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<SEC-DOCUMENT>0000950134-03-010837.txt : 20030801
<SEC-HEADER>0000950134-03-010837.hdr.sgml : 20030801
<ACCEPTANCE-DATETIME>20030801150251
ACCESSION NUMBER:		0000950134-03-010837
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20030630
FILED AS OF DATE:		20030801

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BADGER METER INC
		CENTRAL INDEX KEY:			0000009092
		STANDARD INDUSTRIAL CLASSIFICATION:	TOTALIZING FLUID METERS & COUNTING DEVICES [3824]
		IRS NUMBER:				390143280
		STATE OF INCORPORATION:			WI
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-06706
		FILM NUMBER:		03817801

	BUSINESS ADDRESS:	
		STREET 1:		4545 WEST BROWN DEER ROAD
		CITY:			MILWAUKEE
		STATE:			WI
		ZIP:			53223
		BUSINESS PHONE:		4143715702

	MAIL ADDRESS:	
		STREET 1:		4545 W BROWN DEER RD
		CITY:			MILWAUKEE
		STATE:			WI
		ZIP:			53223

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BADGER METER MANUFACTURING CO
		DATE OF NAME CHANGE:	19710729
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>c78641e10vq.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>


                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  for the quarterly period ended JUNE 30, 2003



                               BADGER METER, INC.

                             4545 W. BROWN DEER ROAD
                           MILWAUKEE, WISCONSIN 53223
                                 (414) 355-0400
                             A Wisconsin Corporation
                   IRS Employer Identification No. 39-0143280
                           Commission File No. 1-6706







         The company 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, and
has been subject to such filing requirements for the past 90 days.

         The company is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).

         As of July 25, 2003, there were 3,257,866 shares of Common Stock
outstanding with a par value of $1.00 per share.





                                       1




<PAGE>





                               BADGER METER, INC.

          QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED JUNE 30, 2003

                                      INDEX


<TABLE>
<CAPTION>
                                                                                                 Page No.
Part I.  Financial Information:

<S>            <C>                                                                             <C>
   Item 1       Financial Statements:

                Consolidated Condensed Balance Sheets --
                June 30, 2003 and December 31, 2002                                                   3

                Consolidated Condensed Statements of Operations --
                Three and Six Months Ended June 30, 2003 and 2002                                     4

                Consolidated Condensed Statements of Cash Flows --
                Six Months Ended June 30, 2003 and 2002                                               5

                Notes to Consolidated Condensed Financial Statements                                  6

   Item 2       Management's Discussion and Analysis of Financial
                Condition and Results of Operations                                                   9

   Item 3       Quantitative and Qualitative Disclosures about Market Risk                           11

   Item 4       Controls and Procedures                                                              11

Part II. Other Information:

   Item 4       Submission of Matters to a Vote of Security Holders                                  12

   Item 6(a)    Exhibits                                                                             13

   Item 6(b)    Reports on Form 8-K                                                                  13

Exhibit Index                                                                                        15
</TABLE>


                                       2


<PAGE>



                         Part I - Financial Information

Item 1   Financial Statements
                               BADGER METER, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>


                                     Assets                               June 30,               December 31,
                                                                            2003                     2002
                                                                            ----                     ----
                                                                        (Unaudited)
<S>                                                                   <C>                    <C>
Current assets:
     Cash                                                            $     2,968                 $     3,779
     Receivables                                                          28,577                      22,139
     Inventories:
       Finished goods                                                      7,322                       7,569
       Work in process                                                     9,277                       8,308
       Raw materials                                                      12,368                       9,305
                                                                     -----------                 -----------
         Total inventories                                                28,967                      25,182
     Prepaid expenses                                                      1,640                       1,219
     Deferred income taxes                                                 3,523                       3,061
                                                                     -----------                 -----------
         Total current assets                                             65,675                      55,380
Property, plant and equipment, at cost                                   102,103                      98,796
     Less accumulated depreciation                                       (58,372)                    (55,328)
                                                                     -----------                 -----------
        Net property, plant and equipment                                 43,731                      43,468

Intangible assets, at cost less accumulated amortization                   1,080                       1,112
Prepaid pension                                                           16,392                      17,454
Other assets                                                               3,308                       3,352
Goodwill                                                                   6,745                       5,697
                                                                     -----------                 -----------
Total assets                                                         $   136,931                 $   126,463
                                                                     ===========                 ===========

                      Liabilities and Shareholders' Equity
Current liabilities:
     Short-term debt                                                 $    28,744                 $    20,355
     Current portion of long-term debt                                     3,428                       5,979
     Payables                                                             14,268                      11,040
     Accrued compensation and employee benefits                            5,227                       6,017
     Warranty and after-sale costs                                         3,694                       3,597
     Income and other taxes                                                2,804                       1,567
                                                                     -----------                 -----------
         Total current liabilities                                        58,165                      48,555

Deferred income taxes                                                      4,720                       4,710
Accrued non-pension postretirement benefits                                5,314                       5,512
Other accrued employee benefits                                            6,230                       6,545
Long-term debt                                                            11,096                      13,046
Commitments and contingencies
Shareholders' equity:
     Common Stock                                                          4,803                       4,762
     Capital in excess of par value                                       18,797                      18,169
     Reinvested earnings                                                  56,418                      54,776
     Accumulated other comprehensive income (loss)                         1,002                         (61)
     Less: Employee benefit stock                                         (1,285)                     (1,535)
           Treasury stock, at cost                                       (28,329)                    (28,016)
                                                                     -----------                 -----------
         Total shareholders' equity                                       51,406                      48,095
                                                                     -----------                 -----------
Total liabilities and shareholders' equity                           $   136,931                 $   126,463
                                                                     ===========                 ===========
</TABLE>


      See accompanying notes to consolidated condensed financial statements.



                                       3

<PAGE>

                               BADGER METER, INC.
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
           (Dollars in Thousands Except Share and Per Share Amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                             Three Months Ended                            Six Months Ended
                                                  June 30,                                     June 30,
                                                  -------                                      -------

                                           2003               2002                       2003             2002
                                           ----               ----                       ----             ----


<S>                                 <C>                <C>                        <C>              <C>
Net sales                           $    47,516        $    43,586                $    87,091      $    81,040

Cost of sales                            31,492             28,768                     58,124           53,462
                                     ----------        -----------                -----------      -----------

Gross margin                             16,024             14,818                     28,967           27,578

Selling, engineering and
     administration                      12,598             10,838                     23,872           20,782
                                     ----------        -----------                -----------      -----------

Operating earnings                        3,426              3,980                      5,095            6,796

Interest expense                            412                468                        968              840
Other income, net                        (1,179)               (57)                    (1,222)             (88)
                                     ----------        ------------               -----------      ------------

Earnings before income taxes              4,193              3,569                      5,349            6,044

Provision for income taxes                1,587              1,249                      2,037            2,117
                                     ----------        -----------                -----------      -----------

Net earnings                        $     2,606        $     2,320                $     3,312      $     3,927
                                     ==========        ===========                ===========      ===========

Per share amounts:  *

   Earnings per share:
     Basic                          $       .81        $       .73                $      1.03      $      1.24
                                     ==========        ===========                ===========      ===========

     Diluted                        $       .78        $       .70                $      1.00      $      1.20
                                     ==========        ===========                ===========      ===========

   Dividends declared:              $       .26        $       .25                $       .52      $       .50
                                     ==========        ===========                ===========      ===========

   Shares used in computation of:
     Basic                            3,221,003          3,156,771                  3,207,961        3,155,734
     Impact of dilutive stock
       options                          117,370            143,564                    118,970          128,466
                                     ----------        -----------                -----------      -----------
     Diluted                          3,338,373          3,300,335                  3,326,931        3,284,200
                                     ==========        ===========                ===========      ===========
</TABLE>




*Earnings per share is computed independently for each of the periods presented.
Therefore, the sum of the quarterly earnings per share does not necessarily
equal the total for the year.

     See accompanying notes to consolidated condensed financial statements.




                                        4
<PAGE>



                               BADGER METER, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                             Six Months Ended
                                                                                 June 30,
                                                                                 --------


                                                                       2003                         2002
                                                                       ----                         ----
<S>                                                          <C>                         <C>
Operating activities:
   Net earnings                                                 $     3,312                  $     3,927
   Adjustments to reconcile net
     earnings to net cash provided
     by (used for) operations:
       Depreciation                                                   3,594                        3,742
       Amortization                                                      32                           37
       Tax benefit on stock options                                     264                          118
       Noncurrent employee benefits                                     799                          508
       Deferred income taxes                                           (452)                         (80)
       Changes in:
         Receivables                                                 (6,438)                      (4,140)
         Inventories                                                 (3,785)                          61
         Current liabilities other than debt                          3,015                        6,800
         Prepaid expenses and other                                    (421)                        (101)
                                                                ------------                 -----------
   Total adjustments                                                 (3,392)                       6,945
                                                                ------------                 -----------
Net cash provided by (used for) operations                              (80)                      10,872
                                                                ------------                 -----------

Investing activities:
   Property, plant and equipment                                     (3,857)                      (2,582)
   Acquisitions, net of cash acquired                                     0                       (8,277)
   Other - net                                                          816                         (277)
                                                                -----------                  -----------
Net cash used for investing activities                               (3,041)                     (11,136)
                                                                ------------                 -----------

Financing activities:
   Net increase in short-term debt                                    8,389                        3,080
   Repayments of long-term debt                                      (4,501)                      (1,626)
   Dividends                                                         (1,670)                      (1,579)
   Stock options and ESSOP                                              405                          867
   Treasury stock purchases                                            (555)                        (964)
   Issuance of treasury stock                                           242                            0
                                                                -----------                  -----------
Net cash provided by (used for)
   financing activities                                               2,310                         (222)
                                                                -----------                  -----------

Decrease in cash                                                       (811)                        (486)
Cash - beginning of period                                            3,779                        3,410
                                                                -----------                  -----------
Cash - end of period                                            $     2,968                  $     2,924
                                                                ===========                  ===========
</TABLE>





     See accompanying notes to consolidated condensed financial statements.



                                       5



<PAGE>




                               BADGER METER, INC.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



1.   In the opinion of management, the accompanying unaudited consolidated
     condensed financial statements of Badger Meter, Inc. (the "Company")
     contain all adjustments (consisting only of normal recurring accruals)
     necessary to present fairly the consolidated condensed financial position
     at June 30, 2003, the results of operations for the three and six-month
     periods ended June 30, 2003 and 2002, and the cash flows for the six-month
     periods ended June 30, 2003 and 2002. The results of operations for any
     interim period are not necessarily indicative of the results to be expected
     for the full year.

2.   The consolidated condensed balance sheet at December 31, 2002 was derived
     from amounts included in the Company's Annual Report on Form 10-K for the
     year ended December 31, 2002. Refer to the footnotes in that report for a
     description of the accounting policies, which have been continued without
     change, and additional details of the Company's financial condition. The
     details in those notes have not changed except as discussed below and as a
     result of normal adjustments in the interim.

     Warranty and After-Sale Costs The Company estimates and records provisions
     for warranties and other after-sale costs in the period the sale is
     reported. 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 for
     the six-month periods ended June 30, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>

                          Balance at        Additions                                              Balance
                           beginning       charged to            Claims          Reserve                at
     (In thousands)          of year         earnings              paid         acquired           June 30
     -----------------------------------------------------------------------------------------------------
<S>                          <C>                <C>             <C>         <C>                   <C>
     2003                     $3,597             $690            $(593)      $    0                 $3,694
     2002                     $3,453             $632            $(760)      $  225(a)              $3,550
     =====================================================================================================
</TABLE>


     (a) In 2002, the reserve increased $30,000 and $195,000 related to the
         acquisition of Data Industrial Corporation and MecaPlus Equipements SA.
         Refer to Note 3 for a description of the acquisitions.

     Stock Option Plans The Company has six stock option plans which provide for
     the issuance of options to key employees and directors of the Company. Each
     plan authorizes the issuance of options to purchase up to an aggregate of
     200,000 shares of Common Stock, with vesting periods of up to ten years and
     maximum option terms of ten years. As of June 30, 2003, options to purchase
     134,235 shares are available for grant.

     As allowed by Financial Accounting Standards Board Statement No. 123,
     "Accounting for Stock-Based Compensation" (SFAS 123), and Statement No.
     148, "Accounting for Stock-based Compensation -- Transition and
     Disclosure", the Company has elected to continue to follow Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
     (APB 25), in accounting for its stock option plans. Under APB 25, the
     Company does not recognize compensation expense upon the issuance of its
     stock options because the option terms are fixed and the exercise price
     equals the market price of the underlying stock on the grant date.





                                       6




<PAGE>



     The following table illustrates the effect on net income and earnings per
     share if the Company had applied the fair value recognition provisions of
     SFAS 123 to stock options.

<TABLE>
<CAPTION>
                                                                    Three Months                          Six Months
                                                                   Ended June 30,                       Ended June 30,
                                                                   --------------                       --------------
     (In thousands except per share amounts)                    2003           2002                  2003           2002
     --------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>        <C>                     <C>            <C>
     Net income, as reported                                    $2,606    $   2,320                 $ 3,312      $ 3,927
     Deduct:  Total stock-based compensation
       determined under fair value based method
       for all awards since January 1, 1995,
       net of related tax effects                                   80           71                     163          142
     --------------------------------------------------------------------------------------------------------------------
     Pro forma net income                                       $2,526    $   2,249                 $ 3,149      $ 3,785
     Earnings per share:
       Basic, as reported                                       $  .81    $     .73                 $  1.03      $  1.24
       Basic, pro forma                                         $  .78    $     .71                 $   .98      $  1.20
       Diluted, as reported                                     $  .78    $     .70                 $  1.00      $  1.20
       Diluted, pro forma                                       $  .76    $     .68                 $   .95      $  1.15
     ====================================================================================================================
</TABLE>


3.   The Company acquired Data Industrial Corporation (DIC )  and MecaPlus
     Equipements SA (MPE) in May and June 2002, respectively. A description of
     the acquisitions is included in the Company's Annual  Report on Form 10-K
     for the year ended December 31, 2002 under Part II, Item 8 "Financial
     Statements and Supplementary Data." During the second quarter 2003, the
     Company finalized the allocation of the purchase price for both
     acquisitions.

     As of June 30, 2003, goodwill increased $757,000 from the December 31, 2002
     amount to reflect severances related to the termination of several MPE
     employees in connection with management's initial assessment at the date of
     acquisition. The amount of the severance cost was not estimable until the
     first quarter of 2003. Additionally, goodwill increased $291,000 due to
     currency translation adjustments for the six months ended June 30, 2003.

     The following unaudited pro forma information combines historical results,
     as if DIC and MPE had been owned by the Company for the following periods:


<TABLE>
<CAPTION>
     (In thousands except per share amounts)
     -----------------------------------------------------------------------------------------------------
                                              Three Months Ended                        Six Months Ended
                                                 June 30, 2002                            June 30, 2002
                                                 -------------                            -------------

<S>                                               <C>                                       <C>
     Net sales                                    $    48,710                               $    89,276
     Net earnings                                 $     2,308                               $     3,943
     Diluted earnings
       per share                                  $       .70                               $      1.20
     =====================================================================================================
</TABLE>


     The pro forma amounts include the results of the stand-alone operations of
     DIC and MPE, plus the impact of purchase accounting entries, which include
     amortization of the acquired intangibles, depreciation of the stepped up
     basis of the fixed assets, and interest expense on debt incurred to finance
     the purchases. The pro forma results are not necessarily indicative of what
     would have occurred if the acquisitions had been completed as of the
     beginning of 2002, nor are they necessarily indicative of future
     consolidated results.

4.   In order to better utilize existing capacity, a decision was made during
     the second quarter 2003 to move production of the non-magnetic impeller
     flow sensor systems product line from the Company's facility in
     Mattapoisett, Massachusetts to its facility in Tulsa, Oklahoma. The lease
     on the Massachusetts facility expires in early 2004 and it is expected that
     the move will be complete by the end of 2003. The affected employees were
     notified in early July 2003. The more significant expenses associated with
     this decision are severance costs and the disposal of leasehold
     improvements estimated to be $150,000 and $67,000, respectively. In
     accordance with Statement of Financial Accounting Standards No. 146
     "Accounting for Costs Associated with Exit or Disposal Activities," these
     costs will be recognized over the remainder of 2003.

5.   Other income, net increased $1.1 million for the three and six-month
     periods ended June 30, 2003 compared to the same periods in 2002 due mainly
     to favorable exchange gains ($0.8 million and $0.9 million, respectively)
     primarily related to the strengthening of the euro versus the U.S. dollar.
     Also included in other income, net for the three month period ended June
     30, 2003 was the gain from the sale of stock ($0.2 million)



                                       7


<PAGE>

     received when an insurance company from which the Company purchased life
     insurance policies converted from a mutual structure to a public structure.

6.   The Company guarantees the outstanding debt of the Badger Meter Employee
     Savings and Stock Ownership Plan (ESSOP) that is recorded in long-term
     debt, offset by a similar amount of unearned compensation that has been
     recorded as a reduction of shareholders' equity. The loan amount is
     collateralized by shares of the Company's Common Stock. A payment of
     $250,000 in the first quarter of 2003 reduced the loan from $1,535,000 at
     December 31, 2002 to $1,285,000 at June 30, 2003.

     The Company also guarantees the debt of the Badger Meter Officers Voting
     Trust (BMOVT), from which officers obtained loans from a bank in order to
     purchase shares of the Company's Common Stock. The officers' loan amounts
     are collateralized by the Company's shares that were purchased with the
     loans' proceeds. There have been no loans made to officers by the BMOVT
     since July 2002 due to restrictions as a result of legislation. The amount
     that the Company guaranteed was $1,988,000 and $2,380,000 at June 30, 2003
     and December 31, 2002, respectively. The current loan was renewed in June
     2003 with an expiration date of June 2004, at which time it will likely be
     renewed. The fair market value of this guarantee at June 30, 2003 and
     December 31, 2002 continues to be insignificant because the collateral
     value of the shares exceeded the loan amount.

7.   Total comprehensive income is comprised of net income and other
     comprehensive income, which includes foreign currency translation
     adjustments. Total comprehensive income was $3,017,000 and $2,320,000 for
     the three-month periods ended June 30, 2003 and 2002, respectively.
     Included in the three months of 2003 is $411,000 of other comprehensive
     income related to foreign currency translation adjustments. Total
     comprehensive income was $4,375,000 and $3,927,000 for the six-month
     periods ended June 30, 2003 and 2002, respectively. Included in the six
     months of 2003 is $1,063,000 of other comprehensive income related to
     foreign currency translation adjustments. Of the $1,063,000, $477,000
     relates to the effect of the Company's Czech Republic subsidiary changing
     its functional currency from the U.S. dollar to the euro, effective January
     1, 2003.

8.   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, except as discussed below.

     The Company is subject to contingencies relative to environmental laws and
     regulations. Currently, the Company is in the process of resolving an issue
     relative to a landfill site. Provision has been made for all known
     settlement costs.

     The Company is also a defendant in five multi-party asbestos suits as a
     result of its membership in certain trade organizations. The cases are
     pending in state court in Mississippi. The Company does not believe the
     ultimate resolution of these issues will 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 enters into various material purchase agreements with its
     vendors, some of which contain minimum purchase quantity commitments
     extending beyond one year. Future purchase commitments are not expected to
     exceed normal usage requirements.

9.   In the quarter ended June 30, 2003, the Financial Accounting Standards
     Board (FASB) issued two new Statements of Financial Accounting Standards:
     No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging
     Activities" and No. 150 "Accounting for Certain Financial Instruments with
     Characteristics of both Liabilities and Equity." The Company does not
     believe either of these recently issued Statements will have a material
     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.


                                       8


<PAGE>

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


Results of Operations - Three Months Ended June 30

         Net sales for the three-months ended June 30, 2003 increased $3.9
million, or 9.0%, over the same period in 2002. The results in the second
quarter included $6.0 million and $2.5 million of net sales related to the two
acquired businesses, Data Industrial Corporation (DIC) and MecaPlus Equipements
SA (MPE), which were acquired in the second quarter of 2002. The increase in
sales related to the acquired companies is due to the timing of the acquisitions
in the second quarter of 2002. Without the acquisitions, net sales would have
increased $0.4 million, or 1.0%, over the same period in 2002.

         The slight increase in net sales without acquisitions was the effect of
increased residential and commercial water meter sales of $100,000 and increased
industrial product sales of $300,000. The slight increase in sales of
residential and commercial products was the net result of a $1.2 million
increase in residential water meter sales and a $1.1 million decrease in
commercial water meter sales. Typically, residential and commercial water meter
sales track in similar directions. The change in the second quarter 2003 is
primarily a function of the nature and timing of orders.

         Residential sales in the second quarter of 2003 increased over the same
period in 2002 due to higher sales of products with automated meter reading
(AMR) technologies mitigated somewhat by lower sales of local or manual read
water meters. Sales of AMR products carry a higher selling price than local or
manual read products. The decrease in commercial water meter sales was driven
principally by lower volumes which appear to be due to the continuing softness
in the general economy.

         Net sales of industrial products, excluding sales from the
acquisitions, continued to be affected by the soft economy, increasing only
$300,000 in the second quarter over the prior year's second quarter. The
industrial net sales increase was the result of modestly higher revenues for
automotive fluid meters, small precision valves and electromagnetic meters
offset by decreases in other industrial products.

         Gross margins for the second quarter of 2003 were 33.7% compared to
34.0% in the second quarter 2002. The decrease was principally the result of
decreased manual read water meter volumes which impacted overhead absorption,
offset somewhat by higher prices associated with AMR sales.

         Selling, engineering and administration costs increased nearly $1.8
million, or 16.2%, for the second quarter 2003 compared to the same period in
2002. The increase included the affect of the acquisitions discussed above ($0.8
million). Without the effects of the acquisitions, these expenses would have
increased approximately $1 million due to higher expenses associated with
incentive compensation programs, professional fees and advertising as well as
normal inflationary increases. Interest expense for the second quarter 2003 was
$56,000 lower than the same period in the prior year primarily due to favorable
interest rates.

         Other income, net increased $1.1 million for the second quarter 2003
compared to the same period in 2002 due to favorable exchange gains ($0.8
million) primarily as a result of the strengthening of the euro versus the U.S.
dollar. Also included in other income, net was the gain from the sale of stock
($0.2 million) received when an insurance company from which the Company
purchased life insurance policies converted from a mutual structure to a public
structure.

         As a result of the above, net earnings for the second quarter of 2003
were $2,606,000 compared to net earnings in the second quarter of 2002 of
$2,320,000. On a diluted earnings per share basis, this equates to $0.78 per
share for the second quarter of 2003 compared to $0.70 for the same period in
2002.

Results of Operations - Six Months Ended June 30

         Net sales for the six months ended June 30, 2003 increased nearly $6.1
million, or 7.5%, over the same period in 2002. The totals include $11.4 million
and $2.5 million of sales related to the two acquired businesses, DIC and MPE,
which were acquired in the second quarter of 2002. Without the acquisitions, net
sales would have decreased nearly $2.9 million, or 3.7%, over the same period in
2002.

         The decrease in sales without acquisitions was due to lower sales of
residential and commercial water meters offset by higher sales of industrial
products. Residential and commercial water meter sales declined $3.5 million in
the first six months of 2003 compared to the first six months of 2002. The sales
decline was the result of lower volumes of water meters (both manual read and
automated) offset somewhat by higher prices. The decline in volumes appears to
be due to the soft economy and geopolitical and terrorism concerns, particularly


                                       9


<PAGE>


early in 2003. Many local governments are struggling with reduced budgets and
the Company experienced longer sales cycles for purchases by water utilities.

         Net sales of industrial products, excluding sales from acquisitions,
continued to be affected by the soft economy, increasing only $0.6 million in
the first six months of 2003. This increase is the net result of increased
automotive fluid meters, electromagnetic meters, and research and control valves
offset by declines in other industrial products.

         Gross margins for the six months ended June 30, 2003 were 33.3%
compared to 34.0% for the same period in 2002. The decrease was principally the
result of decreased water meter volumes which impacted absorption, offset
somewhat by higher prices due to product mix. The gross margins were also
affected by a manufacturing problem during the first quarter 2003 that resulted
in an after-tax expense of approximately $150,000 or $0.05 per diluted share.
The problem was discovered and resolved at the plant.

         Selling, engineering and administration costs increased nearly $3.1
million, or 14.9%, for the first six months of 2003 compared to the same period
in 2002. The increase included the affect of the acquisitions discussed above
($2.5 million). Without the effects of the acquisitions, these expenses would
have increased approximately $0.6 million due to increased incentive
compensation, advertising and normal inflationary increases. Interest expense
for the period was $128,000 higher than the same period in the prior year
primarily due to the increased debt associated with the acquisitions, which
weren't completed until the second quarter of 2002, offset somewhat by favorable
interest rates.

         Other income, net increased $1.1 million for the first six months of
2003 compared to the same period in 2002 due to favorable exchange gains ($0.9
million) primarily as a result of the strengthening of the euro versus the U.S.
dollar. Also included in other income, net was the gain from the sale of stock
($0.2 million) received when an insurance company from which the Company
purchased life insurance policies converted from a mutual structure to a public
structure.

         As a result of the above, net earnings for the six month period ending
June 30, 2003 were $3,312,000 compared to net earnings of $3,927,000 for the
same period in 2002. On a diluted earnings per share basis, this equates to
$1.00 per share for the first six months of 2003 compared to $1.20 for the same
period in 2002.


Liquidity and Capital Resources

         The main sources of liquidity for the Company typically are cash from
operations and borrowing capacity. For the first six months of 2003,
approximately $100,000 of cash was used for operations, as the increases in
inventories and receivables balances were offset by the increase in current
liabilities other than debt and net earnings adjusted for non-cash expenses.

         The change in the receivables balance from $22.1 million at December
31, 2002 to $28.6 million at June 30, 2003 is due to increased sales. The
receivable balance at December 31, 2002 was lower due to weaker sales near
year-end and normal cyclical trends.

         Inventories at June 30, 2003 increased $3.8 million, or 15.0%. This
increase in inventories was due to a build up of certain longer lead-time
electronic materials as well as second quarter manufacturing of product expected
to be shipped in the third quarter of 2003. Capital expenditures for the first
six months of 2003 were $3.9 million, exceeding depreciation expense by
$263,000, which accounted for the change in net property, plant and equipment
from the net amount shown at December 31, 2002.

         Prepaid pension declined from $17.5 million at December 31, 2002 to
$16.4 million at June 30, 2003. The Company received a refund of $0.7 million in
the second quarter 2003 from the pension plan related to contributions made in
2002 in excess of the minimum funding levels. The remainder of the difference is
normal pension amortization. Goodwill increased $1.0 million as the Company
continued to finalize the allocation of the purchase price of MPE during the
first quarter 2003, and the effects of foreign currency translation adjustments.

         Short-term debt and the current portion of long-term debt at June 30,
2003 increased to $32.2 million versus a balance at the end of 2002 of $26.3
million. This increase was caused by the need for cash for operations, capital
expenditures, repayments of long-term debt and dividends. The long-term debt
amounts declined as a result of regularly scheduled payments, plus a prepayment
to take advantage of lower short-term rates.

                                       10


<PAGE>

         Payables increased to $14.3 million from $11.0 million at December 31,
2002 primarily as a result of the timing of payments. Accrued compensation and
employee benefits decreased to $5.2 million from $6.0 million at December 31,
2002 due principally to the first quarter payments of various incentive
compensation programs earned in 2002 as a result of the performance in that
year. Income and other taxes increased to $2.8 million from nearly $1.6 million
at December 31, 2002 as a result of the timing of tax payments.

         Common stock and capital in excess of par value have increased slightly
since December 31, 2002 due to new shares issued in connection with the exercise
of stock options and purchases by the Employee Savings and Stock Ownership Plan
(ESSOP). Treasury stock increased due to shares repurchased during the period.
Employee benefit stock decreased $250,000 due to the regular payment of the
ESSOP debt during the first quarter 2003 and the related release of shares.

         As of June 30, 2003, the Company had approximately $44.5 million of
short-term credit facilities with domestic and foreign banks of which $28.7
million was in use. The Company continues to take advantage of favorable
interest rates for short term borrowing instruments, principally commercial
paper. The Company believes that the present lines of credit are adequate to
meet operating requirements and future capital needs. The Company also believes
it would have no difficulty securing additional term debt.

Other Matters

         The Company is subject to contingencies relative to environmental laws
and regulations. Currently, the Company is in the process of resolving an issue
relative to a landfill site. Provision has been made for all known settlement
costs.

         The Company is also a defendant in five multi-party asbestos suits as a
result of its membership in certain trade organizations. The cases are pending
in state court in Mississippi. The Company does not believe the ultimate
resolution of these issues will 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.

         In order to better utilize existing capacity, a decision was made
during the second quarter 2003 to move production of the non-magnetic impeller
flow sensor systems product line from the Company's facility in Mattapoisett,
Massachusetts to its facility in Tulsa, Oklahoma. The lease on the Massachusetts
facility expires in early 2004 and it is expected that the move will be complete
by the end of 2003. The affected employees were notified in early July 2003. The
more significant expenses associated with this decision are severance costs and
the disposal of leasehold improvements estimated to be $150,000 and $67,000,
respectively. In accordance with Statement of Financial Accounting Standards No.
146 "Accounting for Costs Associated with Exit or Disposal Activities," these
costs will be recognized over the remainder of 2003.

         No other risks or uncertainties were identified that could have a
material impact on operations and no long-lived assets have become permanently
impaired in value.

Item 3   Quantitative and Qualitative Disclosures about Market Risk

         The Company's quantitative and qualitative disclosures about market
risk are included in Part II Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" under the heading "Market Risk"
in the Company's Annual Report on Form 10-K for the year ended December 31,
2002, and have not materially changed since that report was filed.

Item 4   Controls and Procedures

         In accordance with Rule 13a-15(b) of the Securities Exchange Act of
1934 (the "Exchange Act"), as of the end of the second quarter 2003, an
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Company's President and Chief Executive
Officer and the Company's Senior Vice President -- Finance, Chief Financial
Officer and Treasurer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in the rules
promulgated under the Exchange Act). Based upon their evaluation of these
disclosure controls and procedures, the Company's President and Chief Executive
Officer and the Company's Senior Vice President -- Finance, Chief Financial
Officer and Treasurer concluded that the Company's disclosure controls and
procedures were effective as of the date of such evaluation to ensure that
material information relating to the Company, including its consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Quarterly Report on Form 10-Q was
being prepared.

                                       11




<PAGE>

         There was no change in the Company's internal control over financial
reporting that occurred during the second quarter 2003 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

Forward Looking Statements

         Certain statements contained in this document, as well as other
information provided from time to time by 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" and "objective" or similar expressions are intended to
identify forward looking statements. The forward looking statements are based on
the Company's current views and assumptions and involve risks and uncertainties
that include, among other things:

       o the success or failure of new product offerings and acquisitions
       o the actions and financial condition of competitors and alliance
         partners
       o changes in competitive pricing and bids in the marketplace
       o changes in domestic conditions, including housing starts
       o changes in foreign economic conditions, including currency fluctuations
       o changes in laws and regulations
       o changes in customer demand and fluctuations in the prices of and
         availability of purchased raw materials and parts.

Some or all of these factors are beyond the Company's control. Shareholders,
potential investors and other readers are urged to consider these factors
carefully in evaluating the forward looking statements and are cautioned not to
place undue reliance on such forward looking statements. The forward looking
statements made herein are made only as of the date of this document and the
Company undertakes no obligation to publicly update such forward looking
statements to reflect subsequent events or circumstances.

                           Part II - Other Information

Item 4   Submission of Matters to a Vote of Security Holders


(a)      The Annual Meeting of Shareholders was held May 2, 2003.

(b)      The following tables describe the election of directors at the 2003
         Annual Meeting:
<TABLE>
<CAPTION>

        NAME                                                          Votes           Votes
                                                                       FOR           WITHHELD       Not Voted
                                                                      -----          ---------      ---------
<S>                                                                <C>           <C>             <C>
        DIRECTORS ELECTED TO THREE-YEAR
        TERMS EXPIRING AT THE 2006 ANNUAL
        MEETING
        Ulice Payne, Jr.                                            2,591,716         4,206          638,789
        Andrew J. Policano                                          2,591,716         4,206          638,789
        Steven J. Smith                                             2,591,794         4,128          638,789

        DIRECTOR ELECTED TO A TWO-YEAR
        TERM EXPIRING AT THE 2005 ANNUAL MEETING
        Thomas J. Fischer                                           2,591,684         4,238          638,789
</TABLE>

         DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 2005 ANNUAL
         MEETING
         James L. Forbes
         Richard A. Meeusen

         DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 2004 ANNUAL
         MEETING
         Kenneth P. Manning
         John J. Stollenwerk



                                       12


<PAGE>

(c)      Proxies were solicited for the adoption of the Badger Meter, Inc. 2003
         Stock Option Plan. There were no solicitations in opposition to the
         proposed adoption of the Plan, and the Plan was adopted with 92% of the
         votes being cast in favor of its adoption. The following table
         describes the results of the vote of the shareholders with respect to
         the adoption of the 2003 Stock Option Plan:

                                    Votes      Votes     Votes      Broker
                                     FOR      AGAINST   ABSTAIN   Non-votes
                                     ---      -------   -------   ---------

                                  1,643,215   128,050    26,369    798,288


(d)      Not applicable.


Item 6   Exhibits and Reports on Form 8-K

(a)  Exhibits:

     Exhibit No.  Description

     4            Loan Agreement between Bank One, NA and the Badger Meter
                  Employee Savings and Stock Ownership Plan and Trust

     10           Badger Meter, Inc. 2003  Stock Option 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.

     99           Additional Exhibits

(b)  Reports on Form 8-K:

     A Form 8-K was filed on July 16, 2003 to disclose the full contents of the
Company's press release that reported the results of the three and six-month
periods ended June 30, 2003.





                                       13


<PAGE>



                                    SIGNATURE

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






                                       BADGER METER, INC.


Dated: July 31, 2003                 By /S/  Richard A. Meeusen
                                        -----------------------
                                        Richard A. Meeusen
                                        President and Chief Executive Officer



                                     By /S/  Richard E. Johnson
                                        -----------------------
                                        Richard E. Johnson
                                        Senior Vice President - Finance, Chief
                                        Financial Officer and Treasurer



                                     By /S/  Beverly L.P. Smiley
                                        ------------------------
                                        Beverly L.P. Smiley
                                        Vice President - Corporate Controller







                                       14




<PAGE>


                               BADGER METER, INC.

          QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED JUNE 30, 2003

                                  EXHIBIT INDEX



     Exhibit No.  Description

     4            Loan Agreement between Bank One, NA and the Badger Meter
                  Employee Savings and Stock Ownership Plan and Trust

     10           Badger Meter, Inc. 2003 Stock Option 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.

     99           Additional Exhibits






                                       15







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>c78641exv4.txt
<DESCRIPTION>LOAN AGREEMENT
<TEXT>
<PAGE>



                                                                      EXHIBIT 4

  LOAN AGREEMENT BETWEEN BANK ONE, NA AND THE BADGER METER EMPLOYEE SAVINGS AND
                         STOCK OWNERSHIP PLAN AND TRUST

         Bank One, NA, with its main office in Chicago, Illinois (the "Bank")
and the Badger Meter Employee Savings and Stock Ownership Plan and Trust (the
"ESSOP") as established under that certain Trust Agreement effective January 1,
1991, between Badger Meter, Inc. and Marshall & Ilsley Trust Company, as Trustee
(the "Trustee"), agree as follows:

1. Definitions.  As used in this Agreement, the following terms shall have the
following meanings, whether or not they are hereinafter capitalized.

1.2      "Closing Date" means the date of the closing of this agreement by and
         between the Bank and the ESSOP.
1.3      "ERISA" means the Employee Retirement Income Security Act of 1974, as
         amended.
1.4      "Eurodollar Loans" shall mean loans under this Agreement in the minimum
         amount of $100,000, the interest rates on which are determined on the
         basis of the 30, 60, 90 or 180 day LIBOR Rate. The term "LIBOR Rate"
         shall mean the per annum offered rate for deposits in United States
         dollars for one, two, three and six month interest periods (the
         "Interest Periods") which appear on the Bloomberg electronic rate
         terminals at the Bank's money center, as of 11:00 AM, London time,
         each Banking Day. If the appropriate Bloomberg Rate Screen is not
         accessible, the applicable LIBOR Rate will be determined by the Bank
         on the basis of other electronic information and other broker's quotes
         or offered rates for deposits in United States dollars. As used
         herein, "Banking Day" shall mean any day Bank's money center is open
         for business. LIBOR Rate quotes shall be subject to availability to
         the Bank and the Bank retains the right to adjust the reported LIBOR
         Rate to reflect reserve or insurance requirements which may be imposed
         by any regulatory agency having jurisdiction over the Bank."
1.5      "Guarantor" means Badger Meter, Inc.
1.6      "Guarantee" means the unlimited obligation assumed by Badger Meter,
         Inc. to guarantee the performance by the ESSOP of all the terms and
         conditions under this loan agreement in the form of Exhibit A attached
         hereto.
1.7      "Interest Period" shall mean, with respect to any Eurodollar Loan,
         each period commencing on the date such Eurodollar Loan is made or
         converted from a Prime Rate Loan or the last day of the next preceding
         Interest Period for such Loan and ending on the numerically
         corresponding day in the first, second, third or sixth calendar month
         thereafter, as the ESSOP may select, except that each Interest Period
         which commences on the last business day of a calendar month (or on
         any day for which there is no numerically corresponding day in the
         subsequent calendar month; provided, that (I) if any Interest Period
         would otherwise end after the Termination Date, such Interest Period
         shall end on the Termination Date, and (ii) each Interest Period which
         would otherwise end on a day which is not a business day shall end on
         the next succeeding business day or, if such next succeeding business
         day falls in the next succeeding calendar month, on the next preceding
         business day.
1.8      "Loan" means the loan described in Section 2.1 of this Agreement.
1.9      "Note" means the Promissory Note in the form of Exhibit B attached
         hereto.
1.10     "Pledge Agreement" means the agreement in the form of Exhibit C
         attached hereto by the ESSOP to pledge, as collateral for the Loan,
         the Badger Meter, Inc. common stock acquired with the proceeds of a
         prior loan made to finance the acquisition of that stock.
1.11     "Prime Rate" shall mean the rate announced by the Bank as its prime
         rate, with such rate changing as and when the Bank announces any
         change in its prime rate. The Prime Rate is not the lowest rate of
         interest charged by the Bank.
1.12     "Prime Rate Loans" shall mean loans under this Agreement, the
         interest rate on which are determined on the basis of the Prime Rate.
1.13     "Termination Date" shall mean June 20, 2004.

2. The Loan.

2.1      Stock Acquisition Loan.  The Bank agrees to lend to the ESSOP, subject
         to the terms and conditions hereof, the principal amount of $1,285,000
         to be used by the ESSOP to refinance a prior loan made to finance the
         acquisition of Badger Meter, Inc. common stock for the benefit of the
         participants of the ESSOP. The entire principal amount and accrued
         interest shall be paid in full on or before June 20,


                                       16
<PAGE>




         2004.  The loan shall be evidenced by the Note.

2.2      Interest. (a) The ESSOP shall have the option of designating the
         outstanding balance as a Prime Rate Loan or as a Eurodollar Loan. In
         the event that the ESSOP and the Bank have not agreed upon the rate and
         interest period for a Eurodollar Loan, then, prior to an event of
         default described in Section 6 below, the outstandings shall be deemed
         to be a Prime Rate Loan. The ESSOP promises to pay to the Bank interest
         on the unpaid principal amount of each loan for the period from and
         including the date of such loan to, but excluding the date such loan
         shall be paid in full, (i) while such loan is a Prime Rate Loan, at a
         rate per annum equal to the Prime Rate (as in effect from time to
         time); (ii) while such loan is a Eurodollar Loan, for each Interest
         Period relating thereto, at a rate per annum equal to the LIBOR Rate
         applicable to such loan for such Interest Period, plus 1.50%. The ESSOP
         hereby delegates authority to select interest rates and interest
         periods hereunder to the Guarantor, and the Bank may rely on any such
         directions received from the Guarantor.

         (b)       Notwithstanding the foregoing, the ESSOP will pay to the
         Bank on demand interest at the rate of two percent in excess of the
         rate otherwise in effect for any principal which shall not be paid in
         full when due (whether at stated maturity, by acceleration or
         otherwise), for each day during the period from and including the due
         date thereof to, but excluding the date the same is paid in full.

         (c)       The Note may be prepaid in whole or in part, at the option
         of the ESSOP at any time, provided however, that the ESSOP shall give
         the Bank at least one day prior written notice of any such prepayment.
         Accrued interest on the amount prepaid shall also be paid on the date
         of prepayment. In the event of prepayment of less than all of the
         outstanding balance of such Note, such prepayment shall be in the
         minimum principal amount of Five Thousand Dollars ($5,000.00) or a
         multiple thereof. To the extent at the time of any prepayment there
         exists both a Prime Rate Loan and a Eurodollar Loan, the prepayment
         shall be applied to the Prime Rate Loan first, until there is no
         outstanding principal balance thereon, and the remainder, if any,
         applied to the oldest outstanding Eurodollar Loan. There shall be no
         prepayment indemnity for any prepayment of a Prime Rate Loan. In the
         event any Eurodollar Loan is prepaid prior to the end of the Interest
         Period, the ESSOP hereby agrees to indemnify the Bank against any
         funding loss or expense which the Bank may sustain or incur by reason
         of the liquidation or re-employment of deposits or other funds
         acquired by the Bank to fund or maintain any Eurodollar Loan as
         reasonably determined by Bank.

3. Representations and Warranties.  In order to induce the Bank to make the
loan, the Guarantor represents and warrants to the Bank:

3.1      Valid Existence. The ESSOP is a duly qualified employee stock ownership
         plan meeting the requirements of Sections 401(a) and 4975(e)(7) of the
         Internal Revenue Code and complies with the applicable requirements
         thereof, and with the requirements of any other applicable state or
         federal law.
3.2      Execution and Delivery of Agreement, Note and Pledge Agreement. The
         execution and delivery of this Agreement, the Note, and the Pledge
         Agreement, and the performance by the ESSOP of its obligations
         hereunder and thereunder, are within the ESSOP's general powers, have
         been fully authorized by all necessary and proper action under the
         terms of the applicable ESSOP Trust documents, and do not (a) conflict
         with or result in a breach of any of the provisions of the applicable
         Trust documents, (b) contravene any law, rule or regulation of the
         State of Wisconsin, or the United States, or any order, writ, judgment,
         injunction, decree, determination or award presently in effect which
         affects or binds the ESSOP, (c) conflict with or result in a breach of
         or default under any indenture or loan or credit agreement or any other
         agreement or instrument to which the ESSOP is a party in respect of
         indebtedness for money borrowed or (d) require the approval or consent
         of any governmental body, agency or authority or any other person or
         entity. This Agreement, the Note, and the Pledge Agreement, when
         executed and delivered, will constitute the valid and binding
         obligations of the ESSOP enforceable in accordance with their terms, in
         each case (a) except as the enforceability thereof may be limited by
         applicable bankruptcy, insolvency, reorganization, moratorium or
         similar laws affecting the enforceability of creditors' rights
         generally, (b) subject to the availability of equitable remedies for
         the enforcement of such obligations, and (c) subject to applicable laws
         and equitable principles which may limit or otherwise affect the
         remedies provided therein.
3.3      Use of Proceeds.  The ESSOP will not use the loan proceeds for any
         purpose other than to refinance the acquisition of Badger Meter, Inc.
         common stock.

3.4      Other Loans.  The ESSOP will not enter into any other loan agreements
         without the prior written consent of the Bank, which consent will not
         be unreasonably withheld.

                                     17

<PAGE>

3.5      Investment Company. The ESSOP is not an "investment company" or a
         company controlled by an "investment company" within the meaning of
         the Investment Company Act of 1940, as amended.
3.6      Litigation. There is no litigation or administrative or regulatory
         proceeding pending or threatened against the ESSOP which might result
         in any material adverse change in the financial condition of the ESSOP.

4.  Conditions of Borrowing. The Bank's obligation to make the Loan is
         subject to the satisfaction of the following conditions:

4.1      Opinion of Counse  The Bank shall have received from counsel
         for the ESSOP, a favorable opinion in form and substance satisfactory
         to the Bank and dated as of the Closing Date as to (i) the matters
         referred to in Sections 3.1, 3.2, 3.5 and, to the best of such
         counsel's knowledge, 3.6 hereof; and (ii) such other matters incident
         to the matters herein contemplated as the Bank may reasonably request.
4.2      Guaranty. The Bank shall have received from the Guarantor the Guaranty
         and a favorable opinion from counsel for the Guarantor in form and
         substance satisfactory to the Bank and dated as of the Closing Date
         that (i) the Guarantor is a legally organized and validly existing
         corporation under the laws of the State of Wisconsin; (ii) the
         execution and delivery of the Guaranty, and the performance by the
         Guarantor of its obligations under the Guaranty are within its
         corporate powers, have been duly authorized by all necessary corporate
         action on the part of the Guarantor, and do not (a) conflict with or
         result in a breach of any of the provisions of its Articles of
         Incorporation or By-Laws, (b) contravene any law, rule, or regulation
         of the State of Wisconsin, or of the United States, or any order, writ,
         judgment, injunction, decree, determination or award presently in
         effect which affects or binds it, (c) conflict with or result in a
         breach of or default under any indenture or loan or credit agreement or
         any other agreement or instrument to which it is a party in respect of
         indebtedness for money borrowed or (d) require the approval or consent
         of any other person or entity; (iii) the Guaranty, when executed and
         delivered, will constitute the valid and binding obligation of the
         Guarantor enforceable in accordance with its terms, in each case (a)
         except as the enforceability thereof may be limited by applicable
         bankruptcy, insolvency, reorganization, moratorium or similar laws
         affecting the enforceability of creditors' rights generally, (b)
         subject to the availability of equitable remedies for the enforcement
         of such obligations and (c) subject to applicable laws and equitable
         principles which may limit or otherwise affect the remedies provided,
         therein; and (iv) such other matters incident to the matters herein
         contemplated as the Bank may reasonably request. The Bank shall also
         have received copies, certified by the Secretary or Assistant Secretary
         of the Guarantor to be true and correct and in full force and effect on
         the Closing Date, of (i) the Restated Articles of Incorporation and
         Restated By-Laws of the Guarantor; and (ii) resolutions of the Board of
         Directors of the Guarantor authorizing the issuance, execution and
         delivery of the Guaranty and authorizing and directing the Guarantor to
         make a stream of contribution payments to the ESSOP sufficient to
         enable the ESSOP to repay the principal and interest as they come due
         on the Note.
4.3      Pledge Agreement. The Bank shall have received from the ESSOP, the duly
         executed Pledge Agreement in a form acceptable to the Bank.
4.4      Representations and Warranties True and Correct. The representations
         and warranties contained in Section 3 hereof shall be true and correct
         on and as of the Closing Date; there shall exist on the Closing Date no
         conditions, event or act which would constitute a default hereunder and
         no condition, event, act or omission shall have occurred which, with
         the giving of notice or the passage of time, would constitute an event
         of default hereunder.
4.5      Proceedings Satisfactory to Bank. All proceedings taken in connection
         with the transactions contemplated by this agreement and all
         instruments, authorizations and other documents applicable thereto
         shall be satisfactory in form and content to the Bank and the Bank
         shall have received copies of all such documents reasonably required by
         it.

5. Affirmative Covenants.  The Guarantor covenants that it will, while any part
         of the Note remains unpaid, unless prior written waiver is granted by
         the Bank:

5.1      Books and Records. Keep proper, complete and accurate books of record
         and account and permit any representatives of the Bank to visit and
         inspect any of the books and records of the ESSOP at any reasonable
         time and as often as may reasonably be desired.
5.2      Other Financial Information. Furnish to the Bank from time to time upon
         request any information regarding the Guarantor's financial condition
         which the Bank reasonably requests; and without request, the Guarantor
         will provide annual audited financial statements in form and content
         satisfactory to the Bank within 120 days of the end of each year and
         management-prepared financial statements within 45 days of the end of
         each of the first three quarters of each fiscal year; all financial
         information provided to the Bank has been and will be accurate when
         given.

                                       18

<PAGE>


5.3      Maintenance of Valid Existence.  The Guarantor agrees that the ESSOP
         will maintain its valid existence and will neither dissolve nor
         institute any proceedings for dissolution.
5.4      ERISA. Notice and Certificate. As soon as possible upon the occurrence
         of a reportable event under ERISA and in any event within thirty (30)
         days after the Guarantor becomes aware of the same, the Guarantor shall
         furnish a certificate setting forth the details as to such reportable
         event as well as a copy of each notice thereof which is sent to the
         Department of Labor in accordance with applicable regulations.

6.  Events of Default.  If any one or more of the following events of default
         shall occur:

6.1      Failure to Pay Note.  The ESSOP shall default in the due and punctual
         payment of any installment of principal of or interest on the Note or
         any other obligation to the Bank and such default shall continue
         uncured for a period of five (5) days; or
6.2      Falsity of Representations and Warranties. Any representation or
         warranty made by the ESSOP or Guarantor herein or in any writing
         furnished in connection with or pursuant to this Agreement shall be
         false in any material respect on the date as of which made or as of
         which the same is to be effective; or
6.3      Default in Other Provisions.  The ESSOP or Guarantor shall default in
         the performance or observance of any other agreement herein contained
         and such default shall continue for a period of 30 days after written
         notice to the ESSOP or Guarantor from the holder of the Note; or
6.4      Default in Other Agreements. The Guarantor shall default in the
         performance of the terms of any other evidence of indebtedness for
         borrowed money issued or assumed by the Guarantor aggregating more than
         $100,000 or in the terms of any agreement under which such indebtedness
         is issued or secured and such default is not waived by the creditor and
         shall continue beyond the period of grace, if any, therein provided and
         which indebtedness is, in the reasonable judgment of the Bank, material
         to the Guarantor; or
6.5      Entry of Final Judgments.  A final judgment is entered against the
         ESSOP and such judgment shall remain unsatisfied, unbonded or unstayed
         for a period of sixty (60) days after the entry thereof; or
6.6      Insolvency, Failure to Pay Debts or Appointment of Receiver, Etc. The
         taking of action by the ESSOP or Guarantor to authorize such
         organization to become the subject of proceedings under the Federal
         Bankruptcy Code; or the execution by the ESSOP or Guarantor of a
         petition to become a debtor under the Federal Bankruptcy Code; or the
         filing of an involuntary petition against the ESSOP or Guarantor under
         the Federal Bankruptcy Code which remains undismissed for a Period of
         sixty (60) days; or the entry of an order for relief under the Federal
         Bankruptcy Code against the ESSOP or Guarantor.
                   Then and in any such event, as to the events described in
         Section 6.1 through 6.6, inclusive, the Bank may, at its option,
         declare the Note to be, and the Note shall thereupon, become
         immediately due and payable, together with accrued interest thereon. In
         the event of default, said Note shall bear interest at a rate equal to
         two percent (2%) in excess of the rate otherwise applicable.
         Presentment, demand, protest and notice of acceleration, nonpayment and
         dishonor in such case are hereby expressly waived.

7. Miscellaneous.

7.1      Survival of Representations and Warranties. The ESSOP's representations
         and warranties contained in this Agreement shall survive closing and
         execution and delivery of the Note.

7.2      Notices. All notices provided for herein shall be sent by first class
         mail and, if to the Bank, addressed to it at 111 East Wisconsin Avenue,
         Milwaukee, Wisconsin 53202, and if to the ESSOP, addressed to Marshall
         and Ilsley Trust Company at 1000 North Water Street, Milwaukee,
         Wisconsin 53202, attention of the officer signing this Agreement, with
         a copy to the Guarantor, addressed to 4545 West Brown Deer Road, Brown
         Deer, Wisconsin, 53223 to the attention of the Vice President-Finance
         or to such other address with respect to either party as such party
         shall notify the other in writing; such notices shall be deemed given
         when mailed.
7.3      Non-Recourse To ESSOP. Notwithstanding any provisions herein to the
         contrary, the Bank shall have no recourse against the ESSOP except as
         provided in the Pledge Agreement and as to such other assets of the
         ESSOP as may be permitted by law.
7.4      Titles.  The titles of sections in this Agreement are for convenience
         only and do not limit or construe the meaning of any section.
7.5      Parties Bound; Waiver. The provisions of this Agreement shall inure to
         the benefit of and be binding upon any successor of any of the parties
         hereto and shall extend and be available to any holder of the Note;
         provided that the ESSOP's rights under this Agreement are not
         assignable. No delay on the part of any holder of the Note in
         exercising any right, power or privilege hereunder shall operate as a
         waiver thereof, and no single or partial exercise of any right, power
         or privilege hereunder shall preclude other or further exercise thereof
         or the exercise of any other right, power or privilege. The rights and
         remedies


                                       19

<PAGE>

         herein specified are cumulative and not exclusive of any rights or
         remedies which the holder of a Note would otherwise have.
7.6      Governing Law.  This Agreement is being delivered and is intended to
         be performed in the State of Wisconsin and shall be construed and
         enforced in accordance with the internal laws of that state.
7.7      Counterparts. This Agreement may be executed in any number of
         counterparts, each of which shall be deemed an original, and all of
         which together shall constitute but one and the same instrument.
7.8      Severability. Should any portion of this Agreement be found to be
         invalid or unenforceable by a court of competent jurisdiction, the
         remainder of this Agreement shall remain in full force and effect.
7.9      Entire Agreement. This Agreement along with the Note, the Pledge
         Agreement and the Guaranty shall constitute the entire agreement of the
         parties pertaining to the subject matter hereof and supersede all prior
         or contemporaneous agreements and understandings of the parties in
         connection therewith.


                   IN WITNESS WHEREOF, the undersigned have executed this Loan
Agreement as of the date first set forth above.

                                   BANK ONE, NA

                                   By:   /S/  Gregory S. Dorf
                                         --------------------------------------
                                         First Vice President, Division Manager

                                   BADGER METER EMPLOYEE SAVINGS AND STOCK
                                   OWNERSHIP PLAN & TRUST

                                   By:   /S/  Lora C. Sykora
                                         --------------------------------------
                                         Vice President
         (SEAL)                    On behalf of Marshall and Ilsley Trust
                                   Company, as Trustee


         The undersigned Badger Meter, Inc. is signing below only to
acknowledge the representations, warranties and covenants set forth in sections
3, 5 and 7 above.

                                   BADGER METER, INC.

                                   By:     /S/  Richard A. Meeusen
                                           ------------------------------------
                                   Title:  President & CEO
                                           ------------------------------------




                                       20



<PAGE>



                                    EXHIBIT A

                  ADDENDUM TO GUARANTY OF SPECIFIC TRANSACTION

                               DATED JUNE 20, 2003

Guarantor also agrees as follows:

                          1.       DEBTOR'S FINANCIAL CONDITION.  The Guarantor
warrants and represents to the Lender that (i) the Guarantor is sufficiently
knowledgeable and experienced in financial and business matters to evaluate and
understand the risks assumed in connection with the execution of this Guaranty;
(ii) the Guarantor has had the opportunity to examine the records, reports,
financial statements, and other information relating to the financial condition
of the Debtor; (iii) the Guarantor has relied solely upon investigations of the
Debtor's financial condition conducted by the Guarantor or the Guarantor's
authorized representative in deciding to execute this Guaranty; and (iv) the
Guarantor, or its authorized representative, shall continue to independently
review, monitor and investigate the financial condition of the Debtor while this
Guaranty is in effect. THE GUARANTOR SPECIFICALLY RELIEVES THE LENDER OF ANY
DUTY, OBLIGATION OR RESPONSIBILITY OF ANY NATURE WHATSOEVER TO ADVISE THE
GUARANTOR OF ANY CHANGE IN THE DEBTOR'S FINANCIAL CONDITION.

                          2.       COLLATERAL.  The Guarantor hereby authorizes
the Lender, without further notice to anyone, to charge any account of the
Guarantor for the amount of any and all Obligations due under this Guaranty.

                          3.       ADDITIONAL COLLATERAL.  If the market value
of the pledged shares of stock falls below $21.00/share, or the Lender otherwise
has a collateral coverage ratio of less than 1 to 1, then the Guarantor agrees
upon the request of the Lender to provide such additional collateral as the
Lender deems to be sufficient to cover such shortfall.

                          4.       ACCELERATION OF OBLIGATIONS; SUCCESSORS;
MULTIPLE GUARANTORS. If the Guarantor shall become the subject of any bankruptcy
or insolvency proceedings, the Guarantor's liability hereunder to pay the
Obligations shall become immediately due and payable whether or not the
Obligations are then due and payable by the Debtor or any other guarantor. This
Guaranty shall inure to the benefit of the Lender, its successors and assigns
and of the holder and owner of any of the Obligations, and shall be binding on
heirs, executors, administrators, successors and assigns of the Guarantor.

                          5.       NOTICE TO GUARANTOR.  By its acceptance of
this Guaranty, the Lender acknowledges that it will, upon any event of default
by the Debtor, notify Guarantor of such default and unless prohibited from doing
so by any applicable law, regular or court order, make demand upon Guarantor,
before liquidating collateral pledged by the Debtor.

                          6.       EXPENSES.  In addition to the costs of
collection agreed to in the Guaranty, the Guarantor agrees to pay $3,000 of the
Lender's legal fees (including fees of in-house counsel) incurred in the
preparation of the Loan Agreement between the Debtor and the Lender and all
related documents.

                                         BADGER METER, INC.


                                         By:      /S/  Richard A. Meeusen
                                                  --------------------------
                                         Title:   President & CEO
                                                  --------------------------



                                       21




<PAGE>


                                    EXHIBIT B

                                 PROMISSORY NOTE


$1,285,000.00                                               June 20, 2003

                  FOR VALUE RECEIVED, the undersigned borrower (the "Borrower"),
promises to pay to the order of Bank One, NA, with its main office in Chicago,
Illinois (the "Bank"), at its office in Milwaukee, Wisconsin, the principal sum
of One Million Two Hundred Eighty-five Thousand and 00/100 Dollars
($1,285,000.00), payable June 20, 2004 (the "MATURITY DATE").

                  Interest. The unpaid outstanding principal balance of the Note
shall bear interest at rate equal to, at Borrower's option, one or more of the
following: (a) The prime rate of interest as announced and in effect from time
to lime at the Bank, with the rate hereon changing as and when such rate changes
(such a loan a "PRIME RATE LOAN" and such a rate a "PRIME RATE"); or (b) 1.50%
per annum in excess of the LIBOR Rate (such a loan a "EURODOLLAR LOAN" and such
a rate a "LIBOR RATE").

                  Interest on the outstanding principal amount of the Note shall
be payable per the Loan Agreement described below, with a final payment of any
accrued interest due at the Maturity Date, or the earlier termination of the
Loan Agreement.

                  Principal. The unpaid principal balance of this Note as may be
outstanding from time to time hereunder, may be paid in the Borrower's sole
discretion, at any time subject to the provisions of the Loan Agreement
described below, but in any event, the entire unpaid principal balance shall be
due and payable on June 20, 2004.

                  Interest shall be computed daily based on a 360 day year.
Principal and interest not paid when due shall bear interest from and after the
due date until paid at a rate of 2% per annum plus the rate otherwise payable
hereunder.

                  In no event will the interest rate hereunder exceed that
permitted by applicable law. If any interest or other charge is finally
determined by a court of competent jurisdiction to exceed the maximum amount
permitted by law, the interest or charge shall be reduced to the maximum
permitted by law, and the Bank may credit any excess amount previously collected
against the balance due or refund the amount to the Borrower.

                  Without affecting the liability of any Borrower, endorser,
surety or guarantor, the Bank may, without notice, renew or extend the time for
payment, accept partial payments, release or impair any collateral security for
the payment of this Note, or agree not to sue any party liable on it.

                  This Note constitutes the Note issued under a certain Loan
Agreement dated as of June 20, 2003 between the Borrower and the Bank, to which
Agreement reference is hereby made for a statement of the terms and conditions
under which loans evidenced hereby were or may be made and a description of the
terms and conditions upon which the maturity of this Note may be accelerated,
and for a description of the collateral securing this Note.

                             BADGER METER EMPLOYEE SAVINGS AND STOCK
                             OWNERSHIP PLAN AND TRUST
                             By: MARSHALL & ILSLEY TRUST COMPANY N.A., solely as
                             trustee

                             By:   /S/  Lora C. Sykora
                                   --------------------------------------------
                             Name and Title:  Lora C. Sykora, Vice President

                             Attested:

                             By:   /S/  Michael C. Weber
                                   --------------------------------------------
                             Name and Title:  Michael C. Weber, Vice President



                                       22


<PAGE>
                                    EXHIBIT C

                                PLEDGE AGREEMENT


                  Agreement made June 20, 2003, between Bank One, NA, with its
main office in Chicago, Illinois ("Bank") and Badger Meter Employee Savings and
Stock Ownership Plan and Trust ("ESSOP") as established under that certain Trust
Agreement effective January 1, 1991, by and between Badger Meter, Inc., and
Marshall & Ilsley Trust Company, as Trustee (the "Trustee").

                  WHEREAS, the Bank is concurrently making a loan to the ESSOP
in the principal amount of $1,285,000 as evidenced by the Loan Agreement dated
June 20, 2003 (the "Loan Agreement") and the Promissory Note dated June 20, 2003
(the "Note"), and

                  WHEREAS, the ESSOP has delivered to the Bank 62,487 shares of
Badger Meter, Inc. common stock (the "Pledged Stock") and irrevocable stock
powers executed in blank for the same, as security for the performance of its
obligations under said Loan Agreement and Note,

                  NOW, THEREFORE, in consideration of the foregoing premises, it
is agreed as follows:

1. The Bank's duty with reference to the Pledged Stock shall be solely to use
reasonable care in the custody and preservation of the Pledged Stock in its
possession, which shall not include any step necessary to preserve rights
against prior parties nor the duty to send notices, perform services, or take
any action in connection with the management of the Pledged Stock.

2. Shares of the Pledged Stock shall be released as security under this Pledge
Agreement upon payment of principal and interest outstanding under the Loan
Agreement and Note, determined as follows: The number of shares to be released
by the Bank shall be: (i) the total number of shares held by the Bank
immediately prior to the release for the plan year times (ii) a fraction, the
numerator of which is the amount of principal and interest paid on the Note (and
interest on the note refinanced by this Note) for the plan year and the
denominator of which is the sum of principal and interest on the Note (and
interest on the note refinanced by this Note) paid for the plan year and the
principal and interest on the Note to be paid for all future plan years,
computed by using the interest rate in effect as of the end of the plan year. In
any event, upon the full performance by the ESSOP of its obligations under the
Loan Agreement and Note, the Bank shall release any and all Pledged Stock
remaining as security hereunder and shall redeliver same to the ESSOP.

3. In the event that the ESSOP defaults in the performance of its obligations
under the Loan Agreement and Note, the Bank shall have the following rights and
remedies under this Pledge Agreement: (a) the Bank (i) may sell any or all of
the Pledged Stock at public or private sale, by one or more contracts, in one or
more parcels, at the same or different times, for cash and/or credit, or upon
any other terms, at such places and times, and to such persons as the Bank deems
best, (ii) shall apply any cash proceeds actually received from any sale in the
order and subject to the conditions provided under Section 409.615 of the
Wisconsin Statutes, and (iii) shall pay any surplus to the ESSOP and (b) the
Bank shall have any other rights and remedies of a secured party under the
Wisconsin Uniform Commercial Code, all such rights and remedies being
cumulative, not exclusive, and enforceable alternatively, successively, or
concurrently.

4. The ESSOP represents and warrants that it owns the Pledged Stock free and
clear of liens, security interests, encumbrances or other restrictions of any
kind other than those created by this Pledge Agreement, and that it is
authorized to enter into this Agreement. At any time requested by the Bank, the
ESSOP shall perform such other acts and sign such other documents and
instruments as may be necessary, proper, or convenient in order to carry out the
purposes and provisions of this Pledge Agreement.

5. This Pledge Agreement shall be binding upon the parties, and their
successors and assigns.
                  IN WITNESS WHEREOF, the parties have signed this Pledge
Agreement as of the day and year first above written.

                             BADGER METER EMPLOYEE SAVINGS AND STOCK OWNERSHIP
                             PLAN & TRUST

                             By:    /S/  Lora C. Sykora, Vice President
                                    -----------------------------------
                                    On behalf of Marshall and Ilsley Trust
                                    Company, as Trustee

                             BANK ONE, NA
                             By:    /S/  Gregory S. Dorf
                                    -----------------------------------
                                    First Vice President, Division Manager



                                       23


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>c78641exv10.txt
<DESCRIPTION>2003 STOCK OPTION PLAN
<TEXT>
<PAGE>


                                                                      EXHIBIT 10

                               BADGER METER, INC.
                             2003 STOCK OPTION PLAN


1.       PURPOSE

         The purpose of the Badger Meter, Inc. 2003 Stock Option Plan (the
"Plan") is to promote the best interests of Badger Meter, Inc. (the "Company")
and its shareholders by encouraging directors and key employees of the Company
and its subsidiaries to secure or increase on reasonable terms their stock
ownership in the Company. The Board of Directors of the Company believes the
Plan will promote continuity of management, increased incentive and personal
interest in the welfare of the Company by those who are primarily responsible
for shaping and carrying out the long-range plans of the Company and its
subsidiaries and securing their continued growth and financial success. It is
intended that certain of the options issued under the Plan may constitute
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code ("Incentive Stock Options") and the remainder of the options issued
under the Plan will constitute non-qualified stock options ("Non-qualified Stock
Options").

2.       EFFECTIVE DATE

         The Plan shall become effective on the date of adoption by the
shareholders of the Company and all options granted by the Board of Directors
prior to such shareholder approval shall be subject to such approval.

3.       ADMINISTRATION

         (a)      The Plan shall be administered by the Management Review
Committee of the Board (the "Committee") as such Committee may be constituted
from time to time. The Committee shall consist of not less than two members of
the Board selected by the Board, each of whom shall qualify as a non-employee
director within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 ("Exchange Act"), or any successor rule or regulation thereto. A majority
of the members of the Committee shall constitute a quorum. All determinations of
the Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held.

         If at any time the Committee shall not be in existence or not consist
of directors who are qualified as "non-employee directors" as defined above, the
Board shall administer the Plan. To the extent permitted by applicable law, the
Board may, in its discretion, delegate to another committee of the Board or to
any or all of the authority and responsibility of the Committee with respect to
options to participants other than participants who are subject to the
provisions of Section 16 of the Exchange Act. To the extent that the Board has
delegated to such other committee the authority and responsibility of the
Committee, all references to the Committee herein shall include such other
committee.

         (b)      Subject to the express provisions of the Plan, the Committee
shall have complete authority to select the key employees to whom options shall
be granted, to determine the number of shares subject to each option, the time
at which the option is to be granted, the type of option, the option period, the
option price and the manner in which options become exercisable, and shall
establish such other terms and conditions of the options as the Committee may
deem necessary or desirable. In making such determinations, the Committee may
take into account the nature of the services rendered by the respective
employees, their present and potential contribution to the success of their
respective organizations and such other factors as the Committee in its
discretion shall deem relevant. Subject to the express provisions of the Plan,
the Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind the rules and regulations relating to it, to waive
any conditions or restriction with respect to any options, and to make all other
determinations necessary or advisable for the administration of the Plan. The
determinations of the Committee on the matters referred to in this paragraph 3
shall be conclusive.

4.       ELIGIBILITY

         Any non-employee director ("Director") or key employee ("Employee") of
the Company or its present and future subsidiaries, as defined in Section 424(f)
of the Internal Revenue Code ("Subsidiaries"), whose judgment,



                                       24
<PAGE>

initiative and efforts contribute materially to the successful performance of
the Company or its Subsidiaries, shall be eligible to receive options under the
Plan.

5.       SHARES SUBJECT TO THE PLAN

         The shares which may be issued pursuant to options under the Plan shall
be shares of the Company's Common Stock, $1.00 par value ("Stock"), and may be
either authorized and unissued or treasury shares. The total number of shares
for which options may be granted and which may be purchased pursuant to options
under the Plan shall not exceed an aggregate of 200,000 shares, subject to
adjustment as provided in the following sentence and in paragraph 12 hereof. If
an option granted under the Plan expires, is canceled or terminates unexercised
as to any shares of Stock subject thereto, or if shares of Stock are used to
satisfy the Company's withholding tax obligations, such shares shall again be
available for the granting of additional options under the Plan.

6.       OPTION PRICE

         The option price per share of Stock shall be fixed by the Committee,
but shall be not less than 100% in the case of Incentive Stock Options of the
fair market value of the Stock on the date the option is granted. Unless
otherwise determined by the Committee, the "fair market value" of Stock on the
date of grant shall be the closing price for a share of Stock on such date, or,
if such date is not a trading date, the next preceding trading date as quoted on
the American Stock Exchange Transaction Reporting System.

7.       GRANT OF OPTIONS

         (a)      Subject to the terms and conditions of the Plan, the
Committee may, from time to time, grant to Employees options to purchase such
number of shares of Stock and on such terms and conditions as the Committee may
determine. More than one option may be granted to the same Employee. The day on
which the Committee approves the granting of an option shall be considered as
the date on which such option is granted.

         (b)      Notwithstanding the foregoing, each Director of the Company
who is not an employee of the Company or any subsidiary or affiliate thereof,
and who first became or becomes a Director after May 2, 2003, shall, upon
approval of the Plan by the shareholders of the Company, or at the time of their
first election to the Board, subject to adjustments as provided in paragraph 12,
automatically receive an option to purchase 6,000 shares of Stock on that date.
Any date on which a Director receives an option shall be referred to as a "Grant
Date". Such options shall be Non-qualified Stock Options with an expiration date
ten (10) years after the Grant Date. The option price per share shall be the
closing price for a share of Stock on the Grant Date, or if such day is not a
trading day, the next preceding trading day as quoted on the American Stock
Exchange Transaction Reporting System.

         (c)      Notwithstanding the foregoing, each Director of the Company
who is not an employee of the Company or any subsidiary or affiliate thereof,
and who first became or becomes a Director after May 2, 2003, shall, upon
approval of the Plan by the shareholders of the Company, or at the time of their
first election to the Board, be entitled to receive an option to purchase up to
2,000 shares of Stock on that date with the amount of options granted fixed by
the number of options remaining unexercised under the Long-term Incentive Plan
approved by the Management Review Committee on January 26, 1999, in order to
increase the Directors' stake in the future of the Company. Any date on which a
Director receives an option shall be referred to as a Grant Date. Such options
shall be Non-qualified Stock Options with an expiration date ten (10) years
after the Grant Date. The option price per share shall be the closing price for
a share of Stock on the Grant Date, or if such day is not a trading day, the
next preceding trading day as quoted on the American Stock Exchange Transaction
Reporting System.

8.       OPTION PERIOD

         Except as set forth in paragraph 7, the Committee shall determine the
expiration date of each option, but in the case of Incentive Stock Options such
expiration date shall be not later than ten (10) years after the date such
option is granted.


9.       MAXIMUM PER PARTICIPANT

         The aggregate fair market value (determined at the time the option is
granted pursuant to paragraph 7) of the Stock with respect to which any
Incentive Stock Options are exercisable for the first time by a Director or


                                       25

<PAGE>

Employee during any calendar year under the Plan or any other such plan of the
Company or any Subsidiary shall not exceed $100,000.

10.      EXERCISE OF OPTIONS

         An option may be exercised, subject to its terms and conditions and the
terms and conditions of the Plan, in full at any time or in part from time to
time by delivery to the Company at its principal office of a written notice of
exercise specifying the number of shares with respect to which the option is
being exercised. Any notice of exercise shall be accompanied by full payment of
the option price of the shares being purchased (a) in cash or its equivalent; or
(b) with the consent of the Committee, by delivering to the Company shares of
Stock (valued at their fair market value as of the date of exercise, as
determined by the Committee consistent with the method of valuation set forth in
paragraphs 6 and 7); (c) with the consent of the Committee, by any combination
of (a) and (b); or (d) by delivering (including by fax) to the Company or its
designated agent an executed irrevocable option exercise form together with
irrevocable instructions to a broker/dealer to sell or margin a sufficient
portion of the shares of Stock and delivering the sale or margin loan proceeds
directly to the Company to pay for the option price.

11.      TRANSFERABILITY

         No option shall be assignable or transferable by a Director or an
Employee other than by will or the laws of descent and distribution, and may be
exercised during the life of the Director or Employee only by the Director or
Employee or his guardian or legal representative, except that an Employee may,
to the extent allowed by the Committee and in a manner specified by the
Committee, (a) designate in writing a beneficiary to exercise the option after
the Employee's death and (b) transfer any option.

12.      CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK

         In the event of a capital adjustment resulting from a stock dividend,
stock split, reorganization, recapitalization, merger, consolidation,
combination or exchange of shares or the like, the number of shares of Stock
subject to the Plan and the aggregate number and class of shares under option in
outstanding option agreements shall be adjusted in a manner consistent with such
capital adjustment; provided, however, that no such adjustment shall require the
Company to sell any fractional shares. The determination of the Committee as to
any adjustment shall be final. Notwithstanding the foregoing, options subject to
grant or previously granted to Directors under the Plan at the time of any
capital adjustments shall be subject only to such adjustments as shall be
necessary to maintain the relative proportionate interest of each Director and
preserve, without exceeding, the value of such options.

13.      CORPORATE MERGERS AND OTHER CONSOLIDATIONS

         The Committee may also grant options having terms and provisions which
vary from those specified in the Plan provided that any options granted pursuant
to this paragraph are granted in substitution for, or in connection with the
assumption of, existing options granted by another company and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition or other
reorganization to which the Company is a party.

14.      OPTION AGREEMENTS

         All options granted under the Plan shall be evidenced by written
agreement (which need not be identical) in such form as the Committee shall
determine. Each option agreement shall specify whether the option granted
thereunder is intended to constitute an Incentive Stock Option or a
Non-qualified Stock Option.

15.      TRANSFER RESTRICTIONS

         Shares of Stock purchased under the Plan and held by any person who is
an officer or Director of the Company, or who directly or indirectly controls
the Company, may not be sold or otherwise disposed of except pursuant to an
effective registration statement under the Securities Act of 1933 or except in a
transaction in compliance with Rule 144 under such Act or other transaction
which, in the opinion of counsel for the Company, is exempt from registration
under such Act. The Committee may waive the foregoing restrictions in whole or
in part in any particular case or cases, or may terminate such restrictions,
whenever the Committee determines that such restrictions afford no substantial
benefit to the Company.


                                       26



<PAGE>

16.      AMENDMENT OF PLAN

         Shareholder approval is required for any material amendment of the
Plan.

17.      TERMINATION OF PLAN

         The Board shall have the right to suspend or terminate the Plan at any
time; provided, however, that no Incentive Stock Options may be granted after
the tenth (10th) anniversary of the effective date of the Plan as described in
paragraph 2 hereof. Termination of the Plan shall not affect the rights of
Employees or Directors under options previously granted to them, and all
unexpired options shall continue in force and operation after termination of the
Plan except as they may lapse or be terminated by their own terms and
conditions.

18.      TAX WITHHOLDING

         (a) The Company may deduct and withhold from any cash otherwise payable
to an Employee such amount as may be required for the purpose of satisfying the
Company's obligation to withhold federal, state or local taxes as the result of
the exercise of an option. In the event the amount so withheld is insufficient
for such purpose, the Company may require that the Employee pay to the Company
upon its demand or otherwise make arrangements satisfactory to the Company for
payment of such amount as may be requested by the Company in order to satisfy
its obligation to withhold any such taxes.

         (b) An Employee may be permitted to satisfy the Company's withholding
tax requirements by electing to have the Company withhold shares of Stock
otherwise issuable to the Employee or to deliver to the Company shares of Stock
having a fair market value on the date income is recognized pursuant to the
exercise of an option equal to the amount required to be withheld. The election
shall be made in writing and shall be made according to such rules and
procedures as the Committee may determine.

19.      RIGHTS AS A SHAREHOLDER

         A Director or an Employee shall have no rights as a shareholder with
respect to any shares subject to any option until the date the options shall
have been exercised, the shares shall have been fully paid and a stock
certificate shall have been issued.

20.      MISCELLANEOUS

         The grant of any option under the Plan may also be subject to other
provisions as the Committee determines appropriate, including, without
limitation, provisions for (a) one or more means to enable Employees to defer
recognition of taxable income relating to options; (b) the purchase of Stock
under options in installments; and (c) compliance with federal or state
securities laws and stock exchange requirements.




                                       27

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>5
<FILENAME>c78641exv31w1.txt
<DESCRIPTION>CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER
<TEXT>
<PAGE>
                                                                    EXHIBIT 31.1

             CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
      PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT AND RULE 13a-14(a)
             OR 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Richard A. Meeusen, certify that:

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

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

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

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

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

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

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

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

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

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


Date:  July 31, 2003                   By /S/ Richard A. Meeusen
                                          ----------------------
                                          Richard A. Meeusen
                                          President and Chief Executive Officer



                                       28

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>6
<FILENAME>c78641exv31w2.txt
<DESCRIPTION>CERTIFICATION BY THE CHIEF FINANCIAL OFFICER
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.2

   CERTIFICATION OF SENIOR VICE PRESIDENT -- FINANCE, CHIEF FINANCIAL OFFICER
      AND TREASURER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT AND
     RULE 13a-14(a) OR 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Richard E. Johnson, certify that:

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

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

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

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

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

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

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

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

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

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


Date:  July 31, 2003                   By /S/ Richard E. Johnson
                                          -----------------------
                                          Richard E. Johnson
                                          Senior Vice President - Finance, Chief
                                          Financial Officer and Treasurer




                                       29

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>c78641exv32.txt
<DESCRIPTION>CERTIFICATION OF PERIODIC FINANCIAL REPORT
<TEXT>
<PAGE>

                                                                      EXHIBIT 32


  WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

                       PURSUANT TO 18 U.S.C. SECTION 1350


         Solely for the purpose of complying with 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the
undersigned Chief Executive Officer and Chief Financial Officer of Badger Meter,
Inc., a Wisconsin corporation (the "Company"), hereby certify, based on our
knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter
period ended June 30, 2003 (the "Report") fully complies with the requirements
of Section 13 (a) of the Securities Exchange Act of 1934 and that information
contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.




Dated:  July 31, 2003                  By /S/ Richard A. Meeusen
                                          ----------------------
                                          Richard A. Meeusen
                                          President and Chief Executive Officer



                                       By /S/ Richard E. Johnson
                                          ----------------------
                                          Richard E. Johnson
                                          Senior Vice President - Finance, Chief
                                          Financial Officer and Treasurer






                                       30

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>8
<FILENAME>c78641exv99.txt
<DESCRIPTION>ADDITIONAL EXHIBITS
<TEXT>
<PAGE>

                                                                      EXHIBIT 99

                ADDITIONAL EXHIBITS: OUTLOOK SECTION FROM WEBSITE


OVERALL OUTLOOK

From Richard A. Meeusen, President and CEO of Badger Meter, Inc., July 2003:


After a weak first quarter, we are pleased that our markets rebounded and we
were able to announce very strong second quarter results. Although our
industrial products still suffer from the weak economy, we have continued to see
strong sales activity on the water meter side of our business, which represents
about three-quarters of our revenues. We are optimistic about the balance of
2003 and very excited about the longer-term prospects for Badger, especially
considering several new products discussed below.

The release of our new Orion(R) radio frequency automatic meter reading ("AMR")
system for the water utility market has been well received, with continued
strong sales. To complement our Orion(R) product line, we introduced a new
handheld reading device at the American Water Works Association ("AWWA")
convention in June. This device will make it easier for customers to obtain
their meter readings in a walk-by situation.

We are proud to offer the Itron(R), Orion(R) and Trace(R) AMR products to our
customers. The Itron products address a market demand for full-featured,
high-power AMR systems that can be upgraded to network systems. The Orion system
provides water utilities with a lower-cost product that meets the basic
requirements of a drive-by AMR system without the need for FCC licensing by the
utility. These two products enable Badger to address the various market segments
for AMR with a full range of offerings.

Badger Meter also introduced a new meter register for our automatic meter
reading systems at the AWWA convention. Historically, Badger has provided a
technologically-advanced register called the Recordall(R) Transmitter Register
("RTR") for use with our Itron(R), Orion(R) and Trace(R) AMR products. While the
RTR is an industry-leading product, certain market segments prefer a register
that uses a different approach to accumulating readings, generally called
"absolute encoders". Badger has now introduced our first absolute encoder
register, called the Advanced Digital Encoder ("ADE"). This register will also
work with all of our AMR systems and will be offered in addition to our current
RTR register. It will enable Badger to address new AMR market segments.

We also saw some slight improvement in the industrial side of our business
during the second quarter. We are seeing market interest in our new
Radio-Frequency Oil Management System, which provides garages with the ability
to control and account for their oil dispensing through radio communication
devices incorporated into the oil meter itself. This system is easier and less
costly to install than our competitors' wired systems.

Our strategy in the industrial area is to continue to grow in our niche markets
through a combination of new product development and strategic acquisitions. We
will be introducing several new industrial products later this year.

Badger Meter remains focused on creating long-term shareholder value. With daily
disclosures of accounting and financial problems in some large corporations,
Badger is proud of our history of conservative and ethical business practices.
We are pleased to see that many U.S. corporations are adopting some of the
policies that have been standard practices at Badger Meter for many years,
including an active and independent Audit and Compliance Committee, segregation
of audit and non-audit services, a clear Code of Corporate Conduct and
conservative application of accounting principles.

For almost 100 years, Badger Meter has grown and profited by providing customers
with flow management solutions that encourage conservation, manage valuable
resources and maximize customer revenues. Our meters and systems help our
customers control the flow and usage of oil, chemicals, industrial fluids and,
most of all, water. With worldwide water shortages, stricter purification
requirements and the increased cost of fresh water, our products are more
necessary today than ever before.

We are confident that, as the world's communities search for better ways to
conserve and control their valuable resources, Badger Meter will be at the
forefront in meeting those needs. We will continue to develop new products that
accurately and efficiently manage our water and other fluid resources. With our
flow technology, manufacturing capabilities and marketing knowledge, we will
continue to grow as a leading producer of water meters in North America, and as
a provider of industrial flow products worldwide.





                                       31
<PAGE>

FINANCIAL OUTLOOK

Earnings in the second quarter of 2003 rebounded from disappointing results in
the first quarter. We did see strengthening in our core water meter business,
which contributed to the increase in earnings from the first quarter. Sales of
our industrial products, still feeling the effect of the sluggish economy,
improved slightly. While the timing of the recovery of the industrial markets is
uncertain, we anticipate that our sales will continue to track their overall
industries. The second quarter results were also affected by favorable
translation gains, due principally to the strength of the euro.

We continue to believe the long-term outlook for Badger Meter is positive. Our
utility product line has excellent future growth potential as we continue to
pursue new sales opportunities and develop new products. The new products
include a recently introduced series of non-leaded water meters, the lower-cost
Orion(R) AMR product and the recently introduced Advanced Digital Encoder. These
products are generating interest in the marketplace and sales activity is
picking up. Long term, automatic meter reading continues to be our most
significant growth opportunity, with only 10% of existing meters currently
converted to this type of system.

In 2002, the Company completed two acquisitions: Data Industrial Corporation of
Mattapoisett, Massachusetts, and MecaPlus Equipements of Nancy, France. The
acquisitions are consistent with our strategy to expand our line of industrial
products for niche markets. They also provide synergies with Badger Meter's
product offerings. While the acquisitions have had a modest negative impact on
earnings, we expect a favorable impact from both of these companies in the
future.

We believe these opportunities, combined with our strong balance sheet, position
Badger Meter for continued success in the future. We have the resources and
sufficient manufacturing capacity to support our future growth.

We are confident that Badger Meter has the products and services to answer our
customers' needs. We are also confident that our marketplace will provide us
with growth opportunities as we move forward.


ABOUT OUR MARKETS

The majority of Badger Meter sales are in the water utility market of the United
States and, to a lesser degree, in the country of Mexico. Badger Meter's
position in the water utility market is that of a market share leader, providing
meters and meter reading systems which are utilized by water utilities to
generate utility bills, thus revenue. The utility products of Badger Meter are
further classified by the specific market segments they serve, which include
U.S. and Mexican water meters (residential and commercial/industrial meters) and
submetering (apartments and condominiums). In addition, Badger has a strong
presence in several niche segments of the industrial flow measurement and
control market, including research control valves, automotive fluid meters,
electromagnetic meters for industrial and utility applications and traditional
industrial meters utilized in various industrial applications. The outlook for
these markets is discussed in the following sections.


DOMESTIC WATER METER MARKET

At the present time, approximately 12% of the water utility meter market has
been converted to automatic meter reading ("AMR") systems. The majority of
systems being installed in the water industry are mobile radio frequency. Badger
continues to be the leading supplier of AMR systems to the water industry. We
believe that in the long term, system installation of new meters and AMR
products will assist utilities to fund required investments due to improved
revenues and reduced expenses.

How large is the U.S. water meter market and how fast is it growing?

It is estimated that by the end of the year 2002 there were approximately
65,000,000 water meters used to generate revenue from residential and commercial
applications across America. Of that total, 10% are installed in commercial
locations.

Annually, an estimated 6 million water meters are sold in the United States.
This includes about 1.3 million meters for new housing starts, 4 million meters
for replacements, and the balance for AMR conversions. Historically, the growth
rate has been about three percent.

The future growth of the water meter market in the United States could be
significantly and favorably impacted by AMR conversions and by the impacts of
water stress. Continued droughts and water shortages in many areas of the United
States could result in similar increases in demand for water metering systems.



                                       32
<PAGE>

What is automatic meter reading (AMR)?

Automatic meter reading (AMR) refers to an automated process of collecting meter
reading data. Traditionally, meter reading has been accomplished by utility
personnel going to each meter location in order to read the meter and record the
data. Automatic meter reading utilizes electronic components in conjunction with
communication technology to automatically deliver the meter reading data for
utility billing purposes. Automatic meter reading technologies include radio
frequency, telephone and power line carrier. In the water utility industry,
radio frequency meter reading has become the clear technology of choice
currently in use.

What is the AMR conversion rate, and why is it important to Badger Meter?

The AMR conversion rate refers to the rate at which water utilities are changing
their process of reading water meters from a manual method to an electronic
method utilizing a communication technology such as radio frequency. It is
currently estimated that through the year 2002 approximately 12% of water meters
in the United States have converted to automatic meter reading. This means that
approximately 88% of water meters in use, or more than 56 million, are yet to be
converted to an AMR technology!

Water meter life cycles vary across the country. Some utilities annually change
out a percentage of installed meters, thus ensuring that the installed base of
meters is yielding a high rate of accuracy. As utilities change out water
meters, it is logical to install automatic meter reading technologies that will
improve customer relations and reduce expenses. The per-unit price of
AMR-equipped meters is three to six times the price of non-AMR meters. As the
provider of various automatic meter reading technologies, Badger expects to
benefit as a growing number of water utilities recognize the value of converting
to AMR.

How does Badger compare to other companies in AMR shipments?

For the sixth consecutive year, Badger Meter continues to lead the water utility
industry in AMR shipments. Through 2002, BMI has sold 3,038,262 Recordall(R)
water meters and RTR(R)'s installed in AMR applications. Without question,
Badger Meter is the leading choice for product solutions as water utilities
implement automatic meter reading.

According to the 2003 edition of "The Scott Report: AMR Deployments in North
America(C)" (a leading industry report on AMR deployments in all utility
industries), AMR units shipped for the past six years by the top 10 vendors were
as follows:

<TABLE>
<CAPTION>
VENDOR                SHIPPED    SHIPPED    SHIPPED     SHIPPED    SHIPPED     SHIPPED
                      IN '02      IN '01     IN '00     IN '99      IN '98     IN '97
- --------------------------------------------------------------------------------------
<S>                   <C>        <C>        <C>         <C>        <C>         <C>
Badger Meter          602,768    494,652    545,363     325,187    232,546     387,257
Invensys              344,190    357,597    264,508     128,761    149,407     119,219
Neptune               345,637    234,046    162,089     47,784      11,319     134,467
Itron                 65,072     215,103     56,673     333,774    421,858     187,645
RAMAR                 305,775    189,631     97,298     29,552      1,244         0
ABB                   168,291    122,580     56,366     37,748      20,240     22,100
Datamatic.com         131,070     83,960     57,532      3,922       150          0
Master Meter             0        35,636       0          724         0           0
Hexagram              122,965     16,873     11,640       520        875        1,650
DCSI                   3,144      2,500      13,148        0          0        20,000
</TABLE>

What is Badger's share of the North American market?

Market share analysis needs to take into consideration utility meters and
automatic meter reading. For the past three years, Badger Meter has consistently
enjoyed a water meter market share of between 25 - 28% while our AMR market
share averages more than 30%. One of the leading industry market reports on AMR
deployments indicates that through 2002, Badger Meter was the overall market
share leader with 35.4% of the total installed AMR market with 3.0 million units
at 1,026 water utilities.

Why are housing starts important to Badger Meter?

Throughout the decade of the '90's, average annual housing starts were 1.374
million units. Since approximately 80% of these will be to homes served by
municipal water supply, typically resulting in the installation of water meters,
new housing is a significant portion of total annual meter sales.


                                       33
<PAGE>

Who are Badger Meter's major competitors in the U.S. water meter industry?

While Badger Meter enjoys the unique position as one of the largest independent
producers of water meters and meter reading technologies in the world, we are
certainly not without competitors. Over the course of the last two decades,
several major international companies have acquired numerous water meter
production facilities worldwide. Included as Badger's primary competitors in the
United States are Neptune Technology Group, Inc. (previously, Schlumberger
Industries Resource Management Division); Invensys Technologies (previously
called Rockwell or Sensus) and AMCO Water Metering Systems Inc, formerly the
Water Meter Division of ABB Kent. Smaller competitors also include Master Meter,
a subsidiary of ARAD from Israel, Hersey Meter and Metron-Farnier, LLC.


What is Badger Meter's current capacity for manufacturing water meters?

Similar to other manufacturing companies, any calculation of manufacturing
capacity is a combination of multiple factors, including product mix, shifts
worked, production bottlenecks, individual machine output, etc. In general
terms, Badger Meter's historical capacity (prior to 2000) for water meter
production was approximately 1.5 million meters per year. However, Badger Meter
completed a major capacity expansion in 2000. This expansion included major
expenditures for a facility addition in Milwaukee, Wisconsin, as well as
significant expenditures for water meter manufacturing and assembly equipment in
both the Milwaukee and the Nogales, Mexico facilities.

This expansion increased water meter manufacturing capacity to approximately 2.5
million meters per year. Assuming a consistent mix of products, management
believes that water meter production and sales could increase significantly over
the next few years with only minor investments in auxiliary manufacturing
equipment.

What new water meter products have been introduced by Badger Meter?

COMPOUND SERIES WATER METERS: Badger Meter's Compound Series water meter line,
sizes 2" through 6", measure the broadest flow range of meters used by water
utilities. Typically used in well-populated buildings where water use varies
throughout the day (such as hospitals, universities or apartment complexes), the
compound meter provides remarkable low flow accuracy due to measurement through
a positive displacement measurement chamber, as well as outstanding high flow
accuracy due to incorporating an advanced turbine meter technology. The
Recordall(R) compound series water meters use the same field-proven turbine
technology as the Recordall Turbo Series meters.

One of the most significant features of the new Compound Series meter is a
dramatic improvement in crossover accuracy. Crossover accuracy refers to the
meter accuracy at flow rates changing from low flow to high flow and back to low
flow through the two measuring elements. Coupled with this vast improvement in
crossover accuracy is a simplicity of design resulting in reduced maintenance in
the field.

RET(TM): Most water utilities require connectivity to process control
instrumentation. To simplify and improve the interface to process control
equipment, Badger introduced the Remote Electronic Transmitter (RET(TM)). The
RET incorporates numerous improvements over other transmitting devices currently
used in the water industry. The electronics are housed in a glass and copper
package which utilizes the advanced sealing system of Badger's RTR(R),
field-proven -- with millions of units in use throughout North America. The RET
provides scaled and unscaled digital outputs and an optional 4-20 mA signal
output. The RET is compatible with all Recordall(R) positive displacement,
turbine and compound meters.

MAGNETOFLOW(R) ELECTROMAGNETIC METER: The commercial market segment within the
water utility industry is benefiting from Badger's Magnetoflow(R)
electromagnetic meter -- a sophisticated non-intrusive metering technology
ideally suited to specific applications of water and wastewater utilities. By
combining Magnetoflow electromagnetic meters with the Cybersensor(TM) AMR
products, Badger is able to offer an exclusive capability to water and
wastewater utilities for satellite reading of meters in remote or difficult
locations.

ORION(R) RF SYSTEM: With the advanced Orion technology, utility customers can
easily upgrade their meter reading system. Orion is designed for maximum
flexibility to meet the various system and application needs of even the
smallest water municipality.

No FCC licensing is required! Customers will get faster meter reading, greater
accuracy and can eliminate the need for estimated readings. Plus, with optional
features like leak detection and GPS mapping programs, customers can tailor
Orion to fit their system's needs. AMR technology has never been more accessible
to water utilities.

NEW ADE(TM): In June of 2003, Badger Meter previewed the Absolute Digital
Encoder (ADE), a new encoder for the utility market. The ADE joins the Recordall
Transmitter Register (RTR) in a family of encoder registers for use


                                       34
<PAGE>

in various automated meter reading applications. The ADE is a position-based
non-contact encoder utilizing LED technology that senses the position of each
number wheel for AMR and touch applications.

Who are Badger's major alliance partners and why are they important?

For almost one hundred years, Badger has been a leader in flow measurement
technology as is evident by our strong market share within the water utility
industry. We have strengthened our capability through alliances with other
recognized leaders in flow measurement technology. Included in this group is H.
Meinecke AG of Hannover, Germany, the world's largest producer of bulk water
meters used in commercial applications. The alliance has developed turbine water
meter technology that is world class.

Through a close alignment with Ames Company, Inc., Division of Watts Industries,
Badger has developed a superior line of water meters for the utility fire
service applications. These are water meters that are used in commercial and
industrial buildings where fire protection systems are installed. Requirements
for these meters include rigorous testing along with approval under and
conformance to Underwriters Laboratories Inc. and Factory Mutual Insurance Co.
standards.

In the field of AMR, Badger recognized the need to cooperate with industry
leaders in communication technology in order to provide water utilities with
product solutions that meet their needs. To that end, several alliances have
been developed.

For more than a decade, Badger Meter has had a distribution agreement with
American Meter Company, marketing the TRACE(R) radio frequency AMR technology to
the water utility industry.

Badger Meter and Itron, Inc., the world's largest provider of AMR products and
systems, established a joint marketing and distribution agreement in 1999. Joint
marketing efforts of Badger and Itron have resulted in AMR and meter system
sales to major utilities in the United States, such as Philadelphia, Houston and
Milwaukee.

Badger Meter also has a marketing agreement with Honeywell DMC Services that
will enable Badger to offer its customers not only meters and automatic meter
reading technologies, but also a full line of related services including needs
assessment, financing, implementation, meter reading and billing.


MEXICAN WATER METER MARKET

Badger Meter has a significant installed based of automatic meter reading
systems in Mexico, most notably in Mexico City. We expect to see opportunities
in Mexican water meter markets as the new government moves forward in its
efforts to improve the fresh water situation in Mexico. In February of 2001,
Mexican President Vicente Fox stated that "the water problem in this country in
the next ten years requires investments worth $30 billion." He further stated
that one source of the funding "would be to charge real prices for water
throughout our national territory." Such an initiative would require investments
in metering systems. Badger is currently pursuing opportunities to sell water
meters and related systems to various Mexican communities.


VALVE MARKET

Badger Meter offers a line of small valves under the name "Research Control(R)
Valves." These valves are used to control the flow of fluids in a wide variety
of applications in medical research, pharmaceutical production, food and
beverage, petroleum, and heating, ventilation and air conditioning. These valves
are sold throughout the world, with the largest sales in North America and
Europe.

How large is the valve market and how fast is it growing?

It is difficult to ascertain Badger Meter's market share for control valves.
Badger Meter participates in a niche market for small, precision control valves
for research facilities and industrial process industries. Past studies have
indicated that the Company has over a 65% market share in the domestic market
and approximately a 15% market share of the world market for 1/4" diameter
control valves. The same studies indicated that the Company has over a 50%
market share of the domestic market and more than a 10% market share of the
world market for 1/2" diameter control valves.

North American (U.S. and Canada) demand for all industrial control valves
reached $2.1 billion in 1998 representing the world's largest market for
industrial control valves. North American demand for industrial control valves
is projected to increase 6.0% a year to $2.8 billion in 2003. World demand for
industrial control valves reached $10.1 billion in 1998. World demand for
industrial control valves is projected to increase 6.2% a year to $13.4 billion
in 2003.


                                       35
<PAGE>

What new valve products are being introduced by Badger Meter?

Badger Meter acquired a small product line of magnetic flow meters for low flows
in the latter part of 2000. The low flow magnetic flow meters are an ideal
compliment to the Research Control valves. The Research Control Mag was launched
in the first quarter of 2001.

Badger Meter recently introduced a new actuator for its larger size valves (3/4"
to 2"). There were some industrial applications where the performance of our
current actuator was not sufficient to produce enough shut-off force. The new
actuator produces over 60 square inches of shut-off force, which is nearly
double the capacity of the current model.

Badger Meter is currently developing products to further update its line of
electric valve actuators and to address the growing market for intelligent valve
positioners.


AUTOMOTIVE FLUIDS MARKET

Badger Meter serves the automotive fluids market with a full line of meters that
measure and dispense automotive fluids such as oil, grease and transmission
fluids. These meters are used in industrial applications throughout the world
and are marketed through approximately 25 OEM's in North America and Europe -
the two largest markets for our products.

How large is the automotive fluids market and how fast is it growing?

The domestic market for Badger Meter's automotive fluids products is estimated
at just over $10 million annually while the world market is estimated at
approximately $20 million annually. The Company estimated its current market
share to be approximately 50% in both the domestic and world markets. The annual
growth rate for the automotive fluids market is estimated at less than 5%.

What new automotive fluids products are being introduced by Badger Meter?

Badger recently introduced both an advanced series and a standard series
Electronic Preset Meter (EPM). Additionally, Badger Meter Europe has introduced
a new radio frequency oil management system (RF-OMS) which greatly improves the
control and management of automotive fluid products. A U.S. version of the
product has been released. Badger released a new Oval Gear Junior (OG-JR), a
low-feature, end-of-hose meter, handle, swivel and nozzle configuration. Market
acceptance has been limited. A special fluids EPM-SF has been released for
corrosive fluids. It is available in standard and advanced series. It will also
be made available in an RF version.

OTHER INDUSTRIAL METER MARKETS

Badger Meter offers a wide range of flow meters for industrial applications.
These meters include:

[ ] Research Control electromagnetic flow meters that measure extremely low
flows, corrosive fluids, sanitary fluids and batching processes.

[ ] Electromagnetic flow meters (under the name "Magnetoflow(R)") that measure a
large variety of fluids used in various industries, including food and beverage,
pharmaceutical, chemical and mining.

[ ] Oscillating piston meters that handle most fluids regardless of viscosity in
areas such as batching, inventory control and process transfer of fluids.

[ ] Concrete meters and dispensing systems that are interfaced with computer
batching systems to measure and add chemicals to concrete. Badger Meter recently
developed and introduced a new dispenser manifold assembly used to fill and
empty vessels in the concrete admix industry.

What new industrial meter products are being introduced by Badger Meter?

The principal area for development in the Company's other industrial products is
with the electromagnetic flow meters product line. The Company expects to
introduce a new version of its Magnetoflow(R) product line later this year. The
new model will have enhanced features for both the utility and industrial
markets.

Badger Meter's Concrete group plans to release its newest product, the MEASURE
RITE (R) Volumetric Truck Meter, during Q4 of 2003. Through the joint efforts of
Badger Meter Tulsa, OK, and DIC Mattapoisett, MA, a compact, user-friendly and
robust truck meter has been designed enabling the concrete producer to
accurately totalize and dispense water for premixed concrete batches at the job
site thus eliminating operator error and batch waste. The truck meter housing
and electronics can withstand the direct hose spray wash downs that are required
in this environment and can tolerate the high vibrations associated with being
mounted on a concrete mixer truck.


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