Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2014 Badger Meter Earnings Conference Call. My name is Lisa, and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Rick Johnson, Senior Vice President of Finance and Chief Financial Officer. Please proceed, sir.

Thank you very much, Lisa. Good morning, everyone, and welcome to Badger Meter’s fourth quarter and year-end conference call. I want to thank all of you for joining us. As usual, I will begin by stating that we will make a number of forward-looking statements on our call today. Certain statements contained in this presentation as well as other information provided from time-to-time by the company or its employees may contain forward-looking statements that involve risk and uncertainties that could cause actual results to differ materially from those in these forward-looking statements. Please see yesterday’s earnings release for a list of words or expressions that identified such statements and the associated risk factors. Let me reiterate some of our guidelines. For competitive reasons, we do not comment on specific individual product line profitability other than in general terms, nor do we disclose components of cost of sales. More importantly, we continue our practice of not providing specific guidance on future earnings. We believe specific guidance does not serve the long-term interest of our shareholders. Now on to the fourth quarter results. Yesterday after the market close, we released our fourth quarter and year-end 2014 results. We are pleased to report a fourth quarter record sales amount of $89.3 million. This represents an increase of $8.3 million or 10.3% over the fourth quarter sales in 2013. This increase was due to higher sales of both municipal water and flow instrumentation products. Specialty products were relatively flat between years. Let me review each of these sales categories. Municipal water sales increased $7.5 million or 13% to $65.2 million from $57.9 million in the fourth quarter of 2013. These sales represented 72.9% of total sales for the quarter. Included in this amount is approximately $6.1 million of incremental sales from National Meter. You…

Thank you, Rick, and thank all of you for joining us today. As Rick pointed out, our fourth quarter results had some unusual impacts, including the one-time National Meter inventory impact and a lower income tax rate. These types of impacts on a single quarter can reflect the lumpiness of our business when viewed in the short-term. However, looking at the bigger picture, the full year's results clearly reflect our strongest year ever and we're very pleased with that performance. We also had some major accomplishments in 2014 that will position us well going forward. First, we completed the acquisition of National Meter and Automation, our largest distributor with headquarters in Denver and operations in several western states. This acquisition brings us closer to our customers, allows us to work more closely with our field sales people, and can serve as a platform for future distribution operations. The integration has gone very well and National Meter's fourth quarter operating results were on plan. Secondly, we're seeing continued acceptance and growth in our newer products. Sales of the E-Series electronic water meters more than doubled from 2013 to 2014. In early 2013 we introduced the ORION SE radio, which provide simultaneous drive-by and fixed network water meter reading capability. We also saw sales of that product more than doubled from 2013 to 2014. And last year we introduced our newest product, the BEACON advanced metering analytic system with its cellular based radio. We have seen strong sales of our starter kits in 2014 plus several utilities have made a commitment to adopt the system throughout this service territory. These three new products, the E-Series meter, the ORION SE radio, and the BEACON AMA system are all driving sales growth and strong margins for Badger Meter. Recently we've been getting many questions…

[Operator Instructions] And your first question comes from the line of Richard Eastman with Robert W. Baird. Please proceed.

All right. Good morning.

Good morning, Rick.

Just a couple of things, may be related to National Meter. The $6 million in sales, $6.1 million in sales that you noted here in the quarter, in the fourth quarter seems awfully high. Is that seasonal, or are we thinking just seasonality aside, $6 million a quarter is the run rate.

Well, part of that when we said we bought National Meter, we said it will add about $15 million of incremental revenue.

Yeah.

And you're seeing some of that in the $6 million. You're also seeing basically what I call the distributor margin only for the inventory they had at the beginning of the period. In other words when we sell it to them, they always sold it for a little bit more, so we're seeing some of that incremental sales in the number.

Okay. Now again, that -- does that annualize out in the quarter, or put it this way, when modeling NM for '15 are we better off to use a $15 million revenue number incremental for the full year?

Rick, this is Rich. First off, National Meter does have one large project that's going out west. That is boosting us up. And that project will carry us into 2015. So I think you're probably safe estimating a little bit higher. I wouldn't take the $6 million and multiply by four, but I think you'd be safe going north of $15 million.

Okay. And then, can I also just -- now the gross margin kind of gets wiped out with the purchase accounting here, but again my impression is that this is on the normalized basis may be 55% type gross margin. I mean can you just get us in a range here?

Well, when you're talking about adding Badger's normal gross margin on what we were selling to National Meter plus National Meter's gross margin on what they sell.

Yeah.

It's obviously higher than Badger's average in the mid-30s. So, I would say, I'm not sure I will go as high as 55%, but 50% is probably a pretty close number.

Okay. All right. And just one question on the SG&A, Rick, you just kind of mentioned the SMG&A expenses; I guess you attributed about $2.5 million to NM. Is there any legal, professional fees in there, or is that kind of an SG&A run rate for them as well?

That is the run rate.

Okay. And the fact that your - Badger's kind of core SMIGA expenses were a bit high, is some of this like the - say the healthcare, is any of that kind of truing up your end expenses or…

Actually what happened is, for the year our healthcare was probably only about 6% higher. Unfortunately, for the first three quarters we were really running low.

Okay.

In the first quarter because we're self insured in the fourth quarter we got hit pretty hard. And so, it's hard for us - is it because it's people using their flex amounts at year end or whatever. We're doing some analysis with that to try and get a better estimate. But it's just -- it was kind of shocking. On the other hand, being self insured it only takes two or three significant medical expenses to really influence that amount in a particular quarter.

Okay, okay. And then, just may be last question, I'll get back in the queue then. But the seasonal tone to the business, Rick, you know, we had obviously the storms in the northeast, how does the seasonal tone to the resi water municipal business feel through January, because obviously your first quarter sequentially can be plus double-digits or minus double-digits sequentially. But can you just give us any sense of how the tone is through the first month here seasonally, and if the northeast storm is kind of got us off to a slow start or were a non-factor.

This is Rich. You're absolutely right, Rick. The first quarter weather can have such an impact on us because Badger Meter does have a large market share in the upper Midwest and the northeast. And so, we've seen in the past that the seasonality can -- the weather can really impact us. And I would say, you're right, some of the storms we've seen during the month of January have had a slowdown for us. So the quarter is probably off to a little slower start than what we would normally see with a normal weather pattern. That isn't to say it won't make up. I mean, sometimes we have a really strong March. I think it all comes down to ground hard predictions or something; if the winter ends faster, the better quarter.

All right.

And Rick, if you remember in the first quarter of '14, because we had the same issue and we had the similar weather, what happened is we had a mix -- we had a greater mix of sales in the western states which had -- which by the way doesn't get played up a lot on TV, but really had very mild weather in the first quarter of last year. So it had that positive impact on us. So it also depends where the customers are at that point in time. But I agree with Rich. We are seeing a little bit of a slowdown, especially in the northeast.

Yeah. Okay. Fair enough. All right. Thank you very much.

And your next question comes from the line of Ryan Connors with Boenning. Please proceed.

Good morning. Thanks for taking my call.

Good morning.

We know its Boenning.

Boenning, silent O. Wondered if you could just talk a little bit about the competitive environment. Obviously, we had a big industry show this week. You all introduced BEACON last year at DistribuTECH. So I'm wondering if you heard anything from your people there about competitive offerings and people trying to catch up to some of the things you've done, and whether there's anything that seems meaningful. And also, just get an update on anything that you've all rolled out this week there, if anything.

Well, Ryan, this is Rich again. Let me take the last part first. Our roll out has continued to be the -- our flagship product now, which is the BEACON AMA system. And we brought our EyeOnWater which is a downloadable app, which allows the homeowner to monitor their own water usage and a lot of utilities want to provide that data to the homeowner, especially utilities out west where they're trying to encourage conservation. So that was our big push and we've certainly got a lot of customers who are interested in that and they're looking at the entire BEACON system in some cases because they want their customers to have that app. So that's been a real positive for us. Other thing we saw at the show is that and I think this is significant, right now a couple of our competitors have been moving away from brass meters in the residential market and more over to the polymer meters. Now, at this point, really only two companies Badger and Neptune are primarily leading with brass meters. Meanwhile, Mueller, Census, some of the other smaller players are really pushing the polymer meter simply because it's lower price and they can compete more aggressively on price. So I think that's an interesting fact when you consider what's been happening with brass prices. You might assume that lower brass prices benefit all companies equally that might not be true in this scenario. The other thing that's happening is we have seen some other companies coming in with new technology. There are a couple of companies from Europe that were actually displaying at the show for the first time. And these are companies introducing electronic metering, trying to get a foothold in the U.S. I think they are going to have a lot of challenges doing that just as we would have challenges doing missionary work in Europe, but we did see them there. And then I'll also say that some of our competitors started talking about cellular products and started talking about solid state metering, but we didn't always see products. So that's really what was coming out of the show.

Okay. Interesting. Thanks for that update. And then on BEACON AMA, you talk about these, you've got some, I guess, commitments now to do some fairly sizable roll outs there. Any regional focus to that and then any what is if those systems like about the product that's caused them to go forward?

Yeah. I would say we are -- I'm a little surprised that we are not seeing a regional impact. BEACON is really -- the interest in BEACON has been across the United States now for different reasons. Out west, there might be a little more focus on the conservation tools that BEACON implies. Out East is a little more focused on the fact that they don't need infrastructure that they can put in these shell or units without the bases on towers that can be knocked down by windstorms and all of the other issues. So for various reasons the utilities across United States are looking at BEACON pretty much evenly. We're not seeing any area that it's increasing more than anywhere else.

Okay. And then is there something that those utilities looking at having or adapting and have in common in terms of what the real components of the system are that they like. I know there's a number there.

I would say the lack of infrastructure is probably the biggest issue. And then, the second biggest issue is the software and the availability of the data.

Okay. Great. Well, that's all very helpful. Thanks for your time.

Good.

And your next question comes from the line of Kevin Bennett with Sterne Agee. Please proceed.

Hi. Good morning, everybody.

Good morning, Kevin.

Rick, first question for you, a bit of a clarification. Can you give the numbers of the flow instrumentation and specialty product sales, the actual dollar amount?

Why not give them.

If I missed that I apologize.

No, actually I didn't give the numbers. We'll get back to you on that.

Okay. That's fine. And then one other question for you, are we finished with the initial accounting adjustments on National Meter? I guess the question is really the margins there, are we back to a normal level, or is it going to kind of gradually improve as we get through the year?

We're done with the initial.

Yeah. This is Rich. And while Rick is looking, I'll exercise my old CPA certificate and tell you that we should be done with it, assuming inventories remain fairly stable. The problem was that -- and I'm going to try to say this without letting my disdain for modern purchase accounting rules creep into my voice, the problem was that on October 1, we were required to write all of the inventory up to market. And on December 31 we were required to write all the inventory down to cost, eliminating inter-company profit. In the future it will always be written down to cost, and therefore, barring any huge swings in inventory levels, there shouldn't be any impact.

Got you. That makes sense.

And Rick has your answer.

I have your answer.

Perfect.

From a pace flow instrumentation sales in the fourth quarter were $22.3 million this year, $21.4 million last year; and specialty sales were about $1.9 million in both years.

Perfect. Thank you. Rich, one more clarification, if I think -- within municipal water, do you give a breakdown of how much is residential versus commercial?

Generally, no. We do talk about residential being up versus commercial. It's different because residential sales are generally driven more by technology, whereas commercial sales are really driven by unit sales of the meters themselves, because there's a lot more metal there. The analogy is on a plain residential meter, we might sell it for $40. If it's got a radio, we might sell it for $150. Okay, so you are talking radio. But if you are selling a commercial meter for 2,000 versus 2,100 with a radio, it's not that big a deal. So that's why we talk about the distinction.

But it's roughly 80%, 20%. Our revenues come from 80%, 20%. 80% is residential and 20% commercial.

Got you.

Now another interesting fact about that is that the, the brass we use though, is about two-thirds residential and one-third commercial, because obviously the commercial meters are the larger meters. So, I hope you understand.

That make sense. Yes, definitely. That makes perfect sense. And then lastly, Rich, we've heard from here, from some other companies that have had positive things to say about the overall municipal market. I just was wondering if you would share your thoughts on the broad market.

The customers I have spoken to and a few weeks ago, we had our national sales meeting. So I was down there, and we include all of our distributors. So basically, it's all the boots on the ground that we have. And talking to them, there was a very positive attitude. A lot of people were very upbeat. Our municipal customers, even if their money is segregated from the rest of the city, are very sensitive to the overall economy in their city and how the city is doing. And I would say there was a lot of optimism.

And finally, we're seeing some stability. I mean, when we talk about consumer confidence and what you are just reading about in the papers, municipalities are feeling that same thing, and they see that stability.

Yes. Thank you, guys. I appreciate it.

Okay.

And your next question comes from the line of Hasan Doza with Water Asset. Please proceed.

Good morning, guys.

Good morning, Hasan.

A couple of questions. Just wanted to make sure I understood the SG&A run rate for National Meter. And you mentioned $2.5 million is the run rate to use per quarter?

Yes. That's fair.

About $10 million a year?

Yes.

Okay. So I was trying to understand the economics, because, let's just say, you mentioned the revenue is going to be north of $15 million, let's just take $20 million. And if the gross margin is 50%, that's $10 million of annual gross margin. And then you have $10 million of SG&A. So if this business is…

Hasan, let me stop you. What you are forgetting is we said incremental revenue. You know, we've sold them - we sell them product, okay? So there's still a manufacturer's profit when we made that disclosure of 15, that's the incremental sales over and above the sales of our products. We never really did disclose what their sales were of our products, okay? So you don't have the numbers to do the model.

Right. But wouldn't the SG&A, it's also incremental SG&A? I am trying to understand the…

It's incremental to the company, but it's their SG&A…

Yes.

Their SG&A, yes.

Right, so I'm trying to understand…

Most of their cost is SG&A, because they are basically taking a manufactured product already and reselling it.

That I understand, but I was just trying to understand, from this incremental, say $15 million, $20 million of revenues, what is the net income or EPS to Badger Meter? And that's why, when I was going through the gross margin -- the incremental gross margin on this incremental revenue and applying the incremental SG&A, I was coming to basically an incremental zero EBITDA contribution to Badger Meter?

What you are missing is their sales of our products. And basically, what we disclosed before is we paid about $20 million for National Meter. We paid about seven times EBITDA. So our projected EBITDA for 2015 is about $3 million from them.

Okay. I got it. Okay. $3 million of increment, okay. I got you. Okay.

Incremental EBITDA.

Okay. Fair enough. The second question I have is, in terms of your industrial meters and flow products, what kind of -- especially to the oil, gas, and petrochem industries, what kind of impact are you seeing given the decline in oil prices, the fundamental demand for industrial meters from that specific industry?

We had been seeing during 2014 an uptick in our sales of meters into the oil and gas fields, particularly in the fracking area, okay. We are not seeing much change right now, but if I had to guess, I would say if oil prices stay low in 2015 and some of those fracking operations shut down, we could see some lower sales in those areas.

And very high level roughly, like what percentage of your total revenue would you say is exposed to the oil, gas, petrochem industries, fracking, et cetera?

We don't disclose that, but it isn't more than a few percent.

Okay. And the last question I have is on your copper pricing. Rick, I think you mentioned about the lower copper price may lead to more competitive pressures. And what I kind of wanted to understand is fundamentally, is that when -- like, what is sort of historically, when you have a copper price move to the downward, like you have now, what is sort of the sharing to customers? Like, do customers want a lower price? I mean, what is sort of the pass-through we should think about, that savings have to be shared to customers in terms of the -- because of the lower copper price? I mean, how do you think about the sharing of the savings?

I would say that the pressures generally come from our competitors, not from the customers, okay. Customers are doing comparison pricing, and the reality is if a particular significant customer come and say, I'd like to lock in at these lower prices, we would ask for firm delivery dates. And municipalities generally cannot do that past one year out. Therefore, it's very difficult for them to lock in pricing unless they are also willing to lock in delivery dates. Because from our standpoint, our argument is that we still think it's a volatile raw material' and there are studies out there…

JPMorgan said they expect copper to be back up around $2.90, $3.00 by the end of the year…

So I mean, we're still seeing that kind of thing out there. So we're not getting the comments so much from the customer. It will be interesting to see what competitors do. And as Rich said, okay, we were, between us and Neptune, we're the ones that are primarily using brass.

Okay. Aside from copper, like what is the fundamental industry pricing you see today versus say, a year ago? How would you kind of talk -- think about it?

I would say pricing today is pretty stable compared to a year ago.

Correct.

Okay. Thanks, guys. Appreciate it.

Okay.

And your next question comes from the line of Brian Rafn with Morgan Dempsey Capital Management. Please proceed.

Good morning, guys.

Hi, Brian.

Good morning, Brian.

Rich, talk a little bit about, you know, if you look at the strategy of vertical integration, buying National Meter as a wholesale distributor, beyond just the absorption of the gross margin of say, 15% ballpark, what other benefits does that give you? Is there direct interaction with customers, is there some SG&A leverage? What -- in totality, what does that benefit you guys, bringing them under your umbrella?

Sure. I mean, there is a little bit of SG&A leverage, but not much, okay. Its -- I had an old college professor who used to teach us an axiom, anything that brings me closer to my customer is a good thing, and anything that takes me further from my customer is a bad thing. And although I don't always follow the advice of college professors, that one seems pretty good. So it does bring us closer to our customer and gets us faster information on what the customer's preferences are. But there's another aspect here, too. And that is that as our sales become a more complex technology sale, especially things like cellular and software that needs to be demonstrated. This is a sale that really requires somebody to go in and sit down one-on-one and sell this product to a customer. And so expanding our boots on the ground, expanding our reach into the distributor network allows us to better control that function, and I think can only improve the sales experience we have.

Okay. As you look at -- and I'm not going to call it encroachment, as you look at that vertical integration, are these transactions driven by mutual harmony? Is it wholesalers that are family businesses, and there is no more siblings? Is it financial, what kind of drives the cadence of that?

Thus far, okay, I would say this is mutual harmony.

Because it's one.

Because it's one. It's in the case of National Meter, and they were interested in selling, we were interested in buying. Having said that, we have other distributors where the ownership is maybe coming close to retirement and is thinking about what their exit strategy is. And we're certainly out there talking to them, and we are interested in doing something on a mutually beneficial basis. But I'll also say, we do have some small distributors who may not be performing as well. In those cases we may have to have a harder conversation, where we simply look at absorbing territory or dealing with them in a different light, and that could happen.

I man, and saying that differently, we have always taken the bottom distributors out. There's probably one or two that we turn over every year. That is not going to stop.

And Badger Meter really has -- we have about, I think, 30 distributors. And about a third of them are very large, very good. We really work very well with them. And then there's probably a bottom third where there is some struggling, and we either have to improve them or find a way to change.

Okay. Appreciate the color. You talked a little bit in software AMA and -- adopters. And if my count is, you always talked about 54,000 water companies. What is tranche, are we talking about a couple, are we talking in dozens, and how does that adoption cycle kind of move through that end?

Okay. Brian, your phone is cutting out on us there. So we were getting about -- we were missing about every third word, but I think I got the gist of the question here. And you're asking me about the early adopters of our BEACON system and whether it represents the very large utilities, the very small utilities or the medium-sized utilities. And again, I have to say it's been pretty much across the board. We've had people adopting systems across the board.

Okay. And then -- can you hear me now?

No, you are still cutting out pretty bad. You may want to hang up and redial in, Brian.

Thank you.

Okay. Lisa, we could take another call I think.

Certainly. Your next question comes from the line of Glenn Wortman with Sidoti. Please proceed.

Yes. Good morning, guys.

Morning, Glenn.

With respect to the gross margin, can you just please remind us, the stronger dollar, that's still a benefit to you, right?

The stronger dollar, well, let me give you some color on that, okay. Badger Meter has basically two major impacts. One of them is the fact that we do buy some of our ORION radio boards from Europe, and the fact that we have an operation in Europe that sells primarily industrial flow meters. And in the past, the purchase of the radio boards has -- the Euros spent on that has exceeded the Euros generated by our European operation. Therefore, a stronger dollar would benefit Badger Meter, okay. Having said fact, the newest ORION products, SE and the ORION Cellular, those boards are no longer bought from Europe. Those are being bought from other places in dollars. And therefore, that advantage we had or that imbalance - has shrunk, and we're getting pretty close to breakeven. Right now we've still got a little bit of a benefit from the stronger dollar, but we're getting to the point where our Euros spent pretty much equal our Euros generated. In 2015 that's kind of what we're anticipating. Meanwhile, the other side is we do have an operation down in Mexico; so the stronger dollar against the peso does benefit us there.

Okay. Thanks, for that. And then just focusing on the competitive landscape here, in 2014 you had some additional Elster business. You also have a lot of success with your new product introductions. Do you have any sense of how you performed relative to the industry last year?

It's getting harder to get really good numbers on the industry and the reason is some of the sources we have are not as accurate as they used to be. We do believe we gained some market share last year, but that's purely anecdotal. I really don't have good surveys that give me that answer.

Okay. Thanks for taking my questions.

Sure.

And your next question comes from the line of Chip Moore with Canaccord. Please proceed.

Thanks. Good morning, guys. On margins in the quarter, I was hoping that maybe you can tease out a little bit more impact of that inventory step up charge. Then, also, I think you called out some higher warranty claims. Is that just typical of new products type of scenario, and what are some of the impacts there?

Sure. This is Rich. Let me, obviously, you can do the math on the impact of the National Meter inventory, and right away take that $1.2 million. If you deduct that out of cost of sales, it brings the margin up. The other -- we had the higher healthcare costs, and a hunk of that, probably the majority of that falls into cost of sales, so that had an impact. We did have some higher warranty claims, as Rick mentioned, but the major impact there was on the flow instrumentation side. We did have some meters that were being used in an application that turned out to not be the right meter for those applications. And after working with the customers, trying to make them work, we finally decided to pull them out of the field, refund the customer’s money. That was about a $360,000 hit that we took on that. So those are really the impacts that had a major effect on the fourth quarter margin.

Got it. That's helpful. And have you looked at it, if you normalize for those factors, what it shakes out at, roughly?

I think you can add anywhere from 150 to 200 basis points, if you take those out.

Yes. Okay. And then on National Meter, just one question here, in terms of working capital, should we be thinking about anything different now that you have that distribution business in-house?

It will help us generate a little bit more cash per year, but in terms of working -- they do not anticipate growing their inventory. So I don't see a need that we'll have to, you know, that is working capital. So, I always think on a cash basis. So I mean, they will generate more cash for us, and that will help us eventually pay down debt.

Yes. Okay, great. I guess we'll all wait to see what Punxsutawney Phil says here in Q1. Thanks.

You are right. He has already made it, hasn't he?

He's made his prediction, but I think the groundhogs are becoming less reliable. One of the ones in Wisconsin bit off the mayor's ear. So I don't have a lot of faith in him.

Yes. And it's still looking pretty cold here. Thanks.

[Operator Instructions] Your next question is a follow up from the line of Richard Eastman with Robert W. Baird. Please proceed sir.

Yes. I'm back. Thanks. Rich, maybe you could pull the groundhog trick at one of these conferences, one of these institutional conferences. Bring a groundhog with you.

That would at least liven things up a bit.

Hey, just a couple of follow-ups. Can you just give us a sense, though, on the commercial either side, the year-over-year, was it down say 15% or just kind of give us order of magnitude? I know you had a monster comparison in the fourth quarter of 2013. The business was up almost 30%. But just can you give us a general sense of how much down year-over-year that was?

Actually, for year-over-year, commercial was up.

We were up about 4% year-over-year. But for the quarter we were down about 9%.

Okay. Wait, what does that mean? So you are saying sequentially you were down 9%?

No, no, from fourth quarter of 2013 to fourth quarter of 2014, commercial sales were down about 9%.

Okay. That's the number I was after. All right.

But for the full year, yes, for the full year we were up about 4%.

Okay. I got you. Okay. And then the industrial flow business, I know we've got some oil and gas and petrochem; you mentioned some fracking exposure there. But obviously the US economy is perking up, and it's an upward trend. That business tends to lag industrial spend. Is there any reason why you would not budget or plan for that industrial flow business to be up mid-single digits or something in 2015? You certainly have a better backdrop.

You are right, Rick. That is our plan. The other thing we did, as I mentioned before, is effective October 1, we did some restructuring of our reporting within Badger Meter and put the flow instrumentation group into a -- basically under one VP and into a separate group, so we could achieve some greater focus. We think that's also going to help us.

And for the record, that decision was then the works prior to Rick Eastman suggesting it to us several times.

Yes, right.

Okay. Well, I am certainly glad that we did that.

I think you came up to me at last year's annual meeting and said, why don't you do something like that? We don't want to give you credit for the idea. So…

That's fine. You know what, that's just great. I wouldn't expect you guys to. And then just last thought Rich, we bumped into a couple of situations where Badger Meter's AMR products have been displacing Firefly, which is Datamatic, which is now Zenner, I believe. And just recently in December and then earlier in the year, have you guys maybe targeted those installations, because obviously the technology is proving to be defective. But have you targeted these Firefly installations? And if so, can you just give us a sense of maybe what that installed base is, and if there is an opportunity there?

Yes, and there is no question we have. As soon as Datamatic filed bankruptcy and refused to support the warranty on the Firefly units, we had a list of the customers, our field salespeople went out, sat down and talked to the customers about what we could do to help them transition over to Badger. You know, Rick, this just continues to amaze me, because years ago there was a company in the US called RAMAR that had a product out there that failed, and RAMAR immediately filed bankruptcy. And then for about five or six years after that, all of the water utilities were very careful about the companies they bought from, to make sure that they were a company that financially could support future warranties. But like everything else in the business world, people have short memories. And then along came Datamatic, with a very weak balance sheet; and sure enough, some utilities decided to gamble on it again. So this is the second time they have been burned with this. And I am truly hoping that the utilities will go back to realizing that the balance sheet of the company standing behind the product is actually a very important aspect of the buying decision. And so in the case of Firefly, yes, we are out there trying to convince those customers that even though they were buying a very cheap product, a very cheap solution and ours is more expensive, there is a reason why ours is more expensive. And they should really consider it.

Okay.

I apologize for making the commercial, but I felt I had to.

That's all right. I walked you into that one, all right. And you wouldn't want to offer kind of a target number in terms of revenue or something that you guys are pursuing?

It's a little hard to do that at this point. It really is. Part of the problem is -- yes, DataMatic was never a big player. Firefly never had a big part of the market and part of the problem is there is a little sticker shock. When they've been -- when these facilities chose to buy the cheapest product on the market, and we come in and say, well, that failed, here is one that won't fail, then they see the price, they are a little shocked. So it does take some superior salesmanship to convince them of that.

And that the technology that Zenner now owns, right?

Yes. Well, Zenner blocked that -- and I am looking at Cindy, our Director of Sales, who is sitting here. Zenner bought that Firefly technology, Cindy? Yes. So, but now there is also a company, Datamatic Limited is what filed bankruptcy. So we also understand there is a Datamatic Inc. out there that is doing something else with the technology. So there is still a lot of confusion.

Okay. Great. Thanks again.

Okay. Thank you.

There are no additional questions at this time. I would now like to turn the presentation over to Mr. Rich Meeusen for final remarks.

Well, thank you. I want to thank everybody for joining us today. As I said, we were very pleased with 2014 for the year. The fourth quarter had some unusual items in there, showing our lumpiness again. But as we look into 2015, even with the question about the first-quarter weather, and groundhogs, and everything else that we talked about, as we look at 2015 we're pretty confident that we could have a good 2015 with the products we've got and the market position we are in. Also, the tailwind of copper that I spoke about could be very significant, depending upon where copper prices remain going through 2015. So with that, I'll thank you for joining us. And I look forward to talking to you soon.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.