Badger Meter Reports Record Net Sales, Earnings and Earnings Per Share in 2017

MILWAUKEE–(BUSINESS WIRE)–Badger
Meter, Inc. (NYSE: BMI) today reported results for the fourth
quarter and year ended December 31, 2017.

Fourth Quarter 2017 Highlights

• Net sales were a record $96,650,000 for the fourth quarter of 2017, a
  3.8% increase from sales of $93,098,000 for the fourth quarter of 2016.
• Operating earnings were a record $13,151,000 for the fourth quarter of
  2017, a 44.6% increase from operating earnings of $9,095,000 for the
  fourth quarter of 2016.
• Net earnings were a record $7,233,000 for the fourth quarter of 2017,
  a 18.3% increase from net earnings of $6,113,000 for the fourth
  quarter of 2016.
• Diluted earnings per share were a record $0.25 for the fourth quarter
  of 2017, a 19.0% increase from diluted earnings per share of $0.21 for
  the fourth quarter of 2016.

Full Year 2017 Highlights

• Net sales were a record $402,440,000 for 2017, a 2.2% increase from
  sales of $393,761,000 for 2016.
• Operating earnings were a record $55,622,000 for 2017, a 9.6% increase
  from operating earnings of $50,765,000 for 2016.
• Net earnings were a record $34,571,000 for 2017, a 7.0% increase from
  net earnings of $32,295,000 for 2016.
• Diluted earnings per share were a record $1.19 for 2017, a 7.2%
  increase from diluted earnings per share of $1.11 for 2016.

Operations Review

“Record net sales, earnings and earnings per share in the fourth quarter
were the culmination of another strong year for Badger Meter,” said
Richard A. Meeusen, chairman, president and chief executive officer of
Badger Meter. “Ongoing acceptance of our more advanced technology
products and continued operational efficiencies drove margin increases
in the quarter despite continued softness in the municipal utility
market. Sales, engineering and administrative expenses were in line
given our continued investments in our team, product innovation and
enhancements to our sales and distribution channels, most notably the
asset acquisition of Carolina Meter & Supply, which closed in early
November.”

In addition to the positive margin impact from sales of the company’s
newer products, the quarter also benefited from slightly higher
municipal water sales volume as well as continued improvement in key
flow instrumentation markets, such as oil and gas. Gross profit margin
was 40.4%, up from 36.0% in the fourth quarter of 2016, despite somewhat
higher brass costs. Similar to prior years, net earnings and earnings
per share were reduced by a non-cash pre-tax pension settlement charge
of $640,000 or $0.015 per diluted share.

“In addition to a record quarter, we are very pleased with our record
results for the full year. Sales crossed the $400 million threshold for
the first time in 2017, driven in large part by the market’s continued
evolution toward our new technologies and continued improvement in our
industrial markets,” said Meeusen. “This bodes well for the future, as
demand for E-Series® meters and ORION® cellular
endpoints, as well as ongoing interest in our BEACON® Advanced
Metering Analytics (AMA) managed solution, continue to grow.”

Selling, engineering and administration costs increased slightly for the
year due to acquisition expenses, commissions and employee incentives,
as well as higher professional services fees. Despite that, operating
income increased 9.6% and net earnings increased 7.0% over what was a
strong 2016. The company ended the year with a debt-to-total
capitalization ratio of 13.8%. The quarterly cash dividend was increased
for the 25th consecutive year.

“We are optimistic as we head into 2018. Our industry leadership in
North American water metering and improving position in global flow
instrumentation technologies, combined with a more favorable domestic
tax environment, position us well to capture additional sales and
earnings growth over the long term,” added Meeusen.

Impact of 2017 Tax Cuts and Jobs Act

Results for the fourth quarter included a charge of $0.8 million to
record a transition tax on the company’s undistributed foreign earnings,
offset by a credit of $0.8 million to recognize the Federal rate change
impact on the company’s net deferred tax liabilities. These resulted
from the Tax Cuts and Jobs Act signed into law on December 22, 2017. The
company indicated the long-term impact of tax reform is expected to be
significant, with future effective tax rates likely to be reduced from
approximately 36% to 24%.

Conference Call and Webcast

Badger Meter management will hold a conference call on Tuesday, February
6, 2018, at 10:00 AM Central/11:00 AM Eastern time to discuss the
company’s fourth quarter 2017 results. Interested parties can listen to
the call live on the Internet through the company’s website: www.badgermeter.com or
by dialing 1-844-281-9843 and entering the passcode 7486867. Listeners
should dial in to the call at least 5-10 minutes prior to the start of
the call or should go to the website at least 15 minutes prior to the
call to download and install any necessary audio software.

A telephone replay of the conference call will be available
through Tuesday, February 13, 2018, by dialing 1-855-859-2056 and
entering the passcode 7486867. The webcast will be archived on the
company’s website until its next earnings release.

About Badger Meter

Badger Meter is an innovator in flow measurement, control and
communications 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. For more information, visit www.badgermeter.com.

Certain statements contained in this news release, as well as other
information provided from time to time by Badger Meter, Inc. (the
“Company”) or its employees, may contain forward looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those in the forward looking statements. The
words “anticipate,” “believe,” “estimate,” “expect,” “think,” “should,”
“could” and “objective” or similar expressions are intended to identify
forward looking statements. All such forward looking statements
are based on the Company’s then current views and assumptions and
involve risks and uncertainties. Some risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied in forward looking statements include those
described in Item 1A of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2016 that include, among other things:

• the continued shift in the Company’s business from lower cost,
  manually read meters toward more expensive, value-added automatic
  meter reading (AMR) systems, advanced metering infrastructure (AMI)
  systems and advanced metering analytics (AMA) systems that offer more
  comprehensive solutions to customers’ metering needs;
• the success or failure of newer Company products;
• changes in competitive pricing and bids in both the domestic and
  foreign marketplaces, and particularly in continued intense price
  competition on government bid contracts for lower cost, manually read
  meters;
• the actions (or lack thereof) of the Company’s competitors;
• changes in the Company’s relationships with its alliance partners,
  primarily its alliance partners that provide radio solutions, and
  particularly those that sell products that do or may compete with the
  Company’s products;
• changes in the general health of the United States and foreign
  economies, including to some extent such things as the length and
  severity of global economic downturns, international or civil
  conflicts that affect international trade, the ability of municipal
  water utility customers to authorize and finance purchases of the
  Company’s products, the Company’s ability to obtain financing, housing
  starts in the United States, and overall industrial activity;
• unusual weather, weather patterns or other natural phenomena,
  including related economic and other ancillary effects of any such
  events;
• economic policy changes, including but not limited to, trade policy
  and corporate taxation;
• the timing and impact of government funding programs that stimulate
  national and global economies, as well as the impact of government
  budget cuts or partial shutdowns of governmental operations;
• changes in the cost and/or availability of needed raw materials and
  parts, such as volatility in the cost of brass castings as a result of
  fluctuations in commodity prices, particularly for copper and scrap
  metal at the supplier level, foreign-sourced electronic components as
  a result of currency exchange fluctuations and/or lead times, and
  plastic resin as a result of changes in petroleum and natural gas
  prices;
• the Company’s expanded role as a prime contractor for providing
  complete technology systems to governmental entities, which brings
  with it added risks, including but not limited to, the Company’s
  responsibility for subcontractor performance, additional costs and
  expenses if the Company and its subcontractors fail to meet the
  timetable agreed to with the governmental entity, and the Company’s
  expanded warranty and performance obligations;
• the Company’s ability to successfully integrate acquired businesses
  or products;
• changes in foreign economic conditions, particularly currency
  fluctuations in the United States dollar, the Euro and the Mexican
  peso;
• the inability to develop technologically advanced products;
• the failure of the Company’s products to operate as intended;
• the inability to protect the Company’s proprietary rights to its
  products;
• disruptions and other damages to information technology and other
  networks and operations due to breaches in data security or any other
  cybersecurity attack;
• transportation delays or interruptions;
• violations or alleged violations of the U.S. Foreign Corrupt
  Practices Act (FCPA) or other anti-corruption laws and the Foreign
  Account Tax Compliance provisions of the Hiring Incentives to Restore
  Employment Act (referred to as FATCA);
• the loss of certain single-source suppliers; and
• changes in laws and regulations, particularly laws dealing with the
  content or handling of materials used in the Company's products.

All of these factors are beyond the Company's control to varying
degrees. Shareholders, potential investors and other readers are
urged to consider these factors carefully in evaluating the forward
looking statements contained in this news release 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 company news is available 24 hours a day, on-line at: http://www.badgermeter.com.

Contacts

Badger Meter, Inc.
Dawn O’Neill, (414) 371-7276