for
estimating the fair value of the assets acquired with no additional adjustments.

Effective November 2, 2020, the Company acquired 100% of the outstanding stock of s::can headquartered in Vienna,

Austria. s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of
parameters in water and wastewater utilizing in-line monitoring systems and other applications.

The total purchase consideration for s::can, net of cash acquired, was $30.5 million, inclusive of $1.3 million of

working capital adjustments. The Company's allocation of the purchase price at December 31, 2021 included $2.6 million of
receivables, $4.3 million of inventory, $1.2 million of other assets, $12.7 million of intangibles and $17.7 million of goodwill
that is not deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed
technology with an estimated average useful life of 12 years. The Company also assumed $3.5 million of accounts payable,
$3.2 million of deferred tax liabilities and $1.3 million of other liabilities as part of the acquisition. The allocation of the
purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of December 31,
2021, the Company had completed its analysis for estimating the fair value of the assets acquired with no additional
adjustments.

Note 4 Short-term Debt and Credit Lines

The Company did not have short-term debt at December 31, 2021 and 2020. On July 8, 2021, the Company entered

into a new credit agreement, replacing its prior facility which was set to expire in September 2021. The credit agreement
includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million). The facility
includes several features that enhance the Company’s financial flexibility including an increase feature, acquisition holiday and
favorable financial covenants. The Company was in compliance with all covenants as of December 31, 2021. The Company
had $157.1 million of unused credit lines available at December 31, 2021.

Note 5 Stock Compensation

As of December 31, 2021, the Company has an Omnibus Incentive Plan under which 1,000,000 shares are reserved for
restricted stock, performance shares and stock options grants for employees, as well as stock grants for directors. The plan was
approved in 2021 and replaced all prior stock-based plans except for shares and options previously issued under those plans.
As of December 31, 2021 there were 994,119 shares of the Company’s Common Stock available for grant under the 2021
Omnibus Incentive Plan. The Company recognizes the cost of stock-based awards in net earnings for all of its stock-based
compensation plans on a straight-line basis over the service period of the awards. The following sections describe the four
types of grants in more detail.

Stock Options

The Company estimates the fair value of its option awards using the Black-Scholes option-pricing formula, and

records compensation expense for stock options ratably over the stock option grant’s vesting period. Stock option
compensation expense recognized by the Company for the year ended December 31, 2021 and 2020 was $0.4 million and $0.3
million in 2019. No new stock options were granted in 2021.

Note 3 Acquisitions

Acquisitions are accounted for under the purchase method, and accordingly, the results of operations were included in

the Company's financial statements from the date of acquisition. The acquisitions did not have a material impact on the

Company's consolidated financial statements or the notes thereto.

Effective January 1, 2021, the Company acquired 100% of the outstanding stock of ATi, headquartered in

Collegeville, Pennsylvania, a provider of water quality monitoring systems.

The total purchase consideration for ATi, net of cash acquired, was $44.0 million. The Company's allocation of the

purchase price at December 31, 2021 included $3.9 million of receivables, $3.9 million of inventory, $2.5 million of other

assets, $21.0 million of intangibles and $16.4 million of goodwill that is deductible for tax purposes. The intangible assets

acquired are primarily customer relationships, developed technology and trademarks with estimated average useful lives of 12

to 15 years. The Company also assumed $1.4 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7

million of other liabilities as part of the acquisition. The allocation of the purchase price to the assets acquired was based upon

the estimated fair values at the date of acquisition. As of December 31, 2021, the Company had completed its analysis for

estimating the fair value of the assets acquired with no additional adjustments.

Effective November 2, 2020, the Company acquired 100% of the outstanding stock of s::can headquartered in Vienna,

Austria. s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of

parameters in water and wastewater utilizing in-line monitoring systems and other applications.

The total purchase consideration for s::can, net of cash acquired, was $30.5 million, inclusive of $1.3 million of

working capital adjustments. The Company's allocation of the purchase price at December 31, 2021 included $2.6 million of

receivables, $4.3 million of inventory, $1.2 million of other assets, $12.7 million of intangibles and $17.7 million of goodwill

that is not deductible for tax purposes. The intangible assets acquired are primarily customer relationships and developed

technology with an estimated average useful life of 12 years. The Company also assumed $3.5 million of accounts payable,

$3.2 million of deferred tax liabilities and $1.3 million of other liabilities as part of the acquisition. The allocation of the

purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of December 31,

2021, the Company had completed its analysis for estimating the fair value of the assets acquired with no additional

adjustments.

Note 4 Short-term Debt and Credit Lines

The Company did not have short-term debt at December 31, 2021 and 2020. On July 8, 2021, the Company entered

Note 5 Stock Compensation

Stock Options

The Company estimates the fair value of its option awards using the Black-Scholes option-pricing formula, and

The following table summarizes the transactions of the Company’s stock option plans for the three-year period ended

December 31, 2021:

Number of shares

Weighted-
average
exercise price

Options outstanding - December 31, 2018
Options granted
Options exercised
Options forfeited
Options outstanding - December 31, 2019
Options granted
Options exercised
Options forfeited
Options outstanding - December 31, 2020
Options exercised
Options outstanding - December 31, 2021
Exercisable options —
December 31, 2019
December 31, 2020
December 31, 2021

376,900 $
34,926
(66,969 )
(7,525 )
337,332 $
41,807 $
(55,716 )
(7,229 )
316,194 $
(88,932 ) $
227,262 $

271,252 $
235,829
170,484

28.95
59.44
29.29
38.81
31.82
62.76
18.99
50.19
37.75
22.89
43.56

27.17
30.82
38.31

The following assumptions were used for valuing options granted in the year ended December 31, 2020:

Per share fair value of options granted during the period
Risk-free interest rate
Dividend yield
Volatility factor
Weighted-average expected life in years

17.49
0.64 %
1.05 %
30.0 %
7.0

The weighted-average contractual life remaining for options outstanding as of December 31, 2021 was 4.7 years. The

expected life is based on historical exercise behavior and the projected exercise of unexercised stock options. The risk-free
interest rate is based on the U.S. Treasury yield curve in effect on the date of grant for the respective expected life of the option.
The expected dividend yield is based on the expected annual dividends divided by the grant date market value of the
Company’s Common Stock. The expected volatility is based on the historical volatility of the Company’s Common Stock.

The following table summarizes the aggregate intrinsic value related to options exercised, outstanding and exercisable

as of and for the years ended December 31:

Exercised
Outstanding
Exercisable

Director Stock Grant

2021

2020

2019

(In thousands)

7,085 $
14,316
11,635

3,054 $
17,805
14,913

1,870
11,170
10,243

As of December 31, 2021, the unrecognized compensation cost related to stock options was approximately $0.7

million, which will be recognized over a weighted average period of 2.6 years.

Non-employee directors receive an annual award of $60,000 worth of restricted shares of the Company’s Common

Stock under the shareholder-approved 2021 Omnibus Incentive Plan. The Company values stock grants for directors at the

closing price of the Company’s stock on the day the grant was awarded. The Company records compensation expense for this

plan ratably over the annual service period beginning May 1. Director stock compensation expense recognized by the

Company for the years ended December 31, 2021 was $0.3 million compared to $0.4 million in 2020 and $0.3 million in 2019.

As of December 31, 2021, the unrecognized compensation cost related to the director stock award that is expected to be

recognized over the remaining four months is estimated to be approximately $0.1 million.

The following table summarizes the transactions of the Company’s stock option plans for the three-year period ended

December 31, 2021:

Options outstanding - December 31, 2018

Options outstanding - December 31, 2019

Options granted

Options exercised

Options forfeited

Options granted

Options exercised

Options forfeited

Options outstanding - December 31, 2020

Options exercised
Options outstanding - December 31, 2021
Exercisable options —
December 31, 2019
December 31, 2020
December 31, 2021

Number of shares

Weighted-

average

exercise price

376,900 $

34,926

(66,969 )

(7,525 )

337,332 $

41,807 $

(55,716 )

(7,229 )

316,194 $

(88,932 ) $
227,262 $

271,252 $
235,829
170,484

28.95

59.44

29.29

38.81

31.82

62.76

18.99

50.19

37.75

22.89
43.56

27.17
30.82
38.31

The following assumptions were used for valuing options granted in the year ended December 31, 2020:

Per share fair value of options granted during the period
Risk-free interest rate
Dividend yield
Volatility factor
Weighted-average expected life in years

17.49
0.64 %
1.05 %
30.0 %
7.0

The weighted-average contractual life remaining for options outstanding as of December 31, 2021 was 4.7 years. The

The following table summarizes the aggregate intrinsic value related to options exercised, outstanding and exercisable

as of and for the years ended December 31:

Exercised
Outstanding
Exercisable

2021

2020

2019

(In thousands)

7,085 $
14,316
11,635

3,054 $
17,805
14,913

1,870
11,170
10,243

As of December 31, 2021, the unrecognized compensation cost related to stock options was approximately $0.7

million, which will be recognized over a weighted average period of 2.6 years.

Director Stock Grant

Non-employee directors receive an annual award of $60,000 worth of restricted shares of the Company’s Common
Stock under the shareholder-approved 2021 Omnibus Incentive Plan. The Company values stock grants for directors at the
closing price of the Company’s stock on the day the grant was awarded. The Company records compensation expense for this
plan ratably over the annual service period beginning May 1. Director stock compensation expense recognized by the
Company for the years ended December 31, 2021 was $0.3 million compared to $0.4 million in 2020 and $0.3 million in 2019.
As of December 31, 2021, the unrecognized compensation cost related to the director stock award that is expected to be
recognized over the remaining four months is estimated to be approximately $0.1 million.

Restricted Stock

The Company periodically issues nonvested shares of the Company's Common Stock to certain eligible

employees. The Company values restricted stock on the closing price of the Company's stock on the day the grant was
awarded. The Company records compensation expense for this plan ratably over the vesting periods. Restricted stock
compensation expense recognized by the Company for the year ended December 31, 2021 was $1.4 million compared to $1.0
million in 2020 and $0.9 million in 2019.

The fair value of nonvested shares is determined based on the market price of the shares on the grant date.

Nonvested at December 31, 2018
Granted
Vested
Forfeited
Nonvested at December 31, 2019
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2021

Fair value
per share

72,802 $
16,034
(19,227 )
(5,129 )
64,480 $
20,758
(25,044 )
(2,645 )
57,549 $
17,430
(16,528 )
(1,384 )
57,067 $

42.58
59.42
30.08
41.31
48.21
64.19
39.87
54.35
57.33
99.90
49.31
58.68
72.62

As of December 31, 2021, there was $2.0 million of unrecognized compensation cost related to nonvested restricted

stock that is expected to be recognized over a weighted average period of 1.8 years.

Performance Share Units

Beginning in 2021, the Company periodically issues performance share units to certain eligible employees. Recipients

of performance share grants are eligible to receive shares of our common stock depending upon the level of our total adjusted

free cash flow conversion and adjusted return on invested capital (ROIC) as measured over a three-year performance period.

The number of shares earned for awards granted in fiscal 2021 will range from 50% to 200% of the targeted number of

performance shares for the three-year performance period ending December 31, 2023 and will vest, to the extent earned, in the

fiscal quarter following the end of the applicable three-year performance period. Performance share compensation expense

recognized by the Company for the year ended December 31, 2021 was $0.6 million.

A summary of performance share activity for the year ended December 31, 2021 is as follows:

Nonvested at December 31, 2020

Granted

Adjustment for expected performance results

Nonvested at December 31, 2021

Performance Shares

Value

Weighted Average

Grant Date Fair

— $

14,748

7,374

22,122 $

—

100.37

As of December 31, 2021 there was $1.6 million of unrecognized compensation cost related to nonvested performance

share units that is expected to be realized over a weighted average period of 2.2 years.

Restricted Stock

The Company periodically issues nonvested shares of the Company's Common Stock to certain eligible

The fair value of nonvested shares is determined based on the market price of the shares on the grant date.

Nonvested at December 31, 2018
Granted
Vested
Forfeited
Nonvested at December 31, 2019
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2021

Fair value
per share

72,802 $
16,034
(19,227 )
(5,129 )
64,480 $
20,758
(25,044 )
(2,645 )
57,549 $
17,430
(16,528 )
(1,384 )
57,067 $

42.58
59.42
30.08
41.31
48.21
64.19
39.87
54.35
57.33
99.90
49.31
58.68
72.62

As of December 31, 2021, there was $2.0 million of unrecognized compensation cost related to nonvested restricted

stock that is expected to be recognized over a weighted average period of 1.8 years.

Performance Share Units

Beginning in 2021, the Company periodically issues performance share units to certain eligible employees. Recipients

of performance share grants are eligible to receive shares of our common stock depending upon the level of our total adjusted
free cash flow conversion and adjusted return on invested capital (ROIC) as measured over a three-year performance period.
The number of shares earned for awards granted in fiscal 2021 will range from 50% to 200% of the targeted number of
performance shares for the three-year performance period ending December 31, 2023 and will vest, to the extent earned, in the
fiscal quarter following the end of the applicable three-year performance period. Performance share compensation expense
recognized by the Company for the year ended December 31, 2021 was $0.6 million.

A summary of performance share activity for the year ended December 31, 2021 is as follows:

Nonvested at December 31, 2020
Granted
Adjustment for expected performance results
Nonvested at December 31, 2021

Performance Shares

Weighted Average
Grant Date Fair
Value

— $
14,748
7,374
22,122 $

—
100.37
100.37
100.37

As of December 31, 2021 there was $1.6 million of unrecognized compensation cost related to nonvested performance

share units that is expected to be realized over a weighted average period of 2.2 years.

Note 6 Commitments and Contingencies

Commitments

The Company makes commitments in the normal course of business. The Company rents equipment, vehicles and

facilities under operating leases, some of which contain renewal options. Total rental expense charged to operations under all
operating leases was $3.1 million in 2021 and 2020 and $3.4 million in 2019. The Company’s lease commitments and future
minimum lease payments are discussed in Note 12 “Leases.”

Contingencies

In the normal course of business, the Company is named in legal proceedings. 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. A future change in
circumstances with respect to 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 with environmental control
provisions and regulations during 2021, 2020 and 2019 were not material.

The Company relies on single suppliers for most brass castings and certain resin and electronic subassemblies in
several of its product lines. The Company believes these items would be available from other sources, but that the loss of
certain suppliers could 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 attempts to mitigate these risks by working closely with key suppliers,
purchasing minimal amounts from alternative suppliers and by purchasing business interruption insurance where appropriate.

The Company reevaluates its exposures on a periodic basis and makes adjustments to reserves as appropriate.

Note 7 Employee Benefit Plans

The Company maintains supplemental non-qualified plans for certain officers and other key employees. The expense
for these plans was not material for 2021, 2020 or 2019. The discount rate used to measure the net periodic pension cost was
2.08% for 2021, 2.87% for 2020 and 2.86% for 2019. The amount accrued was $0.6 million and $0.4 million as of
December 31, 2021 and 2020, respectively.

The Company also maintains an Employee Savings and Stock Ownership Plan (“ESSOP”) for the majority of the U.S.

employees. The ESSOP includes a voluntary 401(k) savings plan that allows certain employees to defer up to 50% of their
income on a pretax basis subject to limits on maximum amounts. The Company matches 25% of each employee’s contribution,
with the match percentage applying to a maximum of 7% of each employee's salary. Compensation expense was $0.9 million
in 2021 compared to $0.5 million in 2020 and $0.6 million in 2019.

The Company also contributes to a defined contribution feature within the ESSOP plan. Contributions are
discretionary and are calculated as a percentage of eligible wages of the employee. Compensation expense under the defined
contribution feature was $3.1 million in 2021, $2.0 million in 2020 and $3.1 million in 2019.