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