The Company does not have any securities registered pursuant to Section 12(g) of the Act.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: (Check one).

The aggregate market value of the Common Stock held by non-affiliates of the Company as of June 29, 201230, 2014 was $510,127,001.$651,621,555. For purposes of this calculation only, (i) shares of Common Stock are deemed to have a market value of $37.55$52.65 per share, the closing price of the Common Stock as reported on the New York Stock Exchange on June 29, 2012,30, 2014, and (ii) each of the Company's executive officers and directors is deemed to be an affiliate of the Company.

As of February 6, 2013,11, 2015, there were 14,309,73814,454,020 shares of Common Stock outstanding with a par value of $1 per share.

Portions of the Company's Proxy Statement for the 20132015 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after the end of the registrant's fiscal year, are incorporated by reference from the definitive Proxy Statement into Part III of this Annual Report on Form 10-K.

Certain statements contained in this Annual Report on Form 10-K, as well as other information provided from time to time by Badger Meter, Inc. (the “Company”) or its employees, may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “think,” “should,” “could” and “objective” or similar expressions are intended to identify forward looking statements. All such forward looking statements are based on the Company'sCompany’s then current views and assumptions and involve risks and uncertainties. Some risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward looking statements include those described in Item 1A of thisthe Company’s Annual Report on Form 10-K for the year ended December 31, 20122014 that include, among other things:

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

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

Throughout this 20122014 Annual Report on Form 10-K, the words “we”,“we,” “us” and “our” refer to the Company.

The core competency of the CompanyBadger Meter is flow measurement solutions. The Company is a leadingan innovator manufacturer and marketer ofin flow measurement and control products, serving water and gas utilities, municipalities, and commercial and industrial customers worldwide. Measuring a wide variety of liquids ranging fromThe Company’s products measure water, oil, chemicals and oil to lubricants in industrial processes, the Company's productsother fluids, and are known for their high degree of accuracy, long-lasting durability and ability to providefor providing valuable and timely measurement information to customers.data. The Company'sCompany’s product lines fall into three categories: sales of water meters and related technologies to municipal water utilities (municipal water), sales of meters to various industries for water and other fluids (industrial flow)(flow instrumentation), and sales of concrete vibrators and gas meter radios and concrete vibrators to unique markets (specialty products). The Company estimates that over 75% of its products are used in water applications when all categories are grouped together.

Municipal water, the largest category by sales volume, includes mechanical and electronic (static) water meters and related technologies and services used by water utilities as the basis for generating water and wastewater revenues. The key market for the Company'sCompany’s water meter products is North America, primarily the United States, because themost meters are designed and manufactured to conform to standards promulgated by the American Water Works Association. SalesThe majority of water meters sold continues to be mechanical in nature. In recent years, the Company has made inroads in selling electronic (static) meters. This recent development of static water meters combined with updated radio technology now provides the Company with the opportunity to sell into other geographical markets, for example Europe, Middle East and South America. In the municipal water category, sales of water meters and related technologies and services are commonly referred to as residential or commercial water meter sales, the latter referring to larger sizes of meters.

Industrial flowFlow instrumentation includes productsmeters and valves sold worldwide to measure and control materials flowing through a pipe or pipeline including water, air, steam, oil, and other liquids and gases. These meters and valvesproducts are used in a variety of applications, such as water/wastewater; heating, ventilating and air conditioning (HVAC); oil and gas; chemical and petrochemical; food and beverage; and pharmaceutical production. Furthermore, the Company’s flow measurement technologies are sold to original equipment manufacturers as the primary flow measurement device within a product or system.

Specialty products include sales of radio technology to natural gas utilities for installation on their gas meters, and concrete vibrators.vibrators used in the concrete construction process.

For municipal water, residentialResidential and commercial water meters are generally classified as either manually read meters or remotely read meters via radio technology. A manually read meter consists of a water meter and a register that gives a visual meter reading display. Meters equipped with radio transmitters (endpoints) use encoder registers to convert the measurement data from the meter (mechanical or static) into an encrypted digital format which is then transmitted via radio frequency to a receiver that collects and formats the data appropriately for water utility billing systems. MobileThese remotely read, or mobile, systems referred to asare either automatic meter reading (AMR) systems, have been the primary technology deployed by water utilities over the past two decades, providing accurate and cost-effective billing data. In an AMR system,where a vehicle equipped for meter reading purposes, including a radio receiver, computer and reading software, collects the data from the utility's meters.

The ORION SE system can operate asin either a mobile AMR system, aor fixed network AMI system, or both.mode depending on the deployment needs of the utility. For example, a water or gas utility can begin deployment in mobile mode and migratetransition to a fixed network system. Also,system without visiting the endpoint. Once deployed, if the system is operating in fixed network mode and the gateway data collector network goes down,stops functioning, the systemendpoint will automatically revertcontinue to send data that can be captured by a mobile mode, allowingsystem. Once the gateway data collector functions again, the utility to continue collecting readings. Oncewill again receive data through the collector network is back up, it will automatically revert back to its fixed network mode. By using AMA, utilities will be able to proactively manage their day-to-day operations through powerful analytics-based software and a fixed network meter reading system.

The Company'sBEACON AMA secure, hosted software suite includes a customizable dashboard, the ability to establish alerts for specific conditions, and consumer engagement tools that allow end water customers to view and manage their water usage activity. Benefits to the utility include improved customer service, increased visibility through faster leak detection, the ability to promote and quantify the effects of its water conservation efforts, and easier compliance reporting.

The proprietary ORION endpoint technology has been licensed to other technology providers on a non-exclusive basis, including those providing radio products that communicate over power lines, broadband networks and proprietary radio frequency networks, allowing ORION a distinct advantage in the radio solutions market. In addition, the ORION universal gateway receiver transmits data over a variety of public wireless networks, which allows for strategic deployments, such as monitoring large commercial users.

Water meter replacement and the adoption and deployment of new technology comprise the majority of water meter product sales, including radio products. To a much lesser extent, housing starts also contribute to the new product sales base. Over the last decade, there has been a growing trend in the conversion from manually read water meters to radio technology. This conversion rate is accelerating and contributes to an increased water meter and radio solutions base of business. The Company estimates that less than 30 percent43% of water meters installed in the United States have been converted to a radio solutions technology. The Company'sCompany’s strategy is to fulfill customers'customers’ metering expectations and requirements with its proprietary meter reading systems or other systems available through its alliance partners in the marketplace.

Industrial flowFlow instrumentation and specialty products serve niche flow measurement and control applications across a broad industrial spectrum.spectrum, occasionally with the same technologies used for municipal water sales. Specialized communication protocols that control the entire flow measurement process drive these markets. The Company'sCompany’s specific flow measurement and control applications and technologies serve the flow measurement market through both customized and standard precision flow measurement technologies.

    

The Company's products are primarily manufactured and assembled in the Company's Milwaukee, Wisconsin; Racine, Wisconsin; Tulsa, Oklahoma; Scottsdale, Arizona; Nogales, Mexico; Neuffen, Germany; Brno, Czech Republic; and Bern, Switzerland facilities.

    

The Company's products are sold throughout the world through employees, resellers and representatives. Depending on the customer mix, there can be a moderate seasonal impact on sales, primarily relating to higher sales of certain municipal water products during the spring and summer months. No single customer accounts for more than 10 percent10% of the Company's sales.

    

There are competitors in each category in which the Company sells its products, and the competition varies from moderate to intense. Major competitors for utility water meters include Sensus, USA Inc., Neptune Technology Group Inc., Elster AMCO Metering, LLC and Master Meter, Inc. and Mueller Water Products, Inc. Together with Badger Meter, it is estimated these companies sell in excess of 90% of the meters in the North American market, which has been insulated from other competitors due to the nature of the mechanical technology used and the standards promulgated by the American Water Works Association. The Company, as well as some of its competitors, have introduced various forms of electronic (static) meters, which have no moving parts, in recent years and have seen sales of those products begin to grow. As the global water metering market, including the North American market, begins to adopt electronic (static) technology, Kamstrup A/S, Diehl Metering GmbH and Itron, Inc. are also potential competitors.

The Company's primary competitors for water utility radio products in North America are Itron, Inc., Neptune Technology Group Inc. and Sensus. Outside of North America, the primary competitors include Itron, Inc., Sensus, USA Inc.Diehl Metering GmbH and Elster Group GmbH. While the Company sells its own proprietary radio systems (ORION and GALAXY), it is also a reseller of the Itron products. A number of the Company's competitors in certain markets have greater financial resources than the Company. However, the Company believes it currently provides the leading technology in water meters and radio water systems. As a result of significant research and development activities, the Company enjoys favorable patent positions and trade secret protections for several of its technologies and products.

    

There are many competitors in the industrial flow and specialty products markets due to the various markets and applications being served. For example, major competitors in the industrial flow markets include Emerson Electric Company,Co., Krohne Messtechnik GmbH, Endress & Endress+Hauser Management AG and Yokogawa Electric Corporation. In the HVAC market, the key competitor is Onicon Inc.Incorporated. In upstream oil and gas, Cameron International CorporationCorp. is the primary competitor. The Company competes with AW-Lake Company in the measurement of on-machine hydraulic fluids. With the acquisition of Racine Federated, Inc. in January 2012, the Company has a large portfolio of metering technologytechnologies to compete in these markets.

    

The Company's total backlog of unshipped orders at December 31, 20122014 and 20112013 was $34.8$33.6 million and $33.4$31.7 million, respectively. The backlog is comprised of firm orders and signed contractual commitments, or portions of such commitments that call for shipment within 12 months. Backlog can be significantly affected by the timing of orders for large projects and the amounts can vary due to the timing of work performed.

    

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

    

Expenditures for research and development activities relating to the development of new products, the improvement of existing products and manufacturing process improvements were $9.5 million in 2014 compared to $10.5 million in 2013 and $9.6 million in 2012 compared to $8.1 million in 2011 and $7.2 million in 2010.2012. Research and development activities are primarily sponsored by the Company. The Company also engages in some joint research and development with other companies.

    

The Company owns or controls several trade secrets and many patents, trademarks and trade names in the United States and other countries that relate to its products and technologies. No single patent, trademark, trade name or trade secret is material to the Company's business as a whole.

    

The Company is subject to contingencies related to environmental laws and regulations. The Company is named as one of many potentially responsible parties in two landfill lawsuits. The landfill sites are impacted by the Federal Comprehensive Environmental Response, Compensation and Liability Act and other environmental laws and regulations. At this time, the Company does not believe the ultimate resolution of these matters will have a material adverse effect on the Company'sCompany’s financial position or results of operations, either from a cash flow perspective or on the financial statements as a whole. This belief is based on the Company'sCompany’s assessment of its limited past involvement with these landfill sites as well as the substantial involvement of and government focus on other named third parties with these landfill sites. However, due to the inherent uncertainties of such proceedings, the Company cannot predict the ultimate outcome of any of these matters. A future change in circumstances with respect to these specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2012, 20112014, 2013 and 20102012 were not material.

    

The Company and its subsidiaries employed 1,3661,431 persons at December 31, 2012, 1332014, 117 of whom are covered by a collective bargaining agreement with District 10 of the International Association of Machinists. The Company is currently

    

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

    

Mr. Meeusen has served as Chairman, President and Chief Executive Officer for more than five years.

    

Mr. Johnson has served as Senior Vice President - Finance, Chief Financial Officer and Treasurer for more than five years.     

    

Mr. Begale was elected Vice President - Engineering in December 2010. Mr. Begale served as Vice President - Business Development from April 2009 to December 2010, and Director - Business Development from March 2007 to April 2009.2010.

    

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

Mr. Gomez was electedbecame Vice President - Flow Instrumentation in September 2014. Mr. Gomez served as Vice President - Business Development infrom December 2010. Mr. Gomez2010 to September 2014, and served as Vice President - Engineering from February 2008 to December 2010, and Director of Engineering from July 2007 to February 2008.2010.

Mr. Gras has served as Vice President - International Operations for more than five years.

Mr. Serdynski was electedhas served as Vice President - Manufacturing in February 2008. Mr. Serdynski served as Director of Manufacturing Operations prior to that.for more than five years.

    

Ms. Smiley has served as Vice President - Controller for more than five years.

    

Ms. Stoll was elected Vice President - Sales and Marketing in February 2012. Ms. Stoll served as Vice President - Marketing from April 2009 to February 2012, and served as Director - Utility Marketing from August 2008 to April 2009. Prior to August 2008, Ms. Stoll was Marketing Manager at Dorner Manufacturing from April 2007 to June 2008.

    

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

    

Information about the Company's foreign operations and export sales is included in Note 10 “Industry Segment and Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 20122014 Annual Report on Form 10-K.

The Company operates in one industry segment as an innovator, manufacturer and marketer of products incorporating flow measurement and control technologies as described in Note 10 “Industry Segment and Geographic Areas” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 20122014 Annual Report on Form 10-K.

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 20122014 Annual Report on Form 10-K, including the “Special Note Regarding Forward Looking Statements” at the front of this 20122014 Annual Report on Form 10-K. If any of the events contemplated by the following risks actually occur, our financial condition or results of operations could be materially adversely affected. The following list of risk factors may not be exhaustive. We operate in a continually changing business, economic and geopolitical environment, and new risk factors may emerge from time to time. We can neither predict these new risk factors with certainty nor assess the precise impact, if any, on our business, or the extent to which any factor, or combination of factors, may adversely impact our results of operations. While there is much uncertainty, we do analyze the risks we face, perform a probability assessment of their impacts and attempt to soften their potential impact when and if possible.

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

We believe that our future success depends, in part, on our ability to develop technologically advanced products that meet or exceed appropriate industry standards. Although we believe that we currently have a competitive advantage in this area, maintaining such advantage will require continued investment in research and development, sales, marketing and manufacturing capabilities. There can be no assurance that we will have sufficient resources to make such investments or that we will be able to make the technological advances necessary to maintain such competitive advantage. If we are unable to maintain our competitive advantage, our future financial performance may be adversely affected. We are not currently aware of any emerging standards or new products that could render our existing products obsolete.obsolete in the near term. The water utility industry is beginning to see the adoption of electronic (static) water meters. Electronic water metering has lower barriers to entry that could affect the competitive landscape in North America. We believe we have a competitive product if the adoption rate for electronic meters were to accelerate.

    

We are affected by the availability and prices for raw materials, including purchased castings made of metal or alloys (such as brass, which uses copper as its main component, aluminum, stainless steel and cast iron), plastic resins, glass, microprocessors and other electronic subassemblies, and components that are used in the manufacturing process. The inability to obtain adequate supplies of raw materials and component parts for our products at favorable prices could have a material adverse effect on our business, financial condition or results of operations by decreasing profit margins and by negatively impacting timely deliveries to customers. In the past, we have been able to offset increases in raw materials and component parts by increased sales prices, active materials management, product engineering programs and the diversity of materials used

The Securities and Exchange Commission recentlyhas adopted additional disclosure requirements related to certain minerals sourced from the Democratic Republic of Congo and surrounding countries, or “conflict minerals,” that are necessary to the functionality of a product manufactured, or contracted to be manufactured, by a Securities and Exchange Commission reporting company. The minerals that the final rules cover are commonly referred to as “3TG” and include tin, tantalum, tungsten and gold. Implementation of the new disclosure requirements could affect the sourcing and availability of some of the materials that we use in the manufacture of our products. Our supply chain is complex, and if we are not able to conclusively verifydetermine the origins for all conflict minerals used in our products or that our products are “conflict free,” then we may face reputational challenges with customers or investors. We could also incur significant costs related to the compliance process, including potential difficulty or added costs in satisfying the disclosure and audit requirements.

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

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

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

We cannot predict the nature, scope or effect of future environmental or regulatory requirements to which our operations might be subject or the manner in which existing or future laws will be administered or interpreted. Compliance with such laws or regulations may entail additional expenses that could decrease profitability. We are subject to a variety of environmental laws, such as lead content in certain meters incorporating brass housings, and regulatory laws affecting the use and/or licensing of radio frequencies necessary for radio products, as well as regulations related to customs and trade practices. Currently, the cost of complying with existing laws is included as part of our on-going expenses and does not have a material effect on our business or financial position, but a change in the future could adversely affect our profitability.

Since we sell products worldwide as well as manufacture products in several countries, we are subject to risks associated with doing business internationally. These risks include such things as changes in foreign currency exchange rates, changes in a specific country's or region's 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.

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.

We estimate liabilities and expenses for retirement plans and other postretirement benefits that require the use of assumptions relating to the rates used to discount the future estimated liability, rate of return on any assets and various assumptions related to the age and cost of the workforce. Actual results may differ from the estimates and have a material adverse effect on future results of operations or on the financial statements as a whole. Rising healthcare and retirement benefit costs in the United States may also add to cost pressures and decrease our profitability.

We have a history of good corporate governance, including procedures and processes that are required by the Sarbanes-Oxley Act of 2002 and related rules and regulations, such as board committee charters, and a code of business conduct that defines how employees interact with our various stakeholders and addresses issues such as confidentiality, conflict of interest and fair dealing.dealing, and applicable exchange listing standards. Failure to maintain these corporate governance practices could harm our reputation and have a material adverse effect on our business and results of operations.

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

None.

The principal facilities utilized by the Company at December 31, 20122014 are listed below. The Company owns all such facilities in fee simple except as noted. The Company believes that its facilities are generally well maintained and have sufficient capacity for its current needs.

In the normal course of business, the Company is named in legal proceedings from time to time. There are currently no material legal proceedings pending with respect to the Company. The more significant legal proceedings are discussed below.

Information required by this Item is set forth in Note 11 “Unaudited: Quarterly Results of Operations, Common Stock Price and Dividends” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 20122014 Annual Report on Form 10-K.

The following information in Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates it by reference into such a filing.

The following graph compares on a cumulative basis the yearly percentage change since January 1, 20072010 in (a) the total shareholder return on the Common Stock with (b) the total return on the Russell 2000 Index, and (c) the total return of the new peer group made up of 15 companies in similar industries and with similar market capitalization.capitalization, and (d) the total return of the old peer group made up of 11 companies.

The graph assumes $100 invested on December 31, 2006.2009. It further assumes the reinvestment of dividends. The returns of each component company in the peer groups have been weighted based on such company's relative market capitalization.

The new Peer Group consists of A.O. Smith Corp. (AOS), Badger Meter, Inc. (BMI), CIRCOR International, Inc. (CIR), CLARCOR Inc. (CLC), ESCO Technologies Inc. (ESE), Franklin Electric Co, Inc. (FELE), Fuel Systems Solutions, Inc. (FSYS), Gorman-Rupp Company (GRC), Itron, Inc. (ITRI), Lindsay Corporation (LNN), MFRI, Inc. (MFRI), Mueller Water Products (MWA), Northwest Pipe Company (NWPX) , Rexnord Corporation (RXN), Sun Hydraulics Corporation (SNHY), and Watts Water Technologies, Inc. (WTS).

The old Peer Group consists of A.O. Smith Corp. (AOS), Badger Meter, Inc. (BMI), CIRCOR International, Inc. (CIR), Colfax Corporation (CFX), ESCO Technologies Inc. (ESE), Flow International Corporation (FLOW), Franklin Electric Co, Inc. (FELE), Fuel Systems Solutions, Inc. (FSYS), Gorman-Rupp Company (GRC), Lindsay Corporation (LNN), Measurement

The core competency of the CompanyBadger Meter is flow measurement solutions. The Company is a leadingan innovator manufacturer and marketer ofin flow measurement and control products, serving water and gas utilities, municipalities, and commercial and industrial customers worldwide. Measuring a wide variety of liquids ranging fromThe Company’s products measure water, oil, chemicals and oil to lubricants in industrial processes, the Company's productsother fluids, and are known for their high degree of accuracy, long-lasting durability and ability to providefor providing valuable and timely measurement information to customers.data. The Company'sCompany’s product lines fall into three categories: sales of water meters and related technologies to municipal water utilities (municipal water), sales of meters to various industries for water and other fluids (industrial flow)(flow instrumentation), and sales of concrete vibrators and gas meter radios and concrete vibrators to unique markets (specialty products). The Company estimates that over 75% of its products are used in water applications when all categories are grouped together.

Municipal water, the largest category by sales volume, includes mechanical and electronic (static) water meters and related technologies and services used by water utilities as the basis for generating water and wastewater revenues. The key market for the Company'sCompany’s water meter products is North America, primarily the United States, because themost meters are designed and manufactured to conform to standards promulgated by the American Water Works Association. SalesThe majority of water meters sold continues to be mechanical in nature. In recent years, the Company has made inroads in selling electronic (static) meters. This recent development of static water meters combined with updated radio technology now provides the Company with the opportunity to sell into other geographical markets, for example Europe, Middle East and South America. In the municipal water category, sales of water meters and related technologies and services are commonly referred to as residential or commercial water meter sales, the latter referring to larger sizes of meters.

Industrial flowFlow instrumentation includes productsmeters and valves sold worldwide to measure and control materials flowing through a pipe or pipeline including water, air, steam, oil, and other liquids and gases. These meters and valvesproducts are used in a variety of applications, such as water/wastewater; heating, ventilating and air conditioning (HVAC); oil and gas; chemical and petrochemical; food and beverage; and pharmaceutical production. Furthermore, the Company’s flow measurement technologies are sold to original equipment manufacturers as the primary flow measurement device within a product or system.

Specialty products include sales of radio technology to natural gas utilities for installation on their gas meters, and concrete vibrators.vibrators used in the concrete construction process.

Additional information aboutResidential and commercial water meters are generally classified as either manually read meters or remotely read meters via radio technology. A manually read meter consists of a water meter and a register that gives a visual meter reading display. Meters equipped with radio transmitters (endpoints) use encoder registers to convert the Company's businessmeasurement data from the meter (mechanical or static) into an encrypted digital format which is described in Part 1, Item 1 “Business” underthen transmitted via radio frequency to a receiver that collects and formats the heading “Market Overview, Products, Systemsdata appropriately for water utility billing systems. These remotely read, or mobile, systems are either automatic meter reading (AMR) systems, where a vehicle equipped for meter reading purposes, including a radio receiver, computer and Solutions” in this 2012 Annual Report on Form 10-K.reading software, collects the data from utilities’ meters; or fixed network advanced metering infrastructure (AMI) systems, where data is gathered utilizing a network of permanent data collectors or gateway receivers that are always active or listening for the radio transmission from the utilities’ meters. AMI systems eliminate the need for utility personnel to drive through service territories to collect meter reading data. These systems provide the utilities with more frequent and diverse data at specified intervals from the utilities’ meters.

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

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

There are approximately 53,00052,000 water utilities in the United States and the Company estimates that less than 30 percent43% of them have converted to a radio solutions technology. Although there is growing interest in AMI and AMA communication by water utilities, the vast majority of utilities installing such technology continue to select AMR technologies for their applications. The Company's ORION technology has experienced rapid acceptance in the United States as an increasing number of water utilities have selected ORION as their AMR solution. The Company anticipates that even with growing interest in AMI and AMA, AMR will continue to be the primary product of choice for a number of years. For many

On January 31, 2012,October 1, 2014, the Company completed its acquisition ofacquired 100% of the outstanding common stock of Racine Federated,National Meter and Automation, Inc. (“Racine Federated”National Meter”) of Racine, WisconsinCentennial, Colorado. The purchase is estimated to add approximately $15 million of incremental annual revenues to Badger Meter, after eliminating what would be intercompany sales. National Meter was a major distributor of Badger Meter products for the municipal water utility market, serving customers in Colorado, California, Nevada, Arizona and southern Wyoming. National Meter will become a regional distribution center for Badger Meter. In addition to its subsidiary Premier Control Technologies, Ltd. (“PCT”) located in Thetford, Englandprimary product line of water meters and meter reading systems, National Meter provides services including meter testing, leak detection, water audits, meter and meter reading system installation and meter reading.

The total purchase consideration for approximately $57.3National Meter was $22.9 million, which included $20.3 million in cash, plus a small working capital adjustment and settlement of $0.3 million. During the fourth quarterpre-existing receivables. The Consolidated Balance Sheets at December 31, 2014 included a final $2.5 million of 2012,deferred payments, of which $2.0 million is payable in October 2015 and is recorded in payables, and $0.5 million is payable in October 2016 and is recorded in other long-term liabilities. As of December 31, 2014, the Company sold PCThad not completed its analysis for a nominal amount afterestimating the majorityfair value of its functions were absorbed by the Company's European subsidiary. The Company also merged Racine Federated into Badger Meter, Inc. on December 31, 2012. Racine Federated manufacturesassets acquired and markets flow meters for the water industry as well as various industrial metering and specialty products. These products complement and expand the Company's existing lines for the global flow measurement business. This acquisition is further described in Note 3 “Acquisitions” in the accompanying Notes to Consolidated Financial Statements in Part II, Item 8 of this 2012 Annual Report on Form 10-K.

Prior to the Company's introduction of its own proprietary radio products, for example ORION, GALAXY and GALAXY,BEACON, Itron water utility-related products were a dominant radio products contributor to the Company's results. Itron products are sold under an agreement between the Company and Itron, Inc. that has been renewed multiple times and is in effect until early 2016. The Company's radio products directly compete with Itron water radio products. In recent years, many of the Company's customers have selected the Company's proprietary products over Itron products. While the Company's proprietary product sales are generally greater than those of the Itron licensed products, the Company expects that Itron products will remain a significant component of sales to water utilities. Continuing substantial sales in both product lines underscores the continued acceptance of radio technology by water utilities and affirms the Company's strategy of selling Itron products in addition to its own proprietary products.

As the industry continues to evolve, the Company has been vigilant in anticipating and exceeding customer expectations. In 2011, the Company introduced AMA as a hardware and software solution for water and gas utilities, and then in early 2014 launched its new BEACON AMA system as a managed solution which it believes will help maintain the Company's position as a market leader. While results for this new product were not significant in 2014, there were a number of starter kits sold to utilities who generally field test products before making final purchase decisions.

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

Net sales in 20122014 increased $56.8$30.7 million, or 21.6%9.2%, to $319.7$364.8 million from $262.9$334.1 million in 2011.2013. The overall increase was due primarily to higher sales of municipal water and flow instrumentation products as a result of higher volumes of units sold and the inclusionpurchase of Racine Federated'sNational Meter, offset slightly by lower sales of specialty products.

Municipal water sales increased $29.0 million, or 12.5%, to $260.1 million in 2014 from $231.1 million in 2013. These sales represented 71.3% of total net sales in 2014 compared to 69.2% in 2013. Included in the increase for eleven months2014 was $6.2 million of incremental sales associated with the acquisition of National Meter on October 1, 2014. The majority of the increase was due to higher sales of residential meters sold both with and without technology, as well as higher commercial meter sales. Sales of residential meters and related technology increased 14.6% for the year anddue to higher volumes of product sold, offset slightly by lower average prices. Commercial water meter sales increased 4.0% in 2014 compared to 2013 due primarily to higher volumes of product sold.

International sales for municipal water meters and related technologies are generally made to customers in Canada and Mexico, which use similar mechanical technology and standards as customers in the U.S, although the recent introduction of electronic (static) meters allows the Company greater opportunities in other parts of the world. International sales for flow instrumentation and specialty products are generally made throughout the world. In Europe, sales are made primarily in Euros. Other international sales are made in U.S. dollars or local currencies. International sales increased 24.9% to $55.1 million in 2014 from $44.1 million in 2013 primarily due to sales of electronic (static) meters into the Middle East, overall increases in sales internationally, and slightly favorable foreign currency translation effects.

Net sales in 2013 increased $14.4 million, or 4.5%, to $334.1 million from $319.7 million in 2012. The overall increase was due primarily to higher sales of municipal water products as a result of higher volumes of units sold, offset somewhat by lower sales of radios to natural gas utilities. Racine Federated's sales for the eleven months ended

Municipal water sales increased $22.9$17.9 million, or 12.0%8.4%, to $231.1 million in 2013 from $213.2 million in 2012 from $190.3 million in 2011.2012. These sales represented 66.7%69.2% of total net sales in 20122013 compared to 72.4%66.7% in 2011.2012. The sales increase was due to higher sales of residential meters sold both with and without technology as well as higher commercial meter sales. Sales of residential meters withand related technology increased 11.6%6.9% for the year due to higher volumes of product sold. Sales of manually read residential meters were essentially flat between years.sold, slightly offset by lower average prices. Commercial water meter sales increased 19.5%15.2% in 20122013 compared to 20112012 due primarily to higher volumes of product sold. The Company believes the net overall increase for the year was duea continuation of a return to normal buying patterns beginning to resume afterthat began in 2012, although sales were negatively affected in early 2013 by a period where there were (and still are) negative factors affecting market conditions. These factors include lingering concerns about municipal spending, which have resulted in delayed buying decisions,colder and slower housing starts.snowier winter and the effects of Hurricane Sandy. In addition, the Company's introduction in 2011part of the next generation of the ORION product lengthened the sales cycle for water utilities as they evaluate this new technology. Weather may have also played a role as poor weather in the Midwest and Northeast had a negative impact on sales in early 2011increase was due to its effectsadditional sales to former customers of a competitor that ceased North American production of mechanical meters on budget demands and installation rates, which did not recurJune 30, 2013. The Company estimates sales to these customers were approximately $4.1 million in early 2012.2013.

Industrial flow products represented 29.0%27.3% of total net sales in 20122013 compared to 21.5%29.0% in 2011.2012. These sales increased $36.2decreased $1.6 million, or 64.0%1.7%, to $91.2 million from $92.8 million from $56.6 million in 2011. As previously noted, Racine Federated was acquired on January 31, 2012 and Racine Federated's sales2012. Sales of products within this category were included from that point forward. Within this product grouping, Racine Federated's sales were $32.6 million. The remainder of the increase was due to higher salesaffected by general economic conditions which resulted in most of the remaining industrial flow product lines.weaker orders.

Specialty products represented 4.3%3.5% of total net sales in 20122013 compared to 6.1%4.3% in 2011.2012. These sales decreased $2.3$1.9 million in 2012,2013, or 14.4%13.9%, to $11.8 million from $13.7 million from $16.0 million in 2011. Included in this product grouping2012. The decline was $8.7 million of sales from Racine Federated. Without these sales, specialty products would have shown a larger sales decrease due tocaused by lower sales of radios into the natural gas market. The 2011 sales included highermarket and lower sales of radios to one particular natural gas customer that did not recur in 2012.concrete vibrators.

International sales for municipal water meters and related technologies are generally made to customers in Canada and Mexico, which use similar mechanical technology and standards as customers in the U.S. International sales for industrial flow and specialty products are generally made throughout the world. In Europe, sales are made primarily in Euros. Other international sales are made in U.S. dollars or local currencies. International sales increased 53.8%decreased 9.3% to $44.1 million in 2013 from $48.6 million in 2012 from $31.6 million in 2011 primarily due to the additiontiming of Racine Federated's product lines.large projects and general economic conditions.

    

Gross margins as a percentage of sales were 38.2%36.0%, 34.2%35.0% and 37.2%38.2% for 2012, 20112014, 2013 and 2010,2012, respectively. The percentage increase in 20122014 from the 2013 rate was due in part to the additionhigher volumes of Racine Federated'sproduct sold, lower obsolescence expenses, lower raw material costs and favorable exchange rates, offset somewhat by a greater mix of municipal water products whosethat carry lower margins are generally a higher percentage than the Company's overall weighted margin percentage. Margins also increased due to lowerflow instrumentation products, higher warranty costs, for castings which fluctuate withand the metals market, and higher sales volumes in general which increase overall factory utilization. Offsetting these factors wasimpacts of the impactintegration of lower sales of radios to natural gas utilities.National Meter.

Gross margins were lowerThe percentage decline in 20112013 from the 2012 rate was due to a higher mix of municipal water sales compared to 2010industrial flow sales that carry higher margins, lower prices charged to the former customers of a competitor that ceased North American production of water meters, higher obsolete inventory charges, higher costs of electronics due to significantlyforeign exchange effects, and higher commodity costs particularly copper, mitigated somewhat by higher prices charged for the Company's products as well as cost reductionsof metal alloy as the Company beganshift to transition additional operations to its Mexican facilities. This transitionlead-free brass was completed in the second quarter of 2011. Approximately 70 positions were transferred from the Milwaukee facility to the Mexican facility as part of a plan to move production to lower-cost facilities.completed.

 

Selling, engineering and administration expenses in 2012 increased $15.52014 were $7.2 million, or 24.9%9.3%, over 2011's expenses. Thehigher than these expenses in 2013. Included in this increase was primarily attributable to the acquisition$2.5 million of Racine Federated and amortization of intangiblesexpenses associated with National Meter, which was acquired which were noton October1, 2014. Also included in the resultsthis year’s expense were charges totaling $1.7 million (approximately $0.07 per diluted share) for 2011.due diligence and other transaction costs related to a potential acquisition that ultimately was not pursued. The remainder of the increase was due to higher employee incentivesincentive compensation due to improved financial results and normal inflationary increases, offset somewhat by continuing cost control measures. In addition, the 2012 amounts include a $1.0 million charge in connection with the write down of the Company's investment in an emerging technology company and a $1.1 million non-cash pension charge as a result of payouts from the pension plan occurring faster than the assumed rate.lower product development costs that returned to more historic levels.

Selling, engineering and administration costs increased $4.3expenses in 2013 were $0.1 million, or 7.4%0.1%, higher than these expenses in 2011 compared to 2010.2012. The increase was due in part2012 amounts included a $1.0 million charge related to the inclusion of Remag's expenses which were not included in the 2010 amounts and expenses for the acquisition of Cox, which were included in results for only nine months of 2010. Other reasons for the increase include higher amortization of various intangibles and software as well as higher costs associated with the technical supportwrite down of the Company's products. In addition, expenses for 2011Company’s investment in an emerging technology company. The 2013 amounts include approximately $1.1 million ofintangible amortization charges associated with the Aquacue acquisition, of Racine Federated thatcharges associated with a legal issue and normal inflationary increases. Offsetting these increases were lower employee incentive compensation and continuing cost control measures.

Operating earnings in 2012 increased $17.02013 decreased $5.4 million, or 61.8%12.1%, to $39.1 million compared to $44.5 million compared to $27.5 million in 2011, as a net2012. The decrease was the result of the lower gross margins resulting from the mix of sales, the lower prices charged to customers of a former competitor, higher sales of municipal waterobsolescence costs and industrial flow products,higher alloy costs, all offset somewhat by the higher selling, engineering and administration expenses. In addition, lower costs of certain raw materials also contributed to the increased operating earnings.

    

Interest expense, net was $1.0$1.1 million in 2012 compared2014 and 2013 due to $0.2 million in 2011. The increase wasrelatively stable interest rates and similar average borrowing levels. Even with increased earnings, average borrowings remained relatively constant due primarily to higher borrowings in 2012 associated with the acquisition of Racine FederatedNational Meter and the Company's stock repurchase program.increased balances of receivables and inventories.

Interest expense, net was $0.2$1.1 million in 20112013 compared to $0.4$1.0 million in 2010.2012. The decreaseslight increase was due primarily to lowerhigher average borrowings due in 2011.part to the Aquacue acquisition in April 2013.

Income taxes as a percentage of earnings before income taxes were 35.5%33.9%, 29.9%,35.2% and 35.5% for 2012, 20112014, 2013 and 2010,2012, respectively. The 2011 results include recognition of previously unrecognized tax benefits for certain deductions thatvariances in all three years presented were taken on prior tax returns. These benefits total approximately $1.3 million and were recognized in earnings in 2011 due primarily to the realization that such benefits became more likely than not uponchanges in state taxes depending on each year’s sales and the conclusionrelationship of an IRS audit of the Company's 2009 Federal income tax return. Without these benefits, the provision for income taxes as a percentage of earnings before income

As a resultBecause of the increased operating earnings offset somewhat by a higher effectiveand the lower tax rate, net earnings were $28.0$29.7 million in 20122014 compared to $19.2$24.6 million in 2011.2013. On a diluted basis, earnings per share were $1.95$2.06 in 20122014 compared to $1.27$1.70 in 2011.2013.    

As a resultBecause of the lowerdecreased operating earnings, mitigated somewhat by a lower effective tax rate, net earnings were $19.2$24.6 million in 20112013 compared to $28.7$28.0 million in 2010.2012. On a diluted basis, earnings per share were $1.27$1.70 in 20112013 compared to $1.91$1.95 in 2010.2012.

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. Cash provided by operations in 20122014 was $34.8$35.7 million compared to $31.3$34.8 million in 2011.2013. The 2014 amount was primarily due to increased earnings, offset somewhat by an increase in cash provided by operations in 2012 compared to 2011 was due to significantly higher earnings, offset by higher inventory balances and a pension plan contribution made in 2012.inventories.

Receivables at December 31, 20122014 were $45.6$54.0 million compared to $41.2$50.1 million in 2011.at the end of 2013. The increase was due in part to the additioninclusion of Racine Federated in 2012 and the resulting increase in sales.receivables of National Meter, which was acquired on October 1, 2014. Without National Meter, the receivable amounts between years were comparable. The Company believes its net receivables balance is fully collectible.

Inventories at December 31, 20122014 were $61.0$71.8 million compared to $49.4with $60.9 million at December 31, 2011. The2013. Approximately $4.5 million of the increase was primarily due to the additionNational Meter acquisition. The remainder of Racine Federated in 2012 with the remainderincrease was due primarily to the timingbuild-up of purchases.certain inventories prior to a planned temporary production halt to move product lines scheduled in early 2015.

Property, plant and equipment increased as a net result of capital expenditures and the acquisition of Racine Federated's property, plant and equipment, offset by depreciation expense. Capital expenditures totaled $8.2$12.3 million in 2012, $5.32014 compared to $14.3 million in 2011 and $9.2 million in 2010.2013. These amounts vary due to the timing of capital expenditures. Also included in the December 31, 2014 amount was $2.8 million of National Meter assets acquired. The Company believes it has adequate capacity to increase production levels with minimal additional capital expenditures.

Intangible assets increased to $58.4$61.7 million at December 31, 20122014 from $33.7$57.3 million at December 31, 2011 primarily2013. This was the net impact of a $9.8 million increase due to the acquisition of Racine Federated and the resulting valuation of its intangible assets, partiallyNational Meter, offset by normal amortization expense. Also, as a result of thatthe National Meter acquisition, goodwill increased to $35.9$47.7 million at December 31, 20122014 compared to $9.4$44.7 million at December 31, 2011.2013.

Short-term debt increased from December 31, 20112013 to December 31, 20122014 as the Company borrowed funds for its acquisition of Racine Federated and for its stock repurchase program. Cash generated from operations was used to pay down some of this debt in 2012.National Meter. At the end of 2012,2014, debt represented approximately 28.0%26.2% of the Company'sCompany’s total capitalization. The Company is in compliance with the financial covenants associated with the debt. None of the debt is secured by the Company'sCompany’s assets.

Payables increaseddecreased at December 31, 20122014 to $15.6$16.1 million compared to $11.4$18.6 million at December 31, 2011.2013. The 20122013 amount includes $4.6included $3.0 million owed to the sellers of Racine FederatedAquacue that iswas paid in 2014. The 2014 amount included $2.0 million owed to the sellers of National Meter that will be paid July 31, 2013.in late 2015 and early 2016. The remainder of the increasedecrease was due to the timing of purchases. purchases and payments.

Accrued compensation and employee benefits increased $3.1to $11.9 million between yearsat December 31, 2014 from $7.3 million at December 31, 2013 primarily due to higher accrued employee incentives.incentive compensation.

Warranty and other after-sale costs decreased $0.7 million to $0.9The overall increase in total shareholders’ equity from $196.6 million at December 31, 2012 compared2013 to $1.6$214.3 million at December 31, 2011. The 2011 amount included a reserve for a specific known issue that2014 was resolved in 2012.

The Company'sCompany’s financial condition remains strong. In May 2012, the Company signed a new credit agreement whichthat increased its principal line of credit from $90.0 million to $125.0 million with its primary lender for a three year period. The line will be permanentlywas reduced by $16.7 million annually beginning in 2013.May 2013 and was scheduled to be reduced by a similar amount in May 2014. The Company restructured and amended this line of credit effective May 1, 2014 to a three-year $105.0 million line of credit that supports commercial paper (up to $70.0 million) and includes $5.0 million of a Euro line of credit. While the facility is unsecured, there are a number of financial covenants with which the Company is in compliance.compliance as of December 31, 2014. The Company believes that its operating cash flows, available borrowing capacity, and its ability to raise capital provide adequate resources to fund ongoing operating requirements, future capital expenditures and the development of new products. The Company continues to take advantage of its local commercial paper market and carefully monitors the current borrowing market. The Company had $67.4$37.5 million of unused credit lines available at December 31, 2012.2014.

The Company had no off-balance sheet arrangements at December 31, 2012.2014.

In 2010, the Company restructured the outstanding debt of its Employee Savings and Stock Option Plan (the “ESSOP”) by loaning the ESSOP $0.5 million to repay a loan to a third party and loaning the ESSOP an additional $1.0 million to purchase additional shares of the Company's Common Stock for future 401(k) savings plan matches under a program that will expire on December 31, 2020. Under this program, the Company agreed to pay the principal and interest on the new loan amount of $1.5 million. The receivable from the ESSOP and the related obligation were therefore netted to zero on the Company's Consolidated Balance Sheets at December 31, 20122014 and 2011.2013. The terms of the loan call for equal payments of principal with the final payment due on December 31, 2020. At December 31, 2012, $1.22014, $0.9 million of the loan balance remains.

The following table includes the Company's significant contractual obligations as of December 31, 2012.2014. There are no material undisclosed guarantees. 

    

Other than items included in the preceding table, as of December 31, 2012,2014, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant and equipment, which generally have terms of less than 90 days. The Company also has long-term obligations related to its pension and 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 20122014 Annual Report on Form 10-K.  As of the most recent actuarial measurement date, the Company is not required to make a minimum contribution for its pension plan for the 20132015 calendar year. Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.5 million in 20132015 based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured.

The Company's accounting policies are more fully described in Note 1 “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this 20122014 Annual Report on Form 10-K. As discussed in Note 1, the preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company's more significant estimates relate primarily to the following judgmental reserves: allowance for doubtful accounts, reserve for obsolete inventories, warranty and after-sale costs reserve, and the healthcare reserve for claims incurred, but not reported. Each of these reserves is evaluated quarterly and is reviewed with the Company's internal Disclosure Committee and

The criteria used for calculating each of the reserve amounts vary by type of reserve. For the allowance for doubtful accounts reserve, significant past due balances are individually reviewed for collectibility, while the balance of accounts are reviewed in conjunction with applying historical write-off ratios. The calculation for the obsolete inventories reserve is determined by analyzing the relationship between the age and quantity of items on hand versus estimated usage to determine if excess quantities exist. The calculation for warranty and after-sale costs reserve uses criteria that include known potential problems on past sales as well as historical claim experience and current warranty trends. The healthcare reserve for claims incurred, but not reported is determined by using medical cost trend analyses, reviewing subsequent payments made and estimating unbilled amounts. The changes in the balances of these reserves at December 31, 20122014 compared to the prior year were due to normal business conditions and are not deemed to be significant. While the Company continually tries to improve its estimates, no significant changes in the underlying processes are expected in 2013.2015.

The Company also uses estimates in four other significant areas: (i) pension and other postretirement obligations and costs, (ii) stock-based compensation, (iii) income taxes, and (iv) evaluating goodwill at least annually for impairment. The actuarial valuations of benefit obligations and net periodic benefit costs rely on key assumptions including discount rates and long-term expected returns on plan assets. The Company's discount rate assumptions for its pension and postretirement plans are based on the average yield of a hypothetical high quality bond portfolio with maturities that approximately match the estimated cash flow needs of the plans. The assumptions for expected long-term rates of return on assets for its pension plan are based on historical experience and estimated future investment returns, taking into consideration anticipated asset allocations, investment strategies and the views of various investment professionals. On December 31, 2010, the Company froze its pension plan for its non-union participants and formed a new defined contribution feature within the ESSOP plan in which each employee received a similar benefit. On December 31, 2011, the Company froze its pension plan for its union participants and included them in the same defined contribution feature within the ESSOP. The total cost of the Company's stock-based awards is equal to the grant date fair value per award multiplied by the number of awards granted, adjusted for forfeitures. Forfeitures are initially estimated based on historical Company information and subsequently updated over the life of the awards to ultimately reflect actual forfeitures, which could have an impact on the amount of stock compensation cost recognized from period to period. The grant date fair value of stock options relies on assumptions including the risk-free interest rate, dividend yield, market volatility and expected option life. In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted as appropriate based upon the actual results compared to those forecasted at the beginning of the fiscal year. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The reserve for uncertainty in income taxes is a matter of judgment based on an evaluation of the individual facts and circumstances of each tax position in light of all available evidence, including historic data and current trends. A tax benefit is recognized when it is “more likely than not” to be sustained based solely on the technical merits of each tax position. The Company evaluates and updates all of these assumptions quarterly. Goodwill impairment, if any, is determined by comparing the fair value of the reporting unit with its carrying value and is reviewed at least annually. Actual results may differ from these estimates.

    

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, 20122014 for a discussion of risks and uncertainties that could impact the Company's financial performance and results of operations.

In the ordinary course of business, the Company is exposed to various market risks. The Company operates in an environment where competition varies from moderate to intense. The Company believes it currently provides the leading technology in water meters and radio systems for water utilities. A number of the Company's competitors in certain markets have greater financial resources. Competitors also include alliance partners that sell products that do or may compete with our products, particularly those that provide radio solutions. As the global water metering market begins to shift to adopt electronic (static) technology, the number of competitors may increase. In addition, the market's level of acceptance of the Company's newer products, such asproduct offerings, including the recently introducedBEACON AMA systems,system, may have a significant effect on the Company's results of operations. As a result of significant research and development activities, the Company enjoys favorable patent positions for several of its products.

The Company's ability to generate operating income and to increase profitability depends somewhat on the general health of the United States and foreign economies, including to some extent such things as the length and severity of global economic downturns,downturns; the timing and size of governmental programs such as 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,products; the Company's ability to obtain financing,financing; housing starts in the United States,States; and overall industrial activity. In addition, changes in governmental laws and regulations, particularly laws dealing with the use of lead or rules affecting the use and/or licensing of radio frequencies necessary for radio products may impact the results of operations. These factors are largely beyond the Company's control and depend on the economic condition and regulatory environment of the geographic region of the Company's operations.

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

Raw materials used in the manufacture of the Company's products include purchased castings made of metal or alloys (such as brass, which uses copper as its main component, aluminum, stainless steel and cast iron), plastic resins, glass, microprocessors and other electronic subassemblies and components. The Company does not hold significant amounts of precious metals. The price and availability of raw materials is influenced by economic and industry conditions, including supply and demand factors that are difficult to anticipate and cannot be controlled by the Company. Commodity risk is managed by keeping abreast of economic conditions and locking in purchase prices for quantities that correspond to the Company's forecasted usage.

The Company's foreign currency risk relates to the sales of products to foreign customers and purchases of material from foreign vendors. The Company uses lines of credit with U.S. and European banks to offset currency exposure related to European receivables and other monetary assets. As of December 31, 20122014 and 2011,2013, the Company's foreign currency net monetary assets were partially offset by comparable debt resulting in no material exposure to the results of operations. The Company believes the effect of a change in foreign currency rates will not have a material adverse effect on the Company's financial position or results of operations, either from a cash flow perspective or on the financial statements as a whole.

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

The Company's short-term debt on December 31, 20122014 was floating rate debt with market values approximating carrying value. Future annual interest costs for short-term debt will fluctuate based upon short-term interest rates. For the short-term debt on hand on December 31, 2012,2014, the effect of a 1% change in interest rates is approximately $0.7$0.8 million.

    

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 20122014 Annual Report on Form 10-K.

    

    

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Badger Meter, Inc. as of December 31, 20122014 and 2011,2013, and the related consolidated statements of operations, comprehensive income, shareholders'shareholders’ equity and cash flows for each of the three years in the period ended December 31, 20122014 and our report dated March 5, 2013,4, 2015, expressed an unqualified opinion thereon.