1
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------------------- --------------------
Commission file number 1-6706
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
BADGER METER EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Badger Meter, Inc.
4545 W. Brown Deer Road
Milwaukee, WI 53223
2
REQUIRED INFORMATION
1. Not Applicable.
2. Not Applicable.
3. Not Applicable.
4. The Badger Meter Employee Savings and Stock Ownership Plan (the Plan) is
subject to the requirements of the Employee Retirement Income Security Act
of 1974 (ERISA). Attached hereto is a copy of the most recent financial
statements and schedules of the Plan prepared in accordance with the
financial reporting requirements of ERISA.
Exhibits
(23) Consent of Independent Auditors
2
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
Badger Meter
Employee Savings and Stock Ownership Plan
Date: June 22, 2000 By: /S/ Richard A. Meeusen
------------------------------------------
Vice President - Finance and
Chief Financial Officer
3
4
Badger Meter Employee Savings and Stock Ownership Plan
Financial Statements
and Supplemental Schedules
December 31, 1999 and 1998 and year ended December 31, 1999
CONTENTS
Report of Independent Auditors............................................... 5
Financial Statements
Statements of Net Assets Available for Benefits.............................. 7
Statement of Changes in Net Assets Available for Benefits.................... 8
Notes to Financial Statements................................................ 9
Supplemental Schedules
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year............................................................18
Schedule H, Line 4j - Schedule of Reportable Transactions....................19
4
5
Report of Independent Auditors
Retirement Plans Investment Committee of the
Board of Directors of Badger Meter, Inc.
Badger Meter Employee Savings and Stock
Ownership Plan
We have audited the accompanying statements of net assets available for benefits
of Badger Meter Employee Savings and Stock Ownership Plan as of December 31,
1999 and 1998, and the related statement of changes in net assets for the year
ended December 31, 1999. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 31, 1999, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes at end of year as of December 31, 1999, and
reportable transactions for the year then ended, are presented for purposes of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the
5
6
Employee Retirement Income Security Act of 1974. These supplemental schedules
are the responsibility of the Plan's management. The supplemental schedules have
been subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
May 5, 2000
6
7
Badger Meter Employee Savings and Stock Ownership Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
1999 1998
----------- -----------
ASSETS
Investments $40,620,653 $40,610,917
Company contribution receivable 447,896 88,779
Due from brokers -- 16,560
Interest receivable 3,485 416
----------- -----------
Total assets 41,072,034 40,716,672
LIABILITY
Notes payable 2,600,000 2,600,000
----------- -----------
Net assets available for benefits $38,472,034 $38,116,672
=========== ===========
7
See accompanying notes.
8
Badger Meter Employee Savings and Stock Ownership Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 1999
Additions:
Investment income:
Net realized and unrealized appreciation in fair value of
investments $ 531,812
Interest and dividends 781,582
Investment expenses (3,069)
Contributions:
Company 452,488
Participants 2,514,949
------------
4,277,762
Deductions:
Benefit payments to participants 3,838,503
Interest expense 83,897
------------
Net increase 355,362
Net assets available for benefits at beginning of year 38,116,672
------------
Net assets available for benefits at end of year $ 38,472,034
============
8
See accompanying notes.
9
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements
December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements of Badger Meter Employee Savings and Stock
Ownership Plan (the Plan) are prepared on the accrual basis.
INVESTMENT VALUATION
The investment in the guaranteed income group annuity insurance contract is
valued at contract value as reported by Massachusetts Mutual Life Insurance
Company (Mass Mutual). Contract value represents contributions made under the
contract, plus interest at the contract rate, less funds used to pay benefits
and the insurance company's administrative expenses. The Mass Mutual contract is
a "fully benefit-responsive" investment contract, as defined in Statement of
Position (SOP) 94-4, "Reporting of Investment Contracts Held by Health and
Welfare Benefit Plans and Defined Contribution Pension Plans." As such, this
contract is stated at contract value as reported by the insurance company.
Crediting interest rates are adjusted annually on January 1.
The investments in the Heartland U.S. Government Fund and mutual funds, are
valued at the redemption price established by the fund's trustee based upon the
quoted prices of the underlying assets.
Common trust funds are valued at the redemption price established by the
trustee.
The investment in Badger Meter, Inc. (the Company) Common Stock, which is traded
on the American Stock Exchange, is valued at the last reported sales price on
the last business day of the Plan year.
The money market fund is valued at fair value based on quoted market or
redemption price on the last business day of the plan year.
Notes receivable from participants are reported at their unpaid principal
balance, which approximates fair value.
9
10
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
EXPENSES
Expenses related to the administration of the Plan are borne by the Company.
Investment expenses are payable by the Plan and reimbursed by the Company at its
discretion.
RECLASSIFICATION
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
2. DESCRIPTION OF THE PLAN
GENERAL
The following description of the Plan is for general information purposes only.
Participants should refer to the Plan document for more complete information.
The Plan is a defined contribution plan adopted under Section 401(k) of the
Internal Revenue Code ("IRC" or the "Code"). The Plan was established as of
January 1, 1991 to consolidate the Badger Meter Savings Plan, the Badger Meter
Payroll-Based Employee Stock Ownership Plan and the Badger Meter Employee Stock
Ownership Plan into a single plan (See Note 5).
Substantially all domestic employees of the Company are eligible to participate
in the Plan. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
CONTRIBUTIONS
Participant contributions may be made to a maximum of 15% of their compensation
on a pre-tax basis, not to exceed the amount allowed by the IRC. Company
contributions are
10
11
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
made at a rate of 25% of the participant contributions, with the Company
contribution percentage applying to a maximum of 7% of the participant's
compensation for the year ended December 31, 1999. The Company may also
contribute additional amounts over and above the required contribution at the
discretion of the Company's Board of Directors. No such contributions were made
in 1999.
Participant contributions are directed into one, or a combination, of seven
investments, at the participant's discretion. Company contributions are made in
cash and are used by the Plan to repay principal on the note payable (see Note
5). As principal and interest payments are made on the note payable, unallocated
shares of Badger Meter, Inc. Common Stock, which serve as collateral for the
note payable, are released to Plan participants and provide the Company matching
contribution at current market values. Participant contributions may be
temporarily invested in a money market common trust fund before being invested
in the aforementioned investments.
All contributions are excluded from the participant's current wages for federal
income tax purposes. No federal income tax is paid for the pre-tax contributions
and growth thereon until the participant withdraws them from the Plan.
PARTICIPANT'S ACCOUNTS
Each participant's account is credited with the participant's contribution, the
Company's matching contribution, an allocation of the Company's discretionary
contribution, if any, and Plan earnings. The Company's discretionary
contribution is allocated equally to all participants. Plan earnings are
allocated based on the participant's account balances in relation to total
participant account balances. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's account.
VESTING
Participants are fully vested in all amounts in their accounts.
11
12
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
PAYMENT OF BENEFITS
Upon retirement, death, disability, or termination of employment, the
participant's account shall generally be distributed in a single lump sum. Final
distributions will be made either in shares of Company Common Stock plus cash in
lieu of fractional shares, or entirely in cash.
WITHDRAWALS
A participant's contribution may not be withdrawn prior to retirement, death,
disability, termination of employment, or termination of the Plan, except for
financial hardship or in the form of loans to participants. The Plan defines
financial hardship as expenses related to college education, uninsured major
medical expenses, purchase of the participant's principal residence, or other
financial need which cannot be met from other resources of the participant. All
withdrawals are subject to approval by the Plan administrator.
LOANS TO PARTICIPANTS
Participants are allowed to borrow from their separate account balance. The
amount of a loan shall not be less than $1,000 or more than $50,000 and shall
not exceed 50% of the participant's account balance.
Loan maturities cannot exceed sixty months and are secured by the participants'
vested interests in the Plan. Amounts loaned to a participant do not share in
the allocations of Plan earnings (see Participant's Accounts, above), but are
credited with the interest earned on the loan balance payable by the participant
charged at a reasonable rate as determined by the Plan administrator.
3. INVESTMENTS
The Plan has entered into two unallocated insurance contracts with Mass Mutual.
12
13
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
GUARANTEED INCOME GROUP ANNUITY CONTRACT NO. IG 4178
This contract is credited at least annually for interest earned. Interest rates
for 1999 and 1998 were 6.25% and 7.00%, respectively. Mass Mutual determines the
annual guaranteed interest rate each January 1. The average yields for 1999 and
1998 were 6.02% and 6.63%, respectively.
BADGER METER, INC. COMMON STOCK
The Plan's investment in Badger Meter, Inc. stock consists of 488,114 shares and
503,897 shares as of December 31, 1999 and 1998, respectively.
At December 31, 1999 and 1998, the fair value of the Plan's investment in Badger
Meter, Inc. Common Stock, as determined by quoted market price, was $14,704,434
and $17,951,331, respectively.
During 1999, the Plan's investments (including investments purchased, sold, as
well as held during the year) appreciated (depreciated) in fair value as
determined by quoted market prices, as follows:
Net Realized and Unrealized
Appreciation
(Depreciation) in Fair
Value During Year
---------------------------
Badger Meter, Inc. Common Stock $(2,355,972)
Common trust funds 2,489,874
Shares of registered investment companies 397,910
-----------
$ 531,812
===========
13
14
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
Investments that represent 5% or more of fair value of the Plan's net assets are
as follows:
DECEMBER 31
1999 1998
----------- -----------
Badger Meter Stock Fund* $14,704,434 $17,951,331
M&I Growth Balanced Portfolio 4,630,757 4,038,291
M&I Diversified Stock Portfolio 7,824,687 5,940,656
Mass Mutual Guaranteed Income Contract 8,195,791 7,526,254
Heartland Value Plus Fund 1,912,738 2,331,252
*Nonparticipant-directed
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the investments and the significant components of changes in
investments related to the nonparticipant-directed investments are as follows:
DECEMBER 31
1999 1998
----------- -----------
Investments, at fair value:
Badger Meter Stock Fund $10,895,580 $13,039,961
Badger Meter, Inc., Unreleased Common Stock 3,808,854 4,504,247
Badger Meter, Inc., Released Common Stock -- 407,123
----------- -----------
$14,704,434 $17,951,331
=========== ===========
YEAR ENDED
DECEMBER 31
1999
-----------
Change in investments:
Net realized and unrealized depreciation in fair value $(2,355,972)
Interest and dividends, net 89,542
Investment expenses (497)
Contributions 406,685
Benefit payments to participants (1,233,733)
Interest expense (83,897)
Transfers between funds (69,025)
-----------
$(3,246,897)
===========
14
15
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
5. NOTE PAYABLE
In connection with the formation of the Plan (see Note 2), the Plan assumed a
note payable to a bank with a balance of $2,000,000 at January 1, 1991. The note
was repaid in equal annual principal payments of $200,000 through February 1995,
with the remaining $1,000,000 refinanced on December 1, 1995, due December 1,
2001. The principal amount due on the loan was $700,000 at December 1, 1998. In
December 1998, the Plan refinanced the loan and increased it by $1,900,000 to
the December 31, 1999 and 1998 balance of $2,600,000. The terms of the loan
allow variable payments of principal with the final principal and interest
payment due December 31, 2005. Interest is payable at the prime interest rate
(prime was 8.5% at December 31, 1999) or at the LIBOR rate plus 1.50% (LIBOR was
6.12% at December 31, 1999). The Plan has the option of designating the
outstanding balance as a prime rate loan or a Eurodollar loan. The note payable
is secured by the unallocated shares of Badger Meter, Inc. Common Stock held by
the Plan (see summary below). In addition, the Company has guaranteed the note
payable and is obligated to contribute sufficient cash to the Plan to enable it
to repay the loan principal and interest in the event the Plan is unable to
settle its obligation.
The pledged unallocated shares of Badger Meter, Inc. Common Stock are released
as principal payments are made on the note payable. The shares released less any
shares that are distributed as benefit payments are considered available, and
are allocated to the participants' accounts as of the Plan year end just prior
to each annual principal due date on the note payable. At December 31, 1999 and
1998, the breakdown between allocated and unallocated shares were as follows:
15
16
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
5. NOTE PAYABLE (CONTINUED)
Shares
Available
For Benefits Cost Fair Value
------------ ----------- -----------
December 31, 1999:
Allocated 361,679 $ 4,391,706 $10,895,580
Unallocated 126,435 2,550,825 3,808,854
-----------------------------------
488,114 $ 6,942,531 $14,704,434
===================================
Per share $ 30.12
===========
December 31, 1998:
Allocated 377,462 $ 4,164,681 $13,447,084
Unallocated 126,435 2,550,825 4,504,247
-----------------------------------
503,897 $ 6,715,506 $17,951,331
===================================
Per share $ 35.63
===========
The loan agreement contains certain restrictions and covenants, including a
limitation on additional borrowings.
The Company contributions are used to make principal payments on the note
payable and will release unallocated shares with a value in excess of the
principal payments made due to appreciation of the Company's stock.
16
17
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right to
discontinue its contributions at any time and to terminate the Plan subject to
the provisions of ERISA.
7. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated August 3, 1995, stating that the Plan is qualified under Section 401(a)
and 401(k) of the Code and, therefore, the related trust is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan Administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is tax
exempt.
8. TRANSACTIONS WITH RELATED PARTIES
During 1999, the Plan received $89,385 in common stock dividends from the
Company.
17
18
Supplemental Schedules
19
Badger Meter Employee Savings and Stock Ownership Plan
Employer Identification Number 39-0143280
Plan Number 009
Schedule H, Line 4i -Schedule of Assets Held for Investment Purposes at
End of Year
December 31, 1999
DESCRIPTION OF INVESTMENT, INCLUDING COST/
IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, CONTRACT CURRENT VALUE/
LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE VALUE CONTRACT VALUE
- ---------------------------------------------------------------------------------------------------------
*Badger Meter, Inc. 488,114 shares of common stock $6,942,531 $14,704,434
Massachusetts Mutual Life Guaranteed Income Contract
Insurance Company No. IG 4178 8,195,791
Heartland U.S. Government Fund,
Inc. 77,160 fund shares 702,926
Heartland Value Plus Fund 140,953 fund shares 1,912,738
*Marshall International Stock
Fund 80,431 fund shares 1,459,013
*M&I Growth Balanced
Portfolio 218,314 fund shares 4,630,757
*M&I Diversified Stock
Portfolio 276,123 fund shares 7,824,687
*Marshall Money Market
Fund 119,362 units 119,362
Participant loans Various interest rates and
maturity dates 1,070,945
------------------
$40,620,653
==================
* Indicates party-in-interest
18
20
Badger Meter Employee Savings and Stock Ownership Plan
Employer Identification Number 39-0143280
Plan Number 009
Schedule H, Line 4j -Schedule of Reportable Transactions
Year ended December 31, 1999
CURRENT VALUE
OF ASSET ON
PURCHASE SELLING COST OF TRANSACTION NET
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE ASSET DATE GAIN/(LOSS)
- ----------------------------------------------------------------------------------------------------------------------------
Category (iii)--series of transactions in excess of 5 percent of net assets
Badger Meter, Inc. Common Stock $1,656,002 $ - $1,656,002 $1,656,002 $ -
Badger Meter, Inc. Common Stock - 2,237,754 2,294,280 2,237,754 (56,526)
19
There were no category (i), (ii) or (iv) transactions during 1999.
21
EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
- ----------- --------
(23) Consent of Ernst & Young LLP, Independent Auditors 21
20