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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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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
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
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(23) Consent of Independent Auditors
2
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 20, 2002 By: /S/ Richard E. Johnson
----------------------------------------
Vice President -- Finance, Treasurer and
Chief Financial Officer
3
Badger Meter Employee Savings and Stock Ownership Plan
Financial Statements
and Supplemental Schedules
December 31, 2001 and 2000 and year ended December 31, 2001
CONTENTS
Report of Independent Auditors............................................ 5
Financial Statements
Statements of Net Assets Available for Benefits........................... 6
Statement of Changes in Net Assets Available for Benefits................. 7
Notes to Financial Statements............................................. 8
Supplemental Schedules
Schedule H, Line 4i -- Schedule of Assets (Held at End of Year).......... 16
Schedule H, Line 4j -- Schedule of Reportable Transactions............... 17
4
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,
2001 and 2000, and the related statement of changes in net assets for the year
ended December 31, 2001. 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 auditing standards generally accepted
in the United States. 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, 2001 and 2000, and the changes in its net assets available for
benefits for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2001, 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 supplemental schedules have been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
Ernst & Young LLP
April 26, 2002
Milwaukee, Wisconsin
5
Badger Meter Employee Savings and Stock Ownership Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2001 2000
--------------- ---------------
ASSETS
Cash $ 4,908 $ --
Investments 32,988,163 35,513,192
Company contribution receivable 370,392 400,000
Participant contributions receivable -- 78,878
Interest receivable 58,327 46,419
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Total assets 33,421,790 36,038,489
LIABILITIES
Notes payable (Note 5) 1,900,000 2,300,000
Due to brokers -- 99,515
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Net assets available for benefits $31,521,790 $33,638,974
=========== ===========
See accompanying notes
6
Badger Meter Employee Savings and Stock Ownership Plan
Statement of Changes in Net Assets Available for Benefits
YEAR ENDED
DECEMBER 31
2001
---------------------
Additions:
Investment income (loss):
Net realized and unrealized depreciation in fair value of
investments $ (801,299)
Interest and dividends 1,145,917
Investment expenses (2,405)
Contributions:
Company 412,879
Participants 2,426,892
------------
3,181,984
Deductions:
Benefit payments to participants 5,180,152
Interest expense 119,016
------------
Net decrease (2,117,184)
Net assets available for benefits at beginning of year 33,638,974
------------
Net assets available for benefits at end of year $ 31,521,790
============
See accompanying notes
7
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements
December 31, 2001
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements of Badger Meter Employee Savings and Stock
Ownership Plan (the Plan) are prepared on the accrual basis.
INVESTMENT VALUATION
The investment in the guaranteed income group annuity insurance contract is
valued at contract value as reported by Massachusetts Mutual Life Insurance
Company (Mass Mutual). Contract value represents contributions made under the
contract, plus interest at the contract rate, less funds used to pay benefits
and the insurance company's administrative expenses. The Mass Mutual contract is
a "fully benefit-responsive" investment contract, as defined in Statement of
Position (SOP) 94-4, "Reporting of Investment Contracts Held by Health and
Welfare Benefit Plans and Defined Contribution Pension Plans." As such, this
contract is stated at contract value as reported by the insurance company.
Crediting interest rates are adjusted annually on January 1.
The investments in mutual funds are valued at the redemption price established
by the fund's trustee based upon the quoted prices of the underlying assets.
Common trust funds are valued at the redemption price established by the
trustee.
The investment in Badger Meter, Inc. (the Company) common stock, which is traded
on the American Stock Exchange, is valued at the last reported sales price on
the last business day of the Plan year.
The money market fund is valued at fair value based on quoted market or
redemption price on the last business day of the Plan year.
Notes receivable from participants are reported at their unpaid principal
balance, which approximates fair value.
8
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 Summary Plan Description 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.
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 pretax 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 percentage applying to a maximum of 7% of the
participant's compensation for the year ended December 31, 2001. 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 2001.
9
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
Participant contributions are directed into one, or a combination, of nine
investments, at the participant's discretion. Company contributions are made in
cash and are used by the Plan to repay principal and interest on the note
payable (see Note 5). As principal and interest payments are made on the note
payable, unallocated shares of Badger Meter, Inc. common stock, which serve as
collateral for the note payable, are released to Plan participants and provide
the Company matching contribution at current market values. Participant
contributions may be temporarily invested in a money market common trust fund
before being invested in the aforementioned investments.
All contributions are excluded from the participant's current wages for federal
income tax purposes. No federal income tax is paid for the pretax 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.
PAYMENT OF BENEFITS
Upon retirement, death, disability, or termination of employment, the
participant's account shall generally be distributed in a single lump sum. Final
distributions will be made either in shares of Company common stock plus cash in
lieu of fractional shares or entirely in cash.
10
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
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, a one-time distribution after age 59-1/2 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 that 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 60 months and are secured by the participants'
vested interests in the Plan. Amounts loaned to a participant do not share in
the allocations of Plan earnings (see Participant's Accounts, above), but are
credited with the interest earned on the loan balance payable by the participant
charged at a reasonable rate as determined by the Plan administrator.
3. INVESTMENTS
GUARANTEED INCOME GROUP ANNUITY CONTRACT NO. IG 4178
This contract is an unallocated insurance contract with Mass Mutual which is
credited at least annually for interest earned. Interest rates for 2001 and 2000
were 6.60% and 6.50%, respectively. Mass Mutual determines the annual guaranteed
interest rate each January 1. The average yields for 2001 and 2000 were 6.46%
and 6.02%, respectively.
BADGER METER, INC. COMMON STOCK
The Plan's investment in Badger Meter, Inc. stock consists of 414,460 shares and
448,507 shares as of December 31, 2001 and 2000, respectively. At December 31,
2001 and 2000, the fair value of the Plan's investment in Badger Meter, Inc.
common stock, as determined by quoted market price, was $9,296,338 and
$10,315,338, respectively.
11
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
During 2001, the Plan's investments (including investments purchased, sold, as
well as held during the year) depreciated in fair value as determined by quoted
market prices, as follows:
Net Realized
and Unrealized Appreciation
(Depreciation) in Fair
Value During Year
------------------------------
Badger Meter, Inc. common stock $(107,663)
Common trust funds (850,280)
Mutual funds 156,644
---------
$(801,299)
=========
Investments that represent 5% or more of fair value of the Plan's net assets are
as follows:
DECEMBER 31
2001 2000
--------------- ----------------
Badger Meter, Inc. Stock* $ 9,296,338 $10,315,661
M&I Growth Balanced Portfolio 3,372,676 4,368,035
M&I Diversified Stock Portfolio 6,126,134 8,054,446
Massachusetts Mutual Unallocated Insurance Contract 8,683,904 7,682,365
Heartland Value Plus Fund 2,050,753 1,500,149
Marshall International Stock Fund ** 1,796,355
* Nonparticipant-directed
**Below 5% threshold
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Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the investments and the significant components of changes in
investments related to the nonparticipant-directed investments are as follows:
DECEMBER 31
2001 2000
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Investments, at fair value:
Badger Meter, Inc., Common Stock (allocated) $ 7,223,963 $ 7,743,249
Badger Meter, Inc., Common Stock (unallocated) 2,072,375 2,572,412
Marshall Money Market Fund 74,625 114,442
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$ 9,370,963 $10,430,103
=========== ===========
YEAR ENDED DECEMBER 31
2001
------------------
Change in investments:
Net realized and unrealized depreciation in fair value $ (107,442)
Interest and dividends, net 434,482
Investment expenses (5)
Company contributions 37,800
Benefit payments to participants (377,969)
Interest expense (119,016)
Transfers between funds (926,990)
-----------
$(1,059,140)
===========
5. NOTE PAYABLE
At December 31, 2001, the outstanding balance on the loan is $1,900,000. 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 4.75% at December 31, 2001) or at the LIBOR rate plus
1.50% (LIBOR was 1.88% at December 31, 2001). At December 31, 2001, the Plan has
exercised its option to designate the outstanding balance as a LIBOR rate 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
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
5. NOTE PAYABLE (CONTINUED)
The pledged unallocated shares of Badger Meter, Inc. common stock are released
as principal and interest 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, 2001 and 2000, the breakdown between allocated and unallocated
shares was as follows:
Shares
Available
For Benefits Cost Fair Value
------------------------------------------------------
December 31, 2001:
Allocated 322,067 $ 4,333,982 $ 7,223,963
Unallocated 92,393 1,663,898 2,072,375
---------------------------------------------------
414,460 $ 5,997,880 $ 9,296,338
===================================================
Per share $ 22.43
===========
December 31, 2000:
Allocated 336,663 $ 4,494,186 $ 7,743,249
Unallocated 111,844 2,111,271 2,572,412
---------------------------------------------------
448,507 $ 6,605,457 $10,315,661
===================================================
Per share $ 23.00
===========
The loan agreement contains certain restrictions and covenants, including a
limitation on additional borrowings.
The Company contributions are used to make principal and interest payments on
the note payable. The Plan will release unallocated shares with a value in
excess of the principal payments made due to appreciation of the Company's
stock.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right to
discontinue its contributions at any time and to terminate the Plan subject to
the provisions of ERISA.
14
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
7. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated August 3, 1995, stating that the Plan is qualified under Section 401(a)
and 401(k) of the Code and, therefore, the related trust is exempt from
taxation. Subsequent to the issuance of the determination letter, the Plan was
amended. A new determination letter has been requested, but not yet received.
Once qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan Administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is tax
exempt.
8. TRANSACTIONS WITH RELATED PARTIES
During 2001, the Plan received $430,676 in common stock dividends from the
Company.
15
Supplemental Schedules
Badger Meter Employee Savings and Stock Ownership Plan
Employer Identification Number 39-0143280
Plan Number 009
Schedule H, Line 4i -- Schedule of Assets (Held at End of Year)
December 31, 2001
DESCRIPTION OF INVESTMENT,
INCLUDING MATURITY DATE, COST/
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, CONTRACT CURRENT VALUE/
LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE VALUE CONTRACT VALUE
----------------------------------------- ------------------------------- -------------- -------------------
*Badger Meter, Inc. Common Stock 414,460 shares $5,997,880 $ 9,296,338
Massachusetts Mutual Life Insurance
Company Unallocated Insurance
Contract 8,683,904 shares 8,683,904 8,683,904
Heartland Value Plus Fund 127,218 shares 1,859,159 2,050,753
*Marshall Government Income Fund 124,195 shares 1,175,783 1,176,131
*Marshall International Stock Fund 100,210 shares 1,422,781 1,041,178
*M&I Growth Balanced Portfolio 163,197 shares 2,995,108 3,372,675
*M&I Diversified Stock Portfolio 247,745 shares 6,155,447 6,126,134
Fidelity Advisor Mid Cap Fund 7,627,shares 136,899 146,283
Managers Special Equity Fund 1,685 shares 116,286 119,067
*Marshall Money Market Fund 74,625 shares 74,625 74,625
Participant loans Interest rates range
between 5.0% and 9.5%
with various maturity dates 901,075 901,075
------------
$ 32,988,163
============
* Indicates party-in-interest
16
Badger Meter Employee Savings and Stock Ownership Plan
Employer Identification Number 39-0143280
Plan Number 009
Schedule H, Line 4j -- Schedule of Assets (Held at End of Year)
December 31, 2001
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
MARSHALL & ILSLEY BANK Marshall Money Market Fund $1,267,138 $ -- $1,267,138 $1,267,138 $ --
-- 1,321,070 1,321,070 1,321,070 --
There were no category (i), (ii) or (iv) transactions during 2001.
17
EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
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(23) Consent of Ernst & Young LLP, Independent Auditors 19
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