1
Exhibit (13.0)
Portions of Annual Report to Shareholders that are incorporated by reference.
27
2
(Page 1 of Annual Report to Shareholders)
BADGER METER, INC.
F I N A N C I A L H I G H L I G H T S
December 31, 1996 and 1995
1996 1995 %CHANGE
- ---------------------------------------------------------------------------------------------
OPERATIONS
Net sales $116,018,000 $108,644,000 6.8
Net earnings $ 5,127,000 $ 3,719,000 37.9
- ---------------------------------------------------------------------------------------------
PER SHARE
Net earnings:
Primary $ 1.39 $ 1.06 31.1
Fully diluted $ 1.36 $ 1.06 28.3
Cash dividends declared:
Common Stock $ .4300 $ .3908 10.0
Class B Common Stock $ .3910 $ .3555 10.0
Net book value $ 10.32 $ 9.16 12.7
- ---------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION
Working capital $ 17,645,000 $ 16,178,000 9.1
Current ratio 2.0 to 1 2.1 to 1 (4.8)
Long-term debt $ 1,091,000 $ 1,000,000 9.1
Shareholders' equity $ 36,638,000 $ 32,163,000 13.9
Net earnings as a percent of equity 14.0% 11.6% 20.7
=============================================================================================
OTHER
Number of employees 940 904 4.0
Number of shareholders:
Common Stock:
In employee plans 695 678 2.5
Of record 579 608 (4.8)
Class B Common Stock 9 9 0
Shares outstanding:
Common Stock 2,426,376 2,387,214 1.6
Class B Common Stock 1,125,570 1,125,570 0
=============================================================================================
28
3
(Page 14 to 16 of Annual Report to Shareholders)
MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS DESCRIPTION
Badger Meter, Inc. serves the flow measurement and control market worldwide
with products including water meters and related meter reading technologies,
wastewater meters, industrial meters, small valves and natural gas meters and
related instrumentation. The company operates in one business segment with
three internal operating units: Utility, Industrial and International. The
Utility and Industrial divisions market their products in the U.S. and Canada,
while the International Division markets both utility and industrial products
in other countries throughout the world. The company has continued to see
growth in both its domestic and international markets.
RESULTS OF OPERATIONS
SALES
Badger Meter's sales increased $7,374,000 and $9,489,000, or 6.8% and 9.6% in
1996 and 1995, respectively. Sales trends are primarily affected by new
product sales and general market conditions. Residential water meter sales for
the past several years have been impacted by a general industry movement away
from manually-read meters to automated meter reading technologies.
Both years were favorably affected by increased unit sales of the TRACE
radio-frequency automated meter reading system and increased European sales of
lubrication meters. In addition, the 1996 sales increase was impacted by
favorable pricing of meter products, improved channels of distribution and
increased sales of primary flow elements. The 1995 sales increase was also
favorably affected by increased sales volumes of large Recordall meters and
Research Control valves.
Badger Meter continues to improve existing products and develop new products,
primarily in the areas of meter reading technologies, ultrasonic meters,
residential and commercial meters, lubrication meters, valves and natural gas
instrumentation. Increases in sales of new products depends upon the rate of
acceptance of the new technologies, both domestically and internationally, and
overall market conditions. Sales of mature product lines are directly related
to the strength of the various markets utilizing those products and the
development of products to replace them.
International sales are comprised primarily of sales of industrial metering
products in Europe and sales of automated meter reading technologies in
Mexico. Major sales of TRACE radio-frequency meter reading systems under a
single contract to Mexico contributed significantly to 1994 and 1995 sales. In
1996, these sales decreased as this contract neared completion. However, this
impact was partially offset by additional sales to Mexico through expansion of
the original contract . The company continues to pursue new business
opportunities in Mexico, as well as worldwide. Because the company does
business in Mexico in U.S. dollars, Badger Meter experienced no currency losses
on Mexican business in 1994, 1995 or 1996.
The company's sales growth is derived from both new products and alliances that
have been, and continue to be developed with other companies. Badger Meter's
strategy is to meet customers' metering needs with its proprietary technologies
or other technologies available through alliances in the marketplace. Both
alternatives enable the company to sell its products either as part of a
proprietary technology or as components that interface with systems developed
by other companies. For example, Badger Meter has a long-term distribution
agreement with American Meter Company and in 1996 added to that by obtaining
worldwide distribution rights to the TRACE technology for the water market.
Related to ultrasonic flowmeters, the company entered into a joint marketing
agreement in 1996 with ADS Environmental Services.
The company also formed a joint venture in 1996 with Instromet International
for marketing and selling gas measurement products.
GROSS PROFIT MARGINS
Gross profit margins were 36.7%, 36.0% and 36.7% for 1996, 1995 and 1994,
respectively. These margin variations result primarily from changes in
product mix between years. The decrease in margins from 1994 to 1995 was due
primarily to increased sales of lower-margin meter reading technology products.
Although sales of meter reading technology products again increased in 1996,
manufacturing cost improvements have increased the margins on these products
and enabled the company to maintain stable margins in total.
29
4
In 1995, the company experienced price increases in castings, plastic resin,
glass, electronic components and cartons. Increases in raw material prices
were more moderate in 1996. Competitive marketing conditions make it somewhat
difficult to pass along all of the raw material cost increases through higher
selling prices. Offsetting the increased raw material prices are cost
reductions resulting from capital investment to improve manufacturing equipment
and systems and from continued savings achieved from the company's cost
improvement programs. Higher unit volumes in the meter reading technology
product line also offset some of the raw material price increases.
OTHER FACTORS
Marketing and administrative costs increased 6.6% in 1996 and 4.7% in 1995,
which were both less than the percentage increases in sales for each year. The
higher 1996 increase was due primarily to increased incentive compensation
costs and costs associated with the formation of the International Division in
1996.
Research and engineering costs increased 9.4% from 1994 to 1995, but were
essentially flat between 1995 and 1996. The increased expenditures in 1995
related primarily to expansion of the meter reading technology products,
development of a new line of large utility meters and the continued upgrade and
expansion of the ultrasonic and natural gas instrumentation product lines. In
1996, work continued in all of these areas but the engineering expenditures
leveled off as certain product development cycles reached successful conclusion.
Interest expense decreased in both 1995 and 1996 due to a combination of lower
interest rates and lower debt balances. Other expenses increased in 1995 due
primarily to foreign currency translation losses, but decreased in 1996 as
hedging activities eliminated any such losses. The company uses a combination
of foreign currency forward contracts and lines of credit with foreign banks to
reduce the impact of changes in the value of its existing foreign currency
commitments and net asset positions.
INCOME TAXES
Income tax as a percentage of earnings before income taxes was 37.2%, 37.1% and
35.3% for 1996, 1995 and 1994, respectively. The increase in the percentage
from 1994 to 1995 was due to a reduction in the amount of the tax benefit of
the company's foreign sales corporation ("FSC"). In 1996, the FSC benefit
increased again, but was offset by higher taxes on foreign operations.
The company currently has a net deferred tax asset of approximately $1,257,000,
reflecting the net temporary differences between financial reporting and tax
reporting. The majority of this net asset relates to deferred payments for
employee benefit plans and is expected to reverse as future payments exceed
expenses.
NET EARNINGS AND EARNINGS PER SHARE
The 1996 record earnings resulted from the increased sales, improved margins,
level research and engineering expenditures and lower interest and other
expenses. The 1995 earnings improvement reflected the increased sales and
reduced interest expense. This was partially offset by a decrease in gross
profit margins and increased research and engineering expenditures.
Net earnings increased 15.6% from 1994 to 1995, while primary earnings per
share increased at a lower rate, 14%, due to an increase in the shares
outstanding between the periods. For both 1995 and 1994, the per share
information was computed using the average number of share outstanding without
consideration of the impact of stock options because the dilution from such
options was less than 3%. For 1996, dilution exceeded 3% and therefore the
impact of stock options outstanding was factored into the calculation. As a
result, while net earnings increased 37.9% from 1995 to 1996, primary earnings
per share increased 31.1%, due to increased shares outstanding and the impact
of stock options outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations increased from $6.3 million in 1994 to $12 million
in 1995, due to increased earnings and reduced inventory and receivable
balances. In 1996, cash provided by operations decreased to $9.9 million as
inventory and receivable balances increased to support higher sales levels,
partially offset by increased earnings and higher payables related to increased
purchasing activity.
30
5
Capital expenditures were $5.4 million in 1996, $4.5 million in 1995 and $3.6
million in 1994. These increased levels of expenditures enabled the company to
continue to expand production capacity to meet higher sales requirements,
improve manufacturing processes to achieve higher quality and lower costs, and
to improve facilities for marketing and administrative personnel.
The company used cash provided by operations to reduce its debt levels by $2.9
million in 1996, $4.9 million in 1995 and $2.1 million in 1994. Total debt at
December 31, 1996 was $3.7 million, compared to $6.5 million at December 31,
1995 and $11.6 million at December 31, 1994. Total indebtedness at December
31, 1996 consisted of commercial paper, bank debt and a capital lease. During
1994 and 1995, the company had an interest rate swap agreement to minimize
exposure to short-term interest rate fluctuations. Due to the reduced risk as
a result of decreased debt levels, this agreement was terminated during 1996.
Other significant changes in balance sheet accounts during 1996 include an
increase in other accrued liabilities, primarily due to provisions for other
after-sale costs. Intangible assets (primarily patents) decreased due to
normal annual amortization, and the prepaid pension asset increased due to
payments in excess of the pension provision. As a result of the merger of its
overfunded and underfunded pension plans as of December 31, 1996, the company
eliminated its minimum pension liability adjustment to equity.
The company's financial condition remains strong. The company believes that
its cash, other liquid assets, operating cash flows and available borrowing
capacity of over $24 million at December 31, 1996, provide adequate resources
to fund ongoing operating requirements and future capital expenditures related
to expansion of capacity and development of new products.
ENVIRONMENTAL MATTERS
The company's domestic and international operations are subject to
various environmental statutes and regulations. The company believes it is in
compliance with such existing domestic and foreign environmental statutes and
regulations. Currently, the company is in the process of resolving a case
relative to a landfill site, as well as litigation alleging violation of
California's Proposition 65. The company believes the ultimate resolution of
these claims will not have a material adverse effect on the results of
operations. Provision has been made for known settlement costs.
31
6
(Page 17 of Annual Report to Shareholders)
BADGER METER, INC.
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
- ----------------------------------------------------------------------------------------
Net sales $116,018,255 $108,644,001 $99,154,839
Operating costs and expenses:
Cost of sales 73,489,917 69,499,606 62,806,600
Marketing and administrative 27,347,697 25,643,624 24,501,650
Research and engineering 6,426,063 6,479,329 5,923,735
- ----------------------------------------------------------------------------------------
107,263,677 101,622,559 93,231,985
- ----------------------------------------------------------------------------------------
Operating earnings 8,754,578 7,021,442 5,922,854
Other deductions:
Interest expense 367,728 721,250 829,643
Other - net 220,185 389,513 119,684
- ----------------------------------------------------------------------------------------
587,913 1,110,763 949,327
- ----------------------------------------------------------------------------------------
Earnings before income taxes 8,166,665 5,910,679 4,973,527
Provision for income taxes (Note 8) 3,040,000 2,192,000 1,758,000
- ----------------------------------------------------------------------------------------
Net earnings $ 5,126,665 $ 3,718,679 $ 3,215,527
========================================================================================
Earnings per share:
Primary $ 1.39 $ 1.06 $ .93
Fully diluted * $ 1.36 $ 1.06 $ .93
- ----------------------------------------------------------------------------------------
Weighted average shares used in computation of:
Primary 3,698,462 3,508,450 3,461,530
Fully diluted * 3,781,780 3,508,450 3,461,530
========================================================================================
* Dilution was not significant in 1995 and 1994.
See accompanying notes.
32
7
(Page 18 of Annual Report to Shareholders)
BADGER METER, INC.
C O N S O L I D A T E D B A L A N C E S H E E T S
December 31, 1996 and 1995
1996 1995
- ------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 1,123,145 $ 1,176,947
Receivables (Note 3) 15,498,461 13,661,094
Inventories:
Finished goods 3,577,268 3,403,329
Work in process 8,466,296 6,750,432
Raw materials and purchased parts 5,462,619 5,680,616
- ------------------------------------------------------------------------------------------------------------------
Total inventories 17,506,183 15,834,377
Prepaid expenses 917,761 744,989
- ------------------------------------------------------------------------------------------------------------------
Total current assets 35,045,550 31,417,407
Property, plant and equipment, at cost:
Land and improvements 2,770,286 2,759,230
Buildings and improvements 12,270,624 11,354,085
Machinery and equipment 42,070,255 40,987,455
- ------------------------------------------------------------------------------------------------------------------
57,111,165 55,100,770
Less accumulated depreciation (37,751,230) (37,714,079)
- ------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 19,359,935 17,386,691
Intangible assets, at cost less accumulated amortization 877,621 1,216,645
Prepaid pension (Note 7) 7,102,215 5,821,221
Deferred income taxes (Note 8) 1,256,917 1,536,120
Deferred charges and other assets (Note 7) 2,491,032 3,148,437
- ------------------------------------------------------------------------------------------------------------------
$ 66,133,270 $ 60,526,521
==================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (Notes 4 and 6) $ 2,634,326 $ 5,515,320
Payables 7,102,025 4,230,517
Accrued compensation and employee benefits 4,762,988 4,249,643
Other accrued liabilities 1,928,701 690,857
Income and other taxes 972,400 553,355
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 17,400,440 15,239,692
Accrued non-pension postretirement benefits (Note 7) 8,106,000 8,396,000
Other accrued employee benefits (Notes 5 and 7) 2,898,538 3,727,880
Long-term debt (Notes 6 and 7) 1,090,608 1,000,000
Commitments and contingencies (Note 6)
Shareholders' equity: (Notes 2, 5 and 7)
Common Stock, $1 par; authorized 5,000,000 shares;
issued 3,154,566 shares in 1996 and 1,551,912 shares in 1995 3,154,566 1,551,912
Class B Common Stock, $.10 par; authorized 5,000,000 shares;
issued 1,125,570 shares in 1996 and 562,785 shares in 1995 112,557 56,278
Capital in excess of par value 6,802,690 7,831,877
Reinvested earnings 28,199,737 24,552,011
Less:Employee benefit stock (1,052,596) (1,101,846)
Pension liability adjustment (Note 7) 0 (368,978)
Treasury stock, at cost, 728,190 shares in 1996 and 358,305 in 1995 (579,270) (358,305)
- ------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 36,637,684 32,162,949
- ------------------------------------------------------------------------------------------------------------------
$ 66,133,270 $ 60,526,521
==================================================================================================================
See accompanying notes.
33
8
(Page 19 of Annual Report to Shareholders)
BADGER METER, INC.
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
- -----------------------------------------------------------------------------------------------
Operating activities:
Net earnings $ 5,126,665 $ 3,718,679 $ 3,215,527
Adjustments to reconcile net earnings to net cash
provided by operations:
Depreciation 3,521,521 3,522,944 3,467,618
Amortization 597,888 874,683 968,585
Noncurrent employee benefits (882,718) (205,529) (154,947)
Deferred income taxes 279,203 (209,380) (325,740)
Other 37,634 200,329 94,346
Changes in:
Receivables (1,837,367) 771,123 (2,868,621)
Inventories (1,671,805) 2,632,889 (482,246)
Current liabilities other than short-term debt 4,879,818 730,336 2,431,359
Prepaid expenses (172,774) (9,637) (3,655)
- -----------------------------------------------------------------------------------------------
Total adjustments 4,751,400 8,307,758 3,126,699
- -----------------------------------------------------------------------------------------------
Net cash provided by operations 9,878,065 12,026,437 6,342,226
- -----------------------------------------------------------------------------------------------
Investing activities:
Property, plant and equipment (5,381,505) (4,492,690) (3,553,186)
Other - net (548,303) (597,490) (276,364)
- -----------------------------------------------------------------------------------------------
Net cash used for investing activities (5,929,808) (5,090,180) (3,829,550)
- -----------------------------------------------------------------------------------------------
Financing activities:
Bank borrowings (repayments) (2,941,280) (4,921,220) (2,145,303)
Dividends (1,478,939) (1,331,276) (1,194,722)
Stock options and ESSOP 639,125 128,600 317,926
Purchase of treasury stock (220,965) 0 0
- -----------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (4,002,059) (6,123,896) (3,022,099)
- -----------------------------------------------------------------------------------------------
Increase (decrease) in cash (53,802) 812,361 (509,423)
Cash - beginning of year 1,176,947 364,586 874,009
- -----------------------------------------------------------------------------------------------
Cash - end of year $ 1,123,145 $ 1,176,947 $ 364,586
===============================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 2,348,337 $ 2,141,821 $ 2,382,320
Interest $ 377,931 $ 767,189 $ 851,533
Non-cash transaction (Note 7)
===============================================================================================
See accompanying notes.
34
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(Page 20 of Annual Report to Shareholders)
BADGER METER, INC.
C O N S O L I D A T E D S T A T E M E N T S O F S H A R E H O L D E R S'
E Q U I T Y
Years ended December 31, 1996, 1995 and 1994
Class B Capital in Employee Pension
Common Common excess of Reinvested benefit liability Treasury
Stock Stock par value earnings stock adjustment stock
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $1,498,609 $ 56,278 $ 6,693,011 $20,143,803 $(1,663,968) $(295,304) $(358,305)
Net earnings 3,215,527
Cash dividends, $.3548 per Common share (831,726)
Cash dividends, $.3225 per Class B Common
share (362,996)
Restricted stock plan (Note 5):
Amortization of unearned compensation 66,471
Shares canceled (1,000) (17,750) 18,750
Tax benefit on vested restricted stock 37,000
Employee stock ownership plan (Note 7):
Amortization of unearned compensation 200,000
Stock options exercised (Note 5) 18,570 299,356
Tax benefit on stock options (Note 5) 55,000
Treasury stock issued 30,733 614,660
Tax benefit on dividends (Notes 5 and 7) 27,000
Pension liability adjustment (Note 7) (92,969)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,546,912 56,278 7,708,277 22,164,608 (1,378,747) (388,273) (358,305)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings 3,718,679
Cash dividends, $.3908 per Common share (931,136)
Cash dividends, $.3555 per Class B Common
share (400,140)
Restricted stock plan (Note 5):
Amortization of unearned compensation 76,901
Tax benefit on vested restricted stock 4,000
Employee stock ownership plan (Note 7):
Amortization of unearned compensation 200,000
Stock options exercised (Note 5) 5,000 81,600
Tax benefit on stock options (Note 5) 11,000
Tax benefit on dividends (Notes 5 and 7) 27,000
Pension liability adjustment (Note 7) 19,295
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 1,551,912 56,278 7,831,877 24,552,011 (1,101,846) (368,978) (358,305)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings 5,126,665
Cash dividends, $.430 per Common share (1,038,841)
Cash dividends, $.391 per Class B Common
share (440,098)
Restricted stock plan (Note 5):
Amortization of unearned compensation 39,875
Shares Canceled (500) (8,875) 9,375
Tax benefit on vested restricted stock 13,000
Stock options exercised (Note 5) 24,600 428,935
Tax benefit on stock options (Note 5) 103,000
Tax benefit on dividends (Notes 5 and 7) 27,000
Pension liability adjustment (Note 7) 368,978
Shares purchased by ESSOP Participants 1,271 36,394
Treasury stock issued 4,921 210
Treasury stock purchased (221,175)
Two-for-one stock split 1,577,283 56,279 (1,633,562)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $3,154,566 $112,557 $ 6,802,690 $28,199,737 $(1,052,596) $ (0) $(579,270)
==================================================================================================================================
See accompanying notes.
35
10
(Pages 21 to 26 of Annual Report to Shareholders)
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
December 31, 1996, 1995 and 1994
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROFILE Badger Meter is a leading marketer and manufacturer of products
using flow measurement and control technology. It operates in one business
segment. Its products are used to measure and control the flow of liquids and
gases in a variety of applications.
The company serves the flow measurement and control market worldwide with
products including water meters and associated systems, wastewater meters,
industrial meters, small valves and natural gas meters and related
instrumentation.
CONSOLIDATION The consolidated financial statements include the accounts
of the company and its wholly owned subsidiaries.
REVENUE RECOGNITION Revenues are recognized from product sales upon
shipment. The company estimates and records provisions for warranties and
other after-sale costs in the period the sale is reported. Such provisions are
included in other accrued liabilities.
INVENTORIES Inventories are valued at the lower of cost (first-in,
first-out method), or market.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at
cost. Depreciation has been provided principally by the straight-line method.
INTANGIBLE ASSETS Costs of purchased patents are amortized over the lives
of the patents. Accumulated amortization at December 31, 1996 and 1995, was
$2,512,000 and $2,173,000, respectively.
TREASURY STOCK Treasury stock is stated at cost. In 1996, the Board of
Directors authorized the repurchase of up to 350,000 shares of stock. During
1996, the company purchased 12,000 shares, which were added to treasury stock.
RESEARCH AND DEVELOPMENT Research and development costs are charged to
expense as incurred and amounted to $3,851,000, $3,858,000 and $3,278,000 in
1996, 1995 and 1994, respectively.
EARNINGS PER SHARE For 1995 and 1994, earnings per share is based on the
weighted-average shares outstanding during each period. Dilution from common
stock equivalents was less than 3% in both years. For 1996, earnings per share
is based on the weighted-average common and common equivalent shares (stock
options) outstanding during the year.
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.
FOREIGN CURRENCY TRANSLATION The company's functional currency for all of
its foreign subsidiaries is the U.S. dollar. Translation adjustments and
transaction gains and losses are recognized in consolidated income as incurred.
These amounts are reflected in Other-net in the Statements of Operations and
have not been material.
PROSPECTIVE ACCOUNTING CHANGES In October 1996, the Accounting Standards
Executive Committee issued Statement of Position 96-1 (SOP), to be effective in
1997. The SOP provides guidance for determining when an environmental
liability should be recorded. The company believes that future adoption of the
SOP will have no material effect on results of operations or financial
position.
36
11
RECLASSIFICATIONS Certain reclassifications have been made to the 1995
consolidated balance sheet to conform to the 1996 presentation.
2 COMMON STOCK
On February 14, 1997, the Board of Directors declared a two-for-one stock
split on the company's Common Stock and Class B Common Stock effected in the
form of a 100% stock dividend, payable on April 18, 1997, to shareholders of
record at the close of business on March 27, 1997. In this report, all per
share amounts and numbers of shares have been restated to reflect this stock
split. In addition, Common Stock, Class B Common Stock and capital in excess
of par value as of December 31, 1996, have been restated to reflect this split.
Holders of Class B Common Stock are restricted in their ability to
transfer such shares although they may convert their shares of Class B Common
Stock into shares of Common Stock at any time. Holders of Common Stock are
entitled to cash dividends per share equal to 110% of all dividends declared
and paid on each share of the Class B Common Stock. Holders of Class B Common
Stock are entitled to ten votes per share on any matters brought before the
shareholders of the company while holders of Common Stock are entitled to one
vote per share. Liquidation rights are the same for both classes of stock.
3 TRANSACTIONS WITH AFFILIATED COMPANY
The company carries its 15% interest in a Mexican company, Medidores
Azteca, S.A. (Azteca) at cost ($75,000). During 1996, 1995 and 1994, the
company sold approximately $1,175,000, $441,000 and $974,000 of goods to
Azteca. Trade receivables from Azteca at December 31, 1996 and 1995, were
$541,000 and $615,000, respectively.
4 SHORT-TERM DEBT AND CREDIT LINES
Short-term debt at December 31, 1996 and 1995, consisted of:
1996 1995
-----------------------------------------------------------------
Notes payable to banks $1,439,040 $1,057,320
Commercial paper 1,135,000 4,458,000
Current portion of capital lease (Note 6) 60,286 0
-----------------------------------------------------------------
TOTAL $2,634,326 $5,515,320
=================================================================
The company has $26,948,000 of short-term credit lines with domestic banks
and a foreign bank which includes a
$5,000,000 commercial paper line of credit. At December 31, 1996, $2,574,040
of these lines was used, which included $1,135,000 of commercial paper. The
weighted-average interest rate on the outstanding balance was 5.22% and 5.81%
at December 31, 1996 and 1995.
5 RESTRICTED STOCK AND STOCK OPTION PLANS
A. RESTRICTED STOCK PLAN
The company's Restricted Stock Plan (The Plan) provided for the award of
up to 200,000 shares of the company's Common Stock to certain officers and key
employees and for the reimbursement to certain participants for the personal
income tax liability resulting from such awards. The company provides for any
income tax liability ratably throughout the restricted period. Plan
participants are entitled to cash dividends and to vote their respective
shares. The sale or transfer of the shares is limited during the restricted
period, not exceeding eight years. All eligible shares have been issued. The
value of such stock was established by the market price on the date of grant.
Restrictions on 6,000 shares expired during 1996 and 1,000 shares were
canceled.
Unearned compensation was charged for the market value of the restricted
shares as these shares were issued in accordance with The Plan. The unearned
compensation is shown as a reduction of shareholders' equity in the
accompanying consolidated balance sheets and is being amortized ratably over
the restricted period. During 1996, 1995 and 1994, $43,000, $82,000 and
$101,000 was charged to expense relating to The Plan.
37
12
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B. STOCK OPTION PLANS
The company has three 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 three years and maximum option
terms of ten years. As of December 31, 1996, options to purchase approximately
68,000 shares are available for issue.
The following table summarizes the transactions of the company's stock
option plans for the three year period ended December 31, 1996:
Weighted-Average
Number of Shares Exercise Price
- ---------------------------------------------------------------------------------
Unexercised options outstanding -
December 31, 1993 320,600 $ 9.06
Options granted 4,200 $ 9.57
Options exercised (37,140) $ 8.57
Options forfeited (9,000) $ 8.72
- ---------------------------------------------------------------------------------
Unexercised options outstanding -
December 31, 1994 278,660 $ 9.14
Options granted 84,200 $11.25
Options exercised (10,000) $ 8.66
Options forfeited (3,600) $ 8.57
- ---------------------------------------------------------------------------------
Unexercised options outstanding -
December 31, 1995 349,260 $ 9.64
Options granted 144,168 $12.96
Options exercised (49,200) $ 9.22
Options forfeited (8,468) $10.67
- ---------------------------------------------------------------------------------
Unexercised options outstanding -
December 31, 1996 435,760 $10.77
Price range $8.38-$12.88
(weighted-average contractual life
of 7.1 years) 403,760 $10.43
Price range $14.82-$15.82
(weighted-average contractual life
of 9.4 years) 32,000 $15.00
- ---------------------------------------------------------------------------------
Exercisable options -
December 31, 1994 200,400 $ 9.03
December 31, 1995 230,060 $ 9.11
December 31, 1996 241,610 $ 9.39
================================================================================
Statement of Financial Accounting Standard No. 123 "Accounting for
Stock-Based Compensation" (FAS 123) became effective for the company in 1996.
As allowed by FAS 123, 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 on 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.
As required by FAS 123, the company has determined the pro-forma
information as if the company had accounted for stock options granted since
January 1, 1995, under the fair value method of FAS 123. The Black-Scholes
option pricing model was used with the following weighted-average assumptions
for 1996 and 1995: risk-free interest rates of 5.5% and 7.4%; dividend yield of
3%; expected Common Stock market price volatility factor of .168; and a
weighted-average expected life of the options of three to five years. The
weighted-average fair value of options granted in 1996 and 1995 were $2.11 and
$2.36 per share, respectively. The pro-forma effect of these options on net
earnings, primary and fully diluted earnings per share was not material. These
pro-forma calculations only include the effects of 1995 and 1996 grants. As
such, the impacts are not necessarily indicative of the effects on reported net
income of future years.
38
13
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
6 COMMITMENTS AND CONTINGENCIES
A. COMMITMENTS
The company leases equipment and facilities under operating leases, some
of which contain renewal options. In 1996, the company also leased certain
computer equipment under a capital lease. The leased asset is included in
machinery and equipment and the lease obligation is included in short and
long-term debt in the accompanying consolidated balance sheets. Future minimum
lease payments consisted of the following at December 31, 1996:
Operating Capital Total
Leases Lease Leases
---------------------------------------------------------------------------
1997 $314,472 $ 65,100 $379,572
1998 161,321 65,100 226,421
1999 49,041 28,210 77,251
2000 44,910 0 44,910
2001 and thereafter 45,494 0 45,494
---------------------------------------------------------------------------
Total minimum lease payments 615,238 158,410 773,648
Less: amount representing interest 0 (7,516) (7,516)
---------------------------------------------------------------------------
Present value of net minimum lease payments 615,238 150,894 766,132
Less: current portion 0 (60,286) (60,286)
---------------------------------------------------------------------------
Lease obligationss $615,238 $ 90,608 $705,846
===========================================================================
Total rental expense charged to operations under all operating leases was
approximately $1,294,000, $1,362,000 and $1,332,000 in 1996, 1995 and 1994,
respectively.
B. CONTINGENCIES
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 company is subject to contingencies relative to environmental laws and
regulations. Currently the company is in the process of resolving several
cases relative to landfill sites, as well as alleged violation of California's
Proposition 65. The company does not believe the ultimate resolution of these
actual or potential claims will have a material adverse effect on the results
of operations. Provision has been made for known settlement costs.
The company has evaluated its worldwide operations to determine if any
risks and uncertainties exist that could severely impact its operations in the
near-term. In general the company does not believe that it is at risk.
However, the company does rely on single suppliers for certain castings and
components in several of its product lines. Although alternate sources of
supply exist for these items, loss of certain suppliers could disrupt
operations. The company attempts to mitigate these risks by working closely
with key suppliers and by purchasing business interruption insurance where
appropriate.
7 EMPLOYEE BENEFIT PLANS
A. PENSION PLANS
The company maintains non-contributory defined benefit pension plans
covering substantially all domestic employees. Benefits for salaried
employees are based on compensation and years of service while benefits for
hourly employees are generally based on years of service. It is the company's
policy to fund at least the minimum contribution required by ERISA. As of
December 31, 1996, the company merged its various pension plans into one
pension plan.
39
14
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
The following data is provided for the pension plans:
Components of Net Periodic Pension Credit
- -----------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------
Service cost - benefits earned during the year $ 1,043,802 $ 850,072 $ 940,006
Interest cost on projected benefit obligations 2,248,932 2,148,189 1,904,504
Actual (return) loss on plan assets (3,081,757) (6,409,454) 736,097
Net amortization and deferral (323,409) 3,175,733 (3,885,874)
- -----------------------------------------------------------------------------------------
Net periodic pension credit $ (112,432) $ (235,460) $ (305,267)
=========================================================================================
Reconciliation of Funded Status DECEMBER 31,
- ------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------
ASSETS ASSETS ACCUMULATED
EXCEED EXCEED BENEFITS
ACCUMULATED ACCUMULATED EXCEED
BENEFITS BENEFITS ASSETS
- ------------------------------------------------------------------------------------------------------
Actuarial present value of
benefit obligations:
Vested benefit obligation $28,460,986 $15,563,014 $ 8,135,305
Non-vested benefit obligation 522,827 296,236 139,133
- ------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $28,983,813 $15,859,250 $ 8,274,438
=====================================================================================================
Projected benefit obligation $32,202,537 $21,711,321 $ 8,274,438
Plan assets at fair value 37,345,758 27,862,175 6,481,265
- ------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 5,143,221 6,150,854 (1,793,173)
Unrecognized net loss 6,482,703 1,728,524 644,041
Unrecognized prior service cost (credit) (2,834,660) 14,101 946,850
Unrecognized transition asset (1,693,057) (2,072,258) (44,063)
Adjustment required to recognize
minimum liability 0 0 (1,546,828)
- ------------------------------------------------------------------------------------------------------
Prepaid pension cost 7,098,207 5,821,221 (1,793,173)
Contribution payable 4,008 0 0
- ------------------------------------------------------------------------------------------------------
Prepaid pension asset (liability)
included in balance sheet $ 7,102,215 $ 5,821,221 $(1,793,173)
=====================================================================================================
The provisions of FAS No. 87, "Employers' Accounting for Pensions",
require the recognition of an additional minimum liability for each defined
benefit plan for which the accumulated benefit obligation exceeds plan assets.
As a result of the December 31, 1996 merger of the plans, no additional minimum
liability was required as of that date. For December 31, 1995, a minimum
liability adjustment of $1,546,828 was recognized. However, the asset
recognized may not exceed the amount of unrecognized prior service cost of
$946,850. Therefore, a balance of $599,978, net of tax benefits of $231,000,
or $368,978 was recognized as a reduction of shareholders' equity as of
December 31, 1995.
40
15
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
The actuarial assumptions used in the preparation of the above information
were 7.5%, 9.0% and 5.0% for both years for the discount rate, long-term rate
of return and rate of compensation increases, respectively. Plan assets are
primarily invested in corporate and government bonds and listed common stocks.
Effective January 1, 1997, a new cash balance program was established for
domestic non-represented employees. Pension benefits under the previous
formulas were fixed and used as a starting basis for the new plan. Future
benefits will generally be based on a percentage of current salary (which
varies with years of service). Transition provisions were included in the new
plan for existing employees based on years of service and benefits provided by
the current plan.
B. OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits for its domestic employees, the
company has certain
postretirement plans that provide medical benefits for retirees and eligible
dependents. Substantially all of the company's domestic employees may become
eligible for these benefits if they reach normal retirement age while working
for the company.
It is the company's current policy to fund health care benefits on a cash
basis. The plans are coordinated with Medicare when a retiree reaches age 65
and the plans require retiree contributions which equaled approximately 5.7% of
non-pension postretirement benefits costs for both 1996 and 1995.
The following tables provide information on the plan status as of December
31,
1996 1995
- ------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 4,618,000 $ 7,626,000
Fully eligible active plan participants 859,000 1,042,000
Other active participants 1,736,000 1,757,000
- ------------------------------------------------------------------------------------
Total 7,213,000 10,425,000
Unrecognized prior service credit 2,534,000 0
Unrecognized net loss (1,641,000) (2,029,000)
- ------------------------------------------------------------------------------------
Accrued postretirement benefit cost
recognized in the accompanying
consolidated balance sheet $ 8,106,000 $ 8,396,000
====================================================================================
The discount rate used to measure the accumulated postretirement benefit
obligation (APBO) was 7.5% for both years. The assumed health care cost trend
rate used in measuring the APBO as of December 31, 1995, was 8.6% decreasing to
5.7%. The impact of a 1% increase in the health care cost trend rate would have
increased the APBO by 8.2% at December 31, 1995, and would have increased
benefit costs by 3.6% for 1996, 8.3% for 1995 and 8.0% for 1994. During 1996,
the company changed certain benefits for retiree health care, establishing
fixed contribution amounts. As such, future health care cost trends will no
longer impact the company's accruals or provisions. This change contributed to
the decrease in the accumulated postretirement benefit obligation and the
related unrecognized prior service credit, as shown above.
41
16
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Net periodic postretirement benefit cost for the years ending December 31,
- ------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------
Service cost, benefits attributed for service
of active employees for the period $103,000 $ 93,000 $102,000
Interest cost on the accumulated
postretirement benefit obligation 656,000 771,000 695,000
Unrecognized prior service credit (59,000) 0 0
Unrecognized loss 21,000 26,000 29,000
- ------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $721,000 $890,000 $826,000
==========================================================================================
C. BADGER METER EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
In 1991, the company formed The Badger Meter Employee Savings and Stock
Ownership Plan (The ESSOP) and guaranteed a loan made to The ESSOP which had
been used to purchase Common Stock of the company from shares held in Treasury.
The company is obligated to contribute sufficient cash to The ESSOP to enable
it to repay the loan principal and interest. Each payment releases shares of
Common Stock (5,626, 22,856 and 22,856 shares in 1996, 1995 and 1994) for
allocation to participants in The ESSOP.
In 1995, The ESSOP renegotiated the terms of the loan. The new terms
allow variable payments of principal with the final principal and interest
payment due December 1, 2001. The principal amount due on the loan was
$1,000,000 at December 31, 1996 and 1995. Interest may be charged at either
Prime Rate or at LIBOR plus 1.5%. As of
December 31, 1996, the LIBOR-based loan had an interest rate of 7%.
The ESSOP includes a voluntary 401(k) savings plan which allows domestic
employees to defer up to 15% of their income on a pretax basis. The company
matches 25% of each employee's contribution, with the match percentage applying
to a maximum of 6%, 6% and 5% of the employee's salary for 1996, 1995 and 1994,
respectively. The match is paid in company stock. For 1996, 1995 and 1994,
respectively, 16,038, 22,062 and 18,204 shares of Common Stock released through
principal and interest payments on The ESSOP debt were allocated to
participants.
In addition to the match, the company may, at the discretion of the Board
of Directors, allocate additional available shares to non-represented
participants who are not covered by a collective bargaining agreement. An
additional 1,016 and 4,652 shares were allocated for 1996 and 1994,
respectively. No additional shares were allocated for 1995.
The obligation related to The ESSOP has been recorded as long-term debt
and a like amount of unearned compensation has been recorded as a reduction of
shareholders' equity in the accompanying consolidated balance sheets. Charges
to expense were $239,000, $230,000 and $200,000 in 1996, 1995 and 1994,
respectively. The company paid interest on the ESSOP loan of $33,000, $51,000
and $40,000 which was net of dividends on unallocated ESSOP shares of $37,000,
$44,000 and $48,000 for 1996, 1995 and 1994, respectively. These amounts are
included in interest expense in the accompanying consolidated statements of
operations.
42
17
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
8 INCOME TAX EXPENSE
Details of earnings (loss) before income taxes and the related provision
for income taxes are as follows:
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes:
Domestic $7,824,746 $ 5,730,814 $ 5,053,140
Foreign 341,919 179,865 (79,613)
- ------------------------------------------------------------------------------------------------------
Total $8,166,665 $ 5,910,679 $ 4,973,527
======================================================================================================
Income taxes:
Current:
Federal $2,286,000 $ 1,956,000 $ 1,658,000
State 434,000 339,000 300,000
Foreign 41,000 106,000 41,000
Deferred:
Federal 195,000 (145,000) (199,000)
State (57,000) (12,000) 21,000
Foreign 141,000 (52,000) (63,000)
- -----------------------------------------------------------------------------------------------------
Total $3,040,000 $ 2,192,000 $ 1,758,000
=====================================================================================================
The components of the net deferred tax asset as of December 31, were as follows:
DEFERRED TAX ASSETS: 1996 1995
- -------------------------------------------------------------------------------------------
Receivables $ 82,000 $ 62,000
Inventories 275,000 292,000
Accrued compensation 702,000 695,000
Other payables 708,000 266,000
Non-pension postretirement benefits 3,112,000 3,231,000
Accrued employee benefits 1,174,000 1,132,000
Operating loss carryforward 84,000 218,000
- -------------------------------------------------------------------------------------------
Total deferred tax assets 6,137,000 5,896,000
DEFERRED TAX LIABILITIES:
- -------------------------------------------------------------------------------------------
Depreciation 1,995,000 1,928,000
Prepaid pension 2,744,000 2,328,000
Other 141,000 104,000
- -------------------------------------------------------------------------------------------
Total deferred tax liabilities 4,880,000 4,360,000
- -------------------------------------------------------------------------------------------
Net deferred tax asset included in balance sheet $1,257,000 $1,536,000
===========================================================================================
43
18
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
A prior year operating loss at a Mexican subsidiary may be carried forward
for ten years and there is no limitation on the carryforward of a prior year
operating loss at a German subsidiary.
The provision for income tax differs from the amount which would be
provided by applying the statutory
U.S. corporate income tax rate of 34% in each year due to the following items:
1996 1995 1994
------------------------------------------------------------------
Provision at statutory rates $2,776,000 $2,010,000 $1,691,000
State income taxes, net
of federal tax benefit 312,000 216,000 212,000
Foreign income taxes 66,000 (7,000) 5,000
Tax benefit of FSC (201,000) (119,000) (243,000)
Other 87,000 92,000 93,000
------------------------------------------------------------------
Actual provision $3,040,000 $2,192,000 $1,758,000
==================================================================
No provision for federal income taxes is made on the earnings of foreign
subsidiaries that are considered permanently invested or would be offset by
foreign tax credits upon distribution. Such undistributed earnings at December
31, 1996, were $475,921.
9 FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, accounts receivable and accounts payable are reflected in the
financial statements at fair value. Short-term debt is comprised of notes
payable drawn against the company's lines of credit and commercial paper.
Because of the short-term nature of these instruments, the carrying value
reflects the fair value. Long-term debt primarily relates to the company's
guarantee of The ESSOP debt, which is offset by a similar value in
shareholders' equity.
44
19
BADGER METER, INC.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
10 INDUSTRY SEGMENTS
The company operates in one industry segment as a marketer and
manufacturer of various flow measurement products.
DECEMBER 31,
------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------
Exports to non-affiliated companies to consolidated net sales 11% 11% 11%
Net sales by foreign subsidiaries to consolidated net sales 7% 7% 7%
Assets of foreign subsidiaries to consolidated assets 7% 7% 7%
Operating profits (loss) for foreign subsidiaries ($000) $ 346 $ 244 $ (63)
======================================================================================
11 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), COMMON STOCK PRICE AND
DIVIDENDS
QUARTER ENDED
---------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- --------------------------------------------------------------------------------------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
1996
Net sales $26,635 $30,542 $30,542 $28,299
Gross profit $ 9,921 $10,803 $11,323 $10,481
Net earnings $ 888 $ 1,389 $ 1,430 $ 1,420
Earnings per share:
Primary $ .25 $ .38 $ .39 $ .38
Fully diluted $ .25 $ .38 $ .39 $ .38
Dividends declared:
Common $ .10 $ .11 $ .11 $ .11
Class B $ .09 $ .10 $ .10 $ .10
Stock price:
High $ 14.44 $ 15.75 $ 16.81 $ 20.81
Low $ 12.38 $ 13.25 $ 13.50 $ 16.00
Quarter-end close $ 13.50 $ 14.00 $ 15.94 $ 19.19
- --------------------------------------------------------------------------------------
1995
Net sales $27,928 $28,579 $25,856 $26,281
Gross profit $ 9,737 $ 9,991 $ 9,494 $ 9,922
Net earnings $ 857 $ 1,051 $ 915 $ 896
Earnings per share:
Primary $ .25 $ .30 $ .26 $ .26
Dividends declared:
Common $ .09 $ .10 $ .10 $ .10
Class B $ .08 $ .09 $ .09 $ .09
Stock price:
High $ 12.06 $ 13.19 $ 13.38 $ 13.50
Low $ 11.06 $ 11.50 $ 11.56 $ 11.44
Quarter-end close $ 11.69 $ 11.81 $ 13.13 $ 13.25
======================================================================================
Badger Meter, Inc. Common Stock is listed on the American Stock Exchange under
the symbol BMI. There is no market for Badger Meter Class B Common Stock due
to transfer restrictions. Class B Common Stock is equivalent in value to
Common Stock. Earnings per share is computed independently for each quarter.
As such, the annual per share amount may not equal the sum of the quarterly
amounts due to rounding. There are no fully diluted amounts shown for 1995
because dilution was less than 3%. Shareholders of record as of December 31,
1996 and 1995, totaled 579 and 608 for Common Stock and 9 and 9 for Class B
Stock, respectively. Voting trusts are counted as single shareholders for this
purpose.
45
20
(Page 27 of Annual Report to Shareholders)
BADGER METER, INC.
R E P O R T O F I N D E P E N D E N T A U D I T O R S
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
and Shareholders
Badger Meter, Inc.
We have audited the accompanying consolidated balance sheets of Badger
Meter, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the company'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 audits 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 consolidated financial position of Badger Meter,
Inc. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Milwaukee, Wisconsin
January 29, 1997,
except for the first paragraph
of Note 2, as to which the
date is February 14, 1997.
46
21
(Page 28 of Annual Report to Shareholders)
BADGER METER, INC.
T E N Y E A R S U M M A R Y O F S E L E C T E D D A T A
Years ended December 31 (Thousands of dollars except per share data)
1996 1995 1994 1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Net sales $ 116,018 108,644 99,155 84,497 82,106 78,417 77,100 72,266
Research and development $ 3,851 3,858 3,278 3,642 4,119 4,046 3,863 3,614
Earnings before income taxes $ 8,167 5,911 4,974 3,306 1,160 2,419 3,507 3,798
Earnings before changes in
accounting $ 5,127 3,719 3,216 2,164 802 1,648 2,332 2,375
Cumulative effect of changes
in accounting $ 0 0 0 0 (4,684) 0 0 0
Net earnings (loss) $ 5,127 3,719 3,216 2,164 (3,882) 1,648 2,332 2,375
Earnings to sales * 4.4% 3.4% 3.2% 2.6% 1.0% 2.1% 3.0% 3.3%
- -------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Earnings before changes in
accounting $ 1.39 1.06 .93 .64 .24 .49 .73 .77
Cumulative effect of changes
in accounting $ 0 0 0 0 (1.38) 0 0 0
Primary earnings (loss) $ 1.39 1.06 .93 .64 (1.14) .49 .73 .77
Cash dividends declared:
Common Stock $ .43 .39 .35 .32 .30 .30 .30 .29
Class B Common Stock $ .39 .36 .32 .29 .28 .28 .28 .26
Price range - high $ 20.81 13.50 14.00 11.00 8.88 9.00 9.94 11.44
Price range - low $ 12.38 11.06 9.50 8.88 7.38 6.81 6.50 8.00
Closing price $ 19.19 13.25 11.94 9.56 8.75 7.69 6.94 9.81
Book value $ 10.32 9.16 8.38 7.66 7.31 8.61 8.29 8.39
- -------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
Common Stock 2,426,376 2,387,214 2,377,214 2,280,608 2,282,008 2,279,608 2,274,408 1,938,314
Class B Common Stock 1,125,570 1,125,570 1,125,570 1,125,570 1,125,570 1,125,570 1,125,570 1,148,770
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 17,645 16,178 14,569 12,010 9,876 9,842 18,365 13,803
Current ratio 2.0 to 1 2.1 to 1 1.7 to 1 1.6 to 1 1.6 to 1 1.6 to 1 3.3 to 1 2.1 to 1
Net cash provided by
operations $ 9,878 12,026 6,342 2,969 3,833 5,410 5,132 3,342
Capital expenditures $ 5,382 4,493 3,553 3,121 3,496 3,335 4,901 4,376
Total assets $ 66,133 60,527 61,993 57,627 53,895 51,199 50,670 46,672
Long-term debt $ 1,091 1,000 1,200 1,400 1,700 1,900 10,400 5,183
Shareholders' equity $ 36,638 32,163 29,351 26,074 24,894 29,303 28,168 25,897
Debt to total capitalization 9.2% 16.8% 28.4% 34.9% 34.2% 28.7% 30.5% 29.2%
Return on shareholders' equity * 14.0% 11.6% 11.0% 8.3% 3.2% 5.6% 8.3% 9.2%
Price/earnings ratio * 13.8 12.5 12.8 15.1 37.2 15.9 9.6 12.7
- -------------------------------------------------------------------------------------------------------------------------------
1988 1987
- --------------------------------------------------------
OPERATING RESULTS
Net sales 71,150 66,737
Research and development 3,077 2,896
Earnings before income taxes 3,359 3,072
Earnings before changes in
accounting 2,071 1,799
Cumulative effect of changes
in accounting 0 0
Net earnings (loss) 2,071 1,799
Earnings to sales * 2.9% 2.7%
- --------------------------------------------------------
PER COMMON SHARE
Earnings before changes in
accounting .69 .61
Cumulative effect of changes
in accounting 0 0
Primary earnings (loss) .69 .61
Cash dividends declared:
Common Stock .28 .28
Class B Common Stock .25 .25
Price range - high 10.13 12.13
Price range - low 6.00 5.31
Closing price 9.06 6.31
Book value 7.89 7.45
- --------------------------------------------------------
SHARES OUTSTANDING
Common Stock 1,865,314 1,736,170
Class B Common Stock 1,174,770 1,234,770
- --------------------------------------------------------
FINANCIAL POSITION
Working capital 13,599 14,186
Current ratio 2.4 to 1 2.5 to 1
Net cash provided by
operations 5,846 3,631
Capital expenditures 2,904 1,545
Total assets 41,787 41,454
Long-term debt 5,267 7,050
Shareholders' equity 23,975 22,118
Debt to total capitalization 25.9% 32.9%
Return on shareholders' equity * 8.6% 8.1%
Price/earnings ratio * 13.1 10.4
- --------------------------------------------------------
* PRIOR TO ACCOUNTING CHANGES
47