10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________ 

FORM 10-Q

___________________________________________________ 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended September 30, 2018

Commission File Number 001-06706

___________________________________________________

BADGER METER, INC.

 ___________________________________________________ 

4545 W. Brown Deer Road

Milwaukee, Wisconsin 53223

(Address of principal executive offices)

(414) 355-0400

(Registrant's telephone number, including area code)

A Wisconsin Corporation

IRS Employer Identification No. 39-0143280

___________________________________________________ 

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  ý    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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    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	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

As of October 10, 2018, there were 29,112,982 shares of Common stock outstanding with a par value of $1 per share.

BADGER METER, INC.

Quarterly Report on Form 10-Q for the Period Ended September 30, 2018

Index

		Page No.
Part I. Financial Information:
Item 1	Financial Statements (unaudited):
	Consolidated Condensed Balance Sheets - September 30, 2018 and December 31, 2017	4
	Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2018 and 2017	5
	Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2018 and 2017	6
	Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 2018 and 2017	7
	Notes to Unaudited Consolidated Condensed Financial Statements	8
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4	Controls and Procedures	23
Part II. Other Information:
Item 6	Exhibits	24
Signatures		25

2

Special Note Regarding Forward Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, as well as other information provided from time to time by Badger Meter, Inc. (the "Company" or "Badger Meter") 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 that include, among other things:

• the continued shift in the Company’s business from lower cost, manually read meters toward more expensive, value-added automatic meter reading (AMR) systems, advanced metering infrastructure (AMI) systems and advanced metering analytics (AMA) systems that offer more comprehensive solutions to customers’ metering needs;

• the success or failure of newer Company products;

• changes in competitive pricing and bids in both the domestic and foreign marketplaces, and particularly in continued intense price competition on government bid contracts for lower cost, manually read meters;

• the actions (or lack thereof) of the Company’s competitors;

• changes in the Company’s relationships with its alliance partners, primarily its alliance partners that provide radio solutions, and particularly those that sell products that do or may compete with the Company’s products;

• changes in the general health of the United States and foreign economies, including to some extent such things as the length and severity of global economic downturns, 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;

• unusual weather, weather patterns or other natural phenomena, including related economic and other ancillary effects of any such events;

• economic policy changes, including but not limited to, trade policy and corporate taxation;

• the timing and impact of government funding programs that stimulate national and global economies, as well as the impact of government budget cuts or partial shutdowns of governmental operations;

• changes in the cost and/or availability of needed raw materials and parts, such as volatility in the cost of brass castings as a result of fluctuations in commodity prices, particularly for copper and scrap metal at the supplier level, foreign-sourced electronic components as a result of currency exchange fluctuations, tariffs, duties and/or lead times, and plastic resin as a result of changes in petroleum and natural gas prices;

• the Company’s ability to successfully integrate acquired businesses or products;

• changes in foreign economic conditions, particularly currency fluctuations in the United States dollar, the Euro and the Mexican peso;

• the inability to develop technologically advanced products;

• the failure of the Company’s products to operate as intended;

• the inability to protect the Company’s proprietary rights to its products;

• the Company’s expanded role as a prime contractor for providing complete technology systems to governmental entities, which brings with it added risks, including but not limited to, the Company’s responsibility for subcontractor performance, additional costs and expenses if the Company and its subcontractors fail to meet the timetable agreed to with the governmental entity, and the Company’s expanded warranty and performance obligations;

• disruptions and other damages to information technology, other networks, operations and property (Company or third party) due to breaches in data security or any other cybersecurity attack;

• transportation delays or interruptions;

• violations or alleged violations of the U.S. Foreign Corrupt Practices Act (FCPA) or other anti-corruption laws;

• the loss of or disruption in certain single-source suppliers; and

• changes in laws and regulations, particularly laws dealing with the content or handling of materials used in the Company's products.

All of these factors are beyond the Company's control to varying degrees. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward looking statements contained in this Quarterly Report on Form 10-Q and are cautioned not to place undue reliance on such forward looking statements. The forward looking statements made in this document are made only as of the date of this document and the Company assumes no obligation, and disclaims any obligation, to update any such forward looking statements to reflect subsequent events or circumstances.

3

Part I – Financial Information

Item 1  Financial Statements

BADGER METER, INC.

Consolidated Condensed Balance Sheets

	September 30,			December 31,
	(Unaudited)
	(In thousands)
Assets	2018			2017
Current assets:
Cash	$	10,629		$	11,164
Receivables	70,029			58,210
Inventories:
Finished goods	22,588			23,125
Work in process	19,199			22,035
Raw materials	42,558			40,012
Total inventories	84,345			85,172
Prepaid expenses and other current assets	5,881			4,077
Total current assets	170,884			158,623
Property, plant and equipment, at cost	214,234			212,485
Less accumulated depreciation	(122,595		)	(118,884		)
Net property, plant and equipment	91,639			93,601
Intangible assets, at cost less accumulated amortization	57,301			59,326
Other assets	9,436			9,897
Deferred income taxes	802			2,856
Goodwill	71,258			67,424
Total assets	$	401,320		$	391,727
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	35,957		$	44,550
Payables and other current liabilities	24,860			28,601
Accrued compensation and employee benefits	12,381			15,509
Warranty and after-sale costs	4,302			3,367
Income and other taxes	366			1,082
Total current liabilities	77,866			93,109
Other long-term liabilities	14,446			4,073
Deferred income taxes	1,323			3,434
Accrued non-pension postretirement benefits	5,704			5,703
Other accrued employee benefits	6,751			7,956
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common stock	37,198			37,165
Capital in excess of par value	36,809			32,182
Reinvested earnings	250,432			244,224
Accumulated other comprehensive income (loss)	294			(10,893		)
Less: Employee benefit stock	(461		)	(460		)
Treasury stock, at cost	(29,042		)	(24,766		)
Total shareholders’ equity	295,230			277,452
Total liabilities and shareholders’ equity	$	401,320		$	391,727

See accompanying notes to unaudited consolidated condensed financial statements.

4

BADGER METER, INC.

Consolidated Statements of Operations

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	(Unaudited)					(Unaudited)
	(In thousands except share and per share amounts)
	2018		2017			2018		2017
Net sales	$	110,630	$	100,008		$	329,319	$	305,790
Cost of sales	66,684		62,969			207,121		189,047
Gross margin	43,946		37,039			122,198		116,743
Selling, engineering and administration	28,212		24,724			80,139		74,023
Operating earnings	15,734		12,315			42,059		42,720
Interest expense, net	295		242			994		567
Other pension and postretirement costs (benefits)	11,787		(96		)	19,799		249
Earnings before income taxes	3,652		12,169			21,266		41,904
Provision for income taxes	801		4,194			4,715		14,566
Net earnings	$	2,851	$	7,975		$	16,551	$	27,338
Earnings per share:
Basic	$	0.10	$	0.28		$	0.57	$	0.94
Diluted	$	0.10	$	0.27		$	0.57	$	0.94
Dividends declared per common share	$	0.15	$	0.13		$	0.41	$	0.36
Shares used in computation of earnings per share:
Basic	28,989,205		28,939,292			28,983,115		28,939,940
Impact of dilutive securities	207,955		178,756			198,428		173,468
Diluted	29,197,160		29,118,048			29,181,543		29,113,408

See accompanying notes to unaudited consolidated condensed financial statements.

5

BADGER METER, INC.

Consolidated Statements of Comprehensive Income

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	(Unaudited)					(Unaudited)
	(In thousands)
	2018		2017			2018			2017
Net earnings	$	2,851	$	7,975		$	16,551		$	27,338
Other comprehensive income:
Foreign currency translation adjustments	106		310			(281		)	1,650
Pension and postretirement benefits, net of tax	7,396		(25		)	13,168			129
Comprehensive income	$	10,353	$	8,260		$	29,438		$	29,117

See accompanying notes to unaudited consolidated condensed financial statements.

6

BADGER METER, INC.

Consolidated Condensed Statements of Cash Flows

	Nine Months Ended
	September 30
	(Unaudited) (In thousands)
	2018			2017
Operating activities:
Net earnings	$	16,551		$	27,338
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation	8,796			9,079
Amortization	9,675			9,089
Deferred income taxes	132			(188		)
Noncurrent employee benefits	261			(606		)
Pension termination settlement charges	19,900			—
Contributions to pension plan	(2,860		)	(825		)
Stock-based compensation expense	3,374			1,191
Changes in:
Receivables	(11,462		)	(8,041		)
Inventories	1,409			1,929
Prepaid expenses and other assets	(5,573		)	(4,580		)
Liabilities other than debt	(320		)	11,543
Total adjustments	23,332			18,591
Net cash provided by operations	39,883			45,929
Investing activities:
Property, plant and equipment expenditures	(7,219		)	(11,554		)
Acquisitions, net of cash acquired and future payments	(8,048		)	(18,376		)
Net cash used for investing activities	(15,267		)	(29,930		)
Financing activities:
Net (decrease) increase in short-term debt	(8,433		)	1,411
Payment of contingent acquisition consideration	(2,034		)	—
Dividends paid	(11,895		)	(10,444		)
Proceeds from exercise of stock options	933			1,167
Repurchase of treasury stock	(4,451		)	(3,677		)
Issuance of treasury stock	529			594
Net cash used for financing activities	(25,351		)	(10,949		)
Effect of foreign exchange rates on cash	200			1,006
(Decrease) increase in cash	(535		)	6,056
Cash – beginning of period	11,164			7,338
Cash – end of period	$	10,629		$	13,394

See accompanying notes to unaudited consolidated condensed financial statements.

7

BADGER METER, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

Note 1 Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Badger Meter, Inc. (the "Company") contain all adjustments (consisting only of normal recurring accruals except as otherwise discussed) necessary to present fairly the Company’s consolidated condensed financial position at September 30, 2018, results of operations for the three- and nine-month periods ended September 30, 2018 and 2017, comprehensive income for the three- and nine-month periods ended September 30, 2018 and 2017, and cash flows for the nine-month periods ended September 30, 2018 and 2017. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with United States 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.

Note 2 Additional Financial Information Disclosures

The consolidated condensed balance sheet at December 31, 2017 was derived from amounts included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Refer to the footnotes to the financial statements included in that report for a description of the Company’s accounting policies and for additional details of the Company’s financial condition. The details in those notes have not changed except as discussed below and as a result of normal adjustments in the interim.

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 problems 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:

	Three months ended						Nine months ended
	September 30,						September 30,
(In thousands)	2018			2017			2018			2017
Balance at beginning of period	$	4,110		$	3,064		$	3,367		$	2,779
Net additions charged to earnings	1,048			919			3,363			2,902
Adjustments to pre-existing warranties	(389		)	168			(490		)	214
Costs incurred	(467		)	(738		)	(1,938		)	(2,482		)
Balance at end of period	$	4,302		$	3,413		$	4,302		$	3,413

Rights Agreement

The shareholder rights plan that was in effect since February 15, 2008 expired on May 26, 2018 and the Board of Directors decided not to renew the plan.

Note 3 Employee Benefit Plans

The Company maintains a non-contributory defined benefit pension plan that covers substantially all U.S. employees who were employed at December 31, 2011. After that date, no further benefits are being accrued in this plan. For the frozen pension plan, benefits are based primarily on years of service and, for certain individuals, levels of compensation. The Company finalized the termination of the pension plan in the third quarter of 2018. In connection with the Company's activities to terminate the plan, lump-sum distributions were made in the second quarter of 2018 to individuals who elected lump sum distributions, including rolling over their accounts or transferring them to a qualified Company plan. In the third quarter of 2018, purchases of annuity contracts were made to settle obligations for the remaining participants. As a result, the Company recorded pre-tax settlement charges of $8.2 million and $11.7 million during the second and third quarters of 2018, respectively.

8

The Company also maintains supplemental non-qualified plans for certain officers and other key employees, and an Employee Savings and Stock Ownership Plan (“ESSOP”) for the majority of the U.S. employees.

The Company additionally has a postretirement healthcare benefit plan that provides medical benefits for certain U.S. retirees and eligible dependents hired prior to November 1, 2004. Employees are eligible to receive postretirement healthcare benefits upon meeting certain age and service requirements. No employees hired after October 31, 2004 are eligible to receive these benefits. This plan requires employee contributions to offset benefit costs.

The following table sets forth the components of net periodic benefit cost (income) for the three months ended September 30, 2018 and 2017 based on December 31, 2017 and 2016 actuarial measurement dates, respectively:

	Defined pension plan benefits					Other postretirement benefits
(In thousands)	2018		2017			2018			2017
Service cost – benefits earned during the year	$	35	$	7		$	31		$	28
Interest cost on projected benefit obligations	6		149			47			29
Expected return on plan assets	—		(399		)	—			—
Amortization of prior service cost	—		—			(3		)	(6		)
Amortization of net loss (benefit)	13		143			(8		)	(12		)
Settlement expense	11,732		—			—			—
Net periodic benefit cost (income)	$	11,786	$	(100	)	$	67		$	39

The following table sets forth the components of net periodic benefit cost for the nine months ended September 30, 2018 and 2017 based on December 31, 2017 and 2016 actuarial measurement dates, respectively:

	Defined pension plan benefits						Other postretirement benefits
(In thousands)	2018			2017			2018			2017
Service cost – benefits earned during the year	$	105		$	20		$	93		$	91
Interest cost on projected benefit obligations	323			936			142			146
Expected return on plan assets	(835		)	(1,197		)	—			—
Amortization of prior service cost	—			—			(10		)	(19		)
Amortization of net loss (benefit)	302			419			(23		)	(36		)
Settlement expense	19,900			—			—			—
Net periodic benefit cost	$	19,795		$	178		$	202		$	182

The Company disclosed in its financial statements for the year ended December 31, 2017 that it was not required to make a minimum contribution to the defined benefit pension plan for the 2018 calendar year. The Company made net payments of $1.6 million and $1.3 million in the second and third quarter of 2018, respectively, related to the 2017 plan year. No additional contributions will be required during 2018 as the pension plan termination was finalized in the third quarter of 2018.

The Company also disclosed in its financial statements for the year ended December 31, 2017 that it estimated it would pay $0.4 million in other postretirement benefits in 2018 based on actuarial estimates. As of September 30, 2018, $234,000 of such benefits have been paid. The Company continues to believe that its estimated payments for the full year are reasonable. However, such estimates contain inherent uncertainties because cash payments can vary significantly depending on the timing of postretirement medical claims and the collection of the retirees’ portion of certain costs. Note that the amount of benefits paid in calendar year 2018 will not impact the expense for postretirement benefits for 2018.

9

Note 4 Accumulated Other Comprehensive Income (Loss)

Components of and changes in accumulated other comprehensive income (loss) at September 30, 2018 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits			Foreign currency			Total
Balance at beginning of period	$	(11,597	)	$	704		$	(10,893	)
Other comprehensive income (loss) before reclassifications	—			(281		)	(281		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(5.0 million)	13,168			—			13,168
Net current period other comprehensive income (loss), net of tax	13,168			(281		)	12,887
Cumulative impact of adopting ASU 2018-02	(1,700		)	—			(1,700		)
Accumulated other comprehensive income (loss)	$	(129	)	$	423		$	294

Details of reclassifications out of accumulated other comprehensive income (loss) during the nine months ended September 30, 2018 are as follows:

(In thousands)	Amount reclassified from accumulated other comprehensive income (loss)
Amortization of pension and postretirement benefits items:
Prior service benefit (1)	$	(10	)
Settlement expense (1)	19,900
Actuarial loss (1)	(1,728		)
Total before tax	18,162
Income tax benefit	(4,994		)
Amount reclassified out of accumulated other comprehensive income (loss)	$	13,168

(1)    These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (income) in Note 3 “Employee Benefit Plans.”

Components of and changes in accumulated other comprehensive income (loss) at September 30, 2017 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits			Foreign currency			Total
Balance at beginning of period	$	(10,495	)	$	(1,140	)	$	(11,635	)
Other comprehensive income (loss) before reclassifications	—			1,545			1,545
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(0.1) million	234			—			234
Net current period other comprehensive income (loss), net of tax	234			1,545			1,779
Accumulated other comprehensive income (loss)	$	(10,261	)	$	405		$	(9,856	)

10

Details of reclassifications out of accumulated other comprehensive income (loss) during the nine months ended September 30, 2017 are as follows:

(In thousands)	Amount reclassified from accumulated other comprehensive income (loss)
Amortization of pension and postretirement benefits items:
Prior service benefit (1)	$	(19	)
Amortization of actuarial loss (1)	382
Total before tax	363
Income tax benefit	(129		)
Amount reclassified out of accumulated other comprehensive income (loss)	$	234

(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (income) in Note 3 “Employee Benefit Plans.”

Note 5 Acquisitions

On April 2, 2018, the Company acquired 100% of the outstanding stock of Innovative Metering Solutions, Inc. ("IMS") of Odessa, Florida, which was one of the Company's distributors serving Florida.

The total purchase consideration was approximately $12.0 million, which included $7.7 million in cash, a $0.3 million working capital adjustment, a balance sheet holdback of $0.7 million and settlement of $3.3 million of pre-existing Company receivables. The working capital adjustment was settled in the second quarter of 2018 and the balance sheet holdback is recorded in payables and other current liabilities on the Company's Consolidated Balance Sheet as it is anticipated to be paid in the next twelve months. The Company's preliminary allocation of the purchase price at June 30, 2018 included $3.8 million of receivables, $0.8 million of inventories, $0.1 million of machinery and equipment, $3.6 million of intangibles and $3.7 million of goodwill. The intangible assets acquired are customer relationships with an estimated average useful life of 10 years. The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of September 30, 2018, the Company had not completed its analysis for estimating the fair value of the assets acquired.

The IMS acquisition was 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 acquisition did not have a material impact on the Company's consolidated financial statements or the notes thereto.

On November 1, 2017, the Company acquired certain assets of Utility Metering Services, Inc.'s business Carolina Meter & Supply ("Carolina Meter") of Wilmington, North Carolina, which was one of the Company's distributors serving North Carolina, South Carolina and Virginia.

The total purchase consideration for the Carolina Meter assets was $6.2 million, which included $2.0 million in cash and settlement of $4.2 million of pre-existing Company receivables. The Company's preliminary allocation of the purchase price at December 31, 2017 included $0.6 million of receivables, $0.3 million of inventories, $3.3 million of intangibles and $2.0 million of goodwill. The intangible assets acquired are primarily customer relationships with an estimated average useful life of 12 years. As of September 30, 2018, the Company had not completed its analysis for estimating the fair value of the assets acquired.

The Carolina Meter acquisition was 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 acquisition did not have a material impact on the Company's consolidated financial statements or the notes thereto.

On May 1, 2017, the Company acquired 100% of the outstanding common stock of D-Flow Technology AB ("D-Flow") of Luleå, Sweden. The D-Flow acquisition facilitates the continued advancement of the existing E-Series® ultrasonic product line while also adding a technology center for the Company.

11

The purchase price was approximately $23.2 million in cash, plus a small working capital adjustment. The purchase price included $5.0 million of contingent payments, of which $3.0 million are anticipated to be made in the fourth quarter of 2018 and are recorded in payables and other current liabilities on the Consolidated Balance Sheet at September 30, 2018. Contingent payments of $2.0 million were made in the third quarter of 2018. The Company's preliminary allocation of the purchase price included approximately $0.3 million in receivables, $0.6 million of inventories, $0.2 million in property, plant and equipment, $10.9 million of intangibles and $16.1 million of goodwill. The majority of the intangible assets acquired related to ultrasonic technology. The Company also assumed $4.9 million of liabilities as part of the acquisition. As of March 31, 2018, the Company completed its analysis for estimating the fair value of the assets acquired and liabilities assumed with no additional adjustments.

The D-Flow acquisition was 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 acquisition did not have a material impact on the Company's consolidated condensed financial statements or the notes thereto.

Note 6 Contingencies, Litigation and Commitments

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 2017 and the first three quarters of 2018 were not material.

The Company relies on single suppliers for most brass castings, certain resins 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 would 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 Income Taxes

The provision for income taxes as a percentage of earnings before income taxes for the third quarter of 2018 was 21.9% compared to 34.5% in the third quarter of 2017. The provision for income taxes as a percentage of earnings before income taxes for the first three quarters of 2018 was 22.2% compared to 34.8% for the first three quarters of 2017.Interim provisions are tied to an estimate of the overall annual rate which can vary due to state taxes and the relationship of foreign and domestic earnings. These items cause variations between periods. The decrease between years was due almost entirely to the lower Federal tax rate which was a result of U.S. tax reform that was enacted in December 2017. For the nine months ended September 30, 2018 and 2017, the Company recognized discrete net tax benefits related to pension plan contributions and termination costs (2018 only) as well as the excess tax benefits from stock-based compensation of $6.0 million and $0.2 million, respectively.

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. For the three- and nine-month periods ended September 30, 2018, the Company updated its transition tax calculation in preparation for the filing of its 2017 Federal income tax return in October 2018. The change in the transition tax was immaterial compared to the provisional amount of transition tax recorded as of December 31, 2017.

The Company is subject to numerous other provisions of the Act that are effective for tax years starting after December 31, 2017.  These provisions include the Global Intangible Low-Taxed Income inclusion, the deduction for Foreign-Derived Intangible Income, the business interest expense deduction limitation under Section 163(j), the executive compensation provision

12

under Section 162(m), and the reduced deduction for certain meals and entertainment related expenses. The Company will continue to refine its computation related to these provisions as additional guidance becomes available. The net impact of these provisions is not expected to have a material impact on the Company’s consolidated financial statements.

Note 8 Fair Value Measurements of Financial Instruments

The Company applies the accounting standards for fair value measurements and disclosures for its financial assets and financial liabilities. 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. Short-term debt is comprised of notes payable drawn against the Company's lines of credit and commercial paper. Because of its short-term nature, the carrying amount of the short-term debt also approximates fair value. Included in other assets are insurance policies on various individuals who were previously employed by the Company. The carrying amounts of these insurance policies approximate their fair value.

Note 9 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 that the accompanying financial statements were issued, and has determined that no material subsequent events exist through the date of this filing.

Note 10 New Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-13 "Fair Value Measurement (Topic 820)," which is designed to improve the effectiveness of disclosures related to fair value measurements. This ASU is effective for annual periods beginning after December 15, 2019 and early adoption is allowed in any interim reporting periods within those annual reporting periods. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02 "Income Statement - Reporting Comprehensive (Loss) Income (Topic 220)." Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive (loss) income are adjusted, certain tax effects become stranded in accumulated other comprehensive (loss) income. The Company’s provisional adjustments recorded in 2017 to account for the impact of the Tax Cuts and Jobs Act resulted in such stranded tax effects. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive (loss) income to reinvested earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The guidance is effective for annual years beginning after December 15, 2018 with early adoption permitted in any interim reporting period. The Company elected to early-adopt this standard in the quarter ended September 30, 2018. This election resulted in a reclassification of $1.7 million from accumulated other comprehensive income (loss) to reinvested earnings.

In May 2017, the FASB issued ASU 2017-09 "Compensation - Stock Compensation (Topic 718)," which clarifies when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the vesting condition, fair value or the award classification is not the same both before and after a change to the terms and conditions of the award. The new guidance was adopted on a prospective basis on January 1, 2018. The adoption of this standard did not have a significant impact on the Company's consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07 "Compensation - Retirement Benefits (Topic 715)," which changes the presentation of defined benefit and post-retirement benefit plan expense on the income statement by requiring separation between operating and non-operating expense. Under the ASU, the service cost of net periodic benefit expense is an operating expense that will be reported with similar compensation costs. The non-operating components, which include all other components of net periodic benefit expense, are reported outside of operating income. The ASU also stipulates that only the service cost component of pension and postretirement (benefits) costs is eligible for capitalization. The ASU was adopted by the Company on January 1, 2018. Application was done retrospectively for the presentation of the components of these (benefits) costs. In the Consolidated Statements of Operations, the Company previously recorded service and other (benefits) costs in operating cost and expense accounts along with compensation costs. The adoption of the standard resulted in reclassification of those (benefits) costs to the other pension and postretirement (benefits) costs line in the Consolidated Statements of Operations. Adoption of the standard

13

increased operating earnings for 2018 by $11.8 and $19.8 million in the three- and nine-month periods ending September 30, 2018. In the three-month period ending September 30, 2017 operating earnings were decreased by $0.1 million. In the nine-month period ending September 30, 2017 operating earnings were increased by $0.2 million. A corresponding amount was reclassified to other pension and postretirement (benefits) costs for each of these periods. The specific net periodic benefit components are disclosed in Note 3 "Employee Benefit Plans."

In January 2017, the FASB issued ASU 2017-04 "Intangibles - Goodwill and Other (Topic 350)." The update requires

a single-step quantitative test to measure potential impairment based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment can still be completed first for an entity to determine if a quantitative impairment test is necessary. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2019 and interim periods thereafter. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate that the adoption of ASU 2017-04 will have an impact.

In August 2016, the FASB issued ASU No. 2016-15 "Statement of Cash Flows (Topic 230)," which clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. This ASU was effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The adoption of this ASU did not have a significant impact on the categorization of operating, investing and financing activities on the Consolidated Statements of Cash Flows.

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)," which requires lessees to record most leases on their balance sheets. Lessees initially recognize a lease liability (measured at the present value of the lease payments over the lease term) and a right-of-use ("ROU") asset (measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee's initial direct costs). Lessees can make an accounting policy election not to recognize ROU assets and lease liabilities for leases with a lease term of 12 months or less as long as the leases do not include options to purchase the underlying assets that the lessee is reasonably certain to exercise. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard includes the use of a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. In July 2018, the FASB issued ASU No. 2018-11 "Targeted Improvements (Topic 842)." This ASU provides for an optional method of transition which allows companies to adopt the new leasing standard with a cumulative-effect adjustment to reinvested earnings. Under this transition method, comparative periods would continue to be reported in accordance with the existing lease guidance under ASC 840 "Leases". The Company plans to adopt the ASU with this optional transition methodology beginning on the effective date of January 1, 2019. The Company expects that upon adoption the consolidated balance sheet will increase for the recognition of ROU assets and lease liabilities for operating leases. The Company is currently making decisions regarding all of the available practical expedients for transition and is evaluating the impact that the adoption of this guidance will have on its financial condition, results of operations and the presentation of its consolidated financial statements.

Note 11 Revenue Recognition

Adoption of ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)"

On January 1, 2018, the Company adopted ASU 2014-09 using the modified retrospective method applied to those contracts that were not completed or substantially complete as of January 1, 2018. Results for the reporting period beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historic accounting under Topic 605 "Revenue Recognition". The Company recorded a net reduction to opening retained earnings of $0.1 million as of January 1, 2018 as a result of the cumulative impact of adopting Topic 606. The impact to revenues as a result of applying Topic 606 for the three- and nine-month periods ended September 30, 2018 were not material.

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts include the sale of municipal and flow instrumentation products, such as flow meters and radios, software access and other ancillary services. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract. Since the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the majority of the Company's contracts do not contain variable consideration. The Company establishes a provision for estimated warranty and returns as well as certain after sale costs as discussed in Note 2 "Additional Financial Information Disclosures."

14

Disaggregation of Revenue

In accordance with Topic 606, the Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606 which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

Information regarding revenues disaggregated by geographic area is as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2018
Revenues:
United States	$	95,288	$	284,351
Foreign:
Asia	1,928		6,789
Canada	2,564		9,353
Europe	4,457		14,605
Mexico	1,031		2,137
Middle East	4,602		9,958
Other	760		2,126
Total	$	110,630	$	329,319

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2018
Revenue recognized over time	$	3,455	9,203
Revenue recognized at a point in time	107,175		320,116
Total	$	110,630	$	329,319

Contract Balances

The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services.

The opening and closing balances of the Company's receivables and contract liabilities are as follows:

	September 30, 2018		December 31, 2017
Receivables	$	70,029	$	58,210
Contract liabilities	$	14,363	$	9,670

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables in the three- and nine-month periods ended September 30, 2018 and December 31, 2017.

The amount of revenue recognized in the three- and nine-month periods ended September 30, 2018 that was included in the opening contract liability balance was $0.3 million and $0.9 million, respectively. The difference between the opening and closing balances of the Company's contract liabilities was the result of a timing difference between the Company's performance and the customers' prepayments. The increased receivables balance was due to higher sales at the end of the third quarter of 2018 compared to the fourth quarter of 2017, receivables balances are generally lower at year-end than at other times of the year.

15

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of measurement in Topic 606. At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customer. In order to identify performance obligations, the Company considers all of the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

The Company's performance obligations are satisfied at a point in time or over time as work progresses. Revenue from products and services transferred to customers at a single point in time accounted for 96.9% and 97.2% of net sales for the three- and nine-month periods ended September 30, 2018, respectively. The majority of the Company's revenue recognized at a point in time is for the sale of municipal and flow instrumentation products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.

Revenue from services transferred to customers over time accounted for 3.1% and 2.8% of sales of net sales for the three- and nine-month periods ended September 30, 2018, respectively. The majority of the Company's revenue that is recognized over time relates to the BEACON AMA software as a service.

As of September 30, 2018, the Company had certain contracts where there were unsatisfied performance obligations. For contracts recorded as long-term liabilities, $11.6 million was the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied as of the end of the reporting period. The Company estimates that revenue recognized from satisfying those performance obligations will be approximately $0.6 million for the remainder of 2018, $2.6 million in each year from 2019 through 2022 and $0.6 million in 2023.

Significant Judgments

The Company records revenue for BEACON AMA services over time as the customer benefits from the data that is provided through the Company's software. Control of an asset is therefore transferred to the customer over time, and the Company will recognize revenue for BEACON AMA services as service units are used by the customer.

Revenue is recorded for various ancillary services, such as project management and training, over time as the customer benefits from the services provided. The majority of this revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. If the service is not provided evenly over the contract period, revenue will be recognized by the associated input/output method that best measures the progress towards contract completion.

The Company also has contracts that include both the sale and installation of flow meters as performance obligations. In those cases, the Company records revenue for installed flow meters at the point in time when the flow meters have been accepted by the customer. The customer cannot control the use of and obtain substantially all of the benefits from the equipment until the customer has accepted the installed product. Therefore, for both the flow meter and the related installation, the Company has concluded that control is transferred to the customer upon customer acceptance of the installed flow meter. In addition, the Company has a variety of ancillary revenue streams which are minor. The types and composition of the Company's revenue streams did not materially change during the three- and nine-month periods ended September 30, 2018.

Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. Variable consideration in contracts for the three- and nine-month periods ended September 30, 2018 was insignificant.

Transaction Price Allocation

The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract's transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers. If standalone selling price is not directly observable, it is estimated using either a market adjustment or cost plus margin approach.

16

Contract Costs

The recording of assets recognized from the costs to obtain and fulfill customer contracts primarily relate to the deferral of sales commissions on the Company's BEACON AMA software arrangements. The Company's costs incurred to obtain or fulfill a contract with a customer are amortized over the period of benefit of the related revenue. The Company expenses any costs incurred immediately when the amortization period would be one year or less. These costs are recorded within selling, engineering and administration expenses.

Practical Expedients

For the three- and nine-month periods ended September 30, 2018, the Company elected the following practical expedients:

In accordance with Subtopic 340-40 "Other Assets and Deferred Costs - Contracts with Customers," the Company elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less, and contracts for which it has the right to invoice for services performed.

The Company has made an accounting policy election to exclude all taxes by governmental authorities from the measurement of the transaction price.

Item 2  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Description and Overview

Badger Meter is an innovator in flow measurement, control and communication solutions, serving water utilities, municipalities, and commercial and industrial customers worldwide. The Company’s products measure water, oil, chemicals and other fluids, and are known for accuracy, long-lasting durability and for providing and communicating valuable and timely measurement data. The Company’s product lines fall into two categories: sales of water meters and related technologies to municipal water utilities (municipal water) and sales of meters to various industries for water and other fluids (flow instrumentation). The Company estimates that over 85% of its products are used in water applications when both categories are grouped together.

Municipal water, the largest category by sales volume, includes mechanical and ultrasonic (electronic) water meters and related technologies and services used by municipal water utilities as the basis for generating water and wastewater revenues. The key market for the Company’s municipal water meter 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. In recent years, the Company has made inroads in selling ultrasonic water meters. The development of smaller diameter ultrasonic water meters combined with advanced radio technology now provides the Company with the opportunity to sell into other geographical markets, for example Europe, the Middle East and South America. In the municipal water category, sales of water meters and related technologies and services are also commonly referred to as residential or commercial water meter sales, the latter referring to larger sizes of water meters.

Flow instrumentation includes meters and valves sold worldwide to measure and control materials flowing through a pipe or pipeline including water, air, steam, oil, and other liquids and gases. These products are used in a variety of applications, primarily into the following industries: water/wastewater; heating, ventilating and air conditioning (HVAC); oil and gas; chemical and petrochemical; test and measurement; automotive aftermarket; and the concrete construction process. Furthermore, the Company’s flow instrumentation technologies are sold to original equipment manufacturers as the primary flow measurement device within a product or system.

Residential and commercial water meters 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 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 billing systems. These remotely read, or mobile, systems are either automatic meter reading (AMR) systems, where a vehicle equipped for meter reading purposes, including a radio receiver, computer and reading software, collects the data from utilities’ meters; or fixed network advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network of permanent data collectors or gateway receivers that are always active or listening for the radio transmission from the utilities’ meters. AMI systems eliminate the need for utility personnel to drive through service territories to collect data from the meters. These systems provide the utilities with more frequent and diverse data from their meters at specified intervals.

17

The ORION® family of radio endpoints provides water utilities with a range of industry-leading options for meter reading. These include ORION Migratable (ME) for mobile meter reading, ORION (SE) for traditional fixed network applications, and ORION Cellular for infrastructure-free fixed network meter reading. 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 rapid deployment and decreases ongoing maintenance.

Critical to the water metering ecosystem is information and analytics. The Company’s BEACON AMA Managed Solution is the latest in metering technology. BEACON AMA combines the BEACON analytical software suite with proven ORION technologies using two-way fixed and cellular networks in a managed solution, improving utilities’ visibility of their water consumption and eliminating the need for costly utility-managed infrastructure.

The BEACON AMA secure, cloud-hosted software suite includes a customizable dashboard, the ability to establish alerts for specific conditions, and consumer engagement tools that allow end water customers 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.

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

Water meter replacement and the adoption and deployment of new technology comprise the majority of water meter product sales, including radio products. To a much lesser extent, housing starts also contribute to the new product sales base. Over the last decade, there has been a growing trend in the conversion from manually read water meters to radio technology. This conversion rate is accelerating and contributes to an increased water meter and radio solutions base of business. The Company estimates that approximately 55% to 60% of water meters installed in the United States have been converted to a radio solutions technology. The Company’s strategy is to fulfill customers’ metering expectations and requirements with its proprietary meter reading systems or other systems available through its alliance partners in the marketplace.

Flow instrumentation products serve 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’s specific flow measurement and control applications and technologies serve the flow measurement market through both customized and standard flow instrumentation solutions.

Industries today 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.

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

Business Trends

Increasingly, the electric utility industry relies on AMI technology for two-way communication to monitor and control electrical devices at the customer's site. Although the Company does not sell products for electric market applications, the trend toward AMI affects the markets in which the Company does participate, particularly for those customers in the water utility market that are interested in more frequent and diverse data collection. Specifically, AMI and AMA technologies enable water utilities to capture readings from each meter at more frequent and variable intervals. Similar to the electric utility industry’s conversion to solid-state meters in recent years, the water utility industry is beginning the conversion from mechanical to ultrasonic meters. Ultrasonic water metering has lower barriers to entry, which could affect the competitive landscape for the water meter market in North America.

18

The Company sells its technology solutions to meet customer requirements. Since the technology products have comparable margins, any change in the mix between AMR, AMI or AMA is not expected to have a significant impact on the Company's net sales related to meter reading technology.

There are approximately 52,000 water utilities in the United States and the Company estimates that approximately 55% to 60% of them have converted to a radio solutions technology. With the BEACON AMA managed solution and its wide breadth of water meters, the Company believes it is well positioned to meet customers' future needs.

In the global market, companies need to comply with increasing regulations requiring companies to better manage critical resources, monitor their use of hazardous materials, and reduce exhaust gases. 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. The Company provides technology to measure water, hydrocarbon-based fluids, chemicals, gases and steams.

Flow measurements are critical to provide a baseline and quantify reductions as customers attempt to reduce consumption. Once water usage is better understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where water reduction 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.

Acquisitions

On April 2, 2018, the Company acquired 100% of the outstanding stock of Innovative Metering Solutions, Inc. ("IMS") of Odessa, Florida, which was one of the Company's distributors serving Florida.

The total purchase consideration was approximately $12.0 million, which included $7.7 million in cash, a $0.3 million working capital adjustment, a balance sheet holdback of $0.7 million and settlement of $3.3 million of pre-existing Company receivables. The working capital adjustment was settled in the second quarter of 2018 and the balance sheet holdback is recorded in payables and other current liabilities on the Company's Consolidated Balance Sheet as it is anticipated to be paid in the next twelve months. The Company's preliminary allocation of the purchase price at June 30, 2018 included $3.8 million of receivables, $0.8 million of inventories, $0.1 million of machinery and equipment, $3.6 million of intangibles and $3.7 million of goodwill. The intangible assets acquired are customer relationships with an estimated average useful life of 10 years. As of September 30, 2018, the Company had not completed its analysis for estimating the fair value of the assets acquired. This acquisition is further described in Note 5 "Acquisitions" in the Notes to Consolidated Condensed Financial Statements.

On November 1, 2017, the Company acquired certain assets of Utility Metering Services, Inc.'s business Carolina Meter & Supply ("Carolina Meter") of Wilmington, North Carolina, which was one of the Company's distributors serving North Carolina, South Carolina and Virginia.

The total purchase consideration for the Carolina Meter assets was $6.2 million, which included $2.0 million in cash and settlement of $4.2 million of pre-existing Company receivables. The Company's preliminary allocation of the purchase price at December 31, 2017 included $0.6 million of receivables, $0.3 million of inventories, $3.3 million of intangibles and $2.0 million of goodwill. The intangible assets acquired are primarily customer relationships with an estimated average useful life of 12 years. The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of September 30, 2018, the Company has not completed its analysis for estimating the fair value of the assets acquired. This acquisition is further described in Note 5 "Acquisitions" in the Notes to Consolidated Condensed Financial Statements.

On May 1, 2017, the Company acquired 100% of the outstanding common stock of D-Flow Technology AB ("D-Flow") of Luleå, Sweden. The D-Flow acquisition facilitates the continued advancement of the existing E-Series ultrasonic product line while also adding a technology center for the Company.

19

The purchase price was approximately $23.2 million in cash, plus a small working capital adjustment. The purchase price included $5.0 million of contingent payments, of which $3.0 million are anticipated to be made in the fourth quarter of 2018 and are recorded in payables and other current liabilities on the Consolidated Balance Sheet at September 30, 2018. Contingent payments of $2.0 million were made in the third quarter of 2018. The Company's preliminary allocation of the purchase price included approximately $0.3 million in receivables, $0.6 million of inventories, $0.2 million in machinery and equipment, $10.9 million of intangibles and $16.1 million of goodwill. The Company also assumed $4.9 million of liabilities as part of the acquisition. As of March 31, 2018, the Company completed its analysis for estimating the fair value of the assets acquired and liabilities assumed with no additional adjustments. This acquisition is further described in Note 5 "Acquisitions" in the Notes to Consolidated Condensed Financial Statements.

Revenue and Product Mix

As the industry continues to evolve, the Company has been vigilant in anticipating and exceeding customer expectations. In 2011, the Company introduced AMA as a hardware and software solution for water and gas utilities, and then in early 2014 launched its new BEACON AMA system, as a managed solution, which it believes will help maintain the Company's position as a market leader. Since its inception, sales of BEACON AMA have continued to grow with large cities and private water utilities selecting BEACON AMA and the Company’s industry-leading water meters.

The Company continues to seek opportunities for additional revenue enhancement. For instance, the Company is periodically asked to oversee and perform field installation of its products for certain customers. The Company assumes the role of general contractor, hiring installation subcontractors and supervising their work. The Company also supports its product and technology sales with the sale of extended service programs that provide additional services beyond the standard warranty. In recent years, the Company has sold ORION radio technology to natural gas utilities for installation on their gas meters. Most recently, the introduction of the BEACON AMA system opens the door to “software as a service” revenues. Revenues from such products and services are not yet significant and the Company is uncertain of the potential growth achievable for such products and services in future periods.

Results of Operations - Three Months Ended September 30, 2018

The Company’s net sales for the three months ended September 30, 2018 increased $10.6 million, or 11%, to $110.6 million compared to $100.0 million during the same period in 2017.

Municipal water sales represented 78% of sales in the third quarter of 2018 compared to 75% in the third quarter of 2017. These sales increased $11.8 million, or 16%, to $86.5 million in the third quarter of 2018 from $74.7 million in the third quarter of 2017. The increase was due to higher sales in the residential market in both North America and the Middle East, pricing actions, higher service revenue and a greater mix of newer technology meters and related radios.

Flow instrumentation products represented 22% of sales in the third quarter of 2018 compared to 25% during in the third quarter of 2017. These sales declined $1.2 million, or 5%, to $24.1 million from $25.3 million in the same period last year. Prior year sales included a large petrochemical meter order that did not repeat. In addition, current year sales increases into our targeted end markets, such as water & wastewater, were offset by lower volumes into other markets.

Gross margin as a percentage of sales was 39.7% in the third quarter of 2018 compared to 37.0% in the third quarter of 2017. The improvement in margins was the result of higher sales volumes, pricing actions and favorable product and service mix.

Selling, engineering and administration (SE&A) expenses for the three months ended September 30, 2018 increased $3.5 million, or 14%, to $28.2 million from $24.7 million in the third quarter of 2017. The increase included $2.1 million of executive retirement charges associated with the vesting of equity and cash awards for the retiring chief executive officer. The remaining increase was primarily due to higher incentive compensation.

The resultant operating earnings for the third quarter of 2018 increased $3.4 million, or 28%, to $15.7 million compared to $12.3 million in the same period in 2017.

Other pension and postretirement costs were $11.8 million compared to a benefit of $0.1 million in the third quarter of 2017. The third quarter of 2018 included a settlement charge of $11.7 million made in connection with the last phase of the previously planned termination of the Company’s pension plan. Following the pension termination charges taken in the third quarter of 2018, the pension termination is complete.

20

The provision for income taxes as a percentage of earnings before income taxes for the third quarter of 2018 was 21.9% compared to 34.5% in the third quarter of 2017. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, other credits available and developing tax reform provisions. The decrease between years was due primarily to the lower Federal tax rate, which declined from 35% in 2017 to 21% in 2018.

As a result of the above-mentioned items, net earnings for the three months ended September 30, 2018 were $2.9 million, or $0.10 per diluted share, compared to $8.0 million, or $0.27 per diluted share, for the same period in 2017.

Results of Operations - Nine Months Ended September 30, 2018

    The Company’s net sales for the nine months ended September 30, 2018 increased $23.5 million, or 8%, to $329.3 million compared to $305.8 million during the same period in 2017.

Municipal water sales represented 77% of sales for the first nine months of 2018 compared to 76% for the first nine months of 2017. These sales increased $22.0 million, or 9%, to $255.0 million in the first nine months of 2018 from $233.0 million in 2017 and were driven by pricing actions, increased domestic volumes of newer meter technologies and related radios as well as higher service revenue.

Flow instrumentation products represented 23% of sales for the nine months ended September 30, 2018 compared to 24% for the first nine months of 2017. These sales increased $1.5 million, or 2%, to $74.3 million for the first nine months in 2018 compared to $72.8 million in the same period last year due to higher sales into the oil and gas market as well as other targeted markets.

Gross margin as a percentage of sales was 37.1% for the first nine months of 2018 compared to 38.2% in the same period in 2017. The benefit of higher volume and favorable mix was more than offset by commodity cost increases in excess of pricing.

Selling, engineering and administration expenses for the nine months ended September 30, 2018 increased $6.1 million, or 8%, to $80.1 million in the first nine months of 2018 from $74.0 million in the same period in 2017. The increase included $2.1 million of executive retirement charges associated with the vesting of equity and cash awards for the retiring chief executive officer. The remaining increase was primarily due to higher incentive compensation, increased health care costs and the inclusion of SE&A from acquired companies.

Operating earnings for the first nine months of 2018 decreased $0.6 million, or 1%, to $42.1 million compared to $42.7 million in the same period in 2017 as the result of the lower gross margins and higher selling, engineering and administration expenses.

Other pension and postretirement costs were $19.8 million for the first nine months of 2018 compared to $0.2 million in the same period in 2017. Included in the amount for 2018 was pension termination settlement charges of $19.9 million made in connection with the previously planned termination of the Company’s pension plan.

The provision for income taxes as a percentage of earnings before income taxes for the first nine months of 2018 was 22.2% compared to 34.8% for the same period in 2017. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, other credits available and developing tax reform provisions. The decrease between years was due almost entirely to the lower Federal tax rate, which declined from 35% in 2017 to 21% in 2018.

As a result of the above-mentioned items, net earnings for the nine months ended September 30, 2018 were $16.6 million, or $0.57 per diluted share, compared to $27.3 million, or $0.94 per diluted share, for the same period in 2017.

Liquidity and Capital Resources

The main sources of liquidity for the Company are cash from operations and borrowing capacity. Cash provided by operations was $39.9 million for the first nine months of 2018 compared to $45.9 million through the first nine months of 2017.

Receivables increased from $58.2 million at December 31, 2017 to $70.0 million at September 30, 2018. Generally, receivable balances are lower at year-end than at other times of the year due to seasonality in the Company’s business. The Company believes its net receivables balance is fully collectible.

21

Inventories at September 30, 2018 were $84.3 million, a decrease from $85.2 million at December 31, 2017. These balances fluctuate from time to time due to the level of sales and the timing of inventory purchases.

Net property, plant and equipment decreased slightly from $93.6 million at December 31, 2017 to $91.6 million at September 30, 2018. This was the net effect of depreciation expense, offset by $7.2 million of capital expenditures in the first nine months of 2018.

Intangible assets decreased to $57.3 million at September 30, 2018 from $59.3 million at December 31, 2017 due to normal amortization expense, offset by an increase of $3.7 million related to the April 2018 acquisition of IMS. The IMS acquisition was also the main reason for the increase in goodwill from $67.4 million on December 31, 2017 to $71.3 million on September 30, 2018.

Short-term debt at September 30, 2018 decreased to $36.0 million from $44.6 million at December 31, 2017 due to the timing of cash needs.

Payables of $24.9 million at September 30, 2018 decreased from $28.6 million at December 31, 2017. These balances were impacted by the timing of purchases and payments.

Accrued compensation and employee benefits decreased to $12.4 million at September 30, 2018 from $15.5 million at December 31, 2017 due to payments made in the first three quarters of 2018 related to 2017 earned employee compensation, offset somewhat by provisions made for 2018 employee incentives earned to date.

Income and other taxes payable decreased to $0.4 million at September 30, 2018 from $1.1 million at December 31, 2017. The change was the net impact of the lower Federal tax rate for 2018 and the timing of actual tax payments.

Other long-term liabilities increased to $14.4 million compared to $4.1 million on December 31, 2017. The increase was due primarily to higher deferred revenue associated with the BEACON AMA offering.

The overall increase in total shareholders’ equity from $277.5 million at December 31, 2017 to $295.2 million at September 30, 2018 was the net effect of net earnings and stock options exercised, offset by dividends paid and repurchased stock.

The Company’s financial condition remains strong. In June 2018, the Company amended its May 2012 credit agreement with its primary lender to extend until September 2021 the $125.0 million line of credit that supports commercial paper (up to $70.0 million) and includes $5.0 million of a Euro line of credit. While the facility is unsecured, there are a number of financial covenants with which the Company must comply, and the Company was in compliance as of September 30, 2018. 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 continues to take advantage of its local commercial paper market and carefully monitors the current borrowing market. The Company had $97.9 million of unused credit lines available at September 30, 2018.

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 2017 and the first three quarters of 2018 were not material.

See the “Special Note Regarding Forward Looking Statements” at the front of this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of risks and uncertainties that could impact the Company’s financial performance and results of operations.

Off-Balance Sheet Arrangements and Contractual Obligations

The Company’s off-balance sheet arrangements and contractual obligations are discussed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Off-Balance Sheet Arrangements” and “Contractual Obligations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and have not materially changed since that report was filed unless otherwise indicated in this Form 10-Q.

22

Item 3Quantitative and Qualitative Disclosures about Market Risk

The Company’s quantitative and qualitative disclosures about market risk are included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Market Risks” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and have not materially changed since that report was filed.

Item 4Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management evaluated, with the participation of the Company’s Chairman and Chief Executive Officer and the Company’s Senior Vice President - Finance, Chief Financial Officer and Treasurer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the quarter ended September 30, 2018. Based upon their evaluation of these disclosure controls and procedures, the Company’s Chairman and Chief Executive Officer and the Company’s Senior Vice President - Finance, Chief Financial Officer and Treasurer concluded that, as of the date of such evaluation, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

23

Part II – Other Information

Item 6  Exhibits

EXHIBIT INDEX

Exhibit No.	Description
10.1	Post-Retirement Agreement, dated as of September 24, 2018, by and between the Company and Richard A. Meeusen.
	[Incorporated by reference to Exhibit (10.1) to Badger Meter, Inc.’s Current Report on Form 8-K, dated September 24, 2018 (Commission File No. 001-06706).]
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, (v) Notes to Unaudited Consolidated Condensed Financial Statements, tagged as blocks of text and (vi) document and entity information.

24

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BADGER METER, INC.
Dated: October 24, 2018	By	/s/ Richard A. Meeusen
		Richard A. Meeusen
		Chairman and Chief Executive Officer
	By	/s/ Richard E. Johnson
		Richard E. Johnson
		Senior Vice President – Finance, Chief Financial Officer and Treasurer
	By	/s/ Beverly L. P. Smiley
		Beverly L. P. Smiley
		Vice President – Controller

25

EX-31.1

Exhibit 31.1

Certification of Chairman and Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Richard A. Meeusen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Badger Meter, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	October 24, 2018	By	/s/ Richard A. Meeusen
			Richard A. Meeusen
			Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Senior Vice President - Finance, Chief Financial Officer and Treasurer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Richard E. Johnson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Badger Meter, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	October 24, 2018	By	/s/ Richard E. Johnson
			Richard E. Johnson
			Senior Vice President - Finance, Chief Financial Officer and Treasurer

EX-32

Exhibit 32

Written Statement of the Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. §1350

Solely for the purpose of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Badger Meter, Inc., a Wisconsin corporation (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	October 24, 2018	By	/s/ Richard A. Meeusen
			Richard A. Meeusen
			Chairman and Chief Executive Officer
		By	/s/ Richard E. Johnson
			Richard E. Johnson
			Senior Vice President - Finance, Chief Financial Officer and Treasurer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 10, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	BADGER METER INC
Entity Central Index Key	0000009092
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Entity Emerging Growth Company	false
Entity Small Business	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		29,112,982

XML

Consolidated Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash	$ 10,629	$ 11,164
Receivables	70,029	58,210
Inventories:
Finished goods	22,588	23,125
Work in process	19,199	22,035
Raw materials	42,558	40,012
Total inventories	84,345	85,172
Prepaid expenses and other current assets	5,881	4,077
Total current assets	170,884	158,623
Property, plant and equipment, at cost	214,234	212,485
Less accumulated depreciation	(122,595)	(118,884)
Net property, plant and equipment	91,639	93,601
Intangible assets, at cost less accumulated amortization	57,301	59,326
Other assets	9,436	9,897
Deferred income taxes	802	2,856
Goodwill	71,258	67,424
Total assets	401,320	391,727
Current liabilities:
Short-term debt	35,957	44,550
Payables and other current liabilities	24,860	28,601
Accrued compensation and employee benefits	12,381	15,509
Warranty and after-sale costs	4,302	3,367
Income and other taxes	366	1,082
Total current liabilities	77,866	93,109
Other long-term liabilities	14,446	4,073
Deferred income taxes	1,323	3,434
Accrued non-pension postretirement benefits	5,704	5,703
Other accrued employee benefits	6,751	7,956
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common stock	37,198	37,165
Capital in excess of par value	36,809	32,182
Reinvested earnings	250,432	244,224
Accumulated other comprehensive income (loss)	294	(10,893)
Less: Employee benefit stock	(461)	(460)
Treasury stock, at cost	(29,042)	(24,766)
Total shareholders’ equity	295,230	277,452
Total liabilities and shareholders’ equity	$ 401,320	$ 391,727

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Net sales	$ 110,630	$ 100,008	$ 329,319	$ 305,790
Cost of sales	66,684	62,969	207,121	189,047
Gross margin	43,946	37,039	122,198	116,743
Selling, engineering and administration	28,212	24,724	80,139	74,023
Operating earnings	15,734	12,315	42,059	42,720
Interest expense, net	295	242	994	567
Other pension and postretirement costs (benefits)	11,787	(96)	19,799	249
Earnings before income taxes	3,652	12,169	21,266	41,904
Provision for income taxes	801	4,194	4,715	14,566
Net earnings	$ 2,851	$ 7,975	$ 16,551	$ 27,338
Earnings per share:
Basic (in dollars per share)	$ 0.10	$ 0.28	$ 0.57	$ 0.94
Diluted (in dollars per share)	0.10	0.27	0.57	0.94
Dividends declared per common share (in dollars per share)	$ 0.15	$ 0.13	$ 0.41	$ 0.36
Shares used in computation of earnings per share:
Basic (in shares)	28,989,205	28,939,292	28,983,115	28,939,940
Impact of dilutive securities (in shares)	207,955	178,756	198,428	173,468
Diluted (in shares)	29,197,160	29,118,048	29,181,543	29,113,408

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement of Comprehensive Income [Abstract]
Net earnings	$ 2,851	$ 7,975	$ 16,551	$ 27,338
Other comprehensive income:
Foreign currency translation adjustments	106	310	(281)	1,650
Pension and postretirement benefits, net of tax	7,396	(25)	13,168	129
Comprehensive income	$ 10,353	$ 8,260	$ 29,438	$ 29,117

XML

Consolidated Condensed Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating activities:
Net earnings	$ 16,551	$ 27,338
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation	8,796	9,079
Amortization	9,675	9,089
Deferred income taxes	132	(188)
Noncurrent employee benefits	261	(606)
Pension termination settlement charges	19,900	0
Contributions to pension plan	(2,860)	(825)
Stock-based compensation expense	3,374	1,191
Changes in:
Receivables	(11,462)	(8,041)
Inventories	1,409	1,929
Prepaid expenses and other assets	(5,573)	(4,580)
Liabilities other than debt	(320)	11,543
Total adjustments	23,332	18,591
Net cash provided by operations	39,883	45,929
Investing activities:
Property, plant and equipment expenditures	(7,219)	(11,554)
Acquisitions, net of cash acquired and future payments	(8,048)	(18,376)
Net cash used for investing activities	(15,267)	(29,930)
Financing activities:
Net (decrease) increase in short-term debt	(8,433)	1,411
Payment of contingent acquisition consideration	(2,034)	0
Dividends paid	(11,895)	(10,444)
Proceeds from exercise of stock options	933	1,167
Repurchase of treasury stock	(4,451)	(3,677)
Issuance of treasury stock	529	594
Net cash used for financing activities	(25,351)	(10,949)
Effect of foreign exchange rates on cash	200	1,006
(Decrease) increase in cash	(535)	6,056
Cash – beginning of period	11,164	7,338
Cash – end of period	$ 10,629	$ 13,394

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Badger Meter, Inc. (the "Company") contain all adjustments (consisting only of normal recurring accruals except as otherwise discussed) necessary to present fairly the Company’s consolidated condensed financial position at September 30, 2018, results of operations for the three- and nine-month periods ended September 30, 2018 and 2017, comprehensive income for the three- and nine-month periods ended September 30, 2018 and 2017, and cash flows for the nine-month periods ended September 30, 2018 and 2017. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with United States 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.

XML

Additional Financial Information Disclosures

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Additional Financial Information Disclosures

Additional Financial Information Disclosures

The consolidated condensed balance sheet at December 31, 2017 was derived from amounts included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Refer to the footnotes to the financial statements included in that report for a description of the Company’s accounting policies and for additional details of the Company’s financial condition. The details in those notes have not changed except as discussed below and as a result of normal adjustments in the interim.

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 problems 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:

	Three months ended						Nine months ended
	September 30,						September 30,
(In thousands)	2018			2017			2018			2017
Balance at beginning of period	$	4,110		$	3,064		$	3,367		$	2,779
Net additions charged to earnings	1,048			919			3,363			2,902
Adjustments to pre-existing warranties	(389		)	168			(490		)	214
Costs incurred	(467		)	(738		)	(1,938		)	(2,482		)
Balance at end of period	$	4,302		$	3,413		$	4,302		$	3,413

Rights Agreement

The shareholder rights plan that was in effect since February 15, 2008 expired on May 26, 2018 and the Board of Directors decided not to renew the plan.

XML

Employee Benefit Plans

9 Months Ended

Sep. 30, 2018

Retirement Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

The Company maintains a non-contributory defined benefit pension plan that covers substantially all U.S. employees who were employed at December 31, 2011. After that date, no further benefits are being accrued in this plan. For the frozen pension plan, benefits are based primarily on years of service and, for certain individuals, levels of compensation. The Company finalized the termination of the pension plan in the third quarter of 2018. In connection with the Company's activities to terminate the plan, lump-sum distributions were made in the second quarter of 2018 to individuals who elected lump sum distributions, including rolling over their accounts or transferring them to a qualified Company plan. In the third quarter of 2018, purchases of annuity contracts were made to settle obligations for the remaining participants. As a result, the Company recorded pre-tax settlement charges of $8.2 million and $11.7 million during the second and third quarters of 2018, respectively.

The Company also maintains supplemental non-qualified plans for certain officers and other key employees, and an Employee Savings and Stock Ownership Plan (“ESSOP”) for the majority of the U.S. employees.

The Company additionally has a postretirement healthcare benefit plan that provides medical benefits for certain U.S. retirees and eligible dependents hired prior to November 1, 2004. Employees are eligible to receive postretirement healthcare benefits upon meeting certain age and service requirements. No employees hired after October 31, 2004 are eligible to receive these benefits. This plan requires employee contributions to offset benefit costs.

The following table sets forth the components of net periodic benefit cost (income) for the three months ended September 30, 2018 and 2017 based on December 31, 2017 and 2016 actuarial measurement dates, respectively:

	Defined pension plan benefits					Other postretirement benefits
(In thousands)	2018		2017			2018			2017
Service cost – benefits earned during the year	$	35	$	7		$	31		$	28
Interest cost on projected benefit obligations	6		149			47			29
Expected return on plan assets	—		(399		)	—			—
Amortization of prior service cost	—		—			(3		)	(6		)
Amortization of net loss (benefit)	13		143			(8		)	(12		)
Settlement expense	11,732		—			—			—
Net periodic benefit cost (income)	$	11,786	$	(100	)	$	67		$	39

The following table sets forth the components of net periodic benefit cost for the nine months ended September 30, 2018 and 2017 based on December 31, 2017 and 2016 actuarial measurement dates, respectively:

	Defined pension plan benefits						Other postretirement benefits
(In thousands)	2018			2017			2018			2017
Service cost – benefits earned during the year	$	105		$	20		$	93		$	91
Interest cost on projected benefit obligations	323			936			142			146
Expected return on plan assets	(835		)	(1,197		)	—			—
Amortization of prior service cost	—			—			(10		)	(19		)
Amortization of net loss (benefit)	302			419			(23		)	(36		)
Settlement expense	19,900			—			—			—
Net periodic benefit cost	$	19,795		$	178		$	202		$	182

The Company disclosed in its financial statements for the year ended December 31, 2017 that it was not required to make a minimum contribution to the defined benefit pension plan for the 2018 calendar year. The Company made net payments of $1.6 million and $1.3 million in the second and third quarter of 2018, respectively, related to the 2017 plan year. No additional contributions will be required during 2018 as the pension plan termination was finalized in the third quarter of 2018.

The Company also disclosed in its financial statements for the year ended December 31, 2017 that it estimated it would pay $0.4 million in other postretirement benefits in 2018 based on actuarial estimates. As of September 30, 2018, $234,000 of such benefits have been paid. The Company continues to believe that its estimated payments for the full year are reasonable. However, such estimates contain inherent uncertainties because cash payments can vary significantly depending on the timing of postretirement medical claims and the collection of the retirees’ portion of certain costs. Note that the amount of benefits paid in calendar year 2018 will not impact the expense for postretirement benefits for 2018.

XML

Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Components of and changes in accumulated other comprehensive income (loss) at September 30, 2018 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits			Foreign currency			Total
Balance at beginning of period	$	(11,597	)	$	704		$	(10,893	)
Other comprehensive income (loss) before reclassifications	—			(281		)	(281		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(5.0 million)	13,168			—			13,168
Net current period other comprehensive income (loss), net of tax	13,168			(281		)	12,887
Cumulative impact of adopting ASU 2018-02	(1,700		)	—			(1,700		)
Accumulated other comprehensive income (loss)	$	(129	)	$	423		$	294

Details of reclassifications out of accumulated other comprehensive income (loss) during the nine months ended September 30, 2018 are as follows:

(In thousands)	Amount reclassified from accumulated other comprehensive income (loss)
Amortization of pension and postretirement benefits items:
Prior service benefit (1)	$	(10	)
Settlement expense (1)	19,900
Actuarial loss (1)	(1,728		)
Total before tax	18,162
Income tax benefit	(4,994		)
Amount reclassified out of accumulated other comprehensive income (loss)	$	13,168

(1)    These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (income) in Note 3 “Employee Benefit Plans.”

Components of and changes in accumulated other comprehensive income (loss) at September 30, 2017 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits			Foreign currency			Total
Balance at beginning of period	$	(10,495	)	$	(1,140	)	$	(11,635	)
Other comprehensive income (loss) before reclassifications	—			1,545			1,545
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(0.1) million	234			—			234
Net current period other comprehensive income (loss), net of tax	234			1,545			1,779
Accumulated other comprehensive income (loss)	$	(10,261	)	$	405		$	(9,856	)

Details of reclassifications out of accumulated other comprehensive income (loss) during the nine months ended September 30, 2017 are as follows:

(In thousands)	Amount reclassified from accumulated other comprehensive income (loss)
Amortization of pension and postretirement benefits items:
Prior service benefit (1)	$	(19	)
Amortization of actuarial loss (1)	382
Total before tax	363
Income tax benefit	(129		)
Amount reclassified out of accumulated other comprehensive income (loss)	$	234

(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (income) in Note 3 “Employee Benefit Plans.”

XML

Acquisitions

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Acquisitions

Acquisitions

On April 2, 2018, the Company acquired 100% of the outstanding stock of Innovative Metering Solutions, Inc. ("IMS") of Odessa, Florida, which was one of the Company's distributors serving Florida.

The total purchase consideration was approximately $12.0 million, which included $7.7 million in cash, a $0.3 million working capital adjustment, a balance sheet holdback of $0.7 million and settlement of $3.3 million of pre-existing Company receivables. The working capital adjustment was settled in the second quarter of 2018 and the balance sheet holdback is recorded in payables and other current liabilities on the Company's Consolidated Balance Sheet as it is anticipated to be paid in the next twelve months. The Company's preliminary allocation of the purchase price at June 30, 2018 included $3.8 million of receivables, $0.8 million of inventories, $0.1 million of machinery and equipment, $3.6 million of intangibles and $3.7 million of goodwill. The intangible assets acquired are customer relationships with an estimated average useful life of 10 years. The preliminary allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of September 30, 2018, the Company had not completed its analysis for estimating the fair value of the assets acquired.

The IMS acquisition was 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 acquisition did not have a material impact on the Company's consolidated financial statements or the notes thereto.

On November 1, 2017, the Company acquired certain assets of Utility Metering Services, Inc.'s business Carolina Meter & Supply ("Carolina Meter") of Wilmington, North Carolina, which was one of the Company's distributors serving North Carolina, South Carolina and Virginia.

The total purchase consideration for the Carolina Meter assets was $6.2 million, which included $2.0 million in cash and settlement of $4.2 million of pre-existing Company receivables. The Company's preliminary allocation of the purchase price at December 31, 2017 included $0.6 million of receivables, $0.3 million of inventories, $3.3 million of intangibles and $2.0 million of goodwill. The intangible assets acquired are primarily customer relationships with an estimated average useful life of 12 years. As of September 30, 2018, the Company had not completed its analysis for estimating the fair value of the assets acquired.

The Carolina Meter acquisition was 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 acquisition did not have a material impact on the Company's consolidated financial statements or the notes thereto.

On May 1, 2017, the Company acquired 100% of the outstanding common stock of D-Flow Technology AB ("D-Flow") of Luleå, Sweden. The D-Flow acquisition facilitates the continued advancement of the existing E-Series® ultrasonic product line while also adding a technology center for the Company.

The purchase price was approximately $23.2 million in cash, plus a small working capital adjustment. The purchase price included $5.0 million of contingent payments, of which $3.0 million are anticipated to be made in the fourth quarter of 2018 and are recorded in payables and other current liabilities on the Consolidated Balance Sheet at September 30, 2018. Contingent payments of $2.0 million were made in the third quarter of 2018. The Company's preliminary allocation of the purchase price included approximately $0.3 million in receivables, $0.6 million of inventories, $0.2 million in property, plant and equipment, $10.9 million of intangibles and $16.1 million of goodwill. The majority of the intangible assets acquired related to ultrasonic technology. The Company also assumed $4.9 million of liabilities as part of the acquisition. As of March 31, 2018, the Company completed its analysis for estimating the fair value of the assets acquired and liabilities assumed with no additional adjustments.

The D-Flow acquisition was 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 acquisition did not have a material impact on the Company's consolidated condensed financial statements or the notes thereto.

XML

Contingencies, Litigation and Commitments

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Contingencies, Litigation and Commitments

Contingencies, Litigation and Commitments

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 2017 and the first three quarters of 2018 were not material.

The Company relies on single suppliers for most brass castings, certain resins 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 would 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.

XML

Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes as a percentage of earnings before income taxes for the third quarter of 2018 was 21.9% compared to 34.5% in the third quarter of 2017. The provision for income taxes as a percentage of earnings before income taxes for the first three quarters of 2018 was 22.2% compared to 34.8% for the first three quarters of 2017.Interim provisions are tied to an estimate of the overall annual rate which can vary due to state taxes and the relationship of foreign and domestic earnings. These items cause variations between periods. The decrease between years was due almost entirely to the lower Federal tax rate which was a result of U.S. tax reform that was enacted in December 2017. For the nine months ended September 30, 2018 and 2017, the Company recognized discrete net tax benefits related to pension plan contributions and termination costs (2018 only) as well as the excess tax benefits from stock-based compensation of $6.0 million and $0.2 million, respectively.

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. For the three- and nine-month periods ended September 30, 2018, the Company updated its transition tax calculation in preparation for the filing of its 2017 Federal income tax return in October 2018. The change in the transition tax was immaterial compared to the provisional amount of transition tax recorded as of December 31, 2017.

The Company is subject to numerous other provisions of the Act that are effective for tax years starting after December 31, 2017.  These provisions include the Global Intangible Low-Taxed Income inclusion, the deduction for Foreign-Derived Intangible Income, the business interest expense deduction limitation under Section 163(j), the executive compensation provision under Section 162(m), and the reduced deduction for certain meals and entertainment related expenses. The Company will continue to refine its computation related to these provisions as additional guidance becomes available. The net impact of these provisions is not expected to have a material impact on the Company’s consolidated financial statements.

XML

Fair Value Measurements of Financial Instruments

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements of Financial Instruments

Fair Value Measurements of Financial Instruments

The Company applies the accounting standards for fair value measurements and disclosures for its financial assets and financial liabilities. 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. Short-term debt is comprised of notes payable drawn against the Company's lines of credit and commercial paper. Because of its short-term nature, the carrying amount of the short-term debt also approximates fair value. Included in other assets are insurance policies on various individuals who were previously employed by the Company. The carrying amounts of these insurance policies approximate their fair value.

XML

Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

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 that the accompanying financial statements were issued, and has determined that no material subsequent events exist through the date of this filing.

XML

New Pronouncements

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

New Pronouncements

New Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-13 "Fair Value Measurement (Topic 820)," which is designed to improve the effectiveness of disclosures related to fair value measurements. This ASU is effective for annual periods beginning after December 15, 2019 and early adoption is allowed in any interim reporting periods within those annual reporting periods. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02 "Income Statement - Reporting Comprehensive (Loss) Income (Topic 220)." Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive (loss) income are adjusted, certain tax effects become stranded in accumulated other comprehensive (loss) income. The Company’s provisional adjustments recorded in 2017 to account for the impact of the Tax Cuts and Jobs Act resulted in such stranded tax effects. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive (loss) income to reinvested earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The guidance is effective for annual years beginning after December 15, 2018 with early adoption permitted in any interim reporting period. The Company elected to early-adopt this standard in the quarter ended September 30, 2018. This election resulted in a reclassification of $1.7 million from accumulated other comprehensive income (loss) to reinvested earnings.

In May 2017, the FASB issued ASU 2017-09 "Compensation - Stock Compensation (Topic 718)," which clarifies when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the vesting condition, fair value or the award classification is not the same both before and after a change to the terms and conditions of the award. The new guidance was adopted on a prospective basis on January 1, 2018. The adoption of this standard did not have a significant impact on the Company's consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07 "Compensation - Retirement Benefits (Topic 715)," which changes the presentation of defined benefit and post-retirement benefit plan expense on the income statement by requiring separation between operating and non-operating expense. Under the ASU, the service cost of net periodic benefit expense is an operating expense that will be reported with similar compensation costs. The non-operating components, which include all other components of net periodic benefit expense, are reported outside of operating income. The ASU also stipulates that only the service cost component of pension and postretirement (benefits) costs is eligible for capitalization. The ASU was adopted by the Company on January 1, 2018. Application was done retrospectively for the presentation of the components of these (benefits) costs. In the Consolidated Statements of Operations, the Company previously recorded service and other (benefits) costs in operating cost and expense accounts along with compensation costs. The adoption of the standard resulted in reclassification of those (benefits) costs to the other pension and postretirement (benefits) costs line in the Consolidated Statements of Operations. Adoption of the standard increased operating earnings for 2018 by $11.8 and $19.8 million in the three- and nine-month periods ending September 30, 2018. In the three-month period ending September 30, 2017 operating earnings were decreased by $0.1 million. In the nine-month period ending September 30, 2017 operating earnings were increased by $0.2 million. A corresponding amount was reclassified to other pension and postretirement (benefits) costs for each of these periods. The specific net periodic benefit components are disclosed in Note 3 "Employee Benefit Plans."

In January 2017, the FASB issued ASU 2017-04 "Intangibles - Goodwill and Other (Topic 350)." The update requires

a single-step quantitative test to measure potential impairment based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment can still be completed first for an entity to determine if a quantitative impairment test is necessary. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2019 and interim periods thereafter. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate that the adoption of ASU 2017-04 will have an impact.

In August 2016, the FASB issued ASU No. 2016-15 "Statement of Cash Flows (Topic 230)," which clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. This ASU was effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The adoption of this ASU did not have a significant impact on the categorization of operating, investing and financing activities on the Consolidated Statements of Cash Flows.

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)," which requires lessees to record most leases on their balance sheets. Lessees initially recognize a lease liability (measured at the present value of the lease payments over the lease term) and a right-of-use ("ROU") asset (measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee's initial direct costs). Lessees can make an accounting policy election not to recognize ROU assets and lease liabilities for leases with a lease term of 12 months or less as long as the leases do not include options to purchase the underlying assets that the lessee is reasonably certain to exercise. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard includes the use of a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. In July 2018, the FASB issued ASU No. 2018-11 "Targeted Improvements (Topic 842)." This ASU provides for an optional method of transition which allows companies to adopt the new leasing standard with a cumulative-effect adjustment to reinvested earnings. Under this transition method, comparative periods would continue to be reported in accordance with the existing lease guidance under ASC 840 "Leases". The Company plans to adopt the ASU with this optional transition methodology beginning on the effective date of January 1, 2019. The Company expects that upon adoption the consolidated balance sheet will increase for the recognition of ROU assets and lease liabilities for operating leases. The Company is currently making decisions regarding all of the available practical expedients for transition and is evaluating the impact that the adoption of this guidance will have on its financial condition, results of operations and the presentation of its consolidated financial statements.

XML

Revenue Recognition

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Adoption of ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)"

On January 1, 2018, the Company adopted ASU 2014-09 using the modified retrospective method applied to those contracts that were not completed or substantially complete as of January 1, 2018. Results for the reporting period beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historic accounting under Topic 605 "Revenue Recognition". The Company recorded a net reduction to opening retained earnings of $0.1 million as of January 1, 2018 as a result of the cumulative impact of adopting Topic 606. The impact to revenues as a result of applying Topic 606 for the three- and nine-month periods ended September 30, 2018 were not material.

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts include the sale of municipal and flow instrumentation products, such as flow meters and radios, software access and other ancillary services. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract. Since the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the majority of the Company's contracts do not contain variable consideration. The Company establishes a provision for estimated warranty and returns as well as certain after sale costs as discussed in Note 2 "Additional Financial Information Disclosures."

Disaggregation of Revenue

In accordance with Topic 606, the Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606 which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

Information regarding revenues disaggregated by geographic area is as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2018
Revenues:
United States	$	95,288	$	284,351
Foreign:
Asia	1,928		6,789
Canada	2,564		9,353
Europe	4,457		14,605
Mexico	1,031		2,137
Middle East	4,602		9,958
Other	760		2,126
Total	$	110,630	$	329,319

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2018
Revenue recognized over time	$	3,455	9,203
Revenue recognized at a point in time	107,175		320,116
Total	$	110,630	$	329,319

Contract Balances

The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services.

The opening and closing balances of the Company's receivables and contract liabilities are as follows:

	September 30, 2018		December 31, 2017
Receivables	$	70,029	$	58,210
Contract liabilities	$	14,363	$	9,670

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables in the three- and nine-month periods ended September 30, 2018 and December 31, 2017.

The amount of revenue recognized in the three- and nine-month periods ended September 30, 2018 that was included in the opening contract liability balance was $0.3 million and $0.9 million, respectively. The difference between the opening and closing balances of the Company's contract liabilities was the result of a timing difference between the Company's performance and the customers' prepayments. The increased receivables balance was due to higher sales at the end of the third quarter of 2018 compared to the fourth quarter of 2017, receivables balances are generally lower at year-end than at other times of the year.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of measurement in Topic 606. At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customer. In order to identify performance obligations, the Company considers all of the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

The Company's performance obligations are satisfied at a point in time or over time as work progresses. Revenue from products and services transferred to customers at a single point in time accounted for 96.9% and 97.2% of net sales for the three- and nine-month periods ended September 30, 2018, respectively. The majority of the Company's revenue recognized at a point in time is for the sale of municipal and flow instrumentation products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.

Revenue from services transferred to customers over time accounted for 3.1% and 2.8% of sales of net sales for the three- and nine-month periods ended September 30, 2018, respectively. The majority of the Company's revenue that is recognized over time relates to the BEACON AMA software as a service.

As of September 30, 2018, the Company had certain contracts where there were unsatisfied performance obligations. For contracts recorded as long-term liabilities, $11.6 million was the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied as of the end of the reporting period. The Company estimates that revenue recognized from satisfying those performance obligations will be approximately $0.6 million for the remainder of 2018, $2.6 million in each year from 2019 through 2022 and $0.6 million in 2023.

Significant Judgments

The Company records revenue for BEACON AMA services over time as the customer benefits from the data that is provided through the Company's software. Control of an asset is therefore transferred to the customer over time, and the Company will recognize revenue for BEACON AMA services as service units are used by the customer.

Revenue is recorded for various ancillary services, such as project management and training, over time as the customer benefits from the services provided. The majority of this revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. If the service is not provided evenly over the contract period, revenue will be recognized by the associated input/output method that best measures the progress towards contract completion.

The Company also has contracts that include both the sale and installation of flow meters as performance obligations. In those cases, the Company records revenue for installed flow meters at the point in time when the flow meters have been accepted by the customer. The customer cannot control the use of and obtain substantially all of the benefits from the equipment until the customer has accepted the installed product. Therefore, for both the flow meter and the related installation, the Company has concluded that control is transferred to the customer upon customer acceptance of the installed flow meter. In addition, the Company has a variety of ancillary revenue streams which are minor. The types and composition of the Company's revenue streams did not materially change during the three- and nine-month periods ended September 30, 2018.

Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. Variable consideration in contracts for the three- and nine-month periods ended September 30, 2018 was insignificant.

Transaction Price Allocation

The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract's transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers. If standalone selling price is not directly observable, it is estimated using either a market adjustment or cost plus margin approach.

Contract Costs

The recording of assets recognized from the costs to obtain and fulfill customer contracts primarily relate to the deferral of sales commissions on the Company's BEACON AMA software arrangements. The Company's costs incurred to obtain or fulfill a contract with a customer are amortized over the period of benefit of the related revenue. The Company expenses any costs incurred immediately when the amortization period would be one year or less. These costs are recorded within selling, engineering and administration expenses.

Practical Expedients

For the three- and nine-month periods ended September 30, 2018, the Company elected the following practical expedients:

In accordance with Subtopic 340-40 "Other Assets and Deferred Costs - Contracts with Customers," the Company elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less, and contracts for which it has the right to invoice for services performed.

The Company has made an accounting policy election to exclude all taxes by governmental authorities from the measurement of the transaction price.

XML

New Pronouncements - (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

New Pronouncements

New Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-13 "Fair Value Measurement (Topic 820)," which is designed to improve the effectiveness of disclosures related to fair value measurements. This ASU is effective for annual periods beginning after December 15, 2019 and early adoption is allowed in any interim reporting periods within those annual reporting periods. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02 "Income Statement - Reporting Comprehensive (Loss) Income (Topic 220)." Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive (loss) income are adjusted, certain tax effects become stranded in accumulated other comprehensive (loss) income. The Company’s provisional adjustments recorded in 2017 to account for the impact of the Tax Cuts and Jobs Act resulted in such stranded tax effects. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive (loss) income to reinvested earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The guidance is effective for annual years beginning after December 15, 2018 with early adoption permitted in any interim reporting period. The Company elected to early-adopt this standard in the quarter ended September 30, 2018. This election resulted in a reclassification of $1.7 million from accumulated other comprehensive income (loss) to reinvested earnings.

In May 2017, the FASB issued ASU 2017-09 "Compensation - Stock Compensation (Topic 718)," which clarifies when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the vesting condition, fair value or the award classification is not the same both before and after a change to the terms and conditions of the award. The new guidance was adopted on a prospective basis on January 1, 2018. The adoption of this standard did not have a significant impact on the Company's consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07 "Compensation - Retirement Benefits (Topic 715)," which changes the presentation of defined benefit and post-retirement benefit plan expense on the income statement by requiring separation between operating and non-operating expense. Under the ASU, the service cost of net periodic benefit expense is an operating expense that will be reported with similar compensation costs. The non-operating components, which include all other components of net periodic benefit expense, are reported outside of operating income. The ASU also stipulates that only the service cost component of pension and postretirement (benefits) costs is eligible for capitalization. The ASU was adopted by the Company on January 1, 2018. Application was done retrospectively for the presentation of the components of these (benefits) costs. In the Consolidated Statements of Operations, the Company previously recorded service and other (benefits) costs in operating cost and expense accounts along with compensation costs. The adoption of the standard resulted in reclassification of those (benefits) costs to the other pension and postretirement (benefits) costs line in the Consolidated Statements of Operations. Adoption of the standard increased operating earnings for 2018 by $11.8 and $19.8 million in the three- and nine-month periods ending September 30, 2018. In the three-month period ending September 30, 2017 operating earnings were decreased by $0.1 million. In the nine-month period ending September 30, 2017 operating earnings were increased by $0.2 million. A corresponding amount was reclassified to other pension and postretirement (benefits) costs for each of these periods. The specific net periodic benefit components are disclosed in Note 3 "Employee Benefit Plans."

In January 2017, the FASB issued ASU 2017-04 "Intangibles - Goodwill and Other (Topic 350)." The update requires

a single-step quantitative test to measure potential impairment based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment can still be completed first for an entity to determine if a quantitative impairment test is necessary. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2019 and interim periods thereafter. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate that the adoption of ASU 2017-04 will have an impact.

In August 2016, the FASB issued ASU No. 2016-15 "Statement of Cash Flows (Topic 230)," which clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. This ASU was effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The adoption of this ASU did not have a significant impact on the categorization of operating, investing and financing activities on the Consolidated Statements of Cash Flows.

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)," which requires lessees to record most leases on their balance sheets. Lessees initially recognize a lease liability (measured at the present value of the lease payments over the lease term) and a right-of-use ("ROU") asset (measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee's initial direct costs). Lessees can make an accounting policy election not to recognize ROU assets and lease liabilities for leases with a lease term of 12 months or less as long as the leases do not include options to purchase the underlying assets that the lessee is reasonably certain to exercise. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard includes the use of a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. In July 2018, the FASB issued ASU No. 2018-11 "Targeted Improvements (Topic 842)." This ASU provides for an optional method of transition which allows companies to adopt the new leasing standard with a cumulative-effect adjustment to reinvested earnings. Under this transition method, comparative periods would continue to be reported in accordance with the existing lease guidance under ASC 840 "Leases". The Company plans to adopt the ASU with this optional transition methodology beginning on the effective date of January 1, 2019. The Company expects that upon adoption the consolidated balance sheet will increase for the recognition of ROU assets and lease liabilities for operating leases. The Company is currently making decisions regarding all of the available practical expedients for transition and is evaluating the impact that the adoption of this guidance will have on its financial condition, results of operations and the presentation of its consolidated financial statements.

XML

Additional Financial Information Disclosures (Tables)

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Changes in Warranty and After-Sale Costs Reserve

Changes in the Company’s warranty and after-sale costs reserve are as follows:

	Three months ended						Nine months ended
	September 30,						September 30,
(In thousands)	2018			2017			2018			2017
Balance at beginning of period	$	4,110		$	3,064		$	3,367		$	2,779
Net additions charged to earnings	1,048			919			3,363			2,902
Adjustments to pre-existing warranties	(389		)	168			(490		)	214
Costs incurred	(467		)	(738		)	(1,938		)	(2,482		)
Balance at end of period	$	4,302		$	3,413		$	4,302		$	3,413

XML

Employee Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2018

Retirement Benefits [Abstract]

Components of Net Periodic Benefit Cost

The following table sets forth the components of net periodic benefit cost (income) for the three months ended September 30, 2018 and 2017 based on December 31, 2017 and 2016 actuarial measurement dates, respectively:

	Defined pension plan benefits					Other postretirement benefits
(In thousands)	2018		2017			2018			2017
Service cost – benefits earned during the year	$	35	$	7		$	31		$	28
Interest cost on projected benefit obligations	6		149			47			29
Expected return on plan assets	—		(399		)	—			—
Amortization of prior service cost	—		—			(3		)	(6		)
Amortization of net loss (benefit)	13		143			(8		)	(12		)
Settlement expense	11,732		—			—			—
Net periodic benefit cost (income)	$	11,786	$	(100	)	$	67		$	39

The following table sets forth the components of net periodic benefit cost for the nine months ended September 30, 2018 and 2017 based on December 31, 2017 and 2016 actuarial measurement dates, respectively:

	Defined pension plan benefits						Other postretirement benefits
(In thousands)	2018			2017			2018			2017
Service cost – benefits earned during the year	$	105		$	20		$	93		$	91
Interest cost on projected benefit obligations	323			936			142			146
Expected return on plan assets	(835		)	(1,197		)	—			—
Amortization of prior service cost	—			—			(10		)	(19		)
Amortization of net loss (benefit)	302			419			(23		)	(36		)
Settlement expense	19,900			—			—			—
Net periodic benefit cost	$	19,795		$	178		$	202		$	182

XML

Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Components of and Changes in Accumulated Other Comprehensive Loss

Components of and changes in accumulated other comprehensive income (loss) at September 30, 2018 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits			Foreign currency			Total
Balance at beginning of period	$	(11,597	)	$	704		$	(10,893	)
Other comprehensive income (loss) before reclassifications	—			(281		)	(281		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(5.0 million)	13,168			—			13,168
Net current period other comprehensive income (loss), net of tax	13,168			(281		)	12,887
Cumulative impact of adopting ASU 2018-02	(1,700		)	—			(1,700		)
Accumulated other comprehensive income (loss)	$	(129	)	$	423		$	294

Components of and changes in accumulated other comprehensive income (loss) at September 30, 2017 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits			Foreign currency			Total
Balance at beginning of period	$	(10,495	)	$	(1,140	)	$	(11,635	)
Other comprehensive income (loss) before reclassifications	—			1,545			1,545
Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $(0.1) million	234			—			234
Net current period other comprehensive income (loss), net of tax	234			1,545			1,779
Accumulated other comprehensive income (loss)	$	(10,261	)	$	405		$	(9,856	)

Reclassifications Out of Accumulated Other Comprehensive Loss

Details of reclassifications out of accumulated other comprehensive income (loss) during the nine months ended September 30, 2017 are as follows:

(In thousands)	Amount reclassified from accumulated other comprehensive income (loss)
Amortization of pension and postretirement benefits items:
Prior service benefit (1)	$	(19	)
Amortization of actuarial loss (1)	382
Total before tax	363
Income tax benefit	(129		)
Amount reclassified out of accumulated other comprehensive income (loss)	$	234

(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (income) in Note 3 “Employee Benefit Plans.”

Details of reclassifications out of accumulated other comprehensive income (loss) during the nine months ended September 30, 2018 are as follows:

(In thousands)	Amount reclassified from accumulated other comprehensive income (loss)
Amortization of pension and postretirement benefits items:
Prior service benefit (1)	$	(10	)
Settlement expense (1)	19,900
Actuarial loss (1)	(1,728		)
Total before tax	18,162
Income tax benefit	(4,994		)
Amount reclassified out of accumulated other comprehensive income (loss)	$	13,168

(1)    These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (income) in Note 3 “Employee Benefit Plans.”

XML

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Information regarding revenues disaggregated by geographic area is as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2018
Revenues:
United States	$	95,288	$	284,351
Foreign:
Asia	1,928		6,789
Canada	2,564		9,353
Europe	4,457		14,605
Mexico	1,031		2,137
Middle East	4,602		9,958
Other	760		2,126
Total	$	110,630	$	329,319

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2018
Revenue recognized over time	$	3,455	9,203
Revenue recognized at a point in time	107,175		320,116
Total	$	110,630	$	329,319

Contract with Customer, Liability and Receivables

The opening and closing balances of the Company's receivables and contract liabilities are as follows:

	September 30, 2018		December 31, 2017
Receivables	$	70,029	$	58,210
Contract liabilities	$	14,363	$	9,670

XML

Additional Financial Information Disclosures (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Changes in warranty and after-sale costs reserve
Balance at beginning of period	$ 4,110	$ 3,064	$ 3,367	$ 2,779
Net additions charged to earnings	1,048	919	3,363	2,902
Adjustments to pre-existing warranties	(389)	168	(490)	214
Costs incurred	(467)	(738)	(1,938)	(2,482)
Balance at end of period	$ 4,302	$ 3,413	$ 4,302	$ 3,413

XML

Employee Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Defined pension plan benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost – benefits earned during the year	$ 35		$ 7	$ 105	$ 20
Interest cost on projected benefit obligations	6		149	323	936
Expected return on plan assets	0		(399)	(835)	(1,197)
Amortization of prior service cost	0		0	0	0
Amortization of net loss (benefit)	13		143	302	419
Settlement expense	11,732	$ 8,200	0	19,900	0
Net periodic benefit cost	11,786		(100)	19,795	178
Other postretirement benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost – benefits earned during the year	31		28	93	91
Interest cost on projected benefit obligations	47		29	142	146
Expected return on plan assets	0		0	0	0
Amortization of prior service cost	(3)		(6)	(10)	(19)
Amortization of net loss (benefit)	(8)		(12)	(23)	(36)
Settlement expense	0		0	0	0
Net periodic benefit cost	$ 67		$ 39	$ 202	$ 182

XML

Employee Benefit Plans - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Defined pension plan benefits
Defined Benefit Plan Disclosure [Line Items]
Settlement expense	$ (11,732)	$ (8,200)	$ 0	$ (19,900)	$ 0
Benefits paid	1,300	$ 1,600
Other postretirement benefits
Defined Benefit Plan Disclosure [Line Items]
Settlement expense	$ 0		$ 0	0	$ 0
Benefits paid				$ 234
Estimated other postretirement benefits to be paid in 2017						$ 400

XML

Accumulated Other Comprehensive Income (Loss) - Components of and Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amounts reclassified from AOCI, tax	$ (5,000)	$ (100)
Accumulated Other Comprehensive Income
Balance at beginning of period	(10,893)	(11,635)
Other comprehensive income (loss) before reclassifications	(281)	1,545
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	13,168	234
Net current period other comprehensive income (loss), net of tax	12,887	1,779
Cumulative impact of adopting ASU 2018-02			$ (1,700)
Accumulated other comprehensive income (loss)	294	(9,856)
Unrecognized pension and postretirement benefits
Accumulated Other Comprehensive Income
Balance at beginning of period	(11,597)	(10,495)
Other comprehensive income (loss) before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	13,168	234
Net current period other comprehensive income (loss), net of tax	13,168	234
Cumulative impact of adopting ASU 2018-02			(1,700)
Accumulated other comprehensive income (loss)	(129)	(10,261)
Foreign currency
Accumulated Other Comprehensive Income
Balance at beginning of period	704	(1,140)
Other comprehensive income (loss) before reclassifications	(281)	1,545
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	0	0
Net current period other comprehensive income (loss), net of tax	(281)	1,545
Cumulative impact of adopting ASU 2018-02			$ 0
Accumulated other comprehensive income (loss)	$ 423	$ 405

XML

Accumulated Other Comprehensive Income (Loss) - Reclassifications Out of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Amortization of pension and postretirement benefits items:
Prior service benefit/cost	$ (10)	$ (19)
Settlement expense	19,900
Amortization of actuarial loss	(1,728)	382
Total before tax	18,162	363
Income tax benefit	(4,994)	(129)
Amount reclassified out of accumulated other comprehensive income (loss)	$ 13,168	$ 234

XML

Acquisitions (Details) - USD ($) $ in Thousands				3 Months Ended	9 Months Ended
	Apr. 02, 2018	Nov. 01, 2017	May 01, 2017	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
Business Acquisition
Goodwill				$ 71,258	$ 71,258			$ 67,424
Contingent payments					$ 2,034	$ 0
Innovative Metering Solutions, Inc.
Business Acquisition
Outstanding common stock acquired (as a percent)	100.00%
Total purchase consideration	$ 12,000
Cash payment	7,700
Working capital adjustment	300
Balance sheet holdback	700
Receivables							$ 3,800
Inventory							800
Machinery and equipment							100
Intangibles							3,600
Goodwill							$ 3,700
Pre-existing receivables acquired	$ 3,300
Innovative Metering Solutions, Inc. | Customer Relationships
Business Acquisition
Estimated average useful life	10 years
Carolina Meter
Business Acquisition
Total purchase consideration		$ 6,200
Cash payment		2,000
Receivables								600
Inventory								300
Intangibles								3,300
Goodwill								$ 2,000
Pre-existing receivables acquired		$ 4,200
Carolina Meter | Customer Relationships
Business Acquisition
Estimated average useful life		12 years
D-Flow
Business Acquisition
Outstanding common stock acquired (as a percent)			100.00%
Cash payment			$ 23,200
Contingent payments			5,000
Receivables			300
Inventory			600
Machinery and equipment			200
Intangibles			10,900
Goodwill			16,100
Payments anticipated to be made within eighteen months of the purchase date			3,000
Contingent payments				$ 2,000
Liabilities assumed as part of the acquisition			$ 4,900

XML

Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Provision for income taxes (as a percent)	21.90%	34.50%	22.20%	34.80%
Excess tax benefits from stock-based compensation			$ 6.0	$ 0.2

XML

New Pronouncements - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accumulated other comprehensive loss	$ 294,000	$ (9,856,000)	$ 294,000	$ (9,856,000)	$ (10,893,000)	$ (11,635,000)
Reinvested earnings	250,432,000		250,432,000		$ 244,224,000
Operating earnings	(15,734,000)	(12,315,000)	(42,059,000)	(42,720,000)
Accounting Standards Update 2018-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accumulated other comprehensive loss	1,700,000		1,700,000
Reinvested earnings	1,700,000		1,700,000
Accounting Standards Update 2017-07
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating earnings	11.8	100,000	19,800,000	(200,000)
Other pension benefits (costs)	$ (11,800,000)	$ 100,000	$ (19,800,000)	$ (200,000)

XML

Revenue Recognition - Other Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of new accounting principle					$ 1,700
Revenues	$ 110,630	$ 100,008	$ 329,319	$ 305,790
Contract with customer, liability, revenue recognized	$ 300		$ 900
Accounting Standards Update 2014-09 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of new accounting principle					$ 100

XML

Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation of Revenue [Line Items]
Revenues	$ 110,630	$ 100,008	$ 329,319	$ 305,790
United States
Disaggregation of Revenue [Line Items]
Revenues	95,288		284,351
Asia
Disaggregation of Revenue [Line Items]
Revenues	1,928		6,789
Canada
Disaggregation of Revenue [Line Items]
Revenues	2,564		9,353
Europe
Disaggregation of Revenue [Line Items]
Revenues	4,457		14,605
Mexico
Disaggregation of Revenue [Line Items]
Revenues	1,031		2,137
Middle East
Disaggregation of Revenue [Line Items]
Revenues	4,602		9,958
Other
Disaggregation of Revenue [Line Items]
Revenues	760		2,126
Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenues	3,455		9,203
Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Revenues	$ 107,175		$ 320,116

XML

Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Revenue from Contract with Customer [Abstract]
Receivables	$ 70,029	$ 58,210
Contract liabilities	$ 14,363	$ 9,670

XML

Revenue Recognition - Performance Obligations (Details) - Consolidated Sales - Product Concentration Risk	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Revenue recognized at a point in time
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	96.90%	97.20%
Revenue recognized over time
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	3.10%	2.80%

XML

Revenue Recognition - Unsatisfied Performance Obligations (Details) $ in Millions	Sep. 30, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2018-04-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of performance obligation satisfaction, period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2018-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 0.6
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 0.6
Expected timing of performance obligation satisfaction, period	4 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: (nil)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 11.6