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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

As of ~~July 13,~~October 12, 2020, there were ~~29,117,539~~29,116,958 shares of Common stock outstanding with a par value of $1 per share.

Certain statements contained in this Quarterly Report on Form 10-Q, as well as other information provided from time to time by Badger Meter, Inc. (the “Company” or “Badger Meter”) or its employees, may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “think,” “should,” “could” and “objective” or similar expressions are intended to identify forward looking statements. All such forward looking statements are based on the Company’s then current views and assumptions and involve risks and uncertainties. Some risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward looking statements include those described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

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

	June 30,			December 31,			September 30,			December 31,
	(Unaudited)						(Unaudited)
	(In thousands)						(In thousands)
	2020			2019			2020			2019
Assets
Current assets:
Cash and cash equivalents	$	85,201		$	48,871		$	93,901		$	48,871
Receivables		54,021			61,365			57,706			61,365
Inventories:
Finished goods		20,093			22,946			22,151			22,946
Work in process		16,375			17,728			15,771			17,728
Raw materials		40,378			41,274			39,065			41,274
Total inventories		76,846			81,948			76,987			81,948
Prepaid expenses and other current assets		7,339			7,910			4,156			7,910
Total current assets		223,407			200,094			232,750			200,094
Property, plant and equipment, at cost		212,846			209,825			214,354			209,825
Less accumulated depreciation		(129,656	)		(124,064	)		(131,919	)		(124,064	)
Net property, plant and equipment		83,190			85,761			82,435			85,761
Intangible assets, at cost less accumulated amortization		44,638			48,163			42,884			48,163
Other assets		15,022			15,875			17,297			15,875
Deferred income taxes		2,018			742			2,012			742
Goodwill		71,258			71,258			71,258			71,258
Total assets	$	439,533		$	421,893		$	448,636		$	421,893
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	4,480		$	4,480		$	-		$	4,480
Payables		35,449			31,523			37,791			31,523
Accrued compensation and employee benefits		9,678			12,754			12,671			12,754
Warranty and after-sale costs		6,421			5,583			7,557			5,583
Other current liabilities		6,673			2,907			2,173			2,907
Total current liabilities		62,701			57,247			60,192			57,247
Other long-term liabilities		23,639			22,980			24,247			22,980
Deferred income taxes		2,555			876			2,649			876
Accrued non-pension postretirement benefits		5,643			5,711			5,608			5,711
Other accrued employee benefits		3,852			4,011			4,397			4,011
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common stock		37,220			37,200			37,220			37,200
Capital in excess of par value		43,456			41,956			43,850			41,956
Reinvested earnings		297,370			285,879			306,996			285,879
Accumulated other comprehensive income		245			425			684			425
Less: Employee benefit stock		(154	)		(154	)		(154	)		(154	)
Treasury stock, at cost		(36,994	)		(34,238	)		(37,053	)		(34,238	)
Total shareholders’ equity		341,143			331,068			351,543			331,068
Total liabilities and shareholders’ equity	$	439,533		$	421,893		$	448,636		$	421,893

See accompanying notes to unaudited consolidated condensed financial statements.

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,					Nine Months Ended September 30,
	(Unaudited)				(Unaudited)				(Unaudited)					(Unaudited)
	(In thousands except share and per share amounts)								(In thousands except share and per share amounts)
	2020		2019		2020		2019		2020			2019		2020		2019
Net sales	$	91,119	$	103,542	$	199,627	$	208,423	$	113,587		$	108,646	$	313,214	$	317,069
Cost of sales		55,269		63,266		120,455		127,690		68,564			66,976		189,019		194,666
Gross margin		35,850		40,276		79,172		80,733		45,023			41,670		124,195		122,403
Selling, engineering and administration		23,186		25,243		50,493		51,373		25,509			25,225		76,001		76,598
Operating earnings		12,664		15,033		28,679		29,360		19,514			16,445		48,194		45,805
Interest expense, net		32		85		63		214
Interest (income) expense, net										(46	)		66		18		280
Other pension and postretirement costs		44		35		88		82		21			41		109		123
Earnings before income taxes		12,588		14,913		28,528		29,064		19,539			16,338		48,067		45,402
Provision for income taxes		3,054		3,555		7,140		6,882		4,678			3,617		11,818		10,499
Net earnings	$	9,534	$	11,358	$	21,388	$	22,182	$	14,861		$	12,721	$	36,249	$	34,903

Earnings per share:
Basic	$	0.33	$	0.39	$	0.74	$	0.76	$	0.51		$	0.44	$	1.25	$	1.20
Diluted	$	0.33	$	0.39	$	0.73	$	0.76	$	0.51		$	0.44	$	1.24	$	1.19

Dividends declared per common share	$	0.17	$	0.15	$	0.34	$	0.30	$	0.18		$	0.17	$	0.52	$	0.47

Shares used in computation of earnings per share:
Basic		29,047,297		29,027,887		29,046,277		29,024,543		29,048,683			29,013,573		29,049,675		29,022,080
Impact of dilutive securities		218,422		183,646		200,090		200,009		171,814			179,765		169,862		193,112
Diluted		29,265,719		29,211,533		29,246,367		29,224,552		29,220,497			29,193,338		29,219,537		29,215,192

See accompanying notes to unaudited consolidated condensed financial statements.

	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	(Unaudited)				(Unaudited)					(Unaudited)						(Unaudited)
	(In thousands)									(In thousands)
	2020		2019		2020			2019		2020			2019			2020			2019
Net earnings	$	9,534	$	11,358	$	21,388		$	22,182	$	14,861		$	12,721		$	36,249		$	34,903
Other comprehensive income:
Foreign currency translation adjustments		445		395		(182	)		137		450			(646	)		268			(509	)
Pension and postretirement benefits, net of tax		1		360		2			349		(11	)		(16	)		(9	)		333
Comprehensive income	$	9,980	$	12,113	$	21,208		$	22,668	$	15,300		$	12,059		$	36,508		$	34,727

See accompanying notes to unaudited consolidated condensed financial statements.

	Six Months Ended June 30,						Nine Months Ended September 30,
	(Unaudited) (In thousands)						(Unaudited) (In thousands)
	2020			2019			2020			2019
Operating activities:
Net earnings	$	21,388		$	22,182		$	36,249		$	34,903
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation		5,978			6,063			9,132			8,688
Amortization		6,483			6,297			9,803			9,323
Deferred income taxes		392			(15	)		401			18
Noncurrent employee benefits		457			(267	)		571			(150	)
Stock-based compensation expense		705			554			1,041			882
Changes in:
Receivables		6,638			6,028			3,184			4,555
Inventories		5,070			(2,565	)		5,188			(4,259	)
Payables		3,886			9,141			(2,175	)		10,885
Prepaid expenses and other assets		(1,600	)		(3,946	)		6,485			(5,806	)
Other current liabilities		2,889			(2,569	)		3,799			2,100
Total adjustments		30,898			18,721			37,429			26,236
Net cash provided by operations		52,286			40,903			73,678			61,139
Investing activities:
Property, plant and equipment expenditures		(3,579	)		(4,466	)		(5,855	)		(5,589	)
Net cash used for investing activities		(3,579	)		(4,466	)		(5,855	)		(5,589	)
Financing activities:
Net decrease in short-term debt		-			(13,500	)		(4,600	)		(13,500	)
Payment of contingent acquisition consideration		-			(1,650	)		-			(1,650	)
Dividends paid		(9,878	)		(8,717	)		(15,108	)		(13,652	)
Proceeds from exercise of stock options		478			748			505			963
Repurchase of treasury stock		(2,873	)		(2,837	)		(2,934	)		(3,358	)
Issuance of treasury stock		93			97			126			142
Net cash used for financing activities		(12,180	)		(25,859	)		(22,011	)		(31,055	)
Effect of foreign exchange rates on cash		(197	)		230			(782	)		147
Increase in cash and cash equivalents		36,330			10,808			45,030			24,642
Cash and cash equivalents – beginning of period		48,871			13,086			48,871			13,086
Cash and cash equivalents – end of period	$	85,201		$	23,894		$	93,901		$	37,728

See accompanying notes to unaudited consolidated condensed financial statements.

	Quarter and year-to-date ended June 30,																			Quarter and year-to-date ended September 30,
	Common Stock at $1 par value*		Capital in excess of par value		Reinvested earnings			Accumulated other comprehensive income (loss)			Employee benefit stock			Treasury stock (at cost)			Total			Common Stock at $1 par value*		Capital in excess of par value		Reinvested earnings			Accumulated other comprehensive income (loss)			Employee benefit stock			Treasury stock (at cost)			Total
	(Unaudited)																			(Unaudited)
	(In thousands except share and per share amounts)																			(In thousands except share and per share amounts)
Balance, March 31, 2019	$	37,200	$	38,756	$	263,777		$	311		$	(306	)	$	(31,125	)	$	308,613
Balance, June 30, 2019																				$	37,200	$	39,746	$	270,772		$	1,066		$	(306	)	$	(32,026	)	$	316,452
Net earnings		-		-		11,358			-			-			-			11,358			-		-		12,721			-			-			-			12,721
Pension and postretirement benefits (net of ($141) tax effect)		-		-		-			360			-			-			360
Foreign currency translation		-		-		-			395			-			-			395
Cash dividends of $0.15 per share		-		-		(4,363	)		-			-			-			(4,363	)
Stock options exercised		-		243		-			-			-			34			277
Stock-based compensation		-	��	289		-			-			-			-			289
Purchase of common stock for treasury stock		-		-		-			-			-			(964	)		(964	)
Issuance of treasury stock (19 shares)		-		458		-			-			-			29			487
Balance, June 30, 2019	$	37,200	$	39,746	$	270,772		$	1,066		$	(306	)	$	(32,026	)	$	316,452

Balance, December 31, 2018	$	37,198	$	38,082	$	257,313		$	580		$	(306	)	$	(29,364	)	$	303,503
Net earnings		-		-		22,182			-			-			-			22,182
Pension and postretirement benefits (net of ($137) tax effect)		-		-		-			349			-			-			349
Foreign currency translation		-		-		-			137			-			-			137
Cash dividends of $0.30 per share		-		-		(8,723	)		-			-			-			(8,723	)
Stock options exercised		2		640		-			-			-			106			748
Stock-based compensation		-		554		-			-			-			-			554
Purchase of common stock for treasury stock		-		-		-			-			-			(2,837	)		(2,837	)
Issuance of treasury stock (28 shares)		-		470		-			-			-			69			539
Balance, June 30, 2019	$	37,200	$	39,746	$	270,772		$	1,066		$	(306	)	$	(32,026	)	$	316,452

Balance, March 31, 2020	$	37,220	$	42,690	$	292,785		$	(201	)	$	(154	)	$	(36,619	)	$	335,721
Net earnings		-		-		9,534			-			-			-			9,534
Pension and postretirement benefits (net of ($1) tax effect)		-		-		-			1			-			-			1
Pension and postretirement benefits (net of ($4) tax effect)																					-		-		-			(16	)		-			-			(16	)
Foreign currency translation		-		-		-			445			-			-			445			-		-		-			(646	)		-			-			(646	)
Cash dividends of $0.17 per share		-		-		(4,949	)		-			-			-			(4,949	)		-		-		(4,942	)		-			-			-			(4,942	)
Stock-based compensation		-		398		-			-			-			-			398
Purchase of common stock for treasury stock		-		-		-			-			-			(406	)		(406	)
Issuance of treasury stock (6 shares)		-		368		-			-			-			31			399
Balance, June 30, 2020	$	37,220	$	43,456	$	297,370		$	245		$	(154	)	$	(36,994	)	$	341,143
						��
Balance, December 31, 2019	$	37,200	$	41,956	$	285,879		$	425		$	(154	)	$	(34,238	)	$	331,068
Net earnings		-		-		21,388			-			-			-			21,388
Pension and postretirement benefits (net of ($1) tax effect)		-		-		-			2			-			-			2
Foreign currency translation		-		-		-			(182	)		-			-			(182	)
Cash dividends of $0.34 per share		-		-		(9,897	)		-			-			-			(9,897	)
Stock options exercised		20		438		-			-			-			20			478			-		192		-			-			-			23			215
Stock-based compensation		-		705		-			-			-			-			705			-		328		-			-			-			-			328
Purchase of common stock for treasury stock		-		-		-			-			-			(2,873	)		(2,873	)		-		-		-			-			-			(521	)		(521	)
Issuance of treasury stock (21 shares)		-		357		-			-			-			97			454			-		40		-			-			-			8			48
Balance, September 30, 2019																				$	37,200	$	40,306	$	278,551		$	404		$	(306	)	$	(32,516	)	$	323,639

Balance, December 31, 2018																				$	37,198	$	38,082	$	257,313		$	580		$	(306	)	$	(29,364	)	$	303,503
Net earnings																					-		-		34,903			-			-			-			34,903
Pension and postretirement benefits (net of $133 tax effect)																					-		-		-			333			-			-			333
Foreign currency translation																					-		-		-			(509	)		-			-			(509	)
Cash dividends of $0.47 per share																					-		-		(13,665	)		-			-			-			(13,665	)
Stock options exercised																					2		832		-			-			-			129			963
Stock-based compensation																					-		882		-			-			-			-			882
Purchase of common stock for treasury stock																					-		-		-			-			-			(3,358	)		(3,358	)
Issuance of treasury stock (49 shares)																					-		510		-			-			-			77			587
Balance, September 30, 2019																				$	37,200	$	40,306	$	278,551		$	404		$	(306	)	$	(32,516	)	$	323,639

Balance, June 30, 2020	$	37,220	$	43,456	$	297,370		$	245		$	(154	)	$	(36,994	)	$	341,143		$	37,220	$	43,456	$	297,370		$	245		$	(154	)	$	(36,994	)	$	341,143
Net earnings																					-		-		14,861			-			-			-			14,861
Pension and postretirement benefits (net of ($4) tax effect)																					-		-		-			(11	)		-			-			(11	)
Foreign currency translation																					-		-		-			450			-			-			450
Cash dividends of $0.18 per share																					-		-		(5,235	)		-			-			-			(5,235	)
Stock options exercised																					-		20		-			-			-			7			27
Stock-based compensation																					-		336		-			-			-			-			336
Purchase of common stock for treasury stock																					-		-		-			-			-			(61	)		(61	)
Issuance of treasury stock (21 shares)																					-		38		-			-			-			(5	)		33
Balance, September 30, 2020																				$	37,220	$	43,850	$	306,996		$	684		$	(154	)	$	(37,053	)	$	351,543

Balance, December 31, 2019																				$	37,200	$	41,956	$	285,879		$	425		$	(154	)	$	(34,238	)	$	331,068
Net earnings																					-		-		36,249			-			-			-			36,249
Pension and postretirement benefits (net of ($3) tax effect)																					-		-		-			(9	)		-			-			(9	)
Foreign currency translation																					-		-		-			268			-			-			268
Cash dividends of $0.52 per share																					-		-		(15,132	)		-			-			-			(15,132	)
Stock options exercised																					20		458		-			-			-			27			505
Stock-based compensation																					-		1,041		-			-			-			-			1,041
Purchase of common stock for treasury stock																					-		-		-			-			-			(2,934	)		(2,934	)
Issuance of treasury stock (42 shares)																					-		395		-			-			-			92			487
Balance, September 30, 2020																				$	37,220	$	43,850	$	306,996		$	684		$	(154	)	$	(37,053	)	$	351,543

See accompanying notes to unaudited consolidated condensed financial statements.

In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Badger Meter contain all adjustments (consisting only of normal recurring accruals except as otherwise discussed) necessary to present fairly the Company’s consolidated condensed financial position at ~~June~~September 30, 2020 and December 31, 2019, results of operations, comprehensive income, cash flows and statements of shareholders’ equity for the three and ~~six-month~~nine-month periods ended ~~June~~September 30, 2020 and 2019. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The consolidated condensed balance sheet at December 31, 2019 was derived from amounts included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Refer to the notes to consolidated financial statements included in that report for a description of the Company’s accounting policies and for additional details of the Company’s financial condition. The details in those notes have not changed except as discussed below and as a result of normal adjustments in the interim.

The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents.

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

	Three months ended June 30,						Six months ended June 30,						Three months ended September 30,						Nine months ended September 30,
(In thousands)	2020			2019			2020			2019			2020			2019			2020			2019
Balance at beginning of period	$	5,981		$	4,318		$	5,583		$	4,206		$	6,421		$	5,379		$	5,583		$	4,206
Net additions charged to earnings		1,232			1,816			2,393			2,281			2,077			3,124			4,470			5,405
Costs incurred		(792	)		(755	)		(1,555	)		(1,108	)		(941	)		(1,696	)		(2,496	)		(2,804	)
Balance at end of period	$	6,421		$	5,379		$	6,421		$	5,379		$	7,557		$	6,807		$	7,557		$	6,807

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

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

The following table sets forth the components of net periodic benefit cost (income) for the three months ended ~~June~~September 30, 2020 and 2019 based on December 31, 2019 and 2018 actuarial measurement dates, respectively:

	Defined pension plan benefits				Other postretirement benefits					Defined pension plan benefits				Other postretirement benefits
(In thousands)	2020		2019		2020		2019			2020		2019		2020			2019
Service cost – benefits earned during the year	$	13	$	37	$	31	$	23		$	13	$	38	$	15		$	25
Interest cost on projected benefit obligations		2		9		41		51			2		8		34			53
Amortization of net loss (benefit)		1		9		-		(34	)		2		9		(17	)		(29	)
Net periodic benefit cost	$	16	$	55	$	72	$	40		$	17	$	55	$	32		$	49

The following table sets forth the components of net periodic benefit cost (income) for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 based on December 31, 2019 and 2018 actuarial measurement dates, respectively:

	Defined pension plan benefits				Other postretirement benefits					Defined pension plan benefits				Other postretirement benefits
(In thousands)	2020		2019		2020		2019			2020		2019		2020			2019
Service cost – benefits earned during the year	$	26	$	74	$	62	$	52		$	39	$	74	$	77		$	52
Interest cost on projected benefit obligations		4		18		82		105			6		18		116			105
Amortization of net loss (benefit)		2		18		-		(59	)		4		18		(17	)		(59	)
Net periodic benefit cost	$	32	$	110	$	144	$	98		$	49	$	110	$	176		$	98

The Company disclosed in its financial statements for the year ended December 31, 2019 that it estimated it would pay $0.4 million in other postretirement benefits in 2020 based on actuarial estimates. As of ~~June~~September 30, 2020, ~~$0.2~~$0.3 million of such benefits have been paid. The Company continues to believe that its estimated payments for the full year are reasonable. However, such estimates contain inherent uncertainties because cash payments can vary significantly depending on the timing of postretirement medical claims and the collection of the retirees’ portion of certain costs. The amount of benefits paid in calendar year 2020 will 0t impact the expense for postretirement benefits for 2020.

Components of and changes in accumulated other comprehensive income ~~(loss)~~ at ~~June~~September 30, 2020 are as follows:

Details of reclassifications out of accumulated other comprehensive income ~~(loss)~~ during the ~~six~~nine months ended ~~June~~September 30, 2020 are immaterial.

Components of and changes in accumulated other comprehensive income ~~(loss)~~ at ~~June~~September 30, 2019 are as follows:

(In thousands)	Unrecognized pension and postretirement benefits		Foreign currency		Total		Unrecognized pension and postretirement benefits		Foreign currency			Total
Balance at beginning of period	$	360	$	220	$	580	$	360	$	220		$	580
Other comprehensive income before reclassifications		-		137		137
Amounts reclassified from accumulated other comprehensive income, net of tax of ($137)		349		-		349
Net current period other comprehensive income, net of tax		349		137		486
Other comprehensive (loss) before reclassifications								0		(509	)		(509	)
Amounts reclassified from accumulated other comprehensive income, net of tax of ($133)								333		0			333
Net current period other comprehensive (loss), net of tax								333		(509	)		(176	)
Accumulated other comprehensive income	$	709	$	357	$	1,066	$	693	$	(289	)	$	404

Details of reclassifications out of accumulated other comprehensive income ~~(loss)~~ during the ~~six~~nine months ended ~~June~~September 30, 2019 are as follows:

(In thousands)	Amount reclassified from accumulated other comprehensive income (loss)			Amount reclassified from accumulated other comprehensive income (loss)
Amortization of pension and postretirement benefits items:
Actuarial loss (1)	$	(40	)	$	(60	)
Settlement expense (2)		526			526
Total before tax		486			466
Income tax		(137	)		(133	)
Amount reclassified out of accumulated other comprehensive income	$	349		$	333

In the first quarter of 2019, the Company made a payment of contingent acquisition consideration of $1.0 million related to the May 1, 2017 acquisition of 100% of the outstanding common stock of D-Flow Technology AB (“D-Flow”). There is an additional $1.0 million of contingent acquisition consideration outstanding related to the D-Flow acquisition that is anticipated to be made in the ~~next twelve months~~fourth quarter of 2020 which is recorded in Payables on the Company’s Consolidated Condensed Balance Sheet at ~~June~~September 30, 2020. In the second quarter of 2019, the Company made a payment of contingent acquisition consideration of $0.7 million related to the April 2, 2018 acquisition of 100% of the outstanding common stock of Innovative Metering Solutions, Inc. (“~~IMS”~~IMS”).

In the normal course of business, the Company is named in legal proceedings. There are currently no material legal proceedings pending with respect to the Company.

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2019 and the first ~~two~~three quarters of 2020 were not material.

The Company relies on single suppliers for most brass castings, certain resins and electronic subassemblies in several of its product lines. The Company believes these items would be available from other sources, but that the loss of certain suppliers would result in a higher cost of materials, delivery delays, short-term increases in inventory and higher quality control costs in the short term. The Company attempts to mitigate these risks by working closely with key suppliers, purchasing minimal amounts from alternative suppliers and by purchasing business interruption insurance where appropriate.

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

The Company is subject to income taxes in the United States and numerous foreign jurisdictions. The Company’s income tax positions are based on interpretations of income tax laws and rulings in each of the jurisdictions that the Company operates. Significant judgment is required in determining the worldwide provision for income taxes and recording the related deferred tax assets and liabilities. The Company’s deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income for the years in which the assets or liabilities are expected to be realized or settled. Interim provisions are tied to an estimate of the overall annual rate which can vary due to the relationship of foreign and domestic earnings, state taxes and available deductions, credits and discrete items.

The Company’s earnings before incomes taxes, income tax expense and effective income tax rate are as follows:

	Three months ended June 30,						Six months ended June 30,						Three months ended September 30,						Nine months ended September 30,
(In thousands)	2020			2019			2020			2019			2020			2019			2020			2019
Earnings before income taxes	$	12,588		$	14,913		$	28,528		$	29,064		$	19,539		$	16,338		$	48,067		$	45,402
Income tax expense		3,054			3,555			7,140			6,882
Provision for income taxes														4,678			3,617			11,818			10,499
Effective income tax rate		24.3	%		23.8	%		25.0	%		23.7	%		23.9	%		22.1	%		24.6	%		23.1	%

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

The Company evaluates subsequent events at the date of the balance sheet as well as conditions that arise after the balance sheet date but before the financial statements are issued. The effects of conditions that existed at the balance sheet date are recognized in the financial statements. Events and conditions arising after the balance sheet date but before the financial statements are issued are evaluated to determine if disclosure is required to keep the financial statements from being misleading. To the extent such events and conditions exist, if any, disclosures are made regarding the nature of events and the estimated financial effects for those events and conditions. For purposes of preparing the accompanying consolidated financial statements and the notes to these financial statements, the Company evaluated subsequent events through the date that the accompanying financial statements were issued, and has determined that no material subsequent events exist through the date of this filing.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and modifies the existing guidance to enable more consistent application. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year with early adoption being permitted. The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326),” which amends the accounting for credit losses on purchased financial assets and available-for-sale debt securities with credit deterioration. This ASU requires the measurement of all expected credit losses for financial assets, including accounts receivables, held at the reporting date based upon current conditions, historical experience and reasonable forecasts. This ASU is effective for annual reporting periods beginning after December 15, 2019. The Company adopted ASU No. 2016-13 on January 1, 2020 and noted no significant changes to the Company’s financial positions or results of operations.

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

In accordance with ASU No. 2016-10 “Revenue from Contracts with Customers” (“Topic 606”), the Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606 which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,
(In thousands)	2020		2019		2020		2019		2020		2019		2020		2019
Revenues:
United States	$	80,754	$	90,258	$	175,246	$	181,757	$	102,945	$	93,395	$	278,191	$	275,152
Foreign:
Asia		1,437		2,287		2,985		3,739		1,634		2,816		4,619		6,555
Canada		2,125		3,821		5,261		7,318		2,615		3,437		7,876		10,755
Europe		3,293		4,449		8,068		9,801		3,728		4,327		11,796		14,128
Mexico		1,025		1,003		2,995		1,837		1,226		1,682		4,221		3,519
Middle East		2,218		1,481		3,755		3,065		904		1,317		4,659		4,382
Other		267		243		1,317		906		535		1,672		1,852		2,578
Total	$	91,119	$	103,542	$	199,627	$	208,423	$	113,587	$	108,646	$	313,214	$	317,069

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

	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,				��
(In thousands)	2020		2019		2020		2019		2020		2019		2020		2019
Revenue recognized over time	$	5,177	$	4,003	$	9,981	$	7,756	$	5,542	$	3,857	$	15,523	$	11,341
Revenue recognized at a point in time		85,942		99,539		189,646		200,667		108,045		104,789		297,691		305,728
Total	$	91,119	$	103,542	$	199,627	$	208,423	$	113,587	$	108,646	$	313,214	$	317,069

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

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

	June 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
(In thousands)
Receivables	$	54,021	$	61,365	$	57,706	$	61,365
Contract liabilities		22,056		20,143		22,807		20,143

Contract liabilities are included in ~~payables~~Payables and ~~other~~Other long-term liabilities on the Company’s Consolidated Condensed ~~Consolidated~~ Balance Sheets. The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables in the three and ~~six-month~~nine-month periods ended ~~June~~September 30, 2020 and twelve-month period ended December 31, 2019.

As of ~~June~~September 30, 2020, the Company had certain contracts with unsatisfied performance obligations. For contracts recorded as contract liabilities, ~~$22.1~~$22.8 million was the aggregate amount of the transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied as of the end of the reporting period. The Company estimates that revenue recognized from satisfying those performance obligations will be approximately ~~$5.0~~$4.6 million in 2020, ~~$2.0~~$2.4 million in each year from 2021 through 2025 and ~~$7.1~~$6.2 million thereafter.

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

The Company's performance obligations are satisfied at a point in time or over time as work progresses. Revenue from products and services transferred to customers at a single point in time accounted for ~~94.3%~~95.1% and ~~96.1%~~96.4% of net sales for the three-month periods ended ~~June~~September 30, 2020 and 2019, respectively. Revenue from products and services transferred to customers at a single point in time accounted for 95.0% and ~~96.3%~~96.4% of net sales for the ~~six-month~~nine-month periods ended ~~June~~September 30, 2020 and 2019, respectively. The majority of the Company's revenue recognized at a point in time is for the sale of municipal ~~and flow~~

and flow instrumentation products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during shipping.

Revenue from services transferred to customers over time accounted for ~~5.7%~~4.9% and ~~3.9%~~3.6% of net sales for the three-month periods ended ~~June~~September 30, 2020 and 2019, respectively. Revenue from services transferred to customers over time accounted for 5.0% and ~~3.7%~~3.6% of net sales for the ~~six-month~~nine-month periods ended ~~June~~September 30, 2020 and 2019, respectively. The majority of the Company's revenue that is recognized over time relates to the BEACON® AMA software as a service, but also includes training, certain installation and other revenues.

The Company rents facilities, equipment and vehicles under operating leases, some of which contain renewal options. Upon inception of a rent agreement, the Company determines whether the arrangement contains a lease based on the unique conditions present. Leases that have a term over a year are recognized on the balance sheet as right-of-use assets and lease liabilities. Right-of-use assets are included in ~~prepaid expenses and other current assets and other assets~~Other Assets on the Company’s Consolidated Condensed Balance Sheets. Lease liabilities are included in ~~other~~Other current liabilities and ~~other~~Other long-term liabilities on the Company’s Consolidated Condensed Balance Sheets. Information regarding the Company's right-of-use assets and the corresponding lease liabilities are as follows:

	June 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
(In thousands)
Right-of-use assets	$	7,144	$	8,411	$	7,011	$	8,411
Lease liabilities		7,528		8,792		7,367		8,792

The Company’s operating lease agreements have lease and non-lease components that require payments for common area maintenance, property taxes and insurance. The Company has elected to account for both lease and non-lease components as one lease component. The fixed and in-substance fixed consideration in the Company’s rent agreements constitute operating lease expense that is included in the capitalized right-of-use assets and lease liabilities. The variable and short-term lease expense payments are not included in the present value of the right-of use-assets and lease liabilities on the Consolidated Condensed Balance Sheets. The Company’s rent expense is as follows:

	Three months ended June 30,				Six months ended June 30,				Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
(In thousands)
Operating lease expense	$	754	$	759	$	1,519	$	1,560	$	675	$	764	$	2,194	$	2,331
Variable and short-term lease expense		39		121		96		193		35		36		131		223
Rent expense	$	793	$	880	$	1,615	$	1,753	$	710	$	800	$	2,325	$	2,554

The Company records right-of-use assets and lease liabilities based upon the present value of lease payments over the expected lease term. The Company’s lease agreements typically do not have implicit interest rates that are readily determinable. As a result, the Company utilizes an incremental borrowing rate that would be incurred to borrow on a collateralized basis over a similar term in a comparable economic environment. As of ~~June~~September 30, 2020 and December 31, 2019, the remaining lease term on the Company’s leases was ~~4.3~~6.0 years and 4.5 years, respectively. As of ~~June~~September 30, 2020 and December 31, 2019, the discount rate was 5.0%. The future minimum lease payments to be paid under operating leases are as follows:

	June 30, 2020			September 30, 2020
(In thousands)
2020 (remaining six months)	$	1,322
2020 (remaining three months)				$	650
2021		2,336			2,383
2022		1,298			1,335
2023		1,204			1,232
2024		1,170			1,197
Thereafter		1,018			1,826
Total future lease payments		8,348			8,623
Present value adjustment		(820	)		(1,256	)
Present value of future lease payments	$	7,528		$	7,367

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

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

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

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

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

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

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

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

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

Flow instrumentation products are used in flow measurement and control applications across a broad industrial spectrum, occasionally leveraging the same technologies used in the municipal water category. Specialized communication protocols that control the entire flow measurement process and mandatory certifications drive these markets. The Company provides both standard and customized flow instrumentation solutions.

The industries served by the Company’s flow instrumentation products face accelerating demands to contain costs, reduce product variability, and meet ever-changing safety, regulatory and sustainability requirements. To address these challenges, customers must reap more value from every component in their systems. This system-wide scrutiny has heightened the focus on flow instrumentation in industrial process, manufacturing, commercial fluid, building automation and precision engineering applications where flow measurement and control are critical.

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

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

Across the globe, increasing regulations and a focus on sustainability are driving companies and utilities to better manage critical resources like water, monitor their use of hazardous materials and reduce exhaust gases. Some customers measure fluids to identify leaks and/or misappropriation for cost control or add measurement points to help automate manufacturing. Other customers employ measurement to comply with government mandates and laws. The Company provides flow measurement technology to measure water, oil, chemicals and other fluids, gases and steams. This technology is critical to provide baseline usage data and to quantify reductions as customers attempt to reduce consumption. For example, once water usage metrics are better understood, a strategy for water-use reduction can be developed with specific water-reduction initiatives targeted to those areas where it is most viable. With the Company’s technology, customers have found costly leaks, pinpointed equipment in need of repair, and identified areas for process improvements.

Increasingly, customers in the municipal water market are interested in more frequent and diverse data collection and the use of water metering analytics to evaluate water use. 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 60% of them have converted to a radio solution. The Company believes it is well positioned to meet this continuing conversion trend with its comprehensive radio and software solutions.

In addition, certain water utilities are converting from mechanical to static meters. Ultrasonic water metering maintains a high level of measurement accuracy over the life of the meter, reducing a utility’s non-revenue water. The Company has over a decade of proven reliability in the market with its ultrasonic meters and is ~~on a path to~~ launching its next generation of ultrasonic metering with its D-Flow technology, which the Company believes increases its competitive differentiation. While the increasing deployment of ultrasonic technology into North America may increase competition, it also opens up further geographic penetration opportunities for the Company as previously described.

Finally, the concept of “Smart Cities” is beginning to take hold as 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 one of the world’s most precious resources. Badger Meter is well positioned to benefit from the advancement of Smart Water applications within the Smart Cities framework. Cities have a keen interest in Smart Water as it provides both a revenue base and conservation outcome. Badger Meter is one of approximately a dozen firms, and the only water metering company, that participates in the AT&T Smart City Alliance. By leveraging this alliance, the Company has been able to gain access and sell its broad smart water solutions to higher level decision makers within a city

such as the mayor’s office. In addition, it allows Badger Meter to keep abreast of emerging cellular technology changes which the Company believes is the premier infrastructure-free AMI solution.

In December 2019, a novel coronavirus disease (“COVID-19”) was reported and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries. On March 11, 2020, the WHO characterized COVID-19 as a pandemic.

During the second quarter of 2020, the Company implemented remote work arrangements for non-production personnel, adopted robust safety, social distancing and temperature screening protocols throughout its manufacturing sites and enacted other measures to be able to deliver products to meet customer orders on a timely basis. While the pandemic has had varying levels of impact to demand trends, to date it has not materially affected our ability to maintain business operations, including the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures. The Company ~~is in the process of planning and enacting~~has enacted various return-to-work ~~protocol~~protocols for non-production ~~personnel, the timing of which remains uncertain in light of continuing COVID-19 challenges.~~personnel.

During April 2020 and through the first part of May 2020, the majority of the United States, the Company’s primary commercial market, was subject to various levels of government shelter-in-place or other lockdown orders. During this time, we experienced some customer order delays as utilities and other industrial customers paused to determine impacts to their operations, how to operate remotely, how to best proceed with projects, estimate the duration of the shutdown, etc. In addition, our manufacturing facilities experienced the impact of the shelter-in-place and lock-down orders and intermittent ~~employee absenteeism despite~~manufacturing interruptions. As the ~~critical~~lock-downs were lifted and ~~essential nature of the products the Company provides. Overall, customer~~customers adapted to remote work and field safety protocols, order demand gradually ~~improved and our~~improved. Our operations returned to a more normalized ~~capacity~~level of output as the lockdowns lifted ~~in mid-May~~at the end of the second quarter and ~~thereafter.~~into the third quarter of 2020. Municipal water order trends ~~were~~have been more resilient in their sequential performance while flow instrumentation ~~order trends~~orders showed less resiliency and will likely be negatively affected for a longer ~~duration.~~period, albeit flow instrumentation orders were improved slightly over the second quarter of 2020.

As a result of COVID-19, the Company implemented certain cost contingency actions, including travel restrictions, a hiring freeze, reductions in discretionary spending, short-term reduced work hour furloughs globally and executive salary reductions. The temporary actions generally lasted nine weeks, ending in mid-June 2020. The Company continues to manage hiring and discretionary spending actions in light of continuing market uncertainty. ~~The~~Our Board of Directors and Company management continues to monitor the rapidly changing implications of COVID-19 and is prepared to take additional cost actions if warranted.

The Company is committed to effectively managing working capital and cash in order to preserve liquidity. At June 30, 2020, the Company had approximately $85 million in cash on the balance sheet, and $125 million of revolving credit availability that provides ample capacity to fund foreseeable needs, including the Company’s quarterly dividend.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In accordance with the CARES Act the Company delayed federal tax installment payments to the third quarter of 2020. The CARES Act is not expected to have a material impact on the Company’s consolidated financial statements.

With rising levels of COVID-19 cases in many US states and other global markets, it remains difficult to estimate the severity and duration of the impact of the COVID-19 pandemic on the Company’s business, financial position or results of operations. The magnitude of the impact will be determined by the duration and span of the pandemic, operational disruptions including those resulting from government actions, the development and timeline of an effective and broadly available vaccine and the overall impact on the economy. The Company has contingency plans in place to adequately respond to a wide range of potential economic scenarios and our Board of Directors continues to monitor and evaluate the ongoing situation.

In the first quarter of 2019, the Company made a payment of contingent acquisition consideration $1.0 million related to the May 1, 2017 acquisition of 100% of the outstanding common stock of D-Flow. There is an additional $1.0 million of contingent acquisition consideration related to the D-Flow acquisition that is anticipated to be made in the ~~next twelve months~~fourth quarter of 2020 which is recorded in Payables on the Company’s Consolidated Condensed ~~Consolidated~~ Balance Sheets at ~~June~~September 30, 2020. In the second quarter of 2019, the Company made a payment of contingent acquisition consideration of $0.7 million related to the April 2, 2018 acquisition of 100% of the outstanding common stock of IMS.

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

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

The Company’s net sales for the three months ended ~~June~~September 30, 2020 were ~~$91.1~~$113.6 million compared to ~~$103.5~~$108.6 million during the same period in 2019. Sales into the municipal water market were ~~$72.4~~$93.6 million, ~~a decrease~~an increase of ~~9.0%~~11.0% from the prior year’s ~~$79.5~~$84.3 million. The ~~decline~~increase was attributable to ~~reduced~~the relatively equal contributions of improving order ~~activity~~rates across the broad base of utility ~~customer~~customers served, ~~most notably during~~and the ~~widespread lock-down~~conversion of ~~activity across the United States in April 2020, with improving~~ order ~~demand thereafter. Backlog increased as orders exceeded sales~~backlog built in the prior quarter ~~the result of~~which resulted from modest manufacturing interruptions ~~which limited output at certain of our manufacturing facilities.~~incurred during the initial COVID-19 lock-downs. Existing project installation schedules remained largely on track, and demand for ultrasonic meter technology and ORION Cellular ~~LTE-M~~ radios continued to ~~gain traction.~~grow. Sales of products into the global flow instrumentation end markets were ~~$18.7~~$20.0 million, ~~21.8%~~17.9% lower than the prior year’s ~~$24.0~~$24.3 million as a result of significantly reduced activity across the array of ~~industrial~~ end markets ~~served~~ and ~~also the result of widespread COVID-19 shelter-in-place and lockdown restrictions.~~ applications served.

Total operating earnings for the three months ended ~~June~~September 30, 2020 were ~~$12.7~~$19.5 million, or ~~13.9%~~17.2% of sales, compared to ~~$15.0~~$16.4 million, or ~~14.5%~~15.1% of sales, in the comparable prior year quarter. Gross margin dollars ~~decreased $4.4~~increased $3.4 million, ~~but~~and gross margin ~~increased~~ as a percent of sales increased from ~~38.9%~~38.4% to ~~39.3%~~39.6%. The impact of ~~lower~~higher volumes and manufacturing absorption ~~was partially offset by the temporary cost reduction actions initiated in response to COVID-19~~ as well as the benefit of improved sales mix ~~and lower year-over-year commodity costs.~~benefitted margins. In addition, the prior year included a discrete, non-recurring warranty provision for a previously installed product solution sold outside North America. Selling, engineering and administration (“SEA”) expenses were ~~$23.2~~$25.5 million or ~~25.4%~~22.5% of sales compared to $25.2 million or ~~24.4%~~23.2% of sales in the comparable prior year quarter. The ~~decrease~~modest increase in spend was primarily due to ~~the net benefit of cost reduction actions~~higher personnel costs which were partially offset by ~~higher business optimization investments.~~lower travel and other pandemic-impacted expenses.

The provision for income taxes as a percentage of earnings before income taxes for the ~~second~~third quarter of 2020 was ~~24.3%~~23.9% compared to ~~23.8%~~22.1% in the ~~second~~third quarter of 2019. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, and other credits and allowances.

As a result of the above-mentioned items, net earnings for the three months ended ~~June~~September 30, 2020 were ~~$9.5~~$14.9 million, or ~~$0.33~~$0.51 per diluted share, compared to ~~$11.4~~$12.7 million, or ~~$0.39~~$0.44 per diluted share, for the same period in 2019.

The Company’s net sales for the ~~six~~nine months ended ~~June~~September 30, 2020 were ~~$199.6~~$313.2 million compared to ~~$208.4~~$317.1 million during the same period in 2019. Sales into the municipal water market were ~~$158.1~~$251.7 million, ~~a decrease~~an increase of ~~1.6%~~2.7% from the prior year’s ~~$160.7~~$245.0 million. The ~~decline~~increase was attributable to the sharp delay in orders and sales primarily in the month of April 2020 resulting from the enacting of stay-at-home orders throughout much of the United States in response to COVID-19. During the beginning of the fiscal year, the Company experienced higher sales of advanced technology products including ORION Cellular LTE-M endpoints, E-Series® Ultrasonic water meters as well as increased SaaS revenue associated with data collection and software analytics. These trends more than offset the short term decline in orders that occurred in April and May 2020 from the stay-at-home orders throughout much of the United States in response to COVID-19. Sales of products into the global flow instrumentation end markets were ~~$41.5~~$61.5 million, ~~12.9%~~14.6% lower than the prior year’s ~~$47.7~~$72.0 million due to significantly reduced activity across the array of industrial end markets served and also the result of widespread COVID-19 shelter-in-place and lockdown restrictions.

Total operating earnings for the ~~six~~nine months ended ~~June~~September 30, 2020 were ~~$28.7~~$48.2 million, or ~~14.4%~~15.4% of sales, compared to ~~$29.4~~$45.8 million, or ~~14.1%~~14.4% of sales, in the comparable prior year period. Gross margin dollars ~~decreased $1.6~~increased $1.8 million and gross margin percent improved to 39.7% from 38.6% due to ~~the~~

~~impact of modestly lower volumes partially offset by the temporary~~ cost reduction actions, ~~benefit of~~ improved sales mix, and ~~lower year-over-year commodity costs.~~the prior year’s non-recurring discrete warranty charge. SEA expenses were ~~$50.5~~$76.0 million or ~~25.3%~~24.3% of sales compared to ~~$51.4~~$76.6 million or ~~24.6%~~24.2% of sales in the comparable prior year period. The decrease was primarily due to the net benefit of cost reduction actions and lower pandemic-impacted expenses such as travel, offset by higher personnel, research and development and business optimization investments.

The provision for income taxes as a percentage of earnings before income taxes for the first ~~half~~nine months of 2020 was ~~25.0%~~24.6% compared to ~~23.7%~~23.1% in the ~~first half of 2019.~~comparable prior year period. Interim provisions are based on an estimate of the overall annual rate that can vary due to state taxes, the relationship of foreign and domestic earnings, and other credits and allowances.

As a result of the above-mentioned items, net earnings for the ~~six~~nine months ended ~~June~~September 30, 2020 were ~~$21.4~~$36.2 million, or ~~$0.73~~$1.24 per diluted share, compared to ~~$22.2~~$34.9 million, or ~~$0.76~~$1.19 per diluted share, for the comparable prior year period.

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.

The Company uses primary working capital (“PWC”) as a percentage of sales as a key metric for working capital efficiency. The Company defines this metric as the sum of ~~receivables~~Receivables and ~~inventories~~Inventories less ~~payables,~~Payables, divided by trailing twelve month ~~net~~Net sales. The following table shows the components of our PWC (in millions):

	June 30, 2020				December 31, 2019				September 30, 2020				December 31, 2019
	$			PWC%	$			PWC%	$			PWC%	$			PWC%
Receivables	$	54,021		13.0%	$	61,365		14.5%	$	57,706		13.7%	$	61,365		14.5%
Inventories		76,846		18.5%		81,948		19.3%		76,987		18.3%		81,948		19.3%
Payables		(35,449	)	-8.5%		(31,523	)	-7.4%		(37,791	)	-9.0%		(31,523	)	-7.4%
Primary Working Capital	$	95,418		22.9%	$	111,790		26.4%	$	96,902		23.0%	$	111,790		26.4%

Overall, PWC declined ~~$16.4~~$14.9 million compared to the previous year-end. Receivables at ~~June~~September 30, 2020 declined ~~$7.3~~$3.7 million due to ~~lower sales volumes and~~ improved ~~collections.~~collection efforts. Inventories declined ~~$5.1~~$5.0 million, the result of ~~lower volumes and~~ inventory planning ~~initiatives.~~initiatives Payables at ~~June~~September 30, 2020 were ~~$3.9~~$6.3 million higher than year-end due to the timing of payments and previously negotiated payment terms extensions.

Cash provided by operations in the first ~~six~~nine months of 2020 was ~~$52.3~~$73.7 million compared to ~~$40.9~~$61.1 million in the same period of 2019. The increase iswas due primarily to higher earnings and lower working capital ~~in light of the recently reduced demand environment, solid~~balances associated with active working capital management ~~and the deferral of quarterly federal income tax payments in 2020~~initiatives as ~~allowed under the CARES Act.~~described above.

Capital expenditures for the first ~~half~~nine months of 2020 were ~~$3.6~~$5.9 million compared to ~~$4.5~~$5.6 million in the ~~first half of 2019.~~comparable prior year period.

Cash and cash equivalents increased ~~$36.3~~$45.0 million, to ~~$85.2~~$93.9 million at ~~June~~September 30, 2020 due to the strong cash flow from operations, partially offset by the payment of the quarterly ~~dividend. At the end~~dividends, and repayment of the ~~second quarter~~short term line of ~~2020, the Company was in a net cash (cash less short-term debt) position of $80.7 million.~~credit.

The Company’s financial condition remains strong. In June 2018, the Company amended its May 2012 credit agreement with its primary lender and extended its term until September 2021. The credit agreement includes a $125.0 million line of credit that supports commercial paper (up to $70.0 million) and includes $5.0 million of a Euro line of credit. While the facility is unsecured, there are a number of financial covenants with which the Company must comply, and the Company was in compliance as of ~~June~~September 30, 2020. 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, including, in light of COVID-19. As future borrowing requirements would likely be fulfilled via the local commercial paper market, the Company routinely monitors the current borrowing market. The Company had ~~$128.3~~$133.1 million of unused credit lines available at ~~June~~September 30, 2020.

The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to these specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2019 and the first ~~two~~three quarters of 2020 were not material.

The Company’s off-balance sheet arrangements and contractual obligations are discussed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Off-Balance Sheet Arrangements” and “Contractual Obligations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and have not materially changed since that report was filed unless otherwise indicated in this Quarterly Report on Form 10-Q.

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management evaluated, with the participation of the Company’s Chairman, President and Chief Executive Officer and the Company’s Senior Vice President - Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the quarter ended ~~June~~September 30, 2020. Based upon their evaluation of these disclosure controls and procedures, the Company’s Chairman, President and Chief Executive Officer and the Company’s Senior Vice President – Chief Financial Officer concluded that, as of the date of such evaluation, the Company’s disclosure controls and procedures were effective.

There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

Our business, results of operations and financial condition may be adversely affected if a global public health pandemic, including the current global coronavirus (COVID-19) pandemic, interferes with the ability of our employees, suppliers, and customers to perform our and their respective responsibilities and obligations relative to the conduct of our business and operations. The COVID-19 pandemic has significantly impacted economic activity and markets around the world, and it could have a material negative impact on our business and operations in numerous ways, including but not limited to those outlined below:

The extent to which the COVID-19 pandemic, or other outbreaks of disease or similar public health threats, materially and adversely impacts our business, results of operations and financial condition is highly uncertain and will depend on future developments. Such developments may include the geographic spread and duration of the virus, the severity of the disease, the development and timeline of an effective and broadly available vaccine and the actions that may be taken by various governmental authorities and other third parties in response to the outbreak. In addition, how quickly, and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal business operations may be delayed or constrained by lingering effects of the COVID-19 pandemic on our suppliers, third-party service providers, and/or customers.

In February 2020, the Board of Directors authorized the repurchase of up to an additional 400,000 shares of the Company’s Common Stock through February 2023. The following table provides information about the Company's purchases under this repurchase program during the quarter ended ~~June~~September 30, 2020 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

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

Wisconsin		39-0143280
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4545 W. Brown Deer Road Milwaukee, Wisconsin		53233
(Address of principal executive offices)		(Zip code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BMI	New York Stock Exchange

		Page No.

Part I. Financial Information:

Item 1	Financial Statements (unaudited):	4

	Consolidated Condensed Balance Sheets - ~~June~~September 30, 2020 and December 31, 2019	4

	Consolidated Condensed Statements of Operations - Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019	5

	Consolidated Condensed Statements of Comprehensive Income - Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019	6

	Consolidated Condensed Statements of Cash Flows - ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019	7

	Consolidated Condensed Statements of Shareholders’ Equity – Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019	8

	Notes to Unaudited Consolidated Condensed Financial Statements	9

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3	Quantitative and Qualitative Disclosures about Market Risk	20

Item 4	Controls and Procedures	20

Part II. Other Information:

Item 1A	Risk Factors	21

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 6	Exhibits	22

Signatures		23

	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of a publicly announced program		Maximum number of shares that may yet be purchased under the program
April 1, 2020 - April 30, 2020		-		-		40,000		360,000
May 1, 2020 - May 31, 2020		-		-		40,000		360,000
June 1, 2020 - June 30, 2020		6,500	$	62.34		46,500		353,500
Total as of June 30, 2020		6,500				46,500		353,500

	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of a publicly announced program		Maximum number of shares that may yet be purchased under the program
July 1, 2020 - July 31, 2020		-		-		46,500		353,500
August 1, 2020 - August 31, 2020		-		-		46,500		353,500
September 1, 2020 - September 30, 2020		953	$	64.00		47,453		352,547
Total as of September 30, 2020		953				47,453		352,547

	(414) 355-0400
	(Registrant’s telephone number, including area code)

Large accelerated filer	☒	Smaller reporting company	☐
Accelerated filer	☐	Emerging growth company	☐
Non‑accelerated filer	☐

Exhibit No.		Description


10		Amended and Restated Badger Meter, Inc. Executive Supplemental Plan.

31.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2020 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, (v) the Consolidated Condensed Statements of Shareholders’ Equity and (vi) Notes to Unaudited Consolidated Condensed Financial Statements, tagged as blocks of text and including detailed tags.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	BADGER METER, INC.

Dated: ~~July 30,~~October 28, 2020	By	/s/ Kenneth C. Bockhorst
		Kenneth C. Bockhorst
		Chairman, President and Chief Executive Officer

	By	/s/ Robert A. Wrocklage
		Robert A. Wrocklage
		Senior Vice President – Chief Financial Officer

	By	/s/ Daniel R. Weltzien
		Daniel R. Weltzien
		Vice President – Controller