<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-6706
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BADGER METER, INC.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0143280
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4545 West Brown Deer Road, Milwaukee, Wisconsin 53223
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 355-0400
--------------
None
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(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 18, 1997
- --------------------------- ----------------------------
Common Stock, $1.00 par value 2,426,904
Class B Common Stock, $.10 par value 1,125,570
<PAGE> 2
BADGER METER, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Item 1 Financial Statements:
Consolidated Condensed Balance Sheets - -
June 30, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Operations - -
Three and Six Months Ended June 30, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows - -
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information:
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 6(a) Exhibits 9
Item 6(b) Reports on Form 8-K 9
Exhibit Index 11
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<PAGE> 3
Part I - Financial Information
BADGER METER, INC.
Item 1 Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Assets June 30, December 31,
------ 1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 469 $ 1,123
Receivables 17,236 15,498
Inventories:
Finished goods 3,507 3,577
Work in process 9,295 8,466
Raw materials and purchased parts 6,347 5,463
---------- -----------
Total inventories 19,149 17,506
Prepaid expenses 855 918
---------- -----------
Total current assets 37,709 35,045
Property, plant and equipment, at cost 59,373 57,111
Less accumulated depreciation (39,313) (37,751)
---------- -----------
20,060 19,360
Intangible assets, at cost less accumulated amortization 764 878
Prepaid pension 6,930 7,102
Deferred income taxes 1,250 1,257
Deferred charges and other assets 3,252 2,491
---------- -----------
Total assets $ 69,965 $ 66,133
========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Short-term debt $ 3,027 $ 2,634
Payables 8,048 7,102
Accrued compensation and employee benefits 4,242 4,763
Other accrued liabilities 2,711 1,929
Income and other taxes 1,067 972
---------- -----------
Total current liabilities 19,095 17,400
Accrued non-pension postretirement benefits 8,042 8,106
Other accrued employee benefits 3,367 2,899
Long-term debt 961 1,091
Shareholders' equity:
Common Stock 3,213 3,154
Class B Common Stock 112 112
Capital in excess of par value 7,370 6,803
Reinvested earnings 30,604 28,200
Less: Employee benefit stock (935) (1,053)
Treasury stock, at cost (1,864) (579)
---------- -----------
Total shareholders' equity 38,500 36,637
---------- -----------
Total liabilities and shareholders' equity $ 69,965 $ 66,133
========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 4
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 34,104 $ 30,542 $ 65,806 $ 57,177
Operating costs and expenses:
Cost of sales 21,480 19,739 41,704 36,453
Marketing and administrative 7,497 6,841 14,931 13,640
Research and engineering 1,949 1,568 3,800 3,127
----------- ----------- ---------- ----------
30,926 28,148 60,435 53,220
----------- ----------- ---------- ----------
Operating earnings 3,178 2,394 5,371 3,957
Interest expense 97 103 198 221
Other deductions 65 62 78 116
----------- ----------- ---------- ----------
Earnings before income taxes 3,016 2,229 5,095 3,620
Provision for income taxes 1,116 840 1,885 1,343
----------- ----------- ---------- ----------
Net earnings $ 1,900 $ 1,389 $ 3,210 $ 2,277
=========== =========== ========== ==========
Per share amounts: *
Net earnings:
Primary $ .50 $ .38 $ .85 $ .63
=========== =========== ========== ==========
Fully Diluted $ .49 $ .38 $ .83 $ .63
=========== =========== ========== ==========
Dividends declared -
Common Stock $ .12 $ .11 $ .23 $ .21
=========== =========== ========== ==========
Dividends declared -
Class B Common Stock $ .11 $ .10 $ .21 $ .19
=========== =========== ========== ==========
Shares used in computation:
Primary 3,794,858 3,649,442 3,798,949 3,647,720
=========== =========== ========== ==========
Fully Diluted 3,839,051 3,649,966 3,852,595 3,656,140
=========== =========== ========== ==========
</TABLE>
* All per share amounts and number of shares data have been restated to reflect
the 2-for-1 stock split paid April 18, 1997. Earnings per share is computed
independently for each of the quarters presented. Therefore, the sum of the
quarterly earnings per share does not necessarily equal the total for the year.
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 5
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net earnings $ 3,210 $ 2,277
Adjustments to reconcile net
earnings to net cash provided
by (used for) operations:
Depreciation 1,993 1,927
Amortization 330 425
Noncurrent employee benefits 594 31
Deferred income taxes 7 9
Other 48 14
Changes in:
Receivables (1,738) (2,754)
Inventory (1,643) (1,259)
Current liabilities other than short-term debt 1,588 2,439
Prepaid expenses 63 (11)
---------- -----------
Total adjustments 1,242 821
---------- -----------
Net cash provided by (used for) operations 4,452 3,098
---------- -----------
Investing activities:
Property, plant and equipment (2,771) (2,013)
Other - net (1,031) (388)
---------- -----------
Net cash provided by (used for) investing activities (3,802) (2,401)
---------- -----------
Financing activities:
Bank borrowings (repayments) 393 (1,304)
Dividends (806) (718)
Stock options and ESSOP 394 302
Purchase of treasury stock (1,285) 5
---------- -----------
Net cash provided by (used for)
financing activities (1,304) (1,715)
---------- -----------
Increase (decrease) in cash (654) (1,018)
Beginning of year 1,123 1,177
---------- -----------
End of period $ 469 $ 159
========== ===========
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period for:
Income taxes $ 1,576 $ 1,174
========== ============
Interest $ 192 $ 177
========== ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 6
BADGER METER, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the consolidated
condensed financial position at June 30, 1997 and the results of operations
for the three and six-month periods ended June 30, 1997 and 1996 and the
cash flows for the six-month periods ended June 30, 1997 and 1996. The
results of operations for the six-month period ended June 30, 1997, are not
necessarily indicative of the results to be expected for the full year.
The consolidated condensed balance sheet at December 31, 1996, was derived
from amounts included in the Annual Report to Shareholders which was
incorporated by reference in the Company's annual report on Form 10-K for
the year ended December 31, 1996.
2. In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which is required to be adopted on December
31, 1997. At that time, the company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Among other provisions, the dilutive effect of stock options must
be excluded under the new requirements for calculating basic earnings per
share, which will replace primary earnings per share. The impact is
expected to result in an increase in basic earnings per share from primary
earnings per share for the quarter ended June 30, 1997 from $.50 to $.53
per share and an increase for the six months ended June 30, 1997 from $.85
to $.90 per share. The impact of Statement No. 128 on the calculation of
diluted earnings per share is not expected to be material.
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<PAGE> 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Record sales caused receivables to increase 11%, or $1,738,000, from the
seasonally low December 31, 1996 balance. Inventories increased 9%, or
$1,643,000, primarily to support future sales needs. Deferred charges and
other assets increased 31%, or $761,000, due to payments made to fund employee
benefits plans and deposits made in connection with alliance programs.
Payables increased 13%, or $946,000, due to increased inventory purchases and
other trade payables since December 31, 1996. Accrued compensation decreased
11%, or $521,000, due primarily to payment of 1996 incentives during the first
quarter of 1997, partially offset by additional accruals for 1997 incentives.
Other accrued liabilities increased 41%, or $782,000, due to additional
reserves for after-sale costs. Income and other taxes payable increased
$95,000 due to accruals related to increased profits, partially offset by
increased estimated tax payments.
Short-term debt increased $393,000 since December 31, 1996. These borrowings,
along with funds generated by net earnings, were used to fund the net working
capital requirements, capital additions of $2,771,000, and treasury stock
repurchases of $1,285,000. These cash requirements also resulted in a net
reduction in cash of $654,000 during the first six months of 1997.
As of June 30, 1997, the company had approximately $27,000,000 of credit lines
with domestic and foreign banks of which $2,967,000 was in use. This compares
to $4,211,000 in use at June 30, 1996 and $2,574,000 at December 31, 1996. The
company believes that the present lines of credit are adequate to meet
operating requirements.
Results of Operations
Net sales for the second quarter of 1997 of $34,104,000 reflect a 12% increase
over sales of $30,542,000 for the same period in 1996. The increase was
primarily related to higher unit sales of residential, commercial and
industrial water meters and control valves. Gross profit margins increased due
to improved manufacturing efficiencies.
For the first six months of 1997, sales increased 15%, or $8,629,000, over the
same period in 1996. This increase was primarily related to higher unit sales
of residential, commercial and industrial water meters, as well as increased
sales of lubrication meters. Gross profit margins remained relatively stable
between the periods as improved manufacturing efficiencies were offset by
changes in product mix.
In addition to the above factors, strong sales of the TRACE radio-frequency
automated meter reading system continued to contribute significantly to the
company's revenues for both the quarter and year-to-date periods.
Marketing and administrative costs increased 10% for the quarter and 9% for the
six-month period ended June 30, 1997, as compared to the same periods of 1996
due to general wage and personnel increases. Research and engineering expenses
increased 24% for the quarter and 22% for the six-month period ended June 30,
1997, as compared to the same periods of 1996 due to costs associated with
continued product development initiatives.
The effective tax rates for the second quarter of 1997 and for the first six
months of 1997 were estimated to be 37.0%, which are approximately the same
rates for the same periods in 1996.
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<PAGE> 8
Earnings for the second quarter of 1997 were $1,900,000, an increase of 37%
over second quarter 1996 earnings of $1,389,000, due primarily to the higher
sales, improved margins and general cost controls. The 1997 year-to-date
earnings of $3,210,000 increased 41% over the same period of 1996 earnings of
$2,277,000 due primarily to higher sales and general cost controls. The
percentage increases in earnings per share were slightly lower for both periods
due to the impact of dilutive options in 1997.
Other Matters
The company is subject to contingencies relative to environmental laws and
regulations. Currently, the company is in the process of resolving a suit
alleging violation of California's Proposition 65. The company does not
believe the ultimate resolution of this suit will have a material adverse
effect on the company's financial position or results of operations. Provision
has been made for known settlement costs. No other risks or uncertainties were
identified that could have a material impact on operations and no long-lived
assets have become permanently impaired in value.
In June of 1997, the company announced plans for a 52,000 square foot addition
to its facility in Brown Deer, Wisconsin. The addition is estimated to cost $8
million and is expected to begin in August of 1997, with completion scheduled
for early 1999.
-8-
<PAGE> 9
Part II - Other Information
Item 4 Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held April 25, 1997.
(b) Proxies were solicited for the election of ten directors. There was no
solicitation in opposition to management's nominees and all nominees were
re-elected. As of the record date, February 28, 1997, the total number of
votes represented by shares of Common Stock and Class B Common Stock was
6,841,754.
(c) 1. The Badger Meter, Inc. 1997 Stock Option Plan ("Option Plan") was
approved. The Option Plan provides for the grant of options representing up to
an aggregate of 200,000 shares (post-split) of Common Stock to approximately
250 employees eligible to participate in the Option Plan. The option price
will be fixed by the Management Review Committee of the Board of Directors, but
Incentive Stock Options will not be less than 100% of fair market value on the
date of grant.
<TABLE>
<CAPTION>
Votes Votes Votes Broker
FOR AGAINST ABSTAIN Non-Votes
--- ------- ------- ---------
<S> <C> <C> <C> <C>
STOCK OPTION PLAN 5,796,120 708,379 7,854 132,496
</TABLE>
(c) 2. The following table represents the aggregate votes related to the
election of directors:
<TABLE>
<CAPTION>
Votes Votes
NAME FOR WITHHELD Not Voted
- ---- --- -------- ---------
<S> <C> <C> <C>
James L.Forbes 6,079,463 565,386 196,905
Robert M. Hoffer 6,078,627 566,222 196,905
Charles F. James, Jr. 6,079,463 565,386 196,905
Kenneth P. Manning 6,079,263 565,586 196,905
Andrew J. Policano 6,079,163 565,686 196,905
Donald J. Schuenke 6,078,962 565,887 196,905
John J. Stollenwerk 6,079,463 565,386 196,905
Pamela B. Strobel 6,079,263 565,586 196,905
James O. Wright 6,079,413 565,436 196,905
James O. Wright, Jr. 6,079,463 565,386 196,905
</TABLE>
(d) Not applicable.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
(10.0) The Badger Meter, Inc. 1997 Stock Option Plan
(11.0) Computation of fully diluted earnings per share
(27.0) Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the three months ended June
30, 1997.
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<PAGE> 10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BADGER METER, INC.
-----------------------
Dated: July 22, 1997 By /s/ Richard A. Meeusen
-----------------------
Richard A. Meeusen
Vice President - Finance
and Treasurer
Chief Financial Officer
By /s/ Beverly L.P. Smiley
------------------------
Beverly L.P. Smiley
Corporate Controller
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<PAGE> 11
EXHIBIT INDEX
Page Number
(10.0) The Badger Meter, Inc. 1997 Stock Option Plan 12
(11.0) Computation of fully diluted earnings per share 17
(27.0) Financial Data Schedule
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<PAGE> 1
Exhibit (10.0)
BADGER METER, INC.
1997 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Badger Meter, Inc. 1997 Stock Option Plan (the
"Plan") is to promote the best interests of Badger Meter, Inc. (the "Company")
and its shareholders by encouraging directors and key employees of the Company
and its subsidiaries to secure or increase on reasonable terms their stock
ownership in the Company. The Board of Directors of the Company believes the
Plan will promote continuity of management, increased incentive and personal
interest in the welfare of the Company by those who are primarily responsible
for shaping and carrying out the long-range plans of the Company and its
subsidiaries and securing their continued growth and financial success. It is
intended that certain of the options issued under the Plan may constitute
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code ("Incentive Stock Options") and the remainder of the options
issued under the Plan will constitute non-qualified stock options
("Non-qualified Stock Options").
2. EFFECTIVE DATE
The Plan shall become effective on the date of adoption by the Board
of Directors of the Company (the "Board"), subject to the approval and
ratification of the Plan by the shareholders of the Company within twelve (12)
months of the date of adoption by the Board, and all options granted prior to
such shareholder approval shall be subject to such approval.
3. ADMINISTRATION
(a) The Plan shall be administered by the Management Review
Committee of the Board (the "Committee") as such Committee may be constituted
from time to time. The Committee shall consist of not less than two members of
the Board selected by the Board, each of whom shall qualify as a non-employee
director within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 ("Exchange Act"), or any successor rule or regulation thereto. A majority
of the members of the Committee shall constitute a quorum. All determinations
of the Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held.
If at any time the Committee shall not be in existence or not consist
of directors who are qualified as "non-employee directors" as defined above,
the Board shall administer the Plan. To the extent permitted by applicable
law, the Board may, in its discretion, delegate to another committee of the
Board or to one or more senior officers of the Company any or all of the
authority and responsibility of the Committee with respect to options to
participants other than participants who are subject to the provisions of
Section 16 of the Exchange Act. To the extent that the Board has delegated to
such other committee or one or more officers the authority and responsibility
of the Committee, all references to the Committee herein shall include such
other committee or one or more officers.
(b) Subject to the express provisions of the Plan, the Committee
shall have complete authority to select the key employees to whom options shall
be granted, to determine the number of shares subject to each option, the time
at which the option is to be granted, the type of option, the option period,
the option price and the manner in which options become exercisable, and shall
establish such other terms and conditions of the options as the Committee may
deem necessary or desirable. In making such determinations, the Committee may
take into account the nature of the services rendered by the respective
employees, their present and potential contribution to the success of their
respective organizations and such other factors as the Committee in its
discretion shall deem relevant. Subject to the express provisions of the Plan,
the Committee shall also have complete authority to interpret the Plan, to
prescribe, amend and rescind the rules and regulations relating to it, to waive
any conditions or restriction with respect to any options, and to make all
other determinations necessary or advisable for the administration of the Plan.
The determinations of the Committee on the matters referred to in this
paragraph 3 shall be conclusive.
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<PAGE> 2
4. ELIGIBILITY
Any non-employee director ("Director") or key employee ("Employee") of
the Company or its present and future subsidiaries, as defined in Section
424(f) of the Internal Revenue Code ("Subsidiaries"), whose judgment,
initiative and efforts contribute materially to the successful performance of
the Company or its Subsidiaries, shall be eligible to receive options under the
Plan.
5. SHARES SUBJECT TO THE PLAN
The shares which may be issued pursuant to options under the Plan
shall be shares of the Company's Common Stock, $1.00 par value ("Stock"), and
may be either authorized and unissued or treasury shares. The total number of
shares for which options may be granted and which may be purchased pursuant to
options under the Plan shall not exceed an aggregate of 200,000 shares
(adjusted to reflect the 2-for-1 stock split payable April 18, 1997), subject
to adjustment as provided in the following sentence and in paragraph 12 hereof.
If an option granted under the Plan expires, is canceled or terminates
unexercised as to any shares of Stock subject thereto, or if shares of Stock
are used to satisfy the Company's withholding tax obligations, such shares
shall again be available for the granting of additional options under the Plan.
6. OPTION PRICE
The option price per share of Stock shall be fixed by the Committee,
but shall be not less than 100% in the case of Incentive Stock Options of the
fair market value of the Stock on the date the option is granted. Unless
otherwise determined by the Committee, the "fair market value" of Stock on the
date of grant shall be the closing price for a share of Stock on such date, or,
if such date is not a trading date, the next preceding trading date as quoted
on the American Stock Exchange Transaction Reporting System.
7. GRANT OF OPTIONS
(a) Subject to the terms and conditions of the Plan, the Committee
may, from time to time, grant to Employees options to purchase such number of
shares of Stock and on such terms and conditions as the Committee may
determine. More than one option may be granted to the same Employee. The day
on which the Committee approves the granting of an option shall be considered
as the date on which such option is granted.
(b) Notwithstanding the foregoing, each Director of the Company
who is not an employee of the Company or any subsidiary or affiliate thereof,
and who first became or becomes a Director after April 24, 1997, shall, upon
approval of the Plan by the shareholders of the Company, or at the time of
their first election to the Board, subject to adjustments as provided in
paragraph 12, automatically receive an option to purchase 6,000 shares of Stock
on that date. Any date on which a Director receives an option shall be
referred to as a "Grant Date". Such options shall be Non-qualified Stock
Options with an expiration date ten (10) years after the Grant Date. The
option price per share shall be the closing price for a share of Stock on the
Grant Date, or if such day is not a trading day, the next preceding trading day
as quoted on the American Stock Exchange Transaction Reporting System.
(c) Notwithstanding the foregoing, each Director or future
Director of the Company who is not an employee of the Company or any subsidiary
or affiliate thereof shall upon approval of the Plan by the shareholders of the
Company, or at the time of their first election to the Board, be entitled to
receive an option to purchase 2,000 shares of Stock on that date in order to
increase the Directors' stake in the future of the Company. Any date on which
a Director receives an option shall be referred to as a Grant Date. Such
options shall be Non-qualified Stock Options with an expiration date ten (10)
years after the Grant Date. The option price per share shall be the closing
price for a share of Stock on the Grant Date, or if such day is not a trading
day, the next preceding trading day as quoted on the American Stock Exchange
Transaction Reporting System.
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<PAGE> 3
8. OPTION PERIOD
Except as set forth in paragraph 7, the Committee shall determine the
expiration date of each option, but in the case of Incentive Stock Options such
expiration date shall be not later than ten (10) years after the date such
option is granted.
9. MAXIMUM PER PARTICIPANT
The aggregate fair market value (determined at the time the option is
granted pursuant to paragraph 7) of the Stock with respect to which any
Incentive Stock Options are exercisable for the first time by a Director or
Employee during any calendar year under the Plan or any other such plan of the
Company or any Subsidiary shall not exceed $100,000.
10. EXERCISE OF OPTIONS
An option may be exercised, subject to its terms and conditions and
the terms and conditions of the Plan, in full at any time or in part from time
to time by delivery to the Company at its principal office of a written notice
of exercise specifying the number of shares with respect to which the option is
being exercised. Any notice of exercise shall be accompanied by full payment
of the option price of the shares being purchased (a) in cash or its
equivalent; or (b) with the consent of the Committee, by delivering to the
Company shares of Stock (valued at their fair market value as of the date of
exercise, as determined by the Committee consistent with the method of
valuation set forth in paragraphs 6 and 7); (c) with the consent of the
Committee, by any combination of (a) and (b); or (d) by delivering (including
by fax) to the Company or its designated agent an executed irrevocable option
exercise form together with irrevocable instructions to a broker/dealer to sell
or margin a sufficient portion of the shares of Stock and delivering the sale
or margin loan proceeds directly to the Company to pay for the option price.
11. TRANSFERABILITY
No option shall be assignable or transferable by a Director or an
Employee other than by will or the laws of descent and distribution, and may be
exercised during the life of the Director or Employee only by the Director or
Employee or his guardian or legal representative, except that an Employee may,
to the extent allowed by the Committee and in a manner specified by the
Committee, (a) designate in writing a beneficiary to exercise the option after
the Employee's death and (b) transfer any option.
12. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK
In the event of a capital adjustment resulting from a stock dividend,
stock split, reorganization, recapitalization, merger, consolidation,
combination or exchange of shares or the like, the number of shares of Stock
subject to the Plan and the aggregate number and class of shares under option
in outstanding option agreements shall be adjusted in a manner consistent with
such capital adjustment; provided, however, that no such adjustment shall
require the Company to sell any fractional shares. The determination of the
Committee as to any adjustment shall be final. Notwithstanding the foregoing,
options subject to grant or previously granted to Directors under the Plan at
the time of any capital adjustments shall be subject only to such adjustments
as shall be necessary to maintain the relative proportionate interest of each
Director and preserve, without exceeding, the value of such options.
13. CORPORATE MERGERS AND OTHER CONSOLIDATIONS
The Committee may also grant options having terms and provisions which
vary from those specified in the Plan provided that any options granted
pursuant to this paragraph are granted in substitution for, or in connection
with the assumption of, existing options granted by another company and assumed
or otherwise agreed to be provided for by the Company pursuant to or by reason
of a transaction involving a corporate merger, consolidation, acquisition or
other reorganization to which the Company is a party.
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<PAGE> 4
14. OPTION AGREEMENTS
All options granted under the Plan shall be evidenced by written
agreement (which need not be identical) in such form as the Committee shall
determine. Each option agreement shall specify whether the option granted
thereunder is intended to constitute an Incentive Stock Option or a
Non-qualified Stock Option.
15. TRANSFER RESTRICTIONS
Shares of Stock purchased under the Plan and held by any person who is
an officer or Director of the Company, or who directly or indirectly controls
the Company, may not be sold or otherwise disposed of except pursuant to an
effective registration statement under the Securities Act of 1933 or except in
a transaction in compliance with Rule 144 under such Act or other transaction
which, in the opinion of counsel for the Company, is exempt from registration
under such Act. The Committee may waive the foregoing restrictions in whole or
in part in any particular case or cases, or may terminate such restrictions,
whenever the Committee determines that such restrictions afford no substantial
benefit to the Company.
16. AMENDMENT OF PLAN
Shareholder approval of any amendment of the Plan shall be obtained if
otherwise required by: (i) the rules and/or regulations promulgated under
Section 16 of the Exchange Act (in order for the Plan to remain qualified under
Rule 16b-3); (ii) the Internal Revenue Code of 1986, as amended, or any rules
promulgated thereunder (in order to allow for Incentive Stock Options to be
granted under the Plan); or (iii) the listing requirements of the American
Stock Exchange or any principal securities exchange or market on which the
Stock is then traded (in order to maintain the quotation or listing of the
Stock thereon). The provisions of paragraphs 7(b) and 7(c) cannot be amended
more than once every six (6) months other than to comport with changes in the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations thereunder.
17. TERMINATION OF PLAN
The Board shall have the right to suspend or terminate the Plan at any
time; provided, however, that no Incentive Stock Options may be granted after
the tenth (10th) anniversary of the effective date of the Plan as described in
paragraph 2 hereof. Termination of the Plan shall not affect the rights of
Employees or Directors under options previously granted to them, and all
unexpired options shall continue in force and operation after termination of
the Plan except as they may lapse or be terminated by their own terms and
conditions.
18. TAX WITHHOLDING
(a) The Company may deduct and withhold from any cash otherwise
payable to an Employee such amount as may be required for the purpose of
satisfying the Company's obligation to withhold federal, state or local taxes
as the result of the exercise of an option. In the event the amount so
withheld is insufficient for such purpose, the Company may require that the
Employee pay to the Company upon its demand or otherwise make arrangements
satisfactory to the Company for payment of such amount as may be requested by
the Company in order to satisfy its obligation to withhold any such taxes.
(b) An Employee may be permitted to satisfy the Company's
withholding tax requirements by electing to have the Company withhold shares of
Stock otherwise issuable to the Employee or to deliver to the Company shares of
Stock having a fair market value on the date income is recognized pursuant to
the exercise of an option equal to the amount required to be withheld. The
election shall be made in writing and shall be made according to such rules and
procedures as the Committee may determine.
-15-
<PAGE> 5
19. RIGHTS AS A SHAREHOLDER
A Director or an Employee shall have no rights as a shareholder with
respect to any shares subject to any option until the date the options shall
have been exercised, the shares shall have been fully paid and a stock
certificate shall have been issued.
20. MISCELLANEOUS
The grant of any option under the Plan may also be subject to other
provisions as the Committee determines appropriate, including, without
limitation, provisions for (a) one or more means to enable Employees to defer
recognition of taxable income relating to options; (b) the purchase of Stock
under options in installments; and (c) compliance with federal or state
securities laws and stock exchange requirements.
-16-
<PAGE> 1
Exhibit (11.0)
BADGER METER, INC.
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE *
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
- -------
Shares
- ------
Average shares outstanding 3,567,471 3,538,978 3,584,438 3,530,276
Shares issuable upon exercise of
stock options 227,387 110,464 214,511 117,444
----------- ----------- ---------- -----------
Total 3,794,858 3,649,442 3,798,949 3,647,720
=========== =========== ========== ===========
Earnings
- --------
Net earnings applicable to adjusted
common shares $ 1,900 $ 1,389 $ 3,210 $ 2,277
=========== =========== ========== ===========
Per share amounts
- -----------------
Net earnings per share $ .50 $ .38 $ .85 $ .63
=========== =========== ========== ===========
FULLY DILUTED
- -------------
Shares
- ------
Average shares outstanding 3,567,471 3,538,978 3,584,438 3,530,276
Shares issuable upon exercise of
stock options 271,580 110,988 268,157 125,864
----------- ----------- ---------- -----------
Total 3,839,051 3,649,966 3,852,595 3,656,140
=========== =========== ========== ===========
Earnings
- --------
Earnings applicable to adjusted
common shares $ 1,900 $ 1,389 $ 3,210 $ 2,277
=========== =========== ========== ===========
Per share amounts
- -----------------
Net earnings per share $ .49 $ .38 $ .83 $ .63
=========== =========== ========== ===========
</TABLE>
*All per share amounts and number of shares data have been restated to reflect
the 2-for-1 stock split paid April 18, 1997. Earnings per share is computed
independently for each of the quarters presented. Therefore, the sum of the
quarterly earnings per share does not necessarily equal the total for the year.
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 469
<SECURITIES> 0
<RECEIVABLES> 17,236
<ALLOWANCES> 0
<INVENTORY> 19,149
<CURRENT-ASSETS> 37,709
<PP&E> 59,373
<DEPRECIATION> (39,313)
<TOTAL-ASSETS> 69,965
<CURRENT-LIABILITIES> 19,095
<BONDS> 0
0
0
<COMMON> 1,461
<OTHER-SE> 37,039
<TOTAL-LIABILITY-AND-EQUITY> 69,965
<SALES> 65,806
<TOTAL-REVENUES> 65,806
<CGS> 41,704
<TOTAL-COSTS> 60,435
<OTHER-EXPENSES> 78
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198
<INCOME-PRETAX> 5,095
<INCOME-TAX> 1,885
<INCOME-CONTINUING> 3,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,210
<EPS-PRIMARY> .85
<EPS-DILUTED> .83
</TABLE>
