<PAGE> 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, 1997
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
<PAGE> 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
<PAGE> 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 25, 1998 By: /S/ Richard A. Meeusen
----------------------------
Vice President - Finance and
Chief Financial Officer
3
<PAGE> 4
Badger Meter Employee Savings and Stock Ownership Plan
Financial Statements
and Supplemental Schedules
Years ended December 31, 1997 and 1996
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors ............................................ 1
Financial Statements
Statements of Net Assets Available for Plan Benefits ...................... 3
Statements of Changes in Net Assets Available for Plan Benefits ........... 5
Notes to Financial Statements ............................................. 7
Supplemental Schedules
Line 27(a) - Schedule of Assets Held for Investment Purposes .............. 15
Line 27(d) - Schedule of Reportable Transactions .......................... 16
</TABLE>
<PAGE> 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 plan
benefits of Badger Meter Employee Savings and Stock Ownership Plan (the Plan) as
of December 31, 1997 and 1996, and the related statements of changes in net
assets available for plan 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 plan benefits of the Plan at
December 31, 1997 and 1996, and the changes in its net assets available for plan
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, 1997, and reportable
transactions in excess of 5 percent of the current value of plan assets for the
year then ended, are presented for purposes of complying with the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974, and are not a required part of the basic
financial statements. The fund information in the statements of net assets
available for plan benefits and the statements of changes in net assets
available for plan benefits is presented for purposes of additional analysis
rather than to present the net assets available for plan benefits and changes in
net assets available for plan benefits of each fund. The supplemental schedules
and fund
1
<PAGE> 6
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 22, 1998
2
<PAGE> 7
Badger Meter Employee Savings and Stock Ownership Plan
Statements of Net Assets Available for Plan Benefits
December 31, 1997
<TABLE>
<CAPTION>
Badger Meter Guaranteed Heartland U.S.
Inc., Common Income Equity Government
Stock Fund Fund Fund Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
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 16,378,851 -- -- --
Heartland U.S. Government Fund, at fair value -- -- -- 345,741
Marshall Money Market Fund, at fair value 100,463 -- -- --
Notes receivable from participants -- -- -- --
--------------------------------------------------------
Total investments 16,479,314 10,872,299 8,810,240 345,741
Company contribution receivable 257,452 -- -- --
Due from brokers -- -- -- 422,492
Interest receivable 355 25 104 1
--------------------------------------------------------
Total assets 16,737,121 10,872,324 8,810,344 768,234
LIABILITIES
Note payable (Note 4) 900,000 -- -- --
--------------------------------------------------------
Net assets available for plan benefits $15,837,121 $10,872,324 $ 8,810,344 $ 768,234
========================================================
</TABLE>
<TABLE>
<CAPTION>
Badger
Loan Meter
Fund Stock Fund Total
-----------------------------------------
<S> <C> <C> <C>
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 plan benefits $ 1,281,079 $ 1,598,183 $39,167,285
========================================
</TABLE>
3
See accompanying notes.
<PAGE> 8
Badger Meter Employee Savings and Stock Ownership Plan
Statements of Net Assets Available for Plan Benefits (continued)
December 31, 1996
<TABLE>
<CAPTION>
Badger Meter Guaranteed Heartland U.S.
Inc., Common Income Equity Government
Stock Fund Fund Fund Fund
---------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments (Note 3):
Deposits with insurance company:
Guaranteed income group annuity contract No. IG 4178,
at contract value $ -- $ 9,834,651 $ -- $ --
Pooled separate account No. SA 4179, at fair value -- -- 6,271,735 --
Badger Meter, Inc. Common Stock, at fair value 8,331,328 -- -- --
Heartland U.S. Government Fund, at fair value -- -- -- 613,241
Marshall Money Market Fund, at fair value 14,749 -- -- --
Notes receivable from participants -- -- -- --
-----------------------------------------------------
Total investments 8,346,077 9,834,651 6,271,735 613,241
Company contribution receivable 307,720 -- -- --
Due from brokers -- -- -- 37,000
Interest receivable 280 51 47 4
-----------------------------------------------------
Total assets 8,654,077 9,834,702 6,271,782 650,245
LIABILITIES
Note payable (Note 4) 1,000,000 -- -- --
-----------------------------------------------------
Net assets available for plan benefits $ 7,654,077 $ 9,834,702 $ 6,271,782 $ 650,245
=====================================================
</TABLE>
<TABLE>
<CAPTION>
Badger
Loan Meter
Fund Stock Fund Total
-------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments (Note 3):
Deposits with insurance company:
Guaranteed income group annuity contract No. IG 4178,
at contract value $ -- $ -- $ 9,834,651
Pooled separate account No. SA 4179, at fair value -- -- 6,271,735
Badger Meter, Inc. Common Stock, at fair value -- 48,775 8,380,103
Heartland U.S. Government Fund, at fair value -- -- 613,241
Marshall Money Market Fund, at fair value 1,539 329,714 346,002
Notes receivable from participants 1,054,834 -- 1,054,834
-----------------------------------------
Total investments 1,056,373 378,489 26,500,566
Company contribution receivable -- -- 307,720
Due from brokers -- -- 37,000
Interest receivable 8 1,561 1,951
-----------------------------------------
Total assets 1,056,381 380,050 26,847,237
LIABILITIES
Note payable (Note 4) -- -- 1,000,000
-----------------------------------------
Net assets available for plan benefits $ 1,056,381 $ 380,050 $25,847,237
=========================================
</TABLE>
See accompanying notes.
4
<PAGE> 9
Badger Meter Employee Savings and Stock Ownership Plan
Statements of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1997
<TABLE>
<CAPTION>
Heartland
Badger Meter Guaranteed U.S.
Inc., Common Income Equity Government
Stock Fund Fund Fund Fund
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions:
Investment income:
Net appreciation in fair value of investments (Note 3) $ 8,539,047 $ -- $ 1,626,974 $ 18,547
Interest and dividends, net (Note 7) 200,847 736,373 141,767 38,184
Investment expenses (6,340) (15,844) (8,056) --
Contributions:
Company (Note 2) (117,928) 15,844 5,836 --
Employees -- 943,182 964,020 82,564
------------------------------------------------------------
8,615,626 1,679,555 2,730,541 139,295
Deductions:
Benefit payments to participants 340,334 451,034 150,223 25,597
Interest expense 67,812 -- -- --
Transfers between funds (24,436) (190,899) (41,756) 4,291
------------------------------------------------------------
Net increase 8,183,044 1,037,622 2,538,562 117,989
Net assets available for plan benefits at beginning of year 7,654,077 9,834,702 6,271,782 650,245
------------------------------------------------------------
Net assets available for plan benefits at end of year $ 15,837,121 $ 10,872,324 $ 8,810,344 $ 768,234
============================================================
</TABLE>
<TABLE>
<CAPTION>
Badger
Loan Meter
Fund Stock Fund Total
-----------------------------------------------
<S> <C> <C> <C>
Additions:
Investment income:
Net appreciation in fair value of investments (Note 3) $ -- $ 910,575 $ 11,095,143
Interest and dividends, net (Note 7) 97,784 26,179 1,241,134
Investment expenses -- -- (30,240)
Contributions:
Company (Note 2) -- -- (96,248)
Employees -- 187,712 2,177,478
--------------------------------------------
97,784 1,124,466 14,387,267
Deductions:
Benefit payments to participants 6 32,213 999,407
Interest expense -- -- 67,812
Transfers between funds 126,920 125,880 --
--------------------------------------------
Net increase 224,698 1,218,133 13,320,048
Net assets available for plan benefits at beginning of year 1,056,381 380,050 25,847,237
--------------------------------------------
Net assets available for plan benefits at end of year $ 1,281,079 $ 1,598,183 $ 39,167,285
============================================
</TABLE>
See accompanying notes.
5
<PAGE> 10
Badger Meter Employee Savings and Stock Ownership Plan
Statements of Changes in Net Assets Available for Plan Benefits (continued)
Year ended December 31, 1996
<TABLE>
<CAPTION>
Heartland
Badger Meter Guaranteed U.S.
Inc., Common Income Equity Government
Stock Fund Fund Fund Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions:
Investment income:
Net appreciation (depreciation) in fair value of
investments (Note 3) $ 2,578,099 $ -- $ 859,005 $ (34,597)
Interest and dividends, net (Note 7) 189,230 622,114 127,869 42,265
Investment expenses -- (20,014) (6,804) --
Contributions:
Company 232,514 20,014 6,804 --
Employees -- 900,213 952,980 117,623
------------------------------------------------------------
2,999,843 1,522,327 1,939,854 125,291
Deductions:
Benefit payments to participants 328,770 846,132 39,717 13,933
Interest expense 69,958 -- -- --
Transfers between funds (12,063) (49,729) 250,628 (297,961)
------------------------------------------------------------
Net increase (decrease) 2,589,052 626,466 2,150,765 (186,603)
Net assets available for plan benefits at beginning of year 5,065,025 9,208,236 4,121,017 836,848
------------------------------------------------------------
Net assets available for plan benefits at end of year $ 7,654,077 $ 9,834,702 $ 6,271,782 $ 650,245
============================================================
</TABLE>
<TABLE>
<CAPTION>
Badger
Loan Meter
Fund Stock Fund Total
---------------------------------------------
<S> <C> <C> <C>
Additions:
Investment income:
Net appreciation (depreciation) in fair value of
investments (Note 3) $ -- $ 11,109 $ 3,413,616
Interest and dividends, net (Note 7) 40,082 12,330 1,033,890
Investment expenses -- -- (26,818)
Contributions:
Company -- -- 259,332
Employees -- 178,743 2,149,559
------------------------------------------
40,082 202,182 6,829,579
Deductions:
Benefit payments to participants 4 219 1,228,775
Interest expense -- -- 69,958
Transfers between funds 4,329 104,796 --
------------------------------------------
Net increase (decrease) 44,407 306,759 5,530,846
Net assets available for plan benefits at beginning of year 1,011,974 73,291 20,316,391
------------------------------------------
Net assets available for plan benefits at end of year $ 1,056,381 $ 380,050 $ 25,847,237
==========================================
</TABLE>
See accompanying notes.
6
<PAGE> 11
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements
December 31, 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 will continue to be carried at contract value. Because annual rates of
return on the Mass Mutual contract are established at the beginning of each plan
year, the fair value of this contract is not significantly different from
contract value.
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 investment in the Heartland U.S. Government Fund, a mutual fund, is 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
<PAGE> 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). 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).
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 Internal Revenue
Code (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% and 6% of the participant's compensation for the years ended December 31,
1997 and 1996, respectively. The Company may also contribute additional amounts
over and above the required contribution at the discretion of the Company's
Board of Directors.
8
<PAGE> 13
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, four
investments, the Guaranteed Income Fund, Equity Fund, Heartland U.S. Government
Fund or the Badger Meter Stock Fund, at the participant's discretion (see Note
3). Company contributions are made in cash and are used by the Plan to repay
principal on the note payable (see Note 4). As principal 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.
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.
9
<PAGE> 14
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 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.
Included in net assets available for Plan benefits at December 31, 1997 and
1996, is $1,543,000 and $773,000, respectively, relating to account balances for
persons who have withdrawn from the Plan but have not yet been paid.
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.
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 earned
during 1997 and 1996 was 7.25% and 7.00%, respectively. Mass Mutual determines
the annual guaranteed interest rate each January 1.
10
<PAGE> 15
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
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 439,762 shares
(356,562 shares Badger Meter, Inc. Common Stock and 83,200 shares Badger Meter,
Inc. Class B Common Stock) and 436,748 shares (394,748 shares Badger Meter, Inc.
Common Stock and 42,000 shares Badger Meter, Inc., Class B Common Stock) as of
December 31, 1997 and 1996, respectively.
At December 31, 1997 and 1996, the fair value of the Plan's investment in Badger
Meter, Inc. Common Stock, as determined by quoted market price, was $17,920,301
and $8,380,103, respectively.
The Plan's investments (including investments purchased, sold, as well as held
during the year) appreciated (depreciated) in fair value during 1997 and 1996,
as follows:
<TABLE>
<CAPTION>
Net Realized
and Unrealized
Appreciation
in Fair Value Fair Value at
During Year End of Year
------------------------------------
<S> <C> <C>
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
====================================
</TABLE>
11
<PAGE> 16
Badger Meter Employee Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
Net Realized
and Unrealized
Appreciation
(Depreciation)
in Fair Value Fair Value at
During Year End of Year
------------------------------------
<S> <C> <C>
Year ended December 31, 1996:
Fair value determined by quoted market price:
Badger Meter, Inc. Common Stock $2,589,208 $ 8,380,103
Pooled separate account No. SA 4179 859,005 6,271,735
Heartland U.S. Government Fund (34,597) 613,241
Marshall Money Market Fund - 346,002
------------------------------------
3,413,616 15,611,081
Fair value estimated -
Notes receivable from participants - 1,054,834
Contract value as determined by Mass Mutual -
Guaranteed income group annuity contract No. IG 4178 - 9,834,651
------------------------------------
$3,413,616 $26,500,566
====================================
</TABLE>
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, plus
interest payable at the prime interest rate (prime was 8.25% at December 31,
1997) 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.
12
<PAGE> 17
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, 1997 and
1996, the breakdown between allocated and unallocated shares were as follows:
<TABLE>
<CAPTION>
Shares
Available
For Benefits Cost Fair Value
-------------------------------------------------
<S> <C> <C> <C>
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
===============
December 31, 1996:
Allocated 322,458 $2,243,083 $6,187,164
Unallocated 114,290 1,000,038 2,192,939
-------------------------------------------------
436,748 $3,243,121 $8,380,103
=================================================
Per share $ 19.19
===============
</TABLE>
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 1997 Company match
requirement.
13
<PAGE> 18
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 Internal Revenue Service ruled on August 3, 1995, that the Plan qualifies
under Section 401(a) and 401(k) of the IRC and, therefore, the related trust is
not subject to tax under present income tax law. Once qualified, the Plan is
required to operate in conformity with the IRC to maintain its qualification.
The Company is not aware of any course of action or series of events that have
occurred that might adversely affect the Plan's qualified status.
7. TRANSACTIONS WITH RELATED PARTIES
During 1997 and 1996, the Plan received $208,521 and $185,413, respectively, in
common stock dividends from the Company.
14
<PAGE> 19
Supplemental Schedules
<PAGE> 20
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, 1997
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT, COST/
INCLUDING MATURITY DATE, RATE OF CONTRACT CURRENT VALUE/
INTEREST, PAR OR MATURITY DATE VALUE CONTRACT VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Badger Meter, Inc.* 439,762 shares of common stock $ 3,659,680 $17,920,301
Massachusetts Mutual Life Guaranteed Income Contract
Insurance Company No. IG 4178 10,872,299 10,872,299
Massachusetts Mutual Life Separate Account Group Annuity
Insurance Company Contract No. SA 4179 8,810,240 8,810,240
Heartland U.S. Government Fund,
Inc. 35,101 fund shares 342,507 345,741
Marshall Money Market Fund 158,337 units 158,337 158,337
Participant loans Unpaid principal 1,279,290 1,279,290
-----------------------------------
$25,122,353 $39,386,208
===================================
</TABLE>
*Represents a related party
15
<PAGE> 21
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, 1997
<TABLE>
<CAPTION>
PURCHASE SELLING
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts Mutual Life Insurance Guaranteed Income Group Annuity
Company Contract, 30 transactions $2,310,039 $ --
Massachusetts Mutual Life Insurance Guaranteed Income Group Annuity
Company Contract, 29 transactions -- 1,276,462
Massachusetts Mutual Life Insurance Pooled Separate Account
Company 32 transactions 3,329,118 --
Massachusetts Mutual Life Insurance Pooled Separate Account
Company 23 transactions -- 790,613
Marshall & Ilsley Bank Marshall Money Market Fund
390 transactions
6,243,161 --
Marshall & Ilsley Bank Marshall Money Market Fund
274 transactions
-- 6,427,206
</TABLE>
<TABLE>
<CAPTION>
CURRENT VALUE
OF ASSET ON
COST OF TRANSACTION
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET ASSET DATE GAIN/(LOSS)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts Mutual Life Insurance Guaranteed Income Group Annuity
Company Contract, 30 transactions $2,310,039 $2,310,039 N/A
Massachusetts Mutual Life Insurance Guaranteed Income Group Annuity
Company Contract, 29 transactions 1,276,462 1,276,462 --
Massachusetts Mutual Life Insurance Pooled Separate Account
Company 32 transactions 3,329,118 3,329,118 N/A
Massachusetts Mutual Life Insurance Pooled Separate Account
Company 23 transactions 790,613 790,613 --
Marshall & Ilsley Bank Marshall Money Market Fund
390 transactions
6,243,161 6,243,161 N/A
Marshall & Ilsley Bank Marshall Money Market Fund
274 transactions
6,427,206 6,427,206 --
</TABLE>
16
<PAGE> 22
EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
- ----------- --------
(23) Consent of Ernst & Young LLP, Independent Auditors 23
22
<PAGE> 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,
1997.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
June 25, 1998
