-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V9nb+0suSWt303eyW9/sNgCX7LSls1VTqzXIn952nSdGKIztPFGJHg24KxF5kSbf ABjlz14zoWmEdcVRfDvzJA== 0000950124-99-003826.txt : 19990621 0000950124-99-003826.hdr.sgml : 19990621 ACCESSION NUMBER: 0000950124-99-003826 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990618 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BADGER METER INC CENTRAL INDEX KEY: 0000009092 STANDARD INDUSTRIAL CLASSIFICATION: TOTALIZING FLUID METERS & COUNTING DEVICES [3824] IRS NUMBER: 390143280 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-06706 FILM NUMBER: 99648691 BUSINESS ADDRESS: STREET 1: 4545 WEST BROWN DEER ROAD STREET 2: C/O CORPORATE SECRETARY CITY: MILWAUKEE STATE: WI ZIP: 53223-0099 BUSINESS PHONE: 4143715887 FORMER COMPANY: FORMER CONFORMED NAME: BADGER METER MANUFACTURING CO DATE OF NAME CHANGE: 19710729 11-K 1 FORM 11-K 1 FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________________ to ___________________ Commission file number 1-6706 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: BADGER METER EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Badger Meter, Inc. 4545 W. Brown Deer Road Milwaukee, WI 53223 1 2 REQUIRED INFORMATION 1. Not Applicable. 2. Not Applicable. 3. Not Applicable. 4. The Badger Meter Employee Savings and Stock Ownership Plan (the Plan) is subject to the requirements of the Employee Retirement Income Security Act of 1974 (ERISA). Attached hereto is a copy of the most recent financial statements and schedules of the Plan prepared in accordance with the financial reporting requirements of ERISA. Exhibits (23) Consent of Independent Auditors 2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Badger Meter Employee Savings and Stock Ownership Plan Date: June 18, 1999 By: /S/ Richard A. Meeusen ------------------------------------------ Vice President - Finance and Chief Financial Officer 3 4 Badger Meter Employee Savings and Stock Ownership Plan Financial Statements and Supplemental Schedules Years ended December 31, 1998 and 1997 CONTENTS
Report of Independent Auditors.......................................................................... 1 Financial Statements Statements of Net Assets Available for Benefits, with Fund Information.................................. 3 Statements of Changes in Net Assets Available for Benefits, with Fund Information....................... 5 Notes to Financial Statements........................................................................... 7 Supplemental Schedules Line 27(a) - Schedule of Assets Held for Investment Purposes........................................... 18 Line 27(d) - Schedule of Reportable Transactions....................................................... 19
5 Report of Independent Auditors Retirement Plans Investment Committee of the Board of Directors of Badger Meter, Inc. Badger Meter Employee Savings and Stock Ownership Plan We have audited the accompanying statements of net assets available for benefits of Badger Meter Employee Savings and Stock Ownership Plan as of December 31, 1998 and 1997, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 1998 and 1997, and the changes in its net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1998, and reportable transactions for the year then ended, are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The Fund Information in the statements of net assets available for benefits and the statements of changes in net assets available for 1 6 benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. ERNST & YOUNG LLP Milwaukee, Wisconsin April 15, 1999 2 7 Badger Meter Employee Savings and Stock Ownership Plan Statements of Net Assets Available for Benefits, with Fund Information December 31, 1998
Fund Information --------------------------------------------------------------------------- Badger Meter, Badger Meter Guaranteed Heartland U.S. Inc., Unreleased Inc., Released Income Equity Government Common Stock Common Stock Fund Fund Fund ------------ ------------ ---- ---- ---- ASSETS Investments (Note 3): Deposits with insurance company-- Guaranteed income group annuity contract No IG 4178, at contract value $ -- $ -- $ 7,526,254 $ -- $ -- Badger Meter, Inc. Common Stock, 4,504,247 407,123 -- -- -- at fair value Heartland U.S. Government Fund, -- -- -- -- 829,919 at fair value Marshall Money Market Fund, at -- -- -- -- -- fair value Investment in mutual funds, at fair value: M&I Growth Balanced Portfolio -- -- -- -- -- M&I Diversified Stock Portfolio -- -- -- -- -- Heartland Group Inc. Value Plus -- -- -- -- -- Marshall International Stock -- -- -- -- -- Fund Notes receivable from participants -- -- -- -- -- ---------------------------------------------------------------------------- Total investments 4,504,247 407,123 7,526,254 -- 829,919 Company contribution receivable -- -- 19,418 -- 3,196 Due from brokers -- -- -- -- -- Interest receivable 12 -- -- -- -- ---------------------------------------------------------------------------- Total assets 4,504,259 407,123 7,545,672 -- 833,115 LIABILITY Note payable (Note 4) 2,600,000 -- -- -- -- ---------------------------------------------------------------------------- Net assets available for benefits $ 1,904,259 $ 407,123 $ 7,545,672 $ -- $ 833,115 ============================================================================
Fund Information ------------------------------------------------------------------------------ Badger M&I Heartland Meter M&I Growth Diversified Value Stock Fund Balanced Fund Income Fund Plus Fund ---------- ------------- ----------- --------- ASSETS Investments (Note 3): Deposits with insurance company-- Guaranteed income group annuity contract No IG 4178, at contract value $ -- $ -- $ -- $ -- Badger Meter, Inc. Common Stock, 13,039,961 -- -- -- at fair value Heartland U.S. Government Fund, -- -- -- -- at fair value Marshall Money Market Fund, at 83,748 -- -- -- fair value Investment in mutual funds, at fair value: M&I Growth Balanced Portfolio -- 4,038,291 -- -- M&I Diversified Stock Portfolio -- -- 5,940,656 -- Heartland Group Inc. Value Plus -- -- -- 2,331,252 Marshall International Stock -- -- -- -- Fund Notes receivable from participants -- -- -- -- ----------------------------------------------------------------------------- Total investments 13,123,709 4,038,291 5,940,656 2,331,252 Company contribution receivable 15,378 13,396 23,504 10,216 Due from brokers 16,560 -- -- -- Interest receivable 404 -- -- -- ----------------------------------------------------------------------------- Total assets 13,156,051 4,051,687 5,964,160 2,341,468 LIABILITY Note payable (Note 4) -- -- -- -- ----------------------------------------------------------------------------- Net assets available for benefits $13,156,051 $ 4,051,687 $ 5,964,160 $ 2,341,468 =============================================================================
Fund Information ------------------------------------------------------ Marshall International Loan Stock Fund Fund Total ---------- ---- ----- ASSETS Investments (Note 3): Deposits with insurance company-- Guaranteed income group annuity contract No IG 4178, at contract value $ -- $ -- $ 7,526,254 Badger Meter, Inc. Common Stock, -- -- 17,951,331 at fair value Heartland U.S. Government Fund, -- -- 829,919 at fair value Marshall Money Market Fund, at -- -- 83,748 fair value Investment in mutual funds, at fair value: M&I Growth Balanced Portfolio -- -- 4,038,291 M&I Diversified Stock Portfolio -- -- 5,940,656 Heartland Group Inc. Value Plus -- -- 2,331,252 Marshall International Stock 802,668 -- 802,668 Fund Notes receivable from participants -- 1,106,798 1,106,798 ------------------------------------------------------- Total investments 802,668 1,106,798 40,610,917 Company contribution receivable 3,671 -- 88,779 Due from brokers -- -- 16,560 Interest receivable -- -- 416 ------------------------------------------------------- Total assets 806,339 1,106,798 40,716,672 LIABILITY Note payable (Note 4) -- -- 2,600,000 ------------------------------------------------------- Net assets available for benefits $ 806,339 $ 1,106,798 $38,116,672 =======================================================
See accompanying notes. 3 8 Badger Meter Employee Savings and Stock Ownership Plan Statements of Net Assets Available for Benefits, with Fund Information December 31, 1997
Fund Information ---------------------------------------------------------------------------------- Badger Meter Badger Meter Guaranteed Heartland U.S. Inc., Unreleased Inc., Released Income Equity Government Common Stock Common Stock Fund Fund Fund ------------ ------------ ---- ---- ---- ASSETS Investments (Note 3): Deposits with insurance company: Guaranteed income group annuity contract No. IG 4178, at contract value $ -- $ -- $10,872,299 $ -- $ -- Pooled separate account No. SA 4179, at fair value -- -- -- 8,810,240 -- Badger Meter, Inc. Common Stock, at fair value 3,962,367 12,416,484 -- -- -- Heartland U.S. Government Fund, at fair value -- -- -- -- 345,741 Marshall Money Market Fund, at fair value 11,295 89,168 -- -- -- Notes receivable from participants -- -- -- -- -- -------------------------------------------------------------------------------- Total investments 3,973,662 12,505,652 10,872,299 8,810,240 345,741 Company contribution receivable -- 257,452 -- -- -- Due from brokers -- -- -- -- 422,492 Interest receivable 16 339 25 104 1 -------------------------------------------------------------------------------- Total assets 3,973,678 12,763,443 10,872,324 8,810,344 768,234 LIABILITIES Note payable (Note 4) 900,000 -- -- -- -- -------------------------------------------------------------------------------- Net assets available for benefits $ 3,073,678 $12,763,443 $10,872,324 $ 8,810,344 $ 768,234 ================================================================================
Fund Information ---------------------------------------- Badger Loan Meter Fund Stock Fund Total ---- ---------- ----- ASSETS Investments (Note 3): Deposits with insurance company: Guaranteed income group annuity contract No. IG 4178, at contract value $ -- $ -- $10,872,299 Pooled separate account No. SA 4179, at fair value -- -- 8,810,240 Badger Meter, Inc. Common Stock, at fair value -- 1,541,450 17,920,301 Heartland U.S. Government Fund, at fair value -- -- 345,741 Marshall Money Market Fund, at fair value 1,774 56,100 158,337 Notes receivable from participants 1,279,290 -- 1,279,290 ------------------------------------------- Total investments 1,281,064 1,597,550 39,386,208 Company contribution receivable -- -- 257,452 Due from brokers -- -- 422,492 Interest receivable 15 633 1,133 ------------------------------------------- Total assets 1,281,079 1,598,183 40,067,285 LIABILITIES Note payable (Note 4) -- -- 900,000 ------------------------------------------- Net assets available for benefits $ 1,281,079 $ 1,598,183 $39,167,285 ===========================================
See accompanying notes. 4 9 Badger Meter Employee Savings and Stock Ownership Plan Statements of Changes in Net Assets Available for Benefits, with Fund Information Year ended December 31, 1998
Fund Information ---------------------------------------------------------------------------- Badger Meter Badger Meter Guaranteed Heartland U.S. Inc., Unreleased Inc., Released Income Equity Government Common Stock Common Stock Fund Fund Fund ------------ ------------ ---- ---- ---- Additions: Investment income: Net realized and unrealized appreciation (depreciation) in fair value of investments (Note 3) $(1,158,130) $ (761,824) $ -- $ -- $ 13,572 Interest and dividends, net (Note 7) 48,639 96,578 623,510 3,526 35,183 Investment expenses -- -- (12,830) -- (81) Contributions: Company (Note 2) 199,155 (250,157) -- -- -- Employees -- -- 499,946 -- 83,210 ------------------------------------------------------------------------------ (910,336) (915,403) 1,110,626 3,526 131,884 Deductions: Benefit payments to participants -- 101,708 847,159 20 16,019 Interest expense 59,379 44 -- -- -- Transfers between funds (199,704) (11,339,165) (3,590,119) (8,813,850) (50,984) ------------------------------------------------------------------------------ Net increase (decrease) (1,169,419) (12,356,320) (3,326,652) (8,810,344) 64,881 Net assets available for benefits at beginning of year 3,073,678 12,763,443 10,872,324 8,810,344 768,234 ------------------------------------------------------------------------------ Net assets available for benefits at end of year $ 1,904,259 $ 407,123 $ 7,545,672 $ -- $833,115 ==============================================================================
Fund Information -------------------------------------------------------------------------------- M&I M&I Heartland Marshall Badger Growth Diversity Value International Meter Balanced Income Plus Stock Stock Fund Fund Fund Fund Fund ---------- ---- ---- ---- ---- Additions: Investment income: Net realized and unrealized appreciation (depreciation) in fair value of investments (Note 3) $ (648,943) $ 483,384 $ 815,661 $ (387,776) $ (2,271) Interest and dividends, net (Note 7) 140,384 317 364 109,224 15,509 Investment expenses (12,823) (4,753) (6,425) (2,939) (1,029) Contributions: Company (Note 2) 31,230 -- -- -- -- Employees 440,234 387,773 655,032 352,773 122,508 -------------------------------------------------------------------------------- (49,918) 866,721 1,464,632 71,282 134,717 Deductions: Benefit payments to participants 1,100,798 465,859 329,876 171,312 18,398 Interest expense -- -- -- -- -- Transfers between funds 12,708,584 3,650,825 4,829,404 2,441,498 690,020 -------------------------------------------------------------------------------- Net increase (decrease) 11,557,868 4,051,687 5,964,160 2,341,468 806,339 Net assets available for benefits at beginning of year 1,598,183 -- -- -- -- -------------------------------------------------------------------------------- Net assets available for benefits at end of year $13,156,051 $4,051,687 $5,964,160 $2,341,468 $806,339 ================================================================================
Fund Information ---------------------- Loan Fund Total ---- ----- Additions: Investment income: Net realized and unrealized appreciation (depreciation) in fair value of investments (Note 3) $ -- $(1,646,327) Interest and dividends, net (Note 7) 230,444 1,303,678 Investment expenses -- (40,880) Contributions: Company (Note 2) -- (19,772) Employees -- 2,541,476 --------------------------- 230,444 2,138,175 Deductions: Benefit payments to participants 78,216 3,129,365 Interest expense -- 59,423 Transfers between funds (326,509) -- --------------------------- Net increase (decrease) (174,281) (1,050,613) Net assets available for benefits at beginning of year 1,281,079 39,167,285 --------------------------- Net assets available for benefits at end of year $1,106,798 $38,116,672 ===========================
See accompanying notes. 5 10 Badger Meter Employee Savings and Stock Ownership Plan Statements of Changes in Net Assets Available for Benefits, with Fund Information December 31, 1997
Fund Information ------------------------------------------------------------------- Badger Meter Badger Meter Guaranteed Inc., Unreleased Inc., Released Income Equity Common Stock Common Stock Fund Fund ------------ ------------ ---- ---- Additions: Investment income: Net realized and unrealized appreciation in fair value of investments (Note 3) $ 1,918,650 $ 6,620,397 $ -- $ 1,626,974 Interest and dividends, net (Note 7) 46,857 153,990 736,373 141,767 Investment expenses -- (6,340) (15,844) (8,056) Contributions: Company (Note 2) 25,340 (143,268) 15,844 5,836 Employees -- -- 943,182 964,020 -------------------------------------------------------------------- 1,990,847 6,624,779 1,679,555 2,730,541 Deductions: Benefit payments to participants -- 340,334 451,034 150,223 Interest expense 67,812 -- -- -- Transfers between funds (49,235) 24,799 (190,899) (41,756) -------------------------------------------------------------------- Net increase 1,873,800 6,309,244 1,037,622 2,538,562 Net assets available for benefits at beginning of year 1,199,878 6,454,199 9,834,702 6,271,782 -------------------------------------------------------------------- Net assets available for benefits at end of year $ 3,073,678 $ 12,763,443 $ 10,872,324 $ 8,810,344 ====================================================================
Fund Information ------------------------------------------------------------ Heartland U.S. Badger Government Loan Meter Fund Fund Stock Fund Total ---- ---- ---------- ----- Additions: Investment income: Net realized and unrealized appreciation in fair value of investments (Note 3) $ 18,547 $ -- $ 910,575 $ 11,095,143 Interest and dividends, net (Note 7) 38,184 97,784 26,179 1,241,134 Investment expenses -- -- -- (30,240) Contributions: Company (Note 2) -- -- -- (96,248) Employees 82,564 -- 187,712 2,177,478 ---------------------------------------------------------------- 139,295 97,784 1,124,466 14,387,267 Deductions: Benefit payments to participants 25,597 6 32,213 999,407 Interest expense -- -- -- 67,812 Transfers between funds 4,291 126,920 125,880 -- ---------------------------------------------------------------- Net increase 117,989 224,698 1,218,133 13,320,048 Net assets available for benefits at beginning of year 650,245 1,056,381 380,050 25,847,237 ---------------------------------------------------------------- Net assets available for benefits at end of year $ 768,234 $ 1,281,079 $ 1,598,183 $ 39,167,285 ================================================================
See accompanying notes. 6 11 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements Years ended December 31, 1998 and 1997 1. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The accompanying financial statements of Badger Meter Employee Savings and Stock Ownership Plan (the Plan) are prepared on the accrual basis. INVESTMENT VALUATION The investment in the guaranteed income group annuity insurance contract is valued at contract value as reported by Massachusetts Mutual Life Insurance Company (Mass Mutual). Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to pay benefits and the insurance company's administrative expenses. The Mass Mutual contract is a "fully benefit-responsive" investment contract, as defined in Statement of Position (SOP) 94-4, "Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined Contribution Pension Plans." As such, this contract is stated at contract value as reported by the insurance company. Crediting interest rates are adjusted annually on January 1. The investment in the pooled separate account is valued at fair value, based on the quoted redemption value on the last business day of the Plan year. The investments in the Heartland U.S. Government Fund, the M&I Growth Balanced Fund, the M&I Diversified Income Fund, the Heartland Value Plus Fund and the Marshall International Stock Fund, are valued at the redemption price established by the fund's trustee based upon the quoted prices of the underlying assets. Common trust funds are valued at the redemption price established by the trustee. The investment in Badger Meter, Inc. (the Company) Common Stock, which is traded on the American Stock Exchange, is valued at the last reported sales price on the last business day of the Plan year. Badger Meter, Inc. Class B Common Stock is equivalent in value to Badger Meter, Inc. Common Stock because each share is entitled to be exchanged for a share of Badger Meter, Inc. Common Stock. There is no market for Badger Meter, Inc. Class B Common Stock due to transfer restrictions. 7 12 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Notes receivable from participants are reported at their unpaid principal balance, which approximates fair value. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. EXPENSES Expenses related to the administration of the Plan are borne by the Company. Investment expenses are payable by the Plan and reimbursed by the Company at its discretion. 2. DESCRIPTION OF THE PLAN GENERAL The following description of the Plan is for general information purposes only. Participants should refer to the Plan document for more complete information. The Plan is a defined contribution plan adopted under Section 401(k) of the Internal Revenue Code ("IRC" or the "Code"). The Plan was established as of January 1, 1991 to consolidate the Badger Meter Savings Plan, the Badger Meter Payroll-Based Employee Stock Ownership Plan and the Badger Meter Employee Stock Ownership Plan into a single plan (See Note 4). Substantially all domestic employees of the Company are eligible to participate in the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Participant contributions may be made to a maximum of 15% of their compensation on a pre-tax basis, not to exceed the amount allowed by the IRC. Company contributions are made at a rate of 25% of the participant contributions, with the Company contribution 8 13 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) percentage applying to a maximum of 7% of the participant's compensation for the years ended December 31, 1998 and 1997, respectively. The Company may also contribute additional amounts over and above the required contribution at the discretion of the Company's Board of Directors. No such contributions were made in 1998 or 1997. Participant contributions are directed into one, or a combination, of eight investments, the Guaranteed Income Fund, Equity Fund, Heartland U.S. Government Fund, M&I Growth Balanced Fund, M&I Diversified Income Fund, Heartland Value Plus Fund, Marshall International Stock Fund or the Badger Meter Stock Fund, at the participant's discretion (see Note 3). As of January 1998, the Equity Fund is no longer an investment option. Company contributions are made in cash and are used by the Plan to repay principal on the note payable (see Note 4). As principal and interest payments are made on the note payable, unallocated shares of Badger Meter, Inc. Common Stock, which serve as collateral for the note payable, are released to Plan participants and provide the Company matching contribution at current market values. Participant contributions may be temporarily invested in a money market common trust fund before being invested in the aforementioned investments. All contributions are excluded from the participant's current wages for federal income tax purposes. No federal income tax is paid for the pre-tax contributions and growth thereon until the participant withdraws them from the Plan. PARTICIPANT'S ACCOUNTS Each participant's account is credited with the participant's contribution, the Company's matching contribution, an allocation of the Company's discretionary contribution, if any, and Plan earnings. The Company's discretionary contribution is allocated equally to all participants. Plan earnings are allocated based on the participant's account balances in relation to total participant account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. VESTING Participants are fully vested in all amounts in their accounts. 9 14 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) PAYMENT OF BENEFITS Upon retirement, death, disability, or termination of employment, the vested portion of a participant's account shall generally be distributed in a single lump sum not later than 60 days following the end of the Plan year. Final distributions will be made either in shares of Company Common Stock plus cash in lieu of fractional shares, or entirely in cash. WITHDRAWALS A participant's contribution may not be withdrawn prior to retirement, death, disability, termination of employment, or termination of the Plan, except for financial hardship or in the form of loans to participants. The Plan defines financial hardship as expenses related to college education, uninsured major medical expenses, purchase of the participant's principal residence, or other financial need which cannot be met from other resources of the participant. All withdrawals are subject to approval by the Plan administrator. LOANS TO PARTICIPANTS Participants are allowed to borrow from their separate account balance. The amount of a loan shall not be less than $1,000 or more than $50,000 and shall not exceed 50% of the participant's account balance. Loan maturities cannot exceed sixty months and are secured by the participants' vested interests in the Plan. Amounts loaned to a participant do not share in the allocations of Plan earnings (see Participant's Accounts, above), but are credited with the interest earned on the loan balance payable by the participant charged at a reasonable rate as determined by the Plan administrator. 10 15 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 3. INVESTMENTS The Plan has entered into two unallocated insurance contracts with Mass Mutual. GUARANTEED INCOME GROUP ANNUITY CONTRACT NO. IG 4178 This contract is credited at least annually for interest earned. Interest rates for 1998 and 1997 were 7.00% and 7.25%, respectively. Mass Mutual determines the annual guaranteed interest rate each January 1. The average yields for 1998 and 1997 were 6.63% and 6.96%, respectively. POOLED SEPARATE ACCOUNT NO. SA 4179 Accounts deposited to this account are invested by Mass Mutual primarily in common stocks. Mass Mutual includes funds from a number of employers in one investment portfolio. Participants in the fund are allocated units for valuation purposes. BADGER METER, INC. COMMON STOCK The Plan's investment in Badger Meter, Inc. stock consists of 503,897 shares (432,125 shares Badger Meter, Inc. Common Stock and 71,772 shares Badger Meter, Inc. Class B Common Stock) and 439,762 shares (356,562 shares Badger Meter, Inc. Common Stock and 83,200 shares Badger Meter, Inc., Class B Common Stock) as of December 31, 1998 and 1997, respectively. At December 31, 1998 and 1997, the fair value of the Plan's investment in Badger Meter, Inc. Common Stock, as determined by quoted market price, was $17,951,331 and $17,920,301, respectively. 11 16 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The Plan's investments (including investments purchased, sold, as well as held during the year) appreciated (depreciated) in fair value during 1998 and 1997, as follows:
Net Realized and Unrealized Appreciation (Depreciation) in Fair Value Fair Value at During Year End of Year ------------------------------------ Year ended December 31, 1998: Fair value determined by quoted market price: Badger Meter, Inc. Common Stock $(2,568,897) $17,951,331 Heartland U.S. Government Fund 13,572 829,919 Marshall Money Market Fund - 83,748 M&I Growth Balanced Portfolio 483,384 4,038,291 M&I Diversified Stock Portfolio 815,661 5,940,656 Heartland Value Plus Fund (387,776) 2,331,252 Marshall International Stock Fund (2,271) 802,668 ------------------------------------ (1,646,327) 31,977,865 Fair value estimated - Notes receivable from participants - 1,106,798 Contract value as determined by Mass Mutual - Guaranteed income group annuity contract No. IG 4178 - 7,526,254 ==================================== $(1,646,327) $40,610,917 ==================================== Year ended December 31, 1997: Fair value determined by quoted market price: Badger Meter, Inc. Common Stock $ 9,449,622 $17,920,301 Pooled separate account No. SA 4179 1,626,974 8,810,240 Heartland U.S. Government Fund 18,547 345,741 Marshall Money Market Fund - 158,337 ------------------------------------ 11,095,143 27,234,619 Fair value estimated - Notes receivable from participants - 1,279,290 Contract value as determined by Mass Mutual - Guaranteed income group annuity contract No. IG 4178 - 10,872,299 ==================================== $11,095,143 $39,386,208 ====================================
12 17 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 4. NOTE PAYABLE In connection with the formation of the Plan, the Plan assumed a note payable with a bank with a balance of $2,000,000 at January 1, 1991. The note was repaid in equal annual principal payments of $200,000 through February 1995, with the remaining $1,000,000 refinanced on December 1, 1995, due December 1, 2001. The principal amount due on the loan was $700,000 at December 1, 1998 and $900,000 at December 31, 1997. In December 1998, the Plan refinanced the loan and increased it by $1,900,000 to the December 31, 1998 balance of $2,600,000. The terms of the loan allow variable payments of principal with the final principal and interest payment due December 31, 2005. Interest is payable at the prime interest rate (prime was 7.75% at December 31, 1998) or at the LIBOR rate plus 1.50%. The Plan has the option of designating the outstanding balance as a prime rate loan or a Eurodollar loan. The note payable is secured by the unallocated shares of Badger Meter, Inc. Common Stock held by the Plan (see summary below). In addition, the Company has guaranteed the note payable and is obligated to contribute sufficient cash to the Plan to enable it to repay the loan principal and interest in the event the Plan is unable to settle its obligation. 13 18 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 4. NOTE PAYABLE (CONTINUED) The pledged unallocated shares of Badger Meter, Inc. Common Stock are released as principal payments are made on the note payable. The shares released less any shares that are distributed as benefit payments are considered available, and are allocated to the participants' accounts as of the Plan year end just prior to each annual principal due date on the note payable. At December 31, 1998 and 1997, the breakdown between allocated and unallocated shares were as follows:
Shares Available For Benefits Cost Fair Value -------------------------------------------------- December 31, 1998: Allocated 377,462 $4,164,681 $13,447,084 Unallocated 126,435 2,550,825 4,504,247 -------------------------------------------------- 503,897 $6,715,506 $17,951,331 ================================================== Per share $ 35.63 ============ December 31, 1997: Allocated 342,526 $2,808,865 $13,957,934 Unallocated 97,236 850,815 3,962,367 -------------------------------------------------- 439,762 $3,659,680 $17,920,301 ================================================== Per share $ 40.75 ============
The loan agreement contains certain restrictions and covenants, including a limitation on additional borrowings. The Company contributions are used to make principal payments on the note payable and will release unallocated shares with a value in excess of the principal payments made due to appreciation of the Company's stock. This has resulted in a contribution receivable that is less than the 1998 and 1997 Company match requirements. 14 19 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 5. PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. 6. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated August 3, 1995, stating that the Plan is qualified under Section 401(a) and 401(k) of the IRC and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. 7. TRANSACTIONS WITH RELATED PARTIES During 1998 and 1997, the Plan received $276,085 and $208,521, respectively, in common stock dividends from the Company. 8. YEAR 2000 (UNAUDITED) The Plan Sponsor has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle Year 2000 dates. The Plan Sponsor is taking a two-phase approach. The first phase addresses internal systems that must be modified or replaced to function properly. Both internal and external resources are being utilized to replace or modify existing software applications, and test the software and equipment for the Year 2000 modifications. The Plan Sponsor anticipates substantially completing this phase of the project by September 1999. Costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Plan Sponsor. 15 20 Badger Meter Employee Savings and Stock Ownership Plan Notes to Financial Statements (continued) 8. YEAR 2000 (UNAUDITED) (CONTINUED) For the second phase of the project, the Plan sponsor established formal communications with its third-party service providers to determine that they have developed plans to address their own Year 2000 problems as they relate to the Plan's operations. All third-party service providers have indicated that they will be Year 2000 compliant by mid-1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers is not completed timely, the Year 2000 problem could have a material impact on the operations of the Plan. Plan management has not developed a contingency plan, because they are confident that all systems will be Year 2000 ready. 16 21 Supplemental Schedules 17 22 Badger Meter Employee Savings and Stock Ownership Plan Employer Identification Number 39-0143280 Plan Number 009 Line 27(a) - Schedule of Assets Held for Investment Purposes December 31, 1998
DESCRIPTION OF INVESTMENT, INCLUDING COST/ IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, PAR CONTRACT CURRENT VALUE/ LESSOR OR SIMILAR PARTY OR MATURITY VALUE VALUE CONTRACT VALUE ----------------------- ----------------- ----- -------------- *Badger Meter, Inc. 503,897 shares of common stock $ 6,715,506 $17,951,331 Massachusetts Mutual Life Guaranteed Income Contract Insurance Company No. IG 4178 7,526,254 7,526,254 Heartland U.S. Government Fund, Inc. 82,497 fund shares 828,034 829,919 Heartland Value Plus Fund 168,931 fund shares 2,674,372 2,331,252 Marshall International Stock Fund 63,004 fund shares 800,232 802,668 M&I Growth Balanced Portfolio 224,053 fund shares 3,628,526 4,038,291 M&I Diversified Stock Portfolio 270,097 fund shares 5,166,484 5,940,656 Marshall Money Market Fund 83,748 units 83,748 83,748 Participant loans Various interest rates and maturity dates - 1,106,798 -------------------------------- $ 27,423,156 $40,610,917 ================================
* Indicates party-in-interest 18 23 Badger Meter Employee Savings and Stock Ownership Plan Employer Identification Number 39-0143280 Plan Number 009 Line 27(d) - Schedule of Reportable Transactions Year ended December 31, 1998
PURCHASE SELLING COST OF IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE ASSET -------------------------- -------------------- ----- ----- ----- Category (i) -- individual transactions in excess of 5 percent of net assets Massachusetts Mutual Life Insurance Guaranteed Income Group Annuity Company Contract $ - $4,925,415 $4,925,415 Massachusetts Mutual Life Insurance Company Pooled Separate Account - 8,810,240 8,810,240 M&I Trust Company Growth Balanced Portfolio 2,541,256 - 2,541,256 M&I Trust Company Diversified Stock Portfolio 2,806,488 - 2,806,488 Category (iii) -- series of transactions in excess of 5 percent of net assets Massachusetts Mutual Life Insurance Guaranteed Income Group Annuity Company Contract 2,725,342 - 2,725,342 Massachusetts Mutual Life Insurance Guaranteed Income Group Annuity Company Contract - 6,071,387 6,071,387
CURRENT VALUE OF ASSET ON TRANSACTION NET IDENTITY OF PARTY INVOLVED DATE GAIN/(LOSS) -------------------------- ---- ----------- Category (i) -- individual transactions in excess of 5 percent of net assets Massachusetts Mutual Life Insurance Company $4,925,415 $ - Massachusetts Mutual Life Insurance Company 8,810,240 - M&I Trust Company 2,541,256 N/A M&I Trust Company 2,806,488 N/A Category (iii) -- series of transactions in excess of 5 percent of net assets Massachusetts Mutual Life Insurance Company 2,725,342 N/A Massachusetts Mutual Life Insurance Company 6,071,387 -
19 24 Badger Meter Employee Savings and Stock Ownership Plan Employer Identification Number 39-0143280 Plan Number 009 Line 27(d) - Schedule of Reportable Transactions (continued) Year ended December 31, 1998
PURCHASE SELLING COST OF IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE ASSET -------------------------- -------------------- ----- ----- ----- Category (iii) -- series of transactions in excess of 5 percent of net assets (continued) Massachusetts Mutual Life Insurance Company Pooled Separate Account $ - $ 8,810,240 $ 8,810,240 Marshall & Ilsley Bank Marshall Money Market 19,516,666 - 19,516,666 Fund Marshall & Ilsley Bank Marshall Money Market - 19,591,275 19,591,275 Fund Heartland Group Inc. U.S. Government Fund 1,831,225 - 1,831,225 Heartland Group Inc. U.S. Government Fund - 1,360,618 1,345,698 Heartland Group Inc. Value Plus Fund 3,581,728 - 3,581,728 Heartland Group Inc. Value Plus Fund - 857,222 907,356 Badger Meter, Inc. Common Stock 1,684,879 - 1,684,879 Badger Meter, Inc. Common Stock - 1,027,747 430,167
CURRENT VALUE OF ASSET ON TRANSACTION NET IDENTITY OF PARTY INVOLVED DATE GAIN/(LOSS) -------------------------- ---- ----------- Category (iii) -- series of transactions in excess of 5 percent of net assets (continued) Massachusetts Mutual Life Insurance Company $ 8,810,240 $ - Marshall & Ilsley Bank 19,516,666 N/A Marshall & Ilsley Bank 19,591,275 - Heartland Group Inc. 1,831,225 N/A Heartland Group Inc. 1,360,618 14,920 Heartland Group Inc. 3,581,728 N/A Heartland Group Inc. 857,222 (50,134) Badger Meter, Inc. 1,684,879 N/A Badger Meter, Inc. 1,027,747 597,580
20 25 Badger Meter Employee Savings and Stock Ownership Plan Employer Identification Number 39-0143280 Plan Number 009 Line 27(d) - Schedule of Reportable Transactions (continued) Year ended December 31, 1998
CURRENT VALUE OF ASSET ON PURCHASE SELLING COST OF TRANSACTION NET IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE ASSET DATE GAIN/(LOSS) -------------------------- -------------------- ----- ----- ----- ---- ----------- Category (iii) -- series of transactions in excess of 5 percent of net assets (continued) M&I Trust Company Growth Balanced Portfolio $5,303,467 $ - $5,303,467 $5,303,467 $ N/A M&I Trust Company Growth Balanced Portfolio - 1,748,559 1,674,941 1,748,559 73,618 M&I Trust Company Diversified Stock Portfolio 6,848,730 - 6,848,730 6,848,730 N/A M&I Trust Company Diversified Stock Portfolio - 1,723,735 1,682,246 1,723,735 41,489
There were no category (ii) or (iv) transactions during 1998. Lease rental and "Expenses Incurred with Transaction" are not applicable. 21 26 EXHIBIT INDEX
EXHIBIT NO. PAGE NO. - ----------- -------- (23) Consent of Ernst & Young LLP, Independent Auditors 27
EX-23 2 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT (23) CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-62241) pertaining to the Badger Meter Employee Savings and Stock Ownership Plan, with respect to the financial statements and schedules of the Plan included in this Annual Report Form 11-K for the year ended December 31, 1998. ERNST & YOUNG LLP Milwaukee, Wisconsin June 18, 1999 -----END PRIVACY-ENHANCED MESSAGE-----