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Basis of Presentation and Accounting Policies | 12 Months Ended
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Dec. 31, 2023
Accounting Policies [Abstract] |
Basis of Presentation and Accounting Policies | Note 1 Basis of Presentation and Accounting Policies Profile With more than a century of water technology innovation, Badger Meter is a global provider of industry leading water management solutions, with nearly 95% of net sales derived from water-related applications. These tailorable solutions encompass smart measurement hardware, reliable communications, data and analytics software as well as ongoing support and expertise essential to optimize customers' operations and contribute to the sustainable use and protection of the world’s most precious resource. The Company's smart measurement hardware is primarily comprised of the following product families: • Meters that measure the flow of water and other fluids and are known for accuracy, long-lasting durability and for providing valuable and timely flow measurement data. • Water quality monitoring solutions, including optical sensing and electrochemical instruments that provide real-time, on demand data parameters. • High frequency pressure and acoustic leak detection hardware that provides real-time monitoring data. The Company’s broad range of communication solutions include the ORION® branded family of radio endpoints, providing customers with a choice of industry-leading options for communicating data from hardware into usable applications. The Company’s hardware-enabled software provides the insights and analytics critical to the holistic management of our customers’ water systems. These digital solutions increase visibility, empowering customers to monitor system performance and make decisions aiding efficiency, resiliency, and sustainability. The Company also provides training, project management, technical support and other collaborative services for customers. The Company’s solutions fall into two product lines: sales of meters, water quality sensors and other hardware, communication, and software and related technologies, to water utilities (utility water) and sales of meters, other sensing instruments, valves, software and other solutions to commercial and industrial customers, including water related applications (flow instrumentation). Utility water smart metering solutions are comprised of water meters along with the related radio and software technologies and services used by water utilities as the basis for generating their water and wastewater revenues, enabling operating efficiencies and engaging with their end consumers. This product line further comprises other instruments and sensors used in the water distribution system to ensure the safe and efficient delivery of clean water. These sensors are used to detect leaks and to monitor various water quality parameters throughout the distribution system. The largest geographic market in which the Company operates is North America, primarily the United States. The majority of water meters sold are mechanical in nature, with increasing adoption over time of ultrasonic (static) metering technology due to a variety of attributes, including their ability to maintain measurement accuracy over their useful life. The flow instrumentation product line primarily serves water applications throughout the broader industrial market, with both standard and customized solutions. This product line includes meters, valves and other sensing instruments sold worldwide to measure and control the quantity of fluids including water, air, steam, and other liquids and gases. These products, oftentimes leveraging the same technologies used in utility water, are used in a variety of industries and applications, with the Company’s primary market focus being water/wastewater, heating, ventilating and air conditioning (HVAC) and corporate sustainability. Flow instrumentation products are generally sold through manufacturers’ representatives and original equipment manufacturers as the primary flow measurement device within a product or system. Specialized communication protocols that control the entire flow measurement process and mandatory certifications drive these markets. Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. Cash Equivalents The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents. Receivables Receivables consist primarily of trade receivables. The Company does not require collateral or other security and evaluates the collectability of its receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items and the customer's ability and likelihood to pay, as well as applying a historical write-off ratio to the remaining balances. Changes in the Company's allowance for doubtful accounts are as follows:
|  | Balance at beginning of year |  |  | Provision and reserve adjustments |  |  | Write-offs less recoveries |  |  | Balance at end of year |
|  | (In thousands) |
2023 |  | $ | 1,179 |  |  | $ | 1,862 |  |  | $ | (137 | ) |  | $ | 2,904 |
2022 |  |  | 697 |  |  |  | 515 |  |  |  | (33 | ) |  |  | 1,179 |
2021 |  |  | 552 |  |  |  | 191 |  |  |  | (46 | ) |  |  | 697 |
Inventories Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The Company estimates and records provisions for obsolete and excess inventories. Changes to the Company's obsolete and excess inventories reserve are as follows:
|  | Balance at beginning of year |  |  | Net additions charged to earnings |  |  | Disposals |  |  | Balance at end of year |
|  | (In thousands) |
2023 |  | $ | 6,681 |  |  | $ | 2,135 |  |  | $ | (1,942 | ) |  | $ | 6,874 |
2022 |  |  | 6,078 |  |  |  | 1,498 |  |  |  | (895 | ) |  |  | 6,681 |
2021 |  |  | 6,400 |  |  |  | 1,329 |  |  |  | (1,651 | ) |  |  | 6,078 |
Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the respective assets by the straight-line method. The estimated useful lives of assets are: for land improvements, 15 years; for buildings and improvements, 10 to 39 years; and for machinery and equipment, 3 to 20 years. Capitalized Software and Hardware Capitalized internal use software and hardware included in other assets in the Consolidated Balance Sheets were $3.7 million and $4.8 million at December 31, 2023 and 2022, respectively. These amounts are amortized on a straight-line basis over the estimated useful lives of the software and/or hardware, ranging from 1 to 5 years. Amortization expense recognized for the years ending December 31, 2023, 2022 and 2021 was $3.3 million, $3.8 million and $4.5 million, respectively. Long-Lived Assets Property, plant and equipment and identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Intangible Assets Intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from 5 to 20 years. The Company does not have any intangible assets deemed to have indefinite lives. Amortization expense was $8.6 million in 2023, $8.6 million in 2022 and $10.0 million in 2021. Amortization expense expected to be recognized is $8.6 million in 2024, $8.2 in 2025, $7.4 million in 2026, $5.7 million in 2027, $4.3 million in 2028 and $19.5 million thereafter. The carrying value and accumulated amortization by major class of intangible assets are as follows:
|  | December 31, 2023 |  |  | December 31, 2022 |
|  | Gross carrying amount |  |  | Accumulated amortization |  |  | Gross carrying amount |  |  | Accumulated amortization |
|  | (In thousands) |
Technologies |  | $ | 66,157 |  |  | $ | 41,845 |  |  | $ | 58,504 |  |  | $ | 37,857 |
Intellectual property |  |  | 7,086 |  |  |  | 1,301 |  |  |  | 6,857 |  |  |  | 840 |
Non-compete agreements |  |  | 627 |  |  |  | 610 |  |  |  | 691 |  |  |  | 661 |
Licenses |  |  | 650 |  |  |  | 578 |  |  |  | 650 |  |  |  | 560 |
Customer lists |  |  | 8,235 |  |  |  | 5,863 |  |  |  | 8,058 |  |  |  | 5,097 |
Customer relationships |  |  | 27,884 |  |  |  | 12,936 |  |  |  | 38,602 |  |  |  | 22,023 |
Trade names |  |  | 15,424 |  |  |  | 9,193 |  |  |  | 15,880 |  |  |  | 8,597 |
Total intangibles |  | $ | 126,063 |  |  | $ | 72,326 |  |  | $ | 129,242 |  |  | $ | 75,635 |
Goodwill Goodwill is tested for impairment annually during the fourth quarter or more frequently if an event indicates that the goodwill might be impaired. Potential impairment is identified by comparing the fair value of a reporting unit with its carrying value. No adjustments were recorded to goodwill as a result of these tests during 2023, 2022 and 2021. Goodwill was $113.2 million at December 31, 2023 and $101.3 million at December 31, 2022. The increase in goodwill from 2022 to 2023 resulted from the acquisition of Syrinix Ltd, headquartered in Norwich, United Kingdom in 2023, as well as currency translation adjustments of $1.6 million. This acquisition is further described in Note 3 “Acquisitions”. Warranty and After-Sale Costs The Company estimates and records provisions for warranties and other after-sale costs in the period in which the sale is recorded, based on a lag factor and historical warranty claim experience. After-sale costs represent a variety of activities outside of the written warranty policy, such as investigation of unanticipated issues after the customer has installed the product or analysis of water quality issues. Changes in the Company's warranty and after-sale costs reserve are as follows:
|  | Balance at beginning of year |  |  | Provision of acquired business |  |  | Net additions charged to earnings |  |  | Costs incurred |  |  | Balance at end of year |
|  | (In thousands) |
2023 |  | $ | 9,606 |  |  | $ | 93 |  |  | $ | 9,759 |  |  | $ | (8,356 | ) |  | $ | 11,102 |
2022 |  |  | 12,868 |  |  |  | - |  |  |  | 5,624 |  |  |  | (8,886 | ) |  |  | 9,606 |
2021 |  |  | 11,617 |  |  |  | - |  |  |  | 5,856 |  |  |  | (4,605 | ) |  |  | 12,868 |
Research and Development Research and development costs are charged to expense as incurred and amounted to $19.0 million in 2023, $15.8 million in 2022 and $14.7 million in 2021. Healthcare The Company estimates and records provisions for healthcare claims incurred but not reported, based on medical cost trend analysis, reviews of subsequent payments made and estimates of unbilled amounts. Accumulated Other Comprehensive Loss Components of accumulated other comprehensive loss at December 31, 2023 are as follows:
(In thousands) |  | Unrecognized pension and postretirement benefits |  |  | Foreign currency |  |  | Total |
Balance at beginning of period |  | $ | 994 |  |  | $ | (6,977 | ) |  | $ | (5,983 | )
Other comprehensive income before reclassifications |  |  | - |  |  |  | 4,411 |  |  |  | 4,411 |
Amounts reclassified from accumulated other comprehensive income, net of tax of ($26) |  |  | (74 | ) |  |  | - |  |  |  | (74 | )
Net current period other comprehensive loss, net of tax |  |  | (74 | ) |  |  | 4,411 |  |  |  | 4,337 |
Accumulated other comprehensive loss |  | $ | 920 |  |  | $ | (2,566 | ) |  | $ | (1,646 | )
Reclassifications out of accumulated other comprehensive income during 2023 were immaterial. Components of accumulated other comprehensive income at December 31, 2022 are as follows:
(In thousands) |  | Unrecognized pension and postretirement benefits |  |  | Foreign currency |  |  | Total |
Balance at beginning of period |  | $ | 394 |  |  | $ | (258 | ) |  | $ | 136 |
Other comprehensive loss before reclassifications |  |  | - |  |  |  | (6,719 | ) |  |  | (6,719 | )
Amounts reclassified from accumulated other comprehensive income, net of tax of ($197) |  |  | 600 |  |  |  | - |  |  |  | 600 |
Net current period other comprehensive loss, net of tax |  |  | 600 |  |  |  | (6,719 | ) |  |  | (6,119 | )
Accumulated other comprehensive loss |  | $ | 994 |  |  | $ | (6,977 | ) |  | $ | (5,983 | )
Reclassifications out of accumulated other comprehensive income during 2022 were immaterial. Use of Estimates The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Fair Value Measurements of Financial Instruments The carrying amounts of cash and cash equivalents, receivables and payables in the financial statements approximate their fair values due to the short-term nature of these financial instruments. Included in other assets are insurance policies on various individuals who were associated with the Company. The carrying amounts of these insurance policies approximate their fair value. Subsequent Events The Company evaluates subsequent events at the date of the balance sheet as well as conditions that arise after the balance sheet date but before the financial statements are issued. The effects of conditions that existed at the balance sheet date are recognized in the financial statements. Events and conditions arising after the balance sheet date but before the financial statements are issued are evaluated to determine if disclosure is required to keep the financial statements from being misleading. To the extent such events and conditions exist, if any, disclosures are made regarding the nature of events and the estimated financial effects for those events and conditions. For purposes of preparing the accompanying consolidated financial statements and the notes to these financial statements, the Company evaluated subsequent events through the date the accompanying financial statements were issued. Recently Adopted Accounting Pronouncements In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities with Customers," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers." The guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted ASU No. 2021-08 on January 1, 2023, the impact of which was not significant to the Company. In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which requires enhanced disclosures on segment expenses, interim segment disclosures, and requirements for entities operating under a single segment. The guidance is effective on a retrospective basis for fiscal years beginning after December 15, 2023 and interim periods beginning after January 1, 2025, early adoption is permitted. The Company is currently assessing the impact of this proposed change on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires additional disclosure associated with the effective tax rate reconciliation and payment of income taxes. The guidance is effective for fiscal years beginning after December 15, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently assessing the impact of this proposed change on its consolidated financial statements.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent + Details
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