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What changed in BADGER METER INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BADGER METER INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+152 added−166 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-22)

Top changes in BADGER METER INC's 2023 10-K

152 paragraphs added · 166 removed · 135 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+8 added−10 removed29 unchanged
Biggest changeThe Company’s water quality monitoring solutions include optical sensing and electrochemical instruments that provide real-time, on-demand data parameters.
Biggest changeThe Company’s smart measurement hardware is primarily comprised of the following product families: • meters that measure the flow of water and other fluids and are known for accuracy, long-lasting durability and for providing valuable and timely flow measurement data. • water quality monitoring solutions, including optical sensing and electrochemical instruments that provide real-time, on-demand data parameters. • high frequency pressure and acoustic leak detection hardware that provides real-time monitoring data.
The remaining market share is comprised of competitors such as Master Meter, Inc., Mueller Water Products, Inc., Kamstrup A/S and Diehl Metering GmbH depending on the metering technology. The Company's primary competitors for utility water radio products in North America are Itron, Inc., Hubbel, Inc. (Aclara Technologies), Neptune and Sensus.
The remaining market share is comprised of competitors such as Master Meter, Inc., Mueller Water Products, Inc., Kamstrup A/S and Diehl Metering GmbH depending on the metering technology. The Company’s primary competitors for utility water radio products in North America are Hubbel, Inc. (Aclara Technologies), Itron, Inc., Neptune and Sensus.
Community and Social Activities. Through both financial contributions and volunteer efforts of our employees, Badger Meter supports programs and organizations that address water conservation and quality, education and community concerns which are all vital to community sustainability. Information about the Company’s Executive Officers The following table sets forth certain information regarding the Executive Officers of the Registrant.
Community and Social Activities. Through both financial contributions and volunteer efforts of our employees, Badger Meter supports programs and organizations that address water conservation and quality, education and community concerns which are all vital to community sustainability. 9 Information about the Company’s Executive Officers The following table sets forth certain information regarding the Executive Officers of the Registrant.
Meters equipped with radio technology (endpoints) receive flow measurement data from battery-powered encoder registers attached to the water meter, which is encrypted and transmitted via radio frequency to a receiver that collects and formats the data appropriately for water utility usage and billing systems.
Meters equipped with radio technology (endpoints) receive flow measurement data from battery-powered 5 encoder registers attached to the water meter, which is encrypted and transmitted via radio frequency to a receiver that collects and formats the data appropriately for water utility usage and billing systems.
No single patent, trademark, trade name or trade secret is material to the Company's business as a whole. Environmental Protection The Company is subject to contingencies related to environmental laws and regulations.
No single patent, trademark, trade name or trade secret is material to the Company's business as a whole. 7 Environmental Protection The Company is subject to contingencies related to environmental laws and regulations.
However, if new or amended laws or regulations impose significant operational restrictions and compliance requirements upon the Company or its products, the Company's business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted. Refer to Part I, Item 1A. “Risk Factors” of this 2022 Annual Report on Form 10-K for further information.
However, if new or amended laws or regulations impose significant operational restrictions and compliance requirements upon the Company or its products, the Company's business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted. Refer to Part I, Item 1A. “Risk Factors” of this 2023 Annual Report on Form 10-K for further information.
The Company exports products from the United States that are manufactured in Milwaukee, Wisconsin, Racine, Wisconsin, Tulsa, Oklahoma and Collegeville, Pennsylvania. Information about the Company's foreign operations and export sales is included in Note 9 “Industry Segment and Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2022 Annual Report on Form 10-K.
The Company exports products from the United States that are manufactured in Milwaukee, Wisconsin, Racine, Wisconsin, Tulsa, Oklahoma and Collegeville, Pennsylvania. Information about the Company's foreign operations and export sales is included in Note 9 “Industry Segment and Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2023 Annual Report on Form 10-K.
Financial Information about Industry Segments The Company operates in one industry segment as an innovator, manufacturer and marketer of products incorporating flow measurement, control and communication solutions.
Financial Information about Industry Segments The Company operates in one industry segment as an innovator, manufacturer and marketer of products incorporating flow measurement, quality, control and communication solutions.
ITEM 1. BUSINESS Badger Meter, Inc. (the “Company”) is a leading innovator, manufacturer and marketer of products incorporating flow measurement, quality, control and other system solutions serving markets worldwide. The Company was incorporated in 1905. Throughout this 2022 Annual Report on Form 10-K, the words “we,” “us” and “our” refer to the Company.
ITEM 1. BUSINESS Badger Meter, Inc. (the “Company”) is a leading innovator, manufacturer and marketer of products incorporating flow measurement, quality, control and other system solutions serving markets worldwide. The Company was incorporated in 1905. Throughout this 2023 Annual Report on Form 10-K, the words “we,” “us” and “our” refer to the Company.
Our goal is zero. While we are proud of our performance in 2022, most notably in relation to industry averages, we recognize there is more work to be done. • Badger Meter’s Human Rights Policy outlines our commitment to respecting and supporting internationally recognized human rights and freedoms. • We provide an Employee Assistance Program (EAP) and mental health coverage.
Our goal is zero. While we are proud of our performance in 2023, most notably in relation to industry averages, we recognize there is more work to be done. • Badger Meter’s Human Rights Policy outlines our commitment to respecting and supporting internationally recognized human rights and freedoms. • We provide an Employee Assistance Program (EAP) and mental health coverage.
Recruitment, Development and Retention. In addition to market competitive compensation and benefits, we focus on open, two-way communication, training and development and early talent pipeline programs, among other activities to attract and retain key talent: • We focus on the physical, mental and financial wellbeing of our employees and this is reflected in our employee benefit offerings.
In addition to market competitive compensation and benefits, we focus on open, two-way communication, training and development and early talent pipeline programs, among other activities to attract and retain key talent: • We focus on the physical, mental and financial wellbeing of our employees and this is reflected in our employee benefit offerings.
Approximately 105 of those employees are covered by a collective bargaining agreement with District 10 of the International Association of Machinists. The Company currently operates under a three-year contract with the union, which expires on October 31, 2025. The Company believes it has good relations with the union and its employees.
Approximately 117 of those employees are covered by a collective bargaining agreement with District 10 of the International Association of Machinists. The Company currently operates under a three-year contract with the union, which expires on October 31, 2025. The Company believes it has good relations with the union and its employees.
Information about the Company's sales, operating earnings and assets is included in the Consolidated Financial Statements and in Note 9 “Industry Segment and Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2022 Annual Report on Form 10-K.
Information about the Company's sales, operating earnings and assets is included in the Consolidated Financial Statements and in Note 9 “Industry Segment and Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2023 Annual Report on Form 10-K.
Bergum Vice President — General Counsel and Secretary 58 Sheryl L. Hopkins Vice President — Human Resources 55 Richard Htwe Vice President — Global Operations 56 Lars Bo Kristensen Vice President — Global Flow Instrumentation and International Utility 57 Kimberly K. Stoll Vice President — Sales and Marketing 56 Matthew L.
Bergum Vice President — General Counsel and Secretary 59 Sheryl L. Hopkins Vice President — Human Resources 56 Richard Htwe Vice President — Global Operations 57 Lars Bo Kristensen Vice President — Global Flow Instrumentation and International Utility 58 Kimberly K. Stoll Vice President — Sales and Marketing 57 Matthew L.
In addition to on-the-job safety, we take a holistic view of employee health and well-being, including our multifaceted wellness program, B|Well, which aims to provide information, activities, support and rewards for smart and healthy choices. • Safety, as measured by our global Total Case Incident Rate (TCIR), was 0.59 in 2022, compared to 0.75 in 2021, and 0.65 in 2020.
In addition to on-the-job safety, we take a holistic view of employee health and well-being, including our multifaceted wellness program, B|Well, which aims to provide information, activities, support and rewards for smart and healthy choices. • Safety, as measured by our global Total Case Incident Rate (TCIR), was 0.40 in 2023, compared to 0.59 in 2022, and 0.75 in 2021.
The Company believes these items would be available from other sources, but that the loss of certain suppliers may result in a higher cost of materials, delivery delays, short-term increases in inventory and higher quality control costs. The Company carries business interruption insurance on key suppliers.
The Company believes these items would be available from other sources, but that the loss of certain suppliers may result in a higher cost of materials, delivery delays, short-term increases in inventory and higher quality control costs. The Company carries business interruption insurance generally.
Bockhorst was elected President in April 2018, Chief Executive Officer in January 2019 and Chairman in January 2020 after serving as Senior Vice President - Chief Operating Officer for the Company from October 2017 to April 2018. Prior to joining 9 the Company, Mr.
Bockhorst was elected President in April 2018, Chief Executive Officer in January 2019 and Chairman in January 2020 after serving as Senior Vice President - Chief Operating Officer for the Company from October 2017 to April 2018. Mr.
Prior to joining the Company, Mr. Htwe served as Vice President of Global Operations for Emerson Commercial and Residential Solutions for its InSinkErator business unit from January 2022 to December 2022 and Vice President of Operations for Wahl Clipper Corporation from March 2013 to December 2021. Previously, he held roles of increasing responsibility at Oshkosh Corporation. Mr.
Htwe served as Vice President of Global Operations for Emerson Commercial and Residential Solutions for its InSinkErator business unit from January 2022 to December 2022 and Vice President of Operations for Wahl Clipper Corporation from March 2013 to December 2021. Previously, he held roles of increasing responsibility at Oshkosh Corporation. Mr.
These remotely read systems are classified as either automatic meter reading (AMR) systems, where a vehicle equipped for meter reading purposes, including a radio receiver, computer and reading software, collects the data from the utilities’ meters; or advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network (either fixed or cellular) of data collectors or gateway receivers that are able to receive radio data transmission from the utilities’ meters.
These remotely read systems are classified as either automatic meter reading (AMR) systems, where a vehicle equipped for meter reading purposes collects the data from the utilities’ meters, or advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network (either fixed or cellular) of data collectors or gateway receivers that are able to receive radio data transmission from the utilities’ meters.
Stuyvenberg Vice President — Software and Water Quality 40 Daniel R. Weltzien Vice President — Controller 44 There are no family relationships between any of the executive officers. Officers are elected annually at the first meeting of the Board of Directors held after each annual meeting of the shareholders.
Stuyvenberg Vice President — Software and Water Quality 41 Daniel R. Weltzien Vice President — Controller 45 There are no family relationships between any of the executive officers. Officers are elected annually at the first meeting of the Board of Directors (the "Board") held after each annual meeting of the shareholders.
Water meter replacement and the adoption and deployment of new technology comprise the majority of smart water product sales, including radio products. To a much lesser extent, housing starts also contribute to the new product sales base.
Water meter replacement and the adoption and deployment of new technologies comprise the majority of smart water product sales, including radio products. To a much lesser extent, housing starts also contribute to sales annually.
We believe that developing a diverse and inclusive business makes us and society stronger, energizes our growth through customer engagement and helps us attract and retain talent: • We maintain a Human Rights policy, Equal Employment Opportunity policy and partner with a variety of recruiting and hiring agencies focused on diverse candidates. 8 • Currently, 36% of our executive officer group is diverse (three women, one Southeast Asian). • We conduct an external pay equity analysis on an annual basis, taking action to make adjustments where warranted. • We have a dedicated DEI team focused on fostering diversity, equity and inclusion across our global workforce. • We are a signatory to the Equality Act, supporting LGBTQ rights. • We actively participate as part of the Metropolitan Milwaukee Association of Commerce (MMAC) Diversity Pledge, a commitment to increasing diversity representation in the workforce. • The following provides the percentage of certain employee demographic details aligned with the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) reporting frameworks: 2022 2021 Females in the workforce, globally 40% 39% Female representation in management, globally 27% 29% Female representation in manufacturing, globally 51% 48% Female representation on the Board of Directors 30% 22% Minorities in the U.S. workforce 30% 26% Minority representation in U.S. management 12% 11% Minority representation in U.S. manufacturing 54% 47% Employee Rights, Health and Safety.
We believe that developing a diverse and inclusive business makes us and society stronger, energizes our growth through customer engagement and helps us attract and retain talent: • We maintain a Human Rights policy, Equal Employment Opportunity policy and partner with a variety of recruiting and hiring agencies focused on diverse candidates. • Currently, 36% of our executive officer group is diverse (three women, one Southeast Asian). • We conduct an external pay equity analysis on an annual basis, with no findings requiring adjustments. • We have a dedicated DEI team focused on fostering diversity, equity and inclusion across our global workforce. • We are a signatory to the Equality Act, supporting LGBTQ rights. • We actively participate as part of the Metropolitan Milwaukee Association of Commerce (MMAC) Diversity Pledge, a commitment to increasing diversity representation in the workforce. • The following provides the percentage of certain employee demographic details aligned with the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) reporting frameworks: 2023 2022 Females in the workforce, globally 40% 40% Female representation in management, globally 28% 27% Female representation in manufacturing, globally 51% 51% Female representation on the Board of Directors 33% 30% Minorities in the U.S. workforce 32% 30% Minority representation in U.S. management 15% 12% Minority representation in U.S. manufacturing 56% 54% Employee Rights, Health and Safety.
Research and Development Expenditures for research and development activities related to the development of new products, the improvement of existing products and manufacturing process improvements were $15.8 million in 2022, $14.7 million in 2021 and $11.6 million in 2020. Research and development activities are primarily sponsored by the Company.
Research and Development Expenditures for research and development activities related to development of new products, the improvement of existing products and manufacturing process improvements were $19.0 million in 2023, $15.8 million in 2022 and $14.7 million in 2021. Research and development activities are primarily sponsored by the Company.
The industry continues to undergo a conversion from manually read water meters to meters with radio technology, and for AMR systems to be upgraded to AMI. The Company estimates that approximately 70% of water meters installed in the United States have been converted to some form of radio solution technology.
The industry continues to undergo a conversion from manually read water meters to meters with radio technology, and for AMR systems to be upgraded to digital AMI solutions. The Company estimates that approximately one-third of water meters installed in the United States have been converted to AMI systems.
Human Capital Resources Our employees are our greatest strength and are critical to the achievement of our vision and successful execution of our strategies. We are committed to recruiting, developing and retaining top talent, in addition to fostering an inclusive environment where all employees can thrive. The Company and its subsidiaries employed 1,976 persons at December 31, 2022.
Human Capital Resources Our employees are our greatest strength and are critical to the achievement of our vision and successful execution of our global business strategy. We are committed to recruiting, developing and retaining top talent, in addition to fostering an inclusive environment where all employees can thrive. The Company and its subsidiaries employed 2,140 persons at December 31, 2023.
They include, among others, Emerson Electric Company, Krohne Messtechnik GmbH, Endress+Hauser AG, Yokogawa Electric Corporation and Cameron International. With a broad portfolio consisting of products utilizing eight of the ten major flow meter technologies, the Company is well positioned to compete in niche, specialized applications within these markets, primarily focused on water/wastewater and HVAC.
They include, among others, Emerson Electric Company, Krohne Messtechnik GmbH, Endress+Hauser AG, Yokogawa Electric Corporation and Cameron International. With a broad portfolio of meter technologies, the Company is well positioned to compete in niche, specialized applications primarily focused on water/wastewater and HVAC.
The Audit and Compliance Committee of the Board of Directors also reviews significant financial risk exposures and the steps management has taken to monitor, manage and mitigate them wherever possible. Our other Board committees also play a role in risk management, as detailed in their respective charters.
The Audit and Compliance Committee of the Board of Directors also reviews financial reporting risk exposures and the processes management utilizes to monitor, manage and mitigate risks wherever possible. Our other Board committees also play a role in risk management, as detailed in their respective charters.
Name Position Age at 2/28/2023 Kenneth C. Bockhorst Chairman, President and Chief Executive Officer 50 Robert A. Wrocklage Senior Vice President — Chief Financial Officer 44 Karen M. Bauer Vice President — Investor Relations, Corporate Strategy and Treasurer 55 Fred J. Begale Vice President — Engineering 58 William R. A.
Name Position Age at 2/28/2024 Kenneth C. Bockhorst Chairman, President and Chief Executive Officer 51 Robert A. Wrocklage Senior Vice President — Chief Financial Officer 45 Karen M. Bauer Vice President — Investor Relations, Corporate Strategy and Treasurer 56 Fred J. Begale Vice President — Engineering 59 William R. A.
AMI systems eliminate the need for utility personnel to drive through service territories to collect data from the meters. These systems provide utilities with more frequent and diverse data from their meters at specified intervals. 5 The ORION® branded family of radio endpoints provides water utilities with a range of industry-leading options for meter reading.
Among other benefits, AMI systems eliminate the need for utility personnel to drive through service territories to collect data from the meters and provide utilities with more frequent and diverse data from their meters at specified intervals. The ORION® family of endpoints offers water utilities a choice of industry-leading options for communicating meter reading and event data.
Information and analytics are critical to the smart water ecosystem. The Company’s BEACON® software suite improves utility visibility to their water and water usage. BEACON is a secure, cloud-hosted software suite that includes a customizable dashboard and has the ability to establish alerts for specific conditions.
The Company’s BEACON® Software as a Service (SaaS), amongst others, improves utility visibility to their water and water usage. BEACON is a secure, cloud-hosted software suite that includes a customizable dashboard and has the ability to establish alerts for specific conditions.
Our global employee engagement survey consistently measures this sentiment and our employees highly rate our company values. Our culture prioritizes trust, responsibility, collaboration, excellence and customer focus. The first of these, trust, calls for us to act honestly, ethically and with integrity. We maintain a formal ethics and compliance program that encourages doing the right thing.
Our global employee engagement survey consistently measures this sentiment and our employees highly rate our adherence to our stated company values. Our culture prioritizes trust, responsibility, collaboration, excellence and customer focus. The first of these, trust, calls for us to act honestly, ethically and with integrity.
Wrocklage was elected Vice President – Chief Financial Officer and Treasurer in 2019 and Senior Vice President – Chief Financial Officer in January 2020 after serving as Vice President - Finance for the Company from August 2018 to December 2018. Prior to joining the Company, Mr.
Wrocklage was elected Vice President – Chief Financial Officer and Treasurer in 2019 and Senior Vice President – Chief Financial Officer in January 2020 after serving as Vice President - Finance for the Company from August 2018 to December 2018. Ms. Bauer was elected Vice President - Investor Relations, Corporate Strategy and Treasurer effective June 2019.
Increased labor competition in the US was the primary driver of the increase. • We implemented our second global employee engagement survey in 2022. Over 93% of all global employees voluntarily participated. The 2022 survey showed improvement in many areas, as a result of our targeted engagement action plan and commitment to continuous improvement.
A stabilizing labor market in the US was the primary driver of the decrease. • We implemented our third annual global employee engagement survey in 2023, with over 93% of all global employees voluntarily participating. The 2023 survey showed improvement in many areas, as a result of our targeted engagement action plan and commitment to continuous improvement.
The Company’s products fall into two product lines: sales of water meters, radios, software and related technologies, and water quality monitoring solutions to water utilities (utility water) and sales of meters and other sensing instruments, valves, software and other solutions for industrial applications in water, wastewater, and other industries (flow instrumentation).
The Company’s solutions fall into two product lines: sales of meters, water quality sensors and other hardware, communication, and software and related technologies, to water utilities (utility water) and sales of meters, other sensing instruments, valves, software and other solutions to commercial and industrial customers, including water related applications (flow instrumentation).
This portfolio carries respected brand names including Recordall®, Hedland®, Dynasonics®, Blancett®, ModMag®, and Research Control®. 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.
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.
Utility water, the largest sales product line, is comprised of either mechanical or static (ultrasonic) water meters along with the related radio and software technologies and services used by water utilities as the basis for generating their water and wastewater revenues, enabling operating efficiencies and engaging with their end consumers.
Utility Water Product Line (approximately 85% of Net Sales in 2023) Utility water smart metering solutions are comprised of water meters along with the related radio and software technologies and services used by water utilities as the basis for generating their water and wastewater revenues, enabling operating efficiencies and engaging with their end consumers.
This system-wide scrutiny has heightened the focus on flow instrumentation in industrial process, manufacturing, commercial fluid, building automation and precision engineering applications where flow measurement and control are critical. A leader in both mechanical and static flow metering technologies for industrial markets, the Company offers one of the broadest flow measurement, control and communication portfolios in the market.
This system-wide scrutiny has heightened the focus on flow instrumentation and water quality monitoring in wastewater treatment, industrial process, building automation and precision engineering applications where flow measurement, quality and control are critical. 6 The Company offers one of the broadest flow measurement, control and communication portfolios in the market.
The Company’s net sales and corresponding net earnings depend on unit volume and product mix, with the Company generally earning higher average selling prices and margins on meters coupled with radio technology, and on ultrasonic compared to mechanical meters. The Company also sells registers and endpoints separately to customers who wish to upgrade their existing meters in the field.
The Company’s net sales and corresponding net earnings depend on unit volume and product mix, with the Company generally earning higher average selling prices and margins on meters coupled with radio technology, software, water quality monitoring and on ultrasonic compared to mechanical meters.
In addition to our water utility flow measurement solutions, the Company provides various water quality monitoring solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters including turbidity, pH, chlorine, nitrates and approximately 40 others.
In addition, the Company provides various other hardware, instruments and sensors, and related software, to enhance the scope and breadth of connected data valuable to a water utility's operation. This includes water quality monitoring solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters including turbidity, pH, chlorine, nitrates and approximately 40 others.
Expenditures for compliance control provisions and regulations during 2022, 2021 and 2020 were not material. Government Regulations The Company’s operations worldwide are subject to various federal, state, local and foreign laws and regulations.
Expenditures for compliance control provisions and regulations during 2023, 2022 and 2021 were not material. Government Regulations The Company’s operations worldwide are subject to various federal, state, local and foreign laws and regulations. Whether at the federal, state, or local level, the intent of these laws and regulations is to protect product safety, public health and the environment.
The competition varies from moderate to strong depending upon the products involved and the markets served. Major competitors for utility water meters include Xylem, Inc. (“Sensus”) and Roper Technologies, Inc. (“Neptune”). Together with Badger Meter, it is estimated that these 6 companies sell in excess of 85% of the water meters in the North American market.
The Company faces competition for both its utility water and flow instrumentation product lines. Major competitors for utility water meters include Roper Technologies, Inc. (“Neptune”) and Xylem, Inc. (“Sensus”). Together with Badger Meter, it is estimated that these companies sell roughly 85% of the water meters in the North American market.
Our comprehensive benefits include healthcare, disability and life insurance, paid time off, and various leave programs, as well as retirement savings plans and financial advisory services. • We offer flexible, remote work and part-time arrangements, as business roles permit. • Consistent with the broader labor market, our regrettable turnover increased to 10.0% in 2022, compared to 9.6% in 2021, and 4.3% in 2020.
Our comprehensive benefits include healthcare, disability and life insurance, paid time off, and various leave programs, as well as retirement savings plans and financial advisory services. 8 • We invest in the growth and development of our employees, offering a range of all employee, managerial, and leader training that spans on-demand, virtual, and live instructor-led formats. • We offer flexible, remote work and part-time arrangements, as business roles permit. • Our regrettable turnover decreased to 8.3% in 2023, compared to 10.0% in 2022, and 9.6% in 2021.
It further comprises other sensor technology used in the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used to detect leaks in the distribution piping system and to monitor various water quality parameters throughout the distribution system.
This product line further comprises other instruments and sensors used in the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used to detect leaks and to monitor various water quality parameters throughout the distribution system. The largest geographic market in which the Company operates is North America, primarily the United States.
Market Overview, Products, Systems and Solutions With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water solutions encompassing flow measurement, quality and other system parameters.
Market Overview, Products and Solutions With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water management solutions, with nearly 95% of net sales derived from water-related applications.
As part of this program, all ethical and legal concerns brought forth by employees are fully investigated and resolved. Employee training is used to reinforce our values companywide, with participation in trainings related to ethics at nearly 100%. In addition to trust, our values include a focus on diversity, equity, and inclusion, as well as continuous improvement and environmental responsibility.
Employee training is used to reinforce our values companywide, and our annual ethics and compliance training is administered globally with nearly 100% completion by eligible employees. In addition to trust, our values include a focus on diversity, equity, and inclusion, as well as continuous improvement and environmental responsibility. Recruitment, Development and Retention.
Hopkins served as Vice President of Human Resources for ADVENT from April 2019 to October 2020 and Senior Vice President of Human Resources for Runzheimer International from July 2010 to March 2018. Previously, she held roles of increasing responsibility at Eaton Corporation and other multinational public companies. Mr. Htwe was elected Vice President - Global Operations in January 2023.
Previously, she held roles of increasing responsibility at Eaton Corporation and other multinational public companies. Mr. Htwe was elected Vice President - Global Operations in January 2023. Prior to joining the Company, Mr.
These products are used in a variety of industries and applications, with the Company’s primary market focus being water/wastewater, heating, ventilating and air conditioning (HVAC) and corporate sustainability. Flow instrumentation products are generally sold to original equipment manufacturers as the primary flow measurement device within a product or system, as well as through manufacturers’ representatives.
These products, oftentimes leveraging the same technologies used in utility water, are used in a variety of industries and applications, with the Company’s primary market focus being water/wastewater, heating, ventilating and air conditioning (HVAC) and corporate sustainability.
Whether at the federal, state, or local level, the intent of these laws and regulations is to protect product safety, public health and the environment. 7 Similar laws and regulations have been adopted by government authorities in other countries in which we manufacture, distribute, and sell our products.
Similar laws and regulations have been adopted by government authorities in other countries in which we manufacture, distribute, and sell our products.
She joined Badger Meter in July 2018 as Director, Investor Relations and Corporate Strategy. In her role she also oversees the Company’s ESG (Environmental, Social & Governance) initiatives. Prior to joining Badger Meter, she served at Actuant Corporation (now Enerpac Tool Group), most recently as Director, Investor Relations & Communications. Mr.
She joined Badger Meter in July 2018 as Director, Investor Relations and Corporate Strategy. In her role she also oversees the Company’s ESG (Environmental, Social & Governance) initiatives. Mr. Begale has served as Vice President - Engineering for more than five years. Mr. Bergum has served as Vice President - General Counsel and Secretary for more than five years. Ms.
This product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids going through a pipe or pipeline including water, air, steam, and other liquids and gases.
Flow Instrumentation Product Line (approximately 15% of Net Sales in 2023) The flow instrumentation product line primarily serves water applications throughout the broader industrial market, with both standard and customized solutions. This product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids, including water, air, steam, and other liquids and gases.
Utility water meters (both residential and commercial) are generally classified as either manually read meters or remotely read meters via radio technology. A manually read meter consists of a water meter and a register that provides a visual totalized meter reading.
A manually read meter consists of a water meter and a register that provides a visual totalized meter reading.
The majority of water meters sold by the Company continue to be mechanical in nature; however, static meters are an increasing percentage of the water meters sold by the Company and in the industry, due to a variety of attributes, including their ability to maintain measurement accuracy over their useful life.
The majority of water meters sold are mechanical in nature, with increasing adoption over time of ultrasonic (static) metering technology due to a variety of attributes, including their ability to maintain measurement accuracy over their useful life. Utility water meters (both residential and commercial sizes) are generally classified as either manually read meters or remotely read meters via radio technology.
Begale has served as Vice President - Engineering for more than five years. Mr. Bergum has served as Vice President - General Counsel and Secretary for more than five years. Ms. Hopkins was elected Vice President - Human Resources in October 2020. Prior to joining the Company, Ms.
Hopkins was elected Vice President - Human Resources in October 2020. Prior to joining the Company, Ms. Hopkins served as Vice President of Human Resources for ADVENT from April 2019 to October 2020 and Senior Vice President of Human Resources for Runzheimer International from July 2010 to March 2018.
Flow instrumentation products are used in flow measurement and control applications across a broad industrial spectrum, occasionally leveraging the same technologies used in utility water. Specialized communication protocols that control the entire flow measurement process and mandatory certifications drive these markets. The Company provides both standard and customized flow instrumentation solutions.
Flow instrumentation products are generally sold through manufacturers’ representatives and original equipment manufacturers as the primary flow measurement device within a product or system. Specialized communication protocols that control the entire flow measurement process and mandatory certifications drive these markets.
Weltzien was elected Vice President – Controller in March 2019. Prior to joining the Company, Mr.
Weltzien was elected Vice President – Controller in March 2019. 10 Foreign Operations and Export Sales The Company sells its products and software through employees, resellers and representatives throughout the world.
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These offerings provide customers with the data and analytics essential to optimize their operations and contribute to the sustainable use and protection of the world’s most precious resource. The Company’s flow measurement products measure water and other fluids and are known for accuracy, long-lasting durability and for providing valuable and timely measurement data through various methods.
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These tailorable solutions encompass smart measurement hardware, reliable communications, data and analytics software as well as ongoing support and expertise essential to optimize customers' operations and contribute to the sustainable use and protection of the world’s most precious resource.
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The Company estimates that over 90% of its products are used in water related applications.
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The Company’s broad range of communication solutions include the ORION® branded family of radio endpoints, providing customers with a choice of industry-leading options for communicating data from hardware into usable applications. The Company’s hardware-enabled software provides the insights and analytics critical to the holistic management of our customers’ water systems.
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The largest geographic market for the Company’s utility water products is North America, primarily the United States, because most of the Company's meters are designed and manufactured to conform to standards promulgated by the American Water Works Association.
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These digital solutions increase visibility, empowering customers to monitor system performance and make decisions aiding efficiency, resiliency, and sustainability. The Company also provides training, project management, technical support and other collaborative services for customers.
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Providing ultrasonic water meter technology, combined with advanced radio technology, provides the Company with the opportunity to sell into other geographical markets, for example the Middle East, Europe and Southeast Asia. The flow instrumentation product line primarily serves water applications throughout the broader industrial markets.
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ORION Cellular endpoints power our Network as a Service (NaaS) approach to AMI, eliminating the need for the utility to install or maintain infrastructure, enabling rapid or gradual deployment, and enhancing network reliability. ORION mobile read endpoints support customers looking to deploy an AMR solution. Information and analytics are critical to the smart water ecosystem.
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These include ORION (ME) AMR meter reading, ORION (SE) for traditional fixed network applications, and ORION Cellular for an infrastructure-free AMI solution. ORION ME is the solution best suited for utilities that prefer mobile reading. ORION Cellular eliminates the need for utility-owned fixed network infrastructure, allows for gradual or full deployment, and decreases ongoing maintenance.
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It also includes high frequency pressure and leak detection sensors that provide real-time alarms and event location triangulation to aid operators in responding to burst pipe and other leak events quickly, reducing water loss and system downtime.
Removed
In addition, the Company provides various water quality monitoring solutions utilizing optical sensors and electrochemical instruments that measure a variety of parameters providing industrial customers with both process and discharge water quality monitoring capabilities. The Company's products are sold throughout the world through employees, resellers and representatives.
Added
The data and insights collected from these additional operational sensors are often conveyed by cellular networks and can be leveraged alongside of the metering data within BEACON to unlock powerful insights about the operations of a customer's distribution network.
Removed
Depending on the customer mix, there can be a moderate seasonal impact on sales, primarily relating to higher sales of certain utility water products during the spring and summer months. No single customer accounts for more than 10% of the Company's sales. Competition The Company faces competition for both its utility water and flow instrumentation product lines.
Added
Customers and Competition The Company's products are sold throughout the world through employees, resellers and representatives, with utility water sales largely via a direct salesforce and regional distributors, and flow instrumentation sales largely via representatives and distributors. No single customer accounts for more than 10% of the Company's sales.
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Bockhorst was Executive Vice President of the Energy segment, preceded by President of Hydratight and Global Vice President Operations of Enerpac, all within Actuant Corporation (now Enerpac Tool Group) from March 2011 to October 2017. Mr.
Added
We maintain a formal ethics and compliance program that encourages doing the right thing at all times. As part of this program, all ethical and legal concerns raised by employees are fully investigated and resolved. Employees have the ability to raise concerns confidentially through our Ethics Hotline, without fear of retaliation.
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Wrocklage spent ten years with Actuant Corporation (now Enerpac Tool Group), holding various corporate and business unit financial leadership roles, most recently as Vice President - Corporate Controller and Chief Accounting Officer. Ms. Bauer was elected Vice President - Investor Relations, Corporate Strategy and Treasurer effective June 2019.
Removed
Weltzien spent eight years with Actuant Corporation (now Enerpac Tool Group), holding various corporate and business unit financial leadership roles, most recently as Senior Director of Finance for its Hydratight business unit. 10 Foreign Operations and Export Sales The Company sells its products and software through employees, resellers and representatives throughout the world.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFailure to manufacture quality products could have a material adverse effect on our business. If we fail to maintain and enforce quality control and testing procedures, our products will not meet required performance standards. Our products have an extended expected life and we therefore offer extended duration warranty coverages.
Biggest changeIf we fail to maintain and enforce quality control and testing procedures, our products will not meet required performance standards. Our products have an extended expected life and we therefore offer extended duration warranty coverages. Product quality and performance are a priority for us since our products are used in various applications where precise control of fluids is essential.
The effects of climate change, including extreme weather events, may exacerbate these risks. 12 The inability to obtain adequate supplies of raw materials and component parts for our products at reasonable prices could have a material adverse effect on our business, financial condition or results of operations by decreasing profit margins and by negatively impacting timely deliveries to customers.
The effects of climate change, including extreme weather events, may exacerbate these risks. The inability to obtain adequate supplies of raw materials and component parts for our products at reasonable prices could have a material adverse effect on our business, financial condition or results of operations by decreasing profit margins and by negatively impacting timely deliveries to customers.
In some cases, we are dependent on third-party technologies and service providers for which there is no certainty of uninterrupted availability or through which hackers could gain access to sensitive and/or personal information. These potential disruptions and cyber-attacks could negatively affect revenues, costs, customer demand, system availability and our reputation.
In some cases, we are dependent on third-party technologies and service providers for which there is no certainty of 15 uninterrupted availability or through which hackers could gain access to sensitive and/or personal information. These potential disruptions and cyber-attacks could negatively affect revenues, costs, customer demand, system availability and our reputation.
These risks include such things as changes in foreign currency exchange rates, including the effect of a strong U.S. dollar, changes in political or economic conditions of specific countries or regions, potentially negative consequences from changes in tax laws or regulatory requirements, differing labor regulations, and the difficulty of managing widespread operations.
These risks include such things as changes in foreign currency exchange rates, including the effect of a strong or weak U.S. dollar, changes in political or economic conditions of specific countries or regions, potentially negative consequences from changes in tax laws or regulatory requirements, differing labor regulations, and the difficulty of managing widespread operations.
We are subject to a variety of laws in various countries and markets, such as those regulating lead or other material content in certain of our products, the handling, recycling and disposal of certain electronic and other materials, the use and/or licensing of radio frequencies necessary for radio products, data privacy and protection, as well as customs and trade practices.
We are subject to a variety of laws in various countries and markets, such as those regulating lead or other material content in certain of our products, the handling, recycling and disposal of certain electronic and other materials, the use and/or licensing of radio 14 frequencies necessary for radio products, data privacy and protection, as well as customs and trade practices.
Our failure to successfully comply with any such legislation, regulation, or accord could have a material adverse effect on our business, results of operations and overall financial performance. 14 GENERAL Economic impacts due to leadership or policy changes in the countries where we do business could negatively affect our profitability.
Our failure to successfully comply with any such legislation, regulation, or accord could have a material adverse effect on our business, results of operations and overall financial performance. GENERAL Economic impacts due to leadership or policy changes in the countries where we do business could negatively affect our profitability.
As part of our business strategy, we continue to evaluate and may pursue selected business or product acquisition opportunities that we believe may provide us with certain operating and financial benefits. There can be no assurance that we will 15 identify or complete transactions with suitable acquisition candidates in the future.
As part of our business strategy, we continue to evaluate and may pursue selected business or product acquisition opportunities that we believe may provide us with certain operating and financial benefits. There can be no assurance that we will identify or complete transactions with suitable acquisition candidates in the future.
An inability to attract and retain skilled employees could negatively impact our growth and decrease our profitability. Our success depends on our continued ability to identify, attract, develop and retain skilled personnel throughout our organization. Current and future compensation arrangements, including benefits, may not be sufficient to attract new employees or 13 retain existing employees, which may hinder our growth.
An inability to attract and retain skilled employees could negatively impact our growth and decrease our profitability. Our success depends on our continued ability to identify, attract, develop and retain skilled personnel throughout our organization. Current and future compensation arrangements, including benefits, may not be sufficient to attract new employees or retain existing employees, which may hinder our growth.
ITEM 1A. R ISK FACTORS Shareholders, potential investors and other readers are urged to consider the significant business risks described below in addition to the other information set forth or incorporated by reference in this 2022 Annual Report on Form 10-K, including the “Special Note Regarding Forward Looking Statements” at the front of this 2022 Annual Report on Form 10-K.
ITEM 1A. R ISK FACTORS Shareholders, potential investors and other readers are urged to consider the significant business risks described below in addition to the other information set forth or incorporated by reference in this 2023 Annual Report on Form 10-K, including the “Special Note Regarding Forward Looking Statements” at the front of this 2023 Annual Report on Form 10-K.
Further supply chain disruptions and challenges may be caused by a number of factors affecting our suppliers, including, but not limited to, capacity constraints, port congestion, labor disputes or unrest, labor shortages and costs, economic downturns, availability of credit, a high interest rate environment, impaired financial condition, sanctions/tariffs, energy inflation/availability and geopolitical risks (such as the current conflict between Russia and Ukraine).
Further, supply chain disruptions and challenges may be caused by a number of factors affecting our suppliers, including, but not limited to, capacity constraints, port congestion, labor disputes or unrest, labor shortages and costs, economic downturns, availability of credit, a high interest rate environment, impaired financial condition, sanctions/tariffs, energy inflation/availability and geopolitical risks (such as the current conflict between Russia and Ukraine and in the Middle East).
Therefore, a downturn in general economic conditions, as well as in the municipal water market, rising interest rates, delays in the timing or amounts of possible annual federal funding, government budget cuts or partial shutdowns of governmental operations, or the availability of funds to municipalities could result in a reduction in demand for our products and services and could have a material adverse effect on our business, results of operations and overall financial performance.
Therefore, a downturn in general economic conditions, as well as in the municipal water market, rising interest rates, delays in the timing or amounts of possible annual federal funding, government budget cuts or partial shutdowns of governmental operations, or the availability of funds to municipalities could result in a reduction in demand for our products and services and could have a material adverse effect on our business, results of operations and overall financial performance. 13 Geopolitical crisis, including terrorism or pandemics, could adversely affect our business.
Since we do not control the actual production of these raw materials and component parts, there may be continued delays in the production or transportation of these materials for reasons that are beyond our control. World commodity markets and the ongoing inflationary environment are affecting, and may continue to affect, raw material and component part prices.
Since we do not control the actual production of these raw materials and component parts, there may be continued delays in the production or transportation of these materials for reasons that are beyond our control. World commodity markets and inflationary environments may affect raw material and component part prices.
If our software products do not operate as intended, our business could be materially and adversely affected. We sell software products, including some that are provided in “the cloud,” that may contain unexpected design defects or may encounter unexpected complications when used with other technologies utilized by the customer.
If our software products do not operate as intended, our business could be materially and adversely affected. We sell software products, including cloud-based solutions, that may contain unexpected design defects or may encounter unexpected complications when used with other technologies utilized by the customer.
Geopolitical crisis, including terrorism or pandemics, could adversely affect our business. Our operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political instability, and a widespread outbreak of an illness or other health issue. The occurrence of any of these events could have an adverse effect on our business results and financial condition.
Our operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political instability, and a widespread outbreak of an illness or other health issue. The occurrence of any of these events could have an adverse effect on our business results and financial condition. Risks related to foreign markets could decrease our profitability.
Risks related to foreign markets could decrease our profitability. Since we sell products worldwide as well as manufacture products in several countries, we are subject to risks associated with doing business internationally.
Since we sell products worldwide as well as manufacture products in several countries, we are subject to risks associated with doing business internationally.
We believe we have a competitive product and market position. If the adoption rate for static meters were to accelerate, we believe competitors lack brand recognition and product breadth and do not have extensive water utility channel distribution to effectively reach the more than 50,000 water utilities in the United States.
If the adoption rate for static meters were to accelerate, we believe competitors lack brand recognition and product breadth and do not have extensive water utility channel distribution to effectively reach the more than 50,000 water utilities in the United States. Failure to manufacture quality products could have a material adverse effect on our business.
BUSINESS CONDITIONS The inability to obtain adequate supplies of raw materials and component parts at reasonable prices could decrease our profit margins and negatively impact timely delivery to customers and could have a material adverse effect on our business, results of operations and financial condition.
Such litigation and misappropriation of our proprietary information could hinder our ability to market and sell products and services and our results of operations, financial position and cash flows could be materially and adversely affected. 12 BUSINESS CONDITIONS The inability to obtain adequate supplies of raw materials and component parts at reasonable prices could decrease our profit margins and negatively impact timely delivery to customers and could have a material adverse effect on our business, results of operations and financial condition.
The unpredictable nature of weather conditions and climate change therefore may result in volatility for certain portions of our business, as well as the operations of certain of our customers and suppliers.
The unpredictable nature of weather conditions and climate change therefore may result in volatility for certain portions of our business, as well as the operations of certain of our customers and suppliers. Failure to meet ESG expectations or standards, or to achieve our ESG goals, could adversely affect our business, results of operations and overall financial performance.
The pace of that change is largely outside of the Company’s control and the sun-setting of a network may have an adverse impact on the Company. The municipal water industry is continuing to see the adoption of static water meters. Static water metering has lower barriers to entry than mechanical metering that could affect the competitive landscape in North America.
The pace of that change is largely outside of the Company’s control and the sun-setting of a network may have an adverse impact on the Company, however, we have strong relationships with telecommunication providers that assist in mitigating this risk. The municipal water industry is continuing to see the adoption of static water meters.
Removed
Product quality and performance are a priority for us since our products are used in various applications where precise control of fluids is essential.
Added
Static water metering has lower barriers to entry than mechanical metering that could affect the competitive landscape in North America. We believe we have a competitive product and market position.
Removed
Such litigation and misappropriation of our proprietary information could hinder our ability to market and sell products and services and our results of operations, financial position and cash flows could be materially and adversely affected.
Removed
Failure to meet environmental, social and governance (ESG) expectations or standards, or to achieve our ESG goals, could adversely affect our business, results of operations and overall financial performance.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. P ROPERTIES The Company has sales, development, distribution and manufacturing facilities and customer service offices as noted in Part I, Item 1 of this 2022 Annual Report on Form 10-K under the heading “Foreign Operations and Export Sales.” The principal facilities utilized by the Company at December 31, 2022 are listed below.
Biggest changeITEM 2. P ROPERTIES The Company has sales, development, distribution and manufacturing facilities and customer service offices as noted in Part I, Item 1 of this 2023 Annual Report on Form 10-K under the heading “Foreign Operations and Export Sales.” The principal facilities 17 utilized by the Company at December 31, 2023 are listed below.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeInformation about the Company's compliance with environmental regulations is included in Part I, Item 1 of this 2022 Annual Report on Form 10-K under the heading “Environmental Protection.” ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 16 PAR T II
Biggest changeInformation about the Company's compliance with environmental regulations is included in Part I, Item 1 of this 2023 Annual Report on Form 10-K under the heading “Environmental Protection.” ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 18 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+0 added−0 removed2 unchanged
Biggest changeTotal number of shares purchased Average price paid per share Total number of shares purchased as part of a publicly announced program Maximum number of shares that may yet be purchased under the program October 1, 2022 - October 31, 2022 - $ - - 339,678 November 1, 2022 - November 30, 2022 - $ - - 339,678 December 1, 2022 - December 31, 2022 - $ - - 339,678 Total as of December 31, 2022 - - 339,678 On February 10, 2023, the Board of Directors approved a new share repurchase authorization of up to 200,000 shares of the Company's Common Stock through February 10, 2026. 18 ITEM 6.
Biggest changeTotal number of shares purchased Average price paid per share Total number of shares purchased as part of a publicly announced program Maximum number of shares that may yet be purchased under the program October 1, 2023 - October 31, 2023 - $ - - 200,000 November 1, 2023 - November 30, 2023 - $ - - 200,000 December 1, 2023 - December 31, 2023 - $ - - 200,000 Total as of December 31, 2023 - - 200,000 20 ITEM 6.
The Russell 2000® Index is a trademark of the Frank Russell Company, and is used herein for comparative purposes in accordance with Securities and Exchange Commission regulations. The graph assumes $100 invested on December 31, 2017. It further assumes the reinvestment of dividends.
The Russell 2000® Index is a trademark of the Frank Russell Company, and is used herein for comparative purposes in accordance with Securities and Exchange Commission regulations. The graph assumes $100 invested on December 31, 2018. It further assumes the reinvestment of dividends.
The following table provides information about the Company's purchases under this repurchase program during the quarter ended December 31, 2022 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.
The following table provides information about the Company's purchases under this repurchase program during the quarter ended December 31, 2023 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.
The returns of each component company in the peer groups have been weighted based on such company's relative market capitalization. December 31 2017 2018 2019 2020 2021 2022 Badger Meter, Inc.
The returns of each component company in the peer groups have been weighted based on such company's relative market capitalization. December 31 2018 2019 2020 2021 2022 2023 Badger Meter, Inc.
The following graph compares on a cumulative basis the yearly percentage change since January 1, 2018 in (a) the total shareholder return on the Company’s Common Stock with (b) the total return on the Russell 2000® Index, and (c) the total return of the peer group made up of 18 companies, including the Company, in similar industries, employment markets and with similar market capitalization.
The following graph compares on a cumulative basis the yearly percentage change since January 1, 2019 in (a) the total shareholder return on the Company’s Common Stock with (b) the total return on the Russell 2000® Index, and (c) the total return of the peer group made up of 17 companies, including the Company, in similar industries, employment markets and with similar market capitalization.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED ST OCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock is traded on the New York Stock Exchange (NYSE Trading Symbol: BMI). At February 3, 2023, there were approximately 556 holders of the Company’s Common Stock.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED ST OCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock is traded on the New York Stock Exchange (NYSE Trading Symbol: BMI). At January 31, 2024, there were approximately 560 holders of the Company’s Common Stock.
(AQUA), Badger Meter, Inc. (BMI), Brady Corporation (BRC), CIRCOR International, Inc. (CIR), CTS Corporation (CTS), Enerpac Tool Group Corp. (EPAC), ESCO Technologies Inc. (ESE), The Gorman-Rupp Company (GRC), Helios Technologies, Inc. (HLIO), Itron, Inc. (ITRI), Kadant Inc. (KAI), Lindsay Corporation (LNN), Mueller Water Products, Inc. (MWA), Douglas Dynamics, Inc.
(BMI), Brady Corporation (BRC), CIRCOR International, Inc. (CIR), CTS Corporation (CTS), Enerpac Tool Group Corp. (EPAC), ESCO Technologies Inc. (ESE), The Gorman-Rupp Company (GRC), Helios Technologies, Inc. (HLIO), Itron, Inc. (ITRI), Kadant Inc. (KAI), Lindsay Corporation (LNN), Mueller Water Products, Inc. (MWA), Douglas Dynamics, Inc. (PLOW), Strattec Security Corporation (STRT), Standex International Corporation (SXI), Watts Water Technologies, Inc.
(PLOW), Strattec Security Corporation (STRT), Standex International Corporation (SXI), Watts Water Technologies, Inc. (WTS) and Zurn Water Solutions Corporation (ZWS). In February 2020, the Board of Directors authorized the repurchase of up to 400,000 shares of the Company’s Common Stock through February 2023.
(WTS) and Zurn Water Solutions Corporation (ZWS). In February 2023, the Board authorized the repurchase of up to 200,000 shares of the Company’s Common Stock through February 2026.
Return % 4.10% 33.45% 46.39% 14.12% 3.21% Cumulative $ $ 100.00 $ 104.10 $ 138.92 $ 203.36 $ 232.09 $ 239.54 Russell 2000 Index Return % -11.01% 25.52% 19.96% 14.82% -20.44% Cumulative $ $ 100.00 $ 88.99 $ 111.70 $ 134.00 $ 153.85 $ 122.41 Peer Group Return % -18.68% 42.56% 14.50% 25.53% -18.76% Cumulative $ $ 100.00 $ 81.32 $ 115.93 $ 132.74 $ 166.63 $ 135.37 17 The peer group consists of Evoqua Water Technologies Corp.
Return % 33.45% 46.39% 14.12% 3.21% 42.56% Cumulative $ $ 100.00 $ 133.45 $ 195.35 $ 222.95 $ 230.10 $ 328.04 Russell 2000 Index Return % 25.52% 19.96% 14.82% -20.44% 16.93% Cumulative $ $ 100.00 $ 125.52 $ 150.58 $ 172.90 $ 137.56 $ 160.85 Peer Group Return % 39.76% 12.49% 21.01% -19.26% 33.38% Cumulative $ $ 100.00 $ 139.76 $ 157.21 $ 190.25 $ 153.61 $ 204.89 19 The peer group consists of Badger Meter, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe intangible assets acquired are primarily customer relationships, developed technology and trademarks with estimated average useful lives of 12 to 15 years. The Company also assumed $1.4 million of accounts payable, $0.6 million of deferred tax liabilities and $1.7 million of other liabilities as part of the acquisition.
Biggest changeThe Company's allocation of the purchase price at December 31, 2023 included $0.6 million of receivables, $0.7 million of inventories, $2.1 million of other assets, $7.7 million of intangible assets and $10.3 million of goodwill. The intangible assets acquired are primarily developed technology, customer relationships and trademarks with estimated average useful lives of 13 to 15 years.
Gross margin dollars increased $14.5 million due to higher net sales, with gross margin as a percent of sales decreasing from 40.7% in 2021 to 38.9% in 2022. The year-over-year increase in inflationary cost pressures, coupled with production volatility caused by 20 intermittent component delays, tempered gross margin percent in the current year.
Gross margin dollars increased $14.5 million due to higher net sales, with gross margin as a percent of sales decreasing from 40.7% in 2021 to 38.9% in 2022. The year-over-year increase in inflationary cost pressures, coupled with production volatility caused by intermittent component delays, tempered gross margin percent in the current year.
With the Company’s technology, customers have found costly leaks, pinpointed equipment in need of repair, and identified areas for process improvements. Increasingly, customers in the utility water market are interested in more frequent and diverse data collection and the use of water metering and quality analytics to evaluate water distribution activity.
With the Company’s technology, customers have found costly leaks, pinpointed equipment in need of repair, and identified areas for process improvements. Increasingly, customers in the utility water market are interested in more frequent and diverse data collection and the use of water metering, pressure and quality analytics to evaluate water distribution activity.
The Company typically does not hold or issue derivative instruments and has a policy specifically prohibiting the use of such instruments for trading purposes.
The Company typically does not hold or issue derivative instruments and has a policy specifically prohibiting the use of such instruments for trading purposes. 25
See the “Special Note Regarding Forward Looking Statements” at the front of this Annual Report on Form 10-K and Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of risks and uncertainties that could impact the Company's financial performance and results of operations.
See the “Special Note Regarding Forward Looking Statements” at the front of this Annual Report on Form 10-K and Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of risks and uncertainties that could impact the Company's financial performance and results of operations.
As of December 31, 2022 the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant and equipment, which generally have terms of less than 90 days.
As of December 31, 2023 the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant and equipment, which generally have terms of less than 90 days.
Multiple factors can have an impact on future cash flows of a reporting unit, as such, it is possible that our estimates in evaluating impairment could differ from future results. We completed our impairment analysis for goodwill and intangible assets in the fourth quarter for the year ended December 31, 2022.
Multiple factors can have an impact on future cash flows of a reporting unit, as such, it is possible that our estimates in evaluating impairment could differ from future results. 24 We completed our impairment analysis for goodwill and intangible assets in the fourth quarter for the year ended December 31, 2023.
Sales of products into the global flow instrumentation end markets were $93.8 million, 4.3% higher than the prior year’s $89.9 million due to strong order demand and modestly improving supply chain dynamics year-over-year. Excluding the unfavorable impact of the strong US dollar between years, flow instrumentation sales increased 7.1%.
Sales of products into the global flow instrumentation end markets were $93.8 million, 4.3% greater than the prior year’s $89.9 million due strong order demand and modestly improving supply chain dynamics year-over-year. Excluding the unfavorable impact of the strong US dollar between years, flow instrumentation sales increased 7.1%.
The Company establishes valuation allowances against certain deferred tax assets that are not likely to be realized. The Company recorded valuation allowances of $2.7 million and $2.2 million as of December 31, 2022 and 2021, respectively. The valuation allowance relates primarily to foreign net operating loss carryforwards. Goodwill and Intangible Assets Goodwill and intangible assets arise through business acquisitions.
The Company establishes valuation allowances against certain deferred tax assets that are not likely to be realized. The Company recorded valuation allowances of $2.7 million as of December 31, 2023 and 2022. The valuation allowance relates primarily to foreign net operating loss carryforwards. Goodwill and Intangible Assets Goodwill and intangible assets arise through business acquisitions.
These estimates are based on our best judgment about current and future conditions, but actual results could differ from those estimates. Refer to Note 1 in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2022 Annual Report on Form 10-K for information regarding our significant accounting policies.
These estimates are based on our best judgment about current and future conditions, but actual results could differ from those estimates. Refer to Note 1 "Basis of Presentation and Accounting Policies" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2023 Annual Report on Form 10-K for information regarding our significant accounting policies.
Accrued interest was approximately $0.1 million at both December 31, 2022 and 2021 and there were no penalties accrued in either year.
Accrued interest was approximately $0.1 million at both December 31, 2023 and 2022 and there were no penalties accrued in either year.
Selling, engineering and administration (“SEA”) expenses were $132.7 million or 23.5% of sales compared to $126.8 million or 25.1% of sales in the prior year. The increase in SEA expenses year-over-year was due to higher personnel and incentive compensation costs, R&D investments, and travel.
SEA expenses were $132.7 million or 23.5% of sales compared to $126.8 million or 25.1% of sales in the prior year. The increase in SEA expenses year-over-year was due to higher personnel and incentive compensation costs, R&D investments, and travel.
Income Taxes There were no significant variations in the provision for income taxes as a percentage of earnings before income taxes which was 24.2%, 22.6% and 24.1% for 2022, 2021 and 2020, respectively. Earnings and Diluted Earnings per Share For 2022, the increase in operating earnings resulted in net earnings of $66.5 million compared to $60.9 million in 2021.
Income Taxes There were no significant variations in the provision for income taxes as a percentage of earnings before income taxes which was 24.1%, 24.2% and 22.6% for 2023, 2022 and 2021, respectively. Earnings and Diluted Earnings per Share For 2023, the increase in operating earnings resulted in net earnings of $92.6 million compared to $66.5 million in 2022.
Expenditures for compliance with environmental control provisions and regulations during 2022, 2021 and 2020 were not material.
Expenditures for compliance with environmental control provisions and regulations during 2023, 2022 and 2021 were not material.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Long Term Business Trends Across the globe, increasing regulations and a focus on climate-change and sustainability are driving companies and utilities to better manage critical resources like water.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Long Term Business Trends Across the globe significant infrastructure investments needs, aging workforce, increasing regulations and a focus on climate-change and sustainability are driving companies and utilities to better manage critical resources like water.
This technology is critical to provide baseline usage data and to quantify reductions as customers attempt to reduce consumption. For example, once water usage metrics are better understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where it is most viable.
The Company provides flow measurement technology critical to providing baseline usage data and to quantify reductions as customers attempt to reduce consumption. For example, once water usage metrics are better understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where it is most viable.
As a result of significant research and development activities, the Company enjoys favorable patent positions for several of its products. 23 The Company's ability to generate operating income and to increase profitability depends somewhat on the general conditions of the United States and foreign economies, including to some extent such things as the length and severity of global economic downturns; the timing and size of governmental programs such as annual federal funding and periodic stimulus fund programs, as well as the impact of government budget cuts or partial shutdowns of governmental operations; international or civil conflicts that affect international trade; the ability of municipal water utility customers to authorize and finance purchases of the Company's products; the Company's ability to obtain financing; housing starts in the United States; and overall industrial activity.
The Company's ability to generate operating income and to increase profitability depends somewhat on the general conditions of the United States and foreign economies, including to some extent such things as the length and severity of global economic downturns; the timing and size of governmental programs such as annual federal funding and periodic stimulus fund programs, as well as the impact of government budget cuts or partial shutdowns of governmental operations; international or civil conflicts that affect international trade; the ability of municipal water utility customers to authorize and finance purchases of the Company's products; the Company's ability to obtain financing; housing starts in the United States; and overall industrial activity.
Capital expenditures for fiscal 2023 are expected to be in the $10.0-12.0 million range, but could vary depending on timing of projects, growth opportunities and the amount of assets purchased. The Company had no short-term borrowings as of the end of 2022 or 2021. At the end of 2022, the Company was in a net cash position of $138.1 million.
Capital expenditures for fiscal 2024 are expected to be in the $14.0-18.0 million range, but could vary depending on timing of projects, growth opportunities and the amount of assets purchased. The Company had no short-term borrowings as of the end of 2023 or 2022. At the end of 2023, the Company was in a net cash position of $191.8 million.
Revenue and Product Mix As the industry continues to evolve, the Company has been at the forefront of innovation across metering, radio and software technologies in order to meet its customers’ increasing expectations for accurate and actionable data.
Revenue and Product Mix As the industry continues to evolve, the Company has been at the forefront of innovation across measurement hardware (metering, water quality, pressure sensors, etc), radio and software technologies in order to meet its customers’ increasing expectations for accurate and actionable data and insights.
Specifically, AMI technology enables water utilities to capture readings from each meter at more frequent and variable intervals. There are more than 50,000 water utilities in the United States and the Company estimates that approximately 70% of their respective connections have converted to a radio solution, of which the Company estimates approximately half still utilize AMR technology.
Specifically, AMI technology enables water utilities to capture readings from each meter at more frequent and variable intervals. There are more than 50,000 water utilities in the United States and the Company estimates that approximately one-third of their respective connections have converted to an AMI radio solution.
Some customers measure fluids to identify leaks and/or misappropriation for cost control or add measurement points to help automate manufacturing. Other customers employ measurement to comply with government mandates and laws including those associated with process and discharge water quality monitoring. The Company provides flow measurement technology to primarily measure water, but also other fluids, gases and steam.
Some customers measure fluids to identify leaks and/or misappropriation for cost control or add measurement points to help automate manufacturing. Other customers employ measurement to comply with government mandates and laws including those associated with process and discharge water quality monitoring.
The Company had $156.6 million of unused credit lines available at December 31, 2022. CONTRACTUAL OBLIGATIONS The Company's significant contractual obligations as of December 31, 2022 are discussed in Note 12 “Leases” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2022 Annual Report on Form 10-K. There are no material undisclosed guarantees.
CONTRACTUAL OBLIGATIONS The Company's significant contractual obligations as of December 31, 2023 are discussed in Note 12 “Leases” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2023 Annual Report on Form 10-K. There are no material undisclosed guarantees.
On a diluted basis, earnings per share were $2.26 in 2022 compared to $2.08 in 2021. For 2021, the increase in operating earnings resulted in net earnings of $60.9 million compared to $49.3 million in 2020. On a diluted basis, earnings per share were $2.08 in 2021 compared to $1.69 in 2020.
On a diluted basis, earnings per share were $3.14 in 2023 compared to $2.26 in 2022. For 2022, the increase in operating earnings resulted in net earnings of $66.5 million compared to $60.9 million in 2021.
As technologies such as ORION Cellular and BEACON digital solutions have become more readily adopted, the Company’s revenue from Software as a Service (SaaS) has increased significantly, albeit from a small base, and is margin accretive.
As technologies such as ORION Cellular and BEACON digital solutions have become more widely adopted, the Company’s revenue from Software as a Service (SaaS) has increased significantly, and is margin accretive. The Company also seeks opportunities for additional revenue enhancement.
Operating cash flow was more than adequate to fund capital expenditures of $5.9 million and dividends of $24.9 million. Cash provided by operations in 2021 was $87.5 million compared to $89.6 million in 2020. The decrease from 2020 was driven primarily by increased operating earnings offset by increased working capital requirements.
Operating cash flow was more than adequate to fund acquisitions ($17.1 million, net of cash acquired), capital expenditures of $12.0 million and dividends of $29.1 million in 2023. Cash provided by operations in 2022 was $82.5 million compared to $87.5 million in 2021. The decrease from 2021 was driven primarily by increased operating earnings offset by increased working capital requirements.
Receivables at December 31, 2022 were $76.7 million compared to $65.9 million at the end of 2021, an increase of $10.8 million due to increased sales. The Company believes its receivables balance is fully collectible. Inventories at December 31, 2022 were $119.9 million compared to $99.6 million at the end of 2021.
Receivables at December 31, 2023 were $83.5 million compared to $76.7 million at the end of 2022, an increase of $6.9 million due to increased sales, partially offset by improved days sales outstanding. The Company believes its receivables balance is fully collectible. Inventories at December 31, 2023 were $153.7 million compared to $119.9 million at the end of 2022.
In addition, the market's level of acceptance of the Company's newer product offerings, including real-time water quality monitoring and BEACON SaaS, may have a significant effect on the Company's results of operations.
In addition, the market's level of acceptance of the Company's newer product offerings, including real-time water quality monitoring and BEACON SaaS, may have a significant effect on the Company's results of operations. As a result of significant research and development activities, the Company enjoys favorable patent positions for several of its products.
Sales into the utility water market were $471.8 million, an increase of 13.6% over the prior year’s $415.3 million. The utility water sales growth reflected strong market demand and the continued adoption of cellular AMI solutions, specifically ORION Cellular endpoints and BEACON SaaS revenues, as well as increased meter volumes including E-Series Ultrasonic meters.
The utility water sales growth reflected strong market demand and the continued adoption of cellular AMI solutions, specifically ORION Cellular endpoints and BEACON SaaS revenue, as well as increased meter volumes including E-Series Ultrasonic meters.
Operating cash flow was more than adequate to fund acquisitions ($45.3 million, net of cash acquired), capital expenditures of $6.7 million and dividends of $22.2 million. Capital expenditures were $5.9 million, $6.7 million and $9.1 million in fiscal 2022, 2021 and 2020, respectively.
Operating cash flow was more than adequate to fund capital expenditures of $5.9 million and dividends of $24.9 million. Capital expenditures were $12.0 million, $5.9 million and $6.7 million in fiscal 2023, 2022 and 2021, respectively.
Primary Working Capital We use primary working capital ("PWC") as a percentage of sales as a key metric for working capital efficiency. We define this metric as the sum of receivables and inventories less payables, divided by annual net sales.
We define this metric as the sum of receivables and inventories less payables, divided by annual net sales.
The following table shows the components of our PWC (in thousands): December 31, 2022 December 31, 2021 $ PWC% $ PWC% (In thousands) Receivables $ 76,651 13.5% $ 65,866 13.1% Inventories 119,856 21.2% 99,611 19.7% Payables (71,440 ) -12.6% (41,859 ) -8.3% Primary Working Capital $ 125,067 22.1% $ 123,618 24.5% Overall, PWC increased $1.4 million compared to the previous year-end.
The following table shows the components of our PWC: December 31, 2023 December 31, 2022 $ PWC% $ PWC% (In thousands) Receivables $ 83,507 11.9% $ 76,651 13.5% Inventories 153,674 21.8% 119,856 21.2% Payables (81,807 ) -11.6% (71,440 ) -12.6% Primary Working Capital $ 155,374 22.1% $ 125,067 22.1% Overall, PWC increased $30.3 million compared to the previous year-end.
The Company’s financial condition remains strong. On July 8, 2021, the Company entered into a new credit agreement. The credit agreement includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million). The facility includes several features that enhance the Company’s financial flexibility including an increase feature, acquisition holiday and favorable financial covenants.
The Company’s financial condition remains strong. On July 8, 2021, the Company entered into a new credit agreement, with a maturity date of July 8, 2026. The credit agreement includes a $150.0 million multi-currency line of credit that supports commercial paper (up to $100.0 million).
The Company was in compliance with all covenants as of December 31, 2022. 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 believes that its operating cash flows, available borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital expenditures and the development of new products. The Company had $154.4 million of unused credit lines available at December 31, 2023.
Our income tax provision for income taxes is based on the interpretation of applicable taxing laws in the jurisdictions in which we conduct business.
Income Taxes The Company operates in numerous taxing jurisdictions and is subject to regular examinations by U.S. federal, state and non-U.S. taxing authorities. Our income tax provision for income taxes is based on the interpretation of applicable taxing laws in the jurisdictions in which we conduct business.
LIQUIDITY AND CAPITAL RESOURCES The main sources of liquidity for the Company are cash from operations and borrowing capacity. In addition, depending on market conditions, the Company may access the capital markets to strengthen its capital position and to provide additional liquidity for general corporate purposes.
In addition, depending on market conditions, the Company may access the capital markets to strengthen its capital position and to provide additional liquidity for general corporate purposes. Primary Working Capital We use primary working capital ("PWC") as a percentage of sales as a key metric for working capital efficiency.
The Company also has long-term obligations related to its postretirement plans which are discussed in detail in Note 7 “Employee Benefit Plans” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2022 Annual Report on Form 10-K.
The Company also has long-term obligations related to its postretirement plans which are discussed in detail in Note 7 “Employee Benefit Plans” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 2023 Annual Report on Form 10-K. 23 Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.3 million in 2024 based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured.
While our warranty costs have historically been within calculated estimates, it is possible that future warranty costs could differ significantly from those estimates.
While our warranty costs have historically been within calculated estimates, it is possible that future warranty costs could differ significantly from those estimates. At December 31, 2023 and 2022, our reserve for product warranties was $11.1 million and $9.6 million, respectively.
Inventory increased $20.2 million, due to component cost inflation and higher safety stock levels associated with varied component shortages. Payables at December 31, 2022 were $71.4 million compared to $41.9 million at the end of 2021.
Inventory increased $33.8 million, due to component cost inflation, higher safety stock levels and increased sales activity. Payables at December 31, 2023 were $81.8 million compared to $71.4 million at the end of 2022. The increase was due to increased inventory balances and the timing of payments relative to year end.
The increase was due to timing of payments and increased inventory levels between years. 21 Cash Provided by Operations Cash provided by operations in 2022 was $82.5 million compared to $87.5 million in 2021. The decrease from 2021 was driven primarily by increased operating earnings offset by increased working capital requirements as described above.
Cash Provided by Operations Cash provided by operations in 2023 was $110.1 million compared to $82.5 million in 2022. The increase from 2022 was driven primarily by increased operating earnings and working capital management.
The increase in interest income in 2022 was due to increased cash balances and an improved interest rate environment. Changes in net interest (income) expense in 2021 and 2020 were immaterial.
Interest Income, Net Net interest income was $4.0 million in 2023, $0.6 million in 2022 and less than $0.1 million in 2021. The increase in interest income in 2023 and 2022 was due to increased cash balances and increased interest rates. Changes in net interest income in 2021 was immaterial.
Finally, the concept of “Smart Cities” is one avenue to affect efficient city operations, conserve resources and improve service and delivery. Smart water solutions (“Smart Water”) are those that provide actionable information through data analytics from an interconnected and interoperable network of sensors and devices that help people and organizations efficiently use and conserve water.
Together, our tailorable smart water solutions provide actionable information through data analytics derived from an interconnected and interoperable network of sensors and devices that help people and organizations efficiently use and conserve water. Badger Meter is well positioned to benefit from the adoption of smart water solutions.
The Company's foreign currency risk relates to the sales of products to foreign customers and purchases of material from foreign vendors. The Company uses lines of credit with U.S. and European banks to offset currency exposure related to European receivables and other monetary assets.
The Company's foreign currency risk relates to the sales of products to foreign customers and purchases of material from foreign vendors.
For instance, the Company has made inroads into the Middle East market with its ultrasonic meter technology and is pursuing other geographic expansion opportunities. Additionally, the Company is periodically asked to oversee and perform field installation of its products for certain customers.
For instance, the Company has made inroads into select regional markets outside the US such as the Middle East, UK and others with its tailorable smart water solutions portfolio. The Company is periodically asked to oversee and supervise field installation of its products and provide training and other services for certain customers.
This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial Statements. RESULTS OF OPERATIONS Net Sales Net sales in 2022 increased $60.4 million, or 11.9%, to $565.6 million from $505.2 million in 2021. Excluding the unfavorable impact of the strong US dollar between years, sales increased 13.2%.
This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial Statements. RESULTS OF OPERATIONS Net Sales Net sales in 2023 increased $138.0 million, or 24.4%, to $703.6 million from $565.6 million in 2022. Sales into the utility water market were $603.1 million, an increase of 27.8% over the prior year’s $471.8 million.
Operating earnings in 2021 were $78.7 million, or 15.6% of sales, compared to $65.2 million, or 15.3% of sales, in 2020. Gross margin increased $37.2 million, and as a percent of sales increased from 39.5% in 2020 to 40.7% in 2021.
Operating Earnings Operating earnings in 2023 were $118.0 million, or 16.8% of sales, compared to $87.3 million, or 15.4% of sales, in 2022. Gross margin dollars increased $56.5 million due to higher net sales, with gross margin as a percent of sales increasing from 38.9% in 2022 to 39.3% in 2023.
Sales of products into the global flow instrumentation end markets were $89.9 million, 10.7% greater than the prior year’s $81.2 million due to the stabilization of industrial demand globally and across the array of end markets served. Operating Earnings Operating earnings in 2022 were $87.3 million, or 15.4% of sales, compared to $78.7 million, or 15.6% of sales, in 2021.
Sales of products into the global flow instrumentation end markets were $100.5 million, 7.2% higher than the prior year’s $93.8 million due to steady order demand across the water-focused end markets, offset by modest decline in de-emphasized general industrial markets. Net sales in 2022 increased $60.4 million, or 11.9%, to $565.6 million from $505.2 million in 2021.
Badger Meter is well positioned to benefit from the advancement of Smart Water applications. With its strong relationship with AT&T, among others, Badger Meter stays abreast of emerging cellular technology changes which the Company believes is the premier infrastructure-free AMI solution.
With strong relationships with telecommunication providers such as AT&T and Verizon (among others), we stay abreast of emerging cellular technology changes to provide the premier infrastructure-free AMI solution.
The allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of December 31, 2021, the Company had completed its analysis for estimating the fair value of the assets acquired with no additional adjustments.
The Company also assumed $1.9 million of payables, $2.0 million of deferred income taxes and $0.4 million of other current and long-term liabilities as part of the acquisition. 21 As of December 31, 2023, the Company had completed its analysis for estimating the fair value of the assets acquired with no additional adjustments.
In these cases, the Company assumes the role of general contractor and typically hires installation subcontractors and supervises their work. 19 Acquisitions Effective January 1, 2021, the Company acquired 100% of the outstanding stock of ATi, headquartered in Collegeville, Pennsylvania, a provider of water quality monitoring systems. The total purchase consideration for ATi, net of cash acquired, was $44.0 million.
Strategic mergers and acquisitions are another avenue for profitable sales growth. Acquisitions Effective January 1, 2023, the Company acquired 100% of the outstanding stock of Syrinix Ltd. ("Syrinix"), headquartered in the United Kingdom, a provider of high-frequency pressure monitoring and leak detection solutions. The total purchase consideration for Syrinix, net of cash acquired, was $17.1 million.
Removed
The Company has over a decade of proven reliability in the market with its ultrasonic meters and has recently launched its next generation of ultrasonic metering with its D-Flow technology, which the Company believes increases its competitive differentiation.
Added
The Company has over a decade of proven reliability in the market with its ultrasonic meters. As noted above, customers are increasingly looking for more frequent and diverse data to holistically manage their water networks.
Removed
For over 118 years, the Company has offered innovative flow metering and control solutions for smart water management, smart buildings and smart industrial processes.
Added
As a leading provider of water quality and pressure management monitoring solutions, we are able to meet these needs and enhance the scope of actionable data for customers to help measure, conserve and protect water.
Removed
The acquisitions of s::can and ATi, leading providers of water quality monitoring solutions, have added real-time water quality parameters to the Company’s capabilities and has enhanced the scope of actionable data for its customers to help measure, conserve and protect water. The combined solutions from Badger Meter offer technology that measures both the quantity and quality of water.
Added
The increase in utility water sales reflected strong growth across the Company's broad smart water solutions and the continued robust adoption of cellular AMI solutions, specifically ORION Cellular endpoints and BEACON SaaS revenues, as well as increased E-Series Ultrasonic meter volumes.
Removed
In addition, the Company has expanded its smart water offering with the addition of online water quality monitoring solutions, adding real-time water quality parameters to augment the scope of actionable data for water utility and industrial customers to optimize their operations. The Company also seeks opportunities for additional revenue enhancement.
Added
Excluding the unfavorable impact of the strong US dollar between years, sales increased 13.2%. Sales into the utility water market were $471.8 million, an increase of 13.6% over the prior year’s $415.2 million.
Removed
The Company's allocation of the purchase price at December 31, 2021 included $3.9 million of receivables, $3.9 million of inventory, $2.5 million of other assets, $21.0 million of intangibles and $16.4 million of goodwill that is deductible for tax purposes.
Added
The gross margin improvement was due to higher volumes and favorable sales mix. Selling, engineering and administration (“SEA”) expenses were $158.4 million or 22.5% of sales compared to $132.7 million or 23.5% of sales in the prior year.
Removed
This acquisition is further described in Note 3 “Acquisitions” in the Notes to Consolidated Financial Statements.
Added
The increase in SEA expenses year-over-year was due to higher personnel costs, including headcount, salaries and incentive compensation, as well as the acquisition of Syrinix and the associated intangible asset amortization. Operating earnings in 2022 were $87.3 million, or 15.4% of sales, compared to $78.7 million, or 15.6% of sales, in 2021.
Removed
Effective November 2, 2020, the Company acquired 100% of the outstanding stock of s::can headquartered in Vienna, Austria. s::can specializes in optical water quality sensing solutions that provide real-time measurement of a variety of parameters in water and wastewater utilizing in-line monitoring systems and other applications.
Added
On a diluted basis, earnings per share were $2.26 in 2022 compared to $2.08 in 2021. 22 LIQUIDITY AND CAPITAL RESOURCES The main sources of liquidity for the Company are cash from operations and borrowing capacity.
Removed
The total purchase consideration for s::can, net of cash acquired, was $30.5 million, inclusive of $1.3 million of working capital adjustments.
Added
The facility includes several features that enhance the Company’s financial flexibility including an increase feature, acquisition holiday and favorable financial covenants. The Company was in compliance with all covenants as of December 31, 2023.
Removed
The Company's allocation of the purchase price at December 31, 2021 included $2.6 million of receivables, $4.3 million of inventory, $1.2 million of other assets, $12.7 million of intangibles and $17.7 million of goodwill that is not deductible for tax purposes.
Removed
The intangible assets acquired are primarily customer relationships and developed technology with an estimated average useful life of 12 years. The Company also assumed $3.5 million of accounts payable, $3.2 million of deferred tax liabilities and $1.3 million of other liabilities as part of the acquisition.
Removed
The allocation of the purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of December 31, 2021, the Company had completed its analysis for estimating the fair value of the assets acquired with no additional adjustments.
Removed
Net sales in 2021 increased $79.7 million, or 18.7%, to $505.2 million from $425.5 million in 2020. Sales into the utility water market were $415.3 million, an increase of 20.6% over the prior year’s $344.3 million. The acquisitions of s::can and ATi increased sales $40.7 million compared to 2020.
Removed
The remaining increase of $39.0 million was attributable to higher sales of the Company’s water meter, radio and software products including ORION Cellular endpoints as well as increased BEACON SaaS revenue associated with data collection and software analytics.
Removed
These favorable trends more than offset the supply chain shortages of certain components which limited sales of certain products throughout 2021 and contributed to the record backlog level throughout 2021.
Removed
The gross margin improvement was due to higher volumes, improved sales mix as noted above, acquisition mix and strategic pricing actions that offset inflationary cost pressures from material input costs. SEA expenses were $126.8 million or 25.1% of sales compared to $103.1 million or 24.2% of sales in the prior year. The acquired businesses added $16.9 million of SEA expenses.
Removed
The remaining $6.8 million increase was primarily due to higher personnel costs including increased headcount and higher incentive compensation and benefits. Interest (Income) Expense, Net Net interest income was $0.6 million in 2022 and less than $0.1 million in 2021. Net interest expense was less than $0.1 million in 2020.
Removed
Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.4 million in 2023 based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured.
Removed
At December 31, 2022 and 2021, our reserve for product warranties was $9.6 million and $12.9 million, respectively. 22 Income Taxes The Company operates in numerous taxing jurisdictions and is subject to regular examinations by U.S. federal, state and non-U.S. taxing authorities.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Information required by this Item is set forth in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Market Risks” in this 2022 Annual Report on Form 10-K.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Information required by this Item is set forth in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Market Risks” in this 2023 Annual Report on Form 10-K.

Other BMI 10-K year-over-year comparisons