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
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15-(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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
REQUIRED INFORMATION
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.
Wipfli LLP was the independent auditor for the Plan for the year ended December
31, 2003. The former independent auditor for the Plan, Ernst & Young LLP,
audited the plan year ended December 31, 2002.
2
Badger Meter Employee Savings and Stock
Ownership Plan
Financial Statements and Additional Information
December 31, 2003 and 2002
Table of Contents
Reports of Independent Registered Public Accounting Firms............................. 4
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
Additional Information
Schedule H Item 4i - Schedule of Assets Held for Investment Purposes............... 19
Schedule H Item 4j - Schedule of Reportable Transactions........................... 20
3
Report of Independent Registered Public Accounting Firm
Employee Benefit Plans Committee of the Board of Directors of Badger Meter, Inc.
Badger Meter Employee Savings and Stock Ownership Plan
Milwaukee, Wisconsin
We have audited the accompanying statement of net assets available for benefits
of Badger Meter Employee Savings and Stock Ownership Plan as of December 31,
2003, and the related statement of changes in net assets available for benefits
for the year 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 audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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 audit provides 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 as of
December 31, 2003, and the changes in its net assets available for benefits for
the year then ended in conformity with accounting principles generally accepted
in the United States.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information of assets held
for investment purposes as of December 31, 2003 and reportable transactions for
the year ended December 31, 2003 are presented for the purpose of additional
analysis and are not a required part of the basic 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. The supplemental schedules have been subjected to the
auditing procedures applied in the audit 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.
/s/ Wipfli LLP
June 4, 2004, except for note 5, as to which the date is June 17, 2004
Milwaukee, Wisconsin
4
Report of Independent Registered Accounting Firm
Employee Benefit Plans of the Board of Directors of Badger Meter, Inc.
Badger Meter Employee Savings and Stock Ownership Plan
We have audited the accompanying statement of net assets available for benefits
of Badger Meter Employee Savings and Stock Ownership Plan as of December 31,
2002. This statement is the responsibility of the Plan's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2002 in conformity with United States generally accepted accounting
principles.
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
May 9, 2003
5
Badger Meter Employee Savings and Stock
Ownership Plan
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
------------ ------------
Cash $ 174,674 $ 0
Investments, at fair value 41,487,833 34,578,274
Receivables:
Company contributions 223,952 255,625
Broker 0 58,828
Interest 5,400 56,577
------------ ------------
Total receivables 229,352 371,030
------------ ------------
Total assets 41,891,859 34,949,304
------------ ------------
Liabilities:
Notes payable 1,285,000 1,535,000
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 40,606,859 $ 33,414,304
============ ============
See accompanying notes to financial statements. 6
Badger Meter Employee Savings and Stock
Ownership Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2003
2003
------------
Additions:
Investment income:
Net appreciation in fair value of investments $ 5,794,035
Interest and dividends 975,379
------------
Total investment income 6,769,414
------------
Contributions:
Company 223,952
Roll over 332,504
Participants 2,436,472
------------
Total contributions 2,992,928
------------
Total additions 9,762,342
------------
Deductions:
Benefits paid to participants 2,522,460
Interest expense 44,333
Loan fees 2,994
------------
Total deductions 2,569,787
------------
Net increase 7,192,555
------------
Net assets available for benefits:
Balance at beginning of year 33,414,304
------------
Balance at end of year $ 40,606,859
============
See accompanying notes to financial statements. 7
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 1 Description of the Plan
General
The following description of the Badger Meter Employee Savings and
Stock Ownership Plan ("the Plan") is for general information
purposes only. Participants should refer to the summary plan
description for a more complete description of the Plan. The Plan
is a defined-contribution plan adopted under Section 401(k) of the
Internal Revenue Code (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 Badger Meter, Inc. ("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 20% of their
compensation on a pretax basis, not to exceed the amount allowed
by the Code. 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. 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 2003.
Participant contributions are directed into various investment
options (currently totaling nine) 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.
8
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 1 Description of the Plan (Continued)
Contributions (Continued)
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 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.
9
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 1 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 expense,
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.
Note 2 Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements are prepared using the
accrual basis of accounting in accordance with accounting
principles generally accepted in the United States.
10
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 2 Summary of Significant Accounting Policies (Continued)
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 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.
Units of common trust funds are valued at quoted redemption price.
The investment in Badger Meter, Inc. 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 valued based on quoted
market or redemption price on the last business day of the Plan
year.
Loans receivable from participants are reported at their unpaid
principal balance, which approximates fair value.
11
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 2 Summary of Significant Accounting Policies (Continued)
Use of Estimates in Preparation of Financial Statements
The preparation of the accompanying financial statements in
conformity with accounting principles generally accepted in the
United States, requires management to make estimates and
assumptions that directly affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual
results may differ from these estimates.
Expenses
Expenses related to the administration of the Plan are paid by the
Company. Investment expenses are payable by the Plan and
reimbursed by the Company at its discretion.
Payment of Benefits
Benefits are recorded when paid.
Risk and Uncertainties
The Plan's investments are exposed to various risks, such as
interest rate, market and credit risks. Due to the level of risk
associated with certain investments and the level of uncertainty
related to changes in the values of investments, it is at least
reasonably possible that changes in risks in the near term would
materially affect participants' account balances and the amounts
reported in the statements of net assets available for benefits
and the statement of changes in net assets available for benefits.
12
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 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 2003 and 2002 were 5.00% and 6.25%,
respectively. Mass Mutual determines the annual guaranteed
interest rate each January 1. The average yields for 2003 and 2002
were 5.00% and 6.25%, respectively.
Badger Meter, Inc. Common Stock
The Plan's investment in Badger Meter, Inc. stock consists of
366,264 shares and 392,176 shares as of December 31, 2003 and
2002, respectively. At December 31, 2003 and 2002, the fair value
of the Plan's investment in Badger Meter, Inc. common stock, as
determined by quoted market price, was $13,972,972 and
$12,589,277, respectively.
During 2003, the Plan's investments (including investments
purchased, sold, as well as held during the year) appreciated in
fair value as follows:
2003
-----------
Badger Meter, Inc. common stock $ 2,121,338
Common trust funds 1,833,372
Mutual funds 1,839,325
-----------
Net appreciation in fair value of investments $ 5,794,035
===========
13
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 3 Investments (Continued)
Investments that represent 5% or more of fair value of the Plan's
net assets are as follows:
2003
------------
Badger Meter, Inc. common stock $ 13,972,972
M&I Growth Balanced Portfolio 3,289,041
M&I Diversified Stock Portfolio 5,097,067
Massachusetts Mutual Unallocated Insurance Contract 10,156,268
Heartland Value Plus Fund 4,082,276
------------
Total $ 36,597,624
------------
Note 4 Allocated and Unallocated Net Assets Available For Benefits
Information about net assets available for benefits as of December
31, 2003 and 2002 and the significant components of changes in net
assets available for benefits during 2003 related to allocated and
unallocated net assets is as follows:
2003 2002
------------ ------------
Cash (allocated) $ 108,626 $ 0
Cash (unallocated) 66,048 0
Investments, at fair value:
Badger Meter, Inc. common stock (allocated) 11,589,093 10,193,205
Badger Meter, Inc. common stock (unallocated) 2,383,879 2,396,072
Marshall money market fund (allocated) 0 43,820
Marshall money market fund (unallocated) 0 92,908
Investments (allocated) 27,514,861 21,852,269
Receivables:
Company (unallocated) 223,952 255,625
Broker (allocated) 0 58,828
Interest (allocated) 5,361 56,577
Interest (unallocated) 39 0
Note payable (unallocated) (1,285,000) (1,535,000)
------------ ------------
Total $ 40,606,859 $ 33,414,304
------------ ------------
14
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 4 Allocated and Unallocated Net Assets Available For Benefits
(Continued)
2003
-------------------------------------------------
Unallocated Allocated Total
----------- ----------- -----------
Change in net assets:
Net appreciation in fair value $ 378,046 $ 5,415,989 $ 5,794,035
Interest and dividends 66,610 908,769 975,379
Contributions:
Company 223,952 0 223,952
Roll over 0 332,504 332,504
Participants 0 2,436,472 2,436,472
Benefits paid to participants 0 (2,522,460) (2,522,460)
Interest expense (44,333) 0 (44,333)
Loan fees 0 (2,994) (2,994)
Transfers (444,962) 444,962 0
----------- ----------- -----------
Total $ 179,313 $ 7,013,242 $ 7,192,555
=========== =========== ===========
Effective January 1, 2003, all participants have the ability to
direct the investments within their accounts. Accordingly, all
allocated investments are fully participant directed.
Note 5 Note Payable
At December 31, 2003, the outstanding balance on the loan is
$1,285,000. The terms of the loan allow variable payments of
principal with the final principal and interest payment due April
30, 2006. Interest is payable at the prime interest rate
(effective rate of 4.00% at December 31, 2003) or at the LIBOR
rate plus 1.50% (effective rate of 2.66% at December 31, 2003). At
December 31, 2003, 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.
15
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 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 just prior to each annual
principal due date on the note payable.
The note 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.
As of December 31, 2002, $1,535,000 was due under a note payable
with terms and conditions similar to the note payable described
above. The note was refinanced during 2003.
At December 31, 2003 and 2002, the breakdown between allocated and
unallocated shares was as follows:
2003
----------------------------------------------------
Shares
Available for
Benefits Cost Fair Value
------------- ----------- -----------
Allocated 303,777 $ 4,462,679 $11,589,093
Unallocated 62,487 875,548 2,383,879
------- ----------- -----------
Total 366,264 $ 5,338,227 $13,972,972
======= =========== ===========
Per share $ 38.15
===========
16
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 5 Note Payable (Continued)
2002
----------------------------------------------------
Shares
Available for
Benefits Cost Fair Value
------------- ----------- -----------
Allocated 317,532 $ 4,233,902 $10,193,205
Unallocated 74,644 1,265,788 2,396,072
------- ----------- -----------
Total 392,176 $ 5,499,690 $12,589,277
======= =========== ===========
Per share $ 32.10
===========
Note 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.
Note 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 in 2002 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.
17
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
Note 8 Related Party Transactions
During 2003 and 2002, the Plan received $398,904 and $404,120,
respectively, in common stock dividends from the Company.
Note 9 Voting Rights
Each participant is entitled to exercise voting rights
attributable to the shares allocated to his or her account.
Unallocated shares are voted on by the Plan's administrative
committee on behalf of the collective best interest of plan
participants and beneficiaries.
18
Additional Information
Badger Meter Employee Savings and
Stock Ownership Plan
Schedule H Item 4i - Schedule of Assets Held for Investment Purposes
EIN: 39-0143280 Plan Number: 009
Year Ended December 31, 2003
Identity of Issue Description of Investment Cost Current Value
------------------------------------------- --------------------------- -------------- -------------
Badger Meter, Inc. Common Stock * 366,264 shares $ 5,338,227 $ 13,972,972
Massachusetts Mutual Life Insurance Company
Insurance Contract ** 10,156,267
Heartland Value Plus Fund 173,198 shares ** 4,082,276
Marshall Government Income Fund * 136,275 shares ** 1,320,500
Marshall International Stock Fund * 94,176 shares ** 1,072,668
M&I Growth Balanced Portfolio * 147,288 shares ** 3,289,041
M&I Diversified Stock Portfolio * 200,444 shares ** 5,097,067
Fidelity Advisor Mid Cap Fund 40,915 shares ** 916,898
Managers Special Equity Fund 8,355 shares ** 655,816
Participant loans Interest rates ranging $ 924,328 924,328
between 4.0% and 9.5%
with various maturity dates
-------------
Total Assets Held for Investment Purposes $ 41,487,833
=============
* Party-in-interest.
** Cost information not required for participant-directed investments.
See report of independent registered public accounting firm. 19
Badger Meter Employee Savings and
Stock Ownership Plan
Schedule H Item 4j - Schedule of Reportable Transactions
EIN: 39-0143280 Plan Number: 009
Year Ended December 31, 2003
Current Value
of Asset on
Description of Purchase Cost of Transaction Net Gain or
Identity of Issue Asset Price Selling Price Asset Date (Loss)
---------------------- ------------------ ------------ -------------- --------- ----------- -----------
Category (iii) - Series of security transactions in excess of 5% of plan assets:
Marshall & Ilsley Bank Cash $ 900,789 $ 0 $ 900,789 $ 900,789 $ 0
Marshall & Ilsley Bank Cash $ 0 $ 891,772 $ 891,772 $ 891,772 $ 0
Marshall & Ilsley Bank Badger Meter, Inc.
Common Stock $ 334,430 $ 334,430 $ 334,430 $ 0
Marshall & Ilsley Bank Badger Meter, Inc.
Common Stock $ 0 $ 1,120,623 $ 465,521 $ 1,120,623 $ 655,102
============ ============== ========= =========== ===========
There were no category (i), (ii) or (iv) reportable transactions for the year
ended December 31, 2003.
See report of independent registered public accounting firm. 20
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 25, 2004 By: /s/ Richard A. Meeusen
-----------------------------------------
Richard A. Meeusen
Trustee
By: /s/ Ronald H. Dix
-----------------------------------------
Ronald H. Dix
Trustee
21
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
23.1 Consent of Wipfli LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Registered Accounting Firm
22