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 SEPTEMBER 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 October 17, 2003, there were 3,270,543 shares of Common Stock
outstanding with a par value of $1.00 per share.
BADGER METER, INC.
QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 2003
INDEX
Page No.
Part I. Financial Information:
Item 1 Financial Statements:
Consolidated Condensed Balance Sheets - -
September 30, 2003 and December 31, 2002 3
Consolidated Condensed Statements of Operations - -
Three and Nine Months Ended September 30, 2003 and 2002 4
Consolidated Condensed Statements of Cash Flows - -
Nine Months Ended September 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 6(a) Exhibits 12
Item 6(b) Reports on Form 8-K 12
Exhibit Index 14
2
Part I - Financial Information
Item 1 Financial Statements
BADGER METER, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
September 30, December 31,
2003 2002
---- ----
(Unaudited)
Assets
------
Current assets:
Cash $ 4,941 $ 3,779
Receivables 26,114 22,139
Inventories:
Finished goods 7,910 7,569
Work in process 8,779 8,308
Raw materials 12,664 9,305
------------- -------------
Total inventories 29,353 25,182
Prepaid expenses 1,798 1,219
Deferred income taxes 3,967 3,061
------------- -------------
Total current assets 66,173 55,380
Property, plant and equipment, at cost 102,655 98,796
Less accumulated depreciation (59,263) (55,328)
------------- -------------
Net property, plant and equipment 43,392 43,468
Intangible assets, at cost less accumulated amortization 1,324 1,112
Prepaid pension 16,212 17,454
Other assets 3,632 3,352
Goodwill 6,808 5,697
------------- -------------
Total assets $ 137,541 $ 126,463
============= =============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Short-term debt $ 26,240 $ 20,355
Current portion of long-term debt 3,350 5,979
Payables 13,686 11,040
Accrued compensation and employee benefits 6,358 6,017
Warranty and after-sale costs 3,760 3,597
Income and other taxes 4,214 1,567
------------- -------------
Total current liabilities 57,608 48,555
Deferred income taxes 4,858 4,710
Accrued non-pension postretirement benefits 5,168 5,512
Other accrued employee benefits 6,277 6,545
Long-term debt 10,283 13,046
Commitments and contingencies
Shareholders' equity:
Common Stock 4,820 4,762
Capital in excess of par value 19,041 18,169
Reinvested earnings 58,187 54,776
Accumulated other comprehensive income (loss) 1,107 (61)
Less: Employee benefit stock (1,285) (1,535)
Treasury stock, at cost (28,523) (28,016)
------------- -------------
Total shareholders' equity 53,347 48,095
------------- -------------
Total liabilities and shareholders' equity $ 137,541 $ 126,463
============= =============
See accompanying notes to consolidated condensed financial statements.
3
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Share and Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------ ------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales $ 48,613 $ 45,952 $ 135,704 $ 126,992
Cost of sales 32,516 30,285 90,640 83,747
----------- ----------- ----------- -----------
Gross margin 16,097 15,667 45,064 43,245
Selling, engineering and
administration 11,317 11,071 35,189 31,853
----------- ----------- ----------- -----------
Operating earnings 4,780 4,596 9,875 11,392
Interest expense 423 647 1,391 1,487
Other expense (income), net 68 375 (1,154) 287
----------- ----------- ----------- -----------
Earnings before income taxes 4,289 3,574 9,638 9,618
Provision for income taxes 1,645 1,267 3,682 3,384
----------- ----------- ----------- -----------
Net earnings $ 2,644 $ 2,307 $ 5,956 $ 6,234
=========== =========== =========== ===========
Per share amounts: *
Earnings per share:
Basic $ .82 $ .73 $ 1.85 $ 1.97
========== =========== =========== ===========
Diluted $ .80 $ .70 $ 1.81 $ 1.89
========== =========== =========== ===========
Dividends declared: $ .27 $ .26 $ .79 $ .76
========== =========== =========== ===========
Shares used in computation of:
Basic 3,237,605 3,163,872 3,216,267 3,158,474
Impact of dilutive stock
options 79,873 133,541 69,699 133,914
---------- ----------- ----------- -----------
Diluted 3,317,478 3,297,413 3,285,966 3,292,388
========== =========== =========== ===========
*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
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
-------------
2003 2002
---- ----
Operating activities:
Net earnings $ 5,956 $ 6,234
Adjustments to reconcile net
earnings to net cash provided
by (used for) operations:
Depreciation 5,426 5,602
Amortization 88 68
Tax benefit on stock options 397 133
Noncurrent employee benefits 880 816
Contributions to pension plan 0 (9,393)
Deferred income taxes (758) 103
Changes in:
Receivables (3,975) (1,903)
Inventories (4,171) (286)
Current liabilities other than debt 5,040 8,888
Prepaid expenses (579) (386)
------------ -----------
Total adjustments 2,348 3,642
----------- -----------
Net cash provided by operations 8,304 9,876
----------- -----------
Investing activities:
Property, plant and equipment (5,350) (3,602)
Acquisitions, net of cash acquired 0 (8,468)
Other - net 234 (221)
----------- -----------
Net cash used for investing activities (5,116) (12,291)
------------ -----------
Financing activities:
Net increase in short-term debt 5,885 12,162
Repayments of long-term debt (5,392) (4,737)
Dividends (2,545) (2,403)
Stock options and ESSOP 533 1,093
Treasury stock purchases (865) (1,091)
Issuance of treasury stock 358 0
----------- -----------
Net cash provided by (used for)
financing activities (2,026) 5,024
------------ -----------
Increase in cash 1,162 2,609
Cash - beginning of period 3,779 3,410
----------- -----------
Cash -- end of period $ 4,941 $ 6,019
=========== ===========
See accompanying notes to consolidated condensed financial statements.
5
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 September 30, 2003, the results of operations for the three and
nine-month periods ended September 30, 2003 and 2002, and the cash flows
for the nine-month periods ended September 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 nine-month periods ended September 30, 2003 and 2002 are as follows:
Balance at Additions Balance
beginning charged to Claims Reserve at
(In thousands) of year earnings paid acquired September 30
---------------------------------------------------------------------------------------------------------
2003 $3,597 $1,086 $ (923) $ 0 $3,760
2002 $3,453 $1,042 $(1,079) $ 225(a) $3,641
=========================================================================================================
(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 September 30, 2003, options to
purchase 152,804 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
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.
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
(In thousands except per share amounts) 2003 2002 2003 2002
--------------------------------------------------------------------------------------------------------------------
Net income, as reported $ 2,644 $ 2,307 $ 5,956 $ 6,234
Deduct: Total stock-based compensation
determined under fair value based method
for all awards since January 1, 1995,
net of related tax effects 93 80 269 256
--------------------------------------------------------------------------------------------------------------------
Pro forma net income $ 2,551 $ 2,227 $ 5,687 $ 5,978
Earnings per share:
Basic, as reported $ .82 $ .73 $ 1.85 $ 1.97
Basic, pro forma $ .79 $ .70 $ 1.77 $ 1.89
Diluted, as reported $ .80 $ .70 $ 1.81 $ 1.89
Diluted, pro forma $ .77 $ .68 $ 1.73 $ 1.82
====================================================================================================================
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.
In the first quarter 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. As of September 30, 2003, $240,000
associated with the severances remains reserved. Additionally, goodwill
increased $355,000 due to currency translation adjustments for the nine
months ended September 30, 2003.
The following unaudited pro forma information combines historical results,
as if DIC and MPE had been owned by the Company for the nine months ended
September 30, 2002:
(In thousands except per share amounts)
-------------------------------------------------------------------------------
Net sales $ 135,228
Net earnings $ 6,250
Diluted earnings per share $ 1.90
===============================================================================
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 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 expense (income), net increased $1.4 million for the nine months
ended September 30, 2003 compared to the same period in 2002 due mainly to
favorable exchange gains of $833,000 primarily related to the strengthening
of the euro versus the U.S. dollar. Also included in other expense
(income), net for the nine months ended September 30, 2003 was the gain
from the sale of stock ($190,000) received when an insurance company from
which the Company purchased life insurance policies converted from a mutual
structure to a public structure and $145,000 of miscellaneous income
associated with a jobs program at MPE.
7
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 September 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. The amount of such debt that the Company guaranteed was
$1,988,000 and $2,380,000 at September 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 is expected to be renewed. The fair
market value of this guarantee at September 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 $2,749,000 and $2,307,000 for
the three months ended September 30, 2003 and 2002, respectively. Included
in the three months of 2003 is $105,000 of other comprehensive income
related to foreign currency translation adjustments. Total comprehensive
income was $7,124,000 and $6,234,000 for the nine months ended September
30, 2003 and 2002, respectively. Included in the nine months of 2003 is
$1,107,000 of other comprehensive income related to foreign currency
translation adjustments. Of the $1,107,000, $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. The more significant legal proceedings are
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 two 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 agreements for the purchase of materials
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.
8
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Three Months Ended September 30
Net sales for the three-month period ended September 30, 2003 increased
$2.7 million, or 5.8%, over the same period in 2002. The increase in net sales
was due to increased residential and commercial water meter sales of $1.6
million and increased industrial product sales of $1.1 million. The increase in
sales of residential products was the net result of higher sales of residential
water meters with automated meter reading technology, partially offset by lower
volumes of local or manual read meters which generally have a lower price.
Commercial water meter sales increased due principally to increased volumes
associated with a large metering project in South America. The industrial net
sales increase was the result of modestly higher revenues for automotive fluid
meters, electromagnetic meters and other industrial products, offset somewhat by
decreases in valve sales due to the sluggish economy in that market.
Gross margins for the third quarter of 2003 were 33.1% compared to
34.1% in the third 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 sales of residential automated
meter reading (AMR) systems.
Selling, engineering and administration costs increased $246,000, or
2.2%, for the third quarter 2003 compared to the same period in 2002 due to
higher expenses associated with professional fees as well as normal inflationary
increases offset by cost control efforts. Interest expense for the third quarter
2003 was $224,000 lower than the same period in the prior year primarily due to
favorable interest rates.
Other expense (income), net decreased $0.3 million for the third
quarter 2003 compared to the same period in 2002 due to miscellaneous income
associated with a jobs program at MecaPlus Equipements ($145,000) in 2003.
As a result of the above, net earnings for the third quarter of 2003
were $2,644,000 compared to net earnings in the third quarter of 2002 of
$2,307,000. On a diluted earnings per share basis, this equated to $0.80 per
share for the third quarter of 2003 compared to $0.70 for the same period in
2002.
Results of Operations - Nine Months Ended September 30
Net sales for the nine months ended September 30, 2003 increased $8.7
million, or 6.9%, over the same period in 2002. Net sales include $16.2 million
and $6.7 million of sales for the nine months ended September 30, 2003 and 2002,
respectively, related to the two acquired businesses, Data Industrial
Corporation (DIC) and MecaPlus Equipements (MPE), which were acquired in the
second quarter of 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 $1.9 million in
the first nine months of 2003 compared to the first nine months of 2002. The
sales decline was the result of lower volumes of water meters (both manual read
and automated) partially offset by higher prices. The decline in volumes appears
to be due to the soft economy and geopolitical and terrorism concerns,
particularly early in 2003. Many local governments struggled with reduced
budgets and the Company experienced longer sales cycles for purchases by water
utilities.
Net sales of industrial products, excluding sales from acquisitions,
increased $1.1 million in the first nine months of 2003. This increase is the
net result of increased sales of automotive fluid meters, electromagnetic
meters, and other industrial products partially offset by declines of valve
sales, which continue to be soft in a sluggish market.
Gross margins for the nine months ended September 30, 2003 were 33.2%
compared to 34.1% 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 $3.3 million,
or 10.5%, for the first nine months of 2003 compared to the same period in 2002.
The increase included the effect of the acquisitions discussed above ($2.5
million). Without the effects of the acquisitions, these expenses would have
increased approximately $0.8 million due to increased professional fees and
normal inflationary increases, offset somewhat by cost control
9
efforts. Interest expense for the period was $96,000 lower than the same period
in the prior year primarily due to favorable interest rates.
Other expense (income), net increased $1.4 million for the first nine
months of 2003 compared to the same period in 2002 primarily due to favorable
exchange gains ($833,000), primarily as a result of the strengthening of the
euro versus the U.S. dollar. Also included in other expense (income), net was
the gain from the sale of stock ($190,000) received when an insurance company
from which the Company purchased life insurance policies converted from a mutual
structure to a public structure and $145,000 of miscellaneous income associated
with a jobs program at MPE.
As a result of the above, net earnings for the nine month period ending
September 30, 2003 were $5,956,000 compared to net earnings of $6,234,000 for
the same period in 2002. On a diluted earnings per share basis, this equated to
$1.81 per share for the first nine months of 2003 compared to $1.89 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 nine months of 2003, $8.3
million of cash was generated by operations, primarily as the result of net
earnings and increases in current liabilities partially offset by increases in
receivable and inventory balances associated with increased business.
The change in the receivables balance from $22.1 million at December
31, 2002 to $26.1 million at September 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 September 30, 2003 increased nearly $4.2 million, or
16.6%. This increase in inventories was due to a build up of certain longer
lead-time electronic materials and stock for new product offerings. Capital
expenditures and depreciation expense for the first nine months of 2003 were
both $5.4 million, resulting in little variance in net property, plant and
equipment balances.
Prepaid pension declined from $17.5 million at December 31, 2002 to
$16.2 million at September 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
$1.1 million as a result of the Company finalizing the allocation of the
purchase price of MPE during the first quarter 2003, and due to the effects of
foreign currency translation adjustments.
Short-term debt and the current portion of long-term debt at September
30, 2003 increased to a combined $29.6 million versus a balance at the end of
2002 of $26.3 million. This increase was due to cash required for increased
receivable and inventory balances, 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.
Payables increased to $13.7 million at September 30, 2003 from $11.0
million at December 31, 2002 primarily as a result of the timing of payments.
Income and other taxes increased to $4.2 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 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 September 30, 2003, the Company had $44.5 million of short-term
credit facilities with domestic and foreign banks of which $26.2 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.
10
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 two 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 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 are being 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 third 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.
There was no change in the Company's internal control over financial
reporting that occurred during the third quarter 2003 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
11
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 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
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.
(b) Reports on Form 8-K:
A current report was furnished on October 14, 2003 under Item 7 and 12 of
Form 8-K to disclose the full contents of the Company's press release that
reported the results of the three and nine-month periods ended September 30,
2003.
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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: October 22, 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
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BADGER METER, INC.
QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 2003
EXHIBIT INDEX
Exhibit No. Description
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.
14