SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended DECEMBER 31, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____________to____________
Commission file number 1-6706
BADGER METER, INC.
(Exact name of registrant as specified in charter)
WISCONSIN 39-0143280
(State of Incorporation) (I.R.S. Employer Identification No.)
4545 W. BROWN DEER ROAD
MILWAUKEE, WISCONSIN 53223
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 414 - 355-0400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of class: on which registered:
COMMON STOCK AMERICAN STOCK EXCHANGE
COMMON SHARE PURCHASE RIGHTS AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 and (2) has been subject to such filing requirements for
the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $73,922,683 as of February 28, 2002. At February 28, 2002, the
registrant had 2,926,472 shares of Common Stock outstanding.
Documents Incorporated by Reference:
Parts I and II incorporate information by reference from the company's
2001 Annual Report to Shareholders.
Part III incorporates information by reference from the definitive
Proxy Statement for the Annual Meeting of Shareholders to be held on April 19,
2002 [to be filed with the Securities and Exchange Commission under Regulation
14A within 120 days after the end of the registrant's fiscal year].
Part I
Item 1. Business
Badger Meter, Inc. (the "company") is a leading marketer and
manufacturer of products, and a provider of services, using flow measurement and
control technologies serving markets worldwide. The company was incorporated in
1905.
Markets and Products
The company's products are sold to water utilities, original equipment
manufacturers and various industrial customers primarily operating in the
following markets: water, wastewater and process waters; energy and petroleum;
food and beverage; pharmaceutical; chemical; and concrete.
The company has five major product lines: residential and
commercial/industrial water meters (with related technologies), automotive fluid
meters, small precision valves and industrial process meters. Water meters and
related systems produce the majority of the company's sales. A "water meter
system" generally consists of a water meter, a register (some with an interface
technology for communicating the reading), packaging and the monitoring or
computerized management system used to collect and relay the reading.
The company's products are primarily manufactured and assembled in the
company's Milwaukee, Wisconsin, Tulsa, Oklahoma, Rio Rico, Arizona and Brno,
Czech Republic facilities. Assembly is also done in the company's Nogales,
Mexico and Stuttgart, Germany facilities.
Badger Meter's products are sold throughout the world through various
distribution channels including direct sales representatives, distributors and
independent sales representatives. There is only a moderate seasonal impact on
sales, primarily relating to slightly higher sales of certain utility products
during the spring and summer months. No single customer accounts for more than
10% of the company's sales.
Competition
There are several competitors in each of the markets in which the
company sells its products, and the competition varies from moderate to intense.
Major competitors include Invensys, Inc., Neptune Technology Group, Inc.
(formerly Schlumberger Industries, Inc.) and ABB-Kent Meters, Inc. A number of
the company's competitors in certain markets have greater financial resources.
The company believes it currently provides the leading technology in certain
types of automated and automatic water meter systems and small, high-precision
valves. As a result of significant research and development activities, the
company enjoys favorable patent positions for several of its products.
Backlog
The dollar amount of the company's total backlog of unshipped orders at
December 31, 2001 and 2000 was $18,100,000 and $20,400,000, respectively. The
company expects to ship nearly all of the December 31, 2001 backlog in 2002.
Raw Materials
Raw materials used in the manufacture of the company's products include
metal or alloys (such as bronze, aluminum, stainless steel, cast iron, brass and
stellite), plastic resins, glass, microprocessors and other electronic
subassemblies and components. There are multiple sources for these raw
materials, but the company purchases some bronze castings and certain electronic
subassemblies from single suppliers. The company believes these items would be
available from other sources, but that the loss of its current suppliers would
result in higher cost of materials, delivery delays, short-term increases in
inventory and higher quality control costs. The company carries business
interruption insurance on key suppliers. Prices may also be affected by world
commodity markets.
2
Research and Development
Expenditures for research and development activities relating to the
development of new products, the improvement of existing products and
manufacturing process improvements were $5,422,000 during 2001, as compared to
$6,562,000 during 2000 and $6,012,000 during 1999. Research and development
activities are primarily sponsored by the company. The company also engages in
some joint research and development with other companies.
Intangible Assets
The company owns or controls many patents, trademarks, trade names and
license agreements in the United States and other countries that relate to its
products and technologies. No single patent, trademark, trade name or license is
material to the company's business as a whole.
Environmental Protection
The company is subject to contingencies relative to compliance with
Federal, State and local provisions and regulations relating to the protection
of the environment. Currently the company is in the process of resolving an
issue relative to a landfill site. The company does not believe the ultimate
resolution of this issue will have a material adverse effect on the company's
financial position or results of operations. Expenditures during 2001 and 2000
for compliance with environmental control provisions and regulations were not
material and the company does not anticipate any material future expenditures.
To insure compliance with environmental regulations at company sites,
the Board of Directors has established a Compliance Committee that monitors the
company's compliance with various regulatory authorities in regard to
environmental matters, among other things.
Employees
The company and its subsidiaries employed 936 persons at December 31,
2001, of which 230 employees are covered by a collective bargaining agreement
with District 10 of the International Association of Machinists. The company is
currently operating under a four-year contract with the union, which expires on
October 31, 2004. The company has good relations with the union and all of its
employees.
Foreign Operations and Export Sales
The company has distributors and sales representatives throughout the
world. Additionally, the company has a sales, assembly and distribution facility
in Stuttgart, Germany, sales and customer service offices in Mexico City and
Singapore, an assembly facility in Nogales, Mexico, and a manufacturing facility
in Brno, Czech Republic. The company exports products from the United States
that are manufactured in Milwaukee, Wisconsin, Tulsa, Oklahoma, and Rio Rico,
Arizona.
Information about the company's foreign operations and export sales is
included in Note 10 in the Notes to Consolidated Financial Statements of the
company's 2001 Annual Report to Shareholders and such information is
incorporated herein by reference.
Financial Information about Industry Segments
The company operates in one industry segment as a marketer and
manufacturer of various flow measurement and control products as described in
Note 10 in the Notes to Consolidated Financial Statements of the company's 2001
Annual Report to Shareholders and such information is incorporated herein by
reference.
3
Item 2. Properties
The principal facilities utilized by the company at December 31, 2001,
are listed below. Except as indicated, the company owns all of such facilities
in fee simple. The company believes that its facilities are generally well
maintained and have sufficient capacity for its current needs.
Approximate Area
Location Principal Use (Square Feet)
-------- ------------- -------------
Milwaukee, Wisconsin Manufacturing and offices 323,000
Tulsa, Oklahoma Manufacturing and offices 59,500
Rio Rico, Arizona Manufacturing and offices 36,000
Nogales, Mexico Assembly and offices 41,700 (1)
Stuttgart, Germany Assembly and offices 23,000 (2)
Brno, Czech Republic Manufacturing and offices 12,900
(1) Leased facility. Lease term expires January 31, 2004.
(2) Leased facility. Lease term expires December 31, 2005.
Item 3. Legal Proceedings
There are currently no material legal proceedings pending with relation
to the company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the company's shareholders
during the quarter ended December 31, 2001.
4
Executive Officers of the Company
The following table sets forth certain information regarding the
executive officers of the company.
Age at
Name Position 2/28/2002
---- -------- ---------
James L. Forbes Chairman and Chief Executive Officer 69
Richard A. Meeusen President 47
Robert D. Belan Executive Vice President 61
Robert M. Bullis Vice President - Manufacturing 52
Ronald H. Dix Vice President - Administration and 57
Human Resources
Deirdre C. Elliott Vice President - Corporate Counsel 45
and Secretary
Horst Gras Vice President - International Operations 46
Richard E. Johnson Vice President - Finance, Chief Financial 47
Officer and Treasurer
Beverly L.P. Smiley Vice President - Corporate Controller 52
Kenneth E. Smith Vice President - Sales and Marketing 53
Dennis J. Webb Vice President - Engineering 54
Daniel D. Zandron Vice President - Business Development 53
There are no family relationships between any of the executive
officers. All of the officers are elected annually at the first meeting of the
Board of Directors held after each annual meeting of the shareholders. Each
officer holds office until his successor has been elected or until his death,
resignation or removal. There is no arrangement or understanding between any
executive officer and any other person pursuant to which he was elected as an
officer.
Mr. Forbes was elected Chairman and Chief Executive Officer in November
2001. Mr. Forbes served as Chairman, President and Chief Executive officer from
February to November 2001, and has served as Chairman and Chief Executive
Officer from April 1999 to February 2001. Prior to that date, Mr. Forbes served
as President and Chief Executive Officer for more than five years.
Mr. Meeusen was elected President in November 2001. Mr. Meeusen served
as Executive Vice President - Administration from February to November 2001, and
as Treasurer from January 1996 to February 2001. In addition, Mr. Meeusen served
as Vice President - Finance and Chief Financial Officer from November 1995 to
February 2001.
Mr. Belan was elected Executive Vice President in November 2001. Mr.
Belan served as Executive Vice President - Operations from February to November
2001, and as President and Chief Operating Officer from April 1999 to February
2001. Mr. Belan served as Executive Vice President from April 1998 to April
1999. Prior to that date, Mr. Belan served as Vice President - Utility for more
than five years.
Mr. Bullis was elected Vice President - Manufacturing in February 2001.
He served as Vice President - Operations from November 1999 to February 2001.
Prior to that date, Mr. Bullis served as Vice President - Operations - Utility
for more than five years.
5
Mr. Dix was elected Vice President - Administration and Human Resources
in November 2001. Mr. Dix served as Vice President - Human Resources from
February to November 2001. Prior to that date, Mr. Dix served as Vice President
- Administration and Human Resources for more than five years.
Ms. Elliott has served as Vice President - Corporate Counsel and
Secretary for more than five years.
Mr. Gras was elected Vice President - International Operations in
November 2001. Prior to that date, Mr. Gras served as Vice President - Badger
Meter Europe for more than five years.
Mr. Johnson joined the company and was elected Vice President -
Finance, Chief Financial Officer and Treasurer in February 2001. Prior to
joining the company, Mr. Johnson served as Director of Business Support for the
Energy Delivery Business of Wisconsin Electric Power Company from 1999 to
December 2000. From 1996 to 1999, Mr. Johnson served as the Director of Business
Support for the Distribution Operations of Wisconsin Electric Power Company.
Ms. Smiley was elected Vice President - Corporate Controller in
November 1999. Ms. Smiley served as Corporate Controller from April 1997 to
November 1999. Prior to that date, Ms. Smiley served as Accounting Manager of
the company for more than five years.
Mr. Smith was elected Vice President - Sales and Marketing in November
2001. Mr. Smith served as Vice President - Industrial Products and International
from November 2000 to November 2001. Mr. Smith served as Vice President -
Industrial and Commercial Products from January 2000 to November 2000. Prior to
joining the company, Mr. Smith served as President of Peek Measurement Group for
more than five years.
Mr. Webb was elected Vice President - Engineering in November 2001. Mr.
Webb served as Vice President - Customer Solutions from April 2000 to November
2001, and as Vice President - Engineering and Quality from November 1999 to
April 2000. Prior to that date, Mr. Webb served as Vice President - Engineering
and Quality - Utility for more than five years.
Mr. Zandron was elected Vice President - Business Development in
November 2001. Mr. Zandron served as Vice President - Utility Products from
November 2000 to November 2001, and as Vice President - Commercial and
Industrial Products, and a number of similar capacities, from January 2000 to
November 2000. From May 1999 to January 2000, Mr. Zandron served as Vice
President - Commercial and Industrial Products - Utility. Prior to that date,
Mr. Zandron served as Vice President - Commercial and Industrial and Marketing
for more than five years.
Part II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The information set forth on page 25 in the company's 2001 Annual
Report to Shareholders is incorporated herein by reference in response
to this Item.
Item 6. Selected Financial Data
The information set forth on pages 1 and 26 in the company's 2001
Annual Report to Shareholders is incorporated herein by reference in
response to this Item.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth on pages 12 through 15 in the company's 2001
Annual Report to Shareholders is incorporated herein by reference in
response to this Item.
Item 7.a. Quantitative and Qualitative Disclosures of Market Risk
The information set forth on page 15 under the heading "Market Risk"
in the company's 2001 Annual Report to Shareholders is incorporated
herein by reference in response to this Item.
6
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of the company at December 31, 2001
and 2000 and for each of the three years in the period ended December
31, 2001 and the auditor's report thereon and the company's unaudited
quarterly financial data for the two-year period ended December 31,
2001 are incorporated herein by reference from the 2001 Annual Report
to Shareholders, pages 16 through 26.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
Information required by this Item with respect to directors is included
under the headings "Nomination and Election of Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the company's
definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on April 19, 2002, and is incorporated herein
by reference.
Information concerning the executive officers of the company is
included in Part I of this Form 10-K.
Item 11. Executive Compensation
Information required by this Item is included under the headings
"Nomination and Election of Directors - Director Compensation" and
"Executive Compensation" in the company's definitive Proxy Statement
relating to the Annual Meeting of Shareholders to be held on April 19,
2002, and is incorporated herein by reference; provided, however, that
the subsection entitled "Executive Compensation-Board Management Review
Committee Report on Executive Compensation" shall not be deemed to be
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this Item is included under the heading "Stock
Ownership of Management and Others" in the company's definitive Proxy
Statement relating to the Annual Meeting of Shareholders to be held on
April 19, 2002, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information required by this Item is included under the headings
"Management Review Committee Interlocks and Insider Participation" and
"Certain Transactions" in the company's definitive Proxy Statement
relating to the Annual Meeting of Shareholders to be held on April 19,
2002, and is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) Documents filed
1. and 2. Financial Statements and Financial Statement Schedule.
See Index to Financial Statements and Financial
Statement Schedule on page F-0 which is incorporated
herein by reference.
7
3. Exhibits. See the Exhibit Index included as the last
pages of this report which is incorporated herein by
reference.
(b) Reports on Form 8-K
No report on Form 8-K was filed by the registrant during the
quarter ended December 31, 2001.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BADGER METER, INC.
Registrant
By: /s/ Richard E. Johnson
----------------------
Richard E. Johnson
Vice President - Finance, Chief Financial Officer,
and Treasurer
February 8, 2002
By: /s/ Beverly L.P. Smiley
-----------------------
Beverly L.P. Smiley
Vice President - Corporate Controller
February 8, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ James L. Forbes /s/ Andrew J. Policano
------------------- ----------------------
James L. Forbes Andrew J. Policano
Chairman and Director
Chief Executive Officer February 8, 2002
February 8, 2002
/s/ Richard A. Meeusen /s/ Steven J. Smith
---------------------- -------------------
Richard A. Meeusen Steven J. Smith
President Director
February 8, 2002 February 8, 2002
/s/ Charles F. James, Jr. /s/ John J. Stollenwerk
------------------------- -----------------------
Charles F. James, Jr. John J. Stollenwerk
Director Director
February 8, 2002 February 8, 2002
/s/ Kenneth P. Manning /s/ James O. Wright, Jr.
---------------------- ------------------------
Kenneth P. Manning James O. Wright, Jr.
Director Director
February 8, 2002 February 8, 2002
/s/ Ulice Payne, Jr.
--------------------
Ulice Payne, Jr.
Director
February 8, 2002
9
BADGER METER, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Page References
Annual Report
to
Shareholders Form 10-K
Page Number Page Number
----------- -----------
Item 14(a) 1
Financial statements:
Consolidated statements of operations
for each of the three years in the
period ended December 31, 2001 16
Consolidated balance sheets at
December 31, 2001 and 2000 17
Consolidated statements of cash flows
for each of the three years in the
period ended December 31, 2001 18
Consolidated statements of shareholders'
equity for each of the three years in
the period ended December 31, 2001 19
Notes to consolidated financial
statements 20 - 25
Report of Ernst & Young LLP,
Independent Auditors 26
Item 14(a) 2
Financial statement schedules:
Consolidated schedules for each of
the three years in the period ended
December 31, 2001
II - Valuation and qualifying accounts F-1
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedules, or
because the information required is included in the financial statements and the
notes thereto.
F-0
10
BADGER METER, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2001, 2000 and 1999
Balance at Additions Deductions Balance
beginning charged to from at end
of year earnings allowances of year
Allowance for doubtful receivables:
2001 $626,000 $23,000 $ 17,000 (a) $632,000
======== ======= ============ ========
2000 $496,000 $154,000 $24,000 (a) $626,000
======== ======== =========== ========
1999 $369,000 $95,000 $(32,000) (a) $496,000
======== ======= ============= ========
Warranty/after-sale cost reserve:
2001 $3,245,000 $1,837,000 $1,629,000 $3,453,000
========== ========== ========== ==========
2000 $3,835,000 $1,503,000 $2,093,000 $3,245,000
========== ========== ========== ==========
1999 $4,386,000 $1,368,000 $1,919,000 $3,835,000
========== ========== ========== ==========
Note:
(a) Accounts receivable written off, less recoveries, against the allowance.
F-1
11
EXHIBIT INDEX
Exhibit No. Exhibit Description
(3.0) Restated Articles of Incorporation effective September 30,
1999. [Incorporated by reference from Exhibit (3.0) (i) to the
Registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1999].
(3.1) Restated By-Laws as amended November 9, 2001.
(4.0) Loan Agreement, as amended April 30, 1988, between the
Registrant and the M&I Marshall & Ilsley Bank relating to the
Registrant's revolving credit loan. [Incorporated by reference
from Exhibit (4.0) to the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1988].
(4.1) Loan Agreement between Firstar Bank Milwaukee, N.A. and the
Badger Meter Employee Savings and Stock Ownership Plan and
Trust, dated December 1, 1995. [Incorporated by reference from
Exhibit (4.3) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995].
(4.2) Loan Agreement, as amended December 21, 1998, between Firstar
Bank Milwaukee, N.A. and the Badger Meter Employee Savings and
Stock Ownership Plan and Trust. [Incorporated by reference
from Exhibit (4.2) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1998].
(4.3) Rights Agreement, dated May 26, 1998, between Registrant and
Firstar Trust Company. [Incorporated by reference to Exhibit
(4.1) to the Registrant's Registration Statement on Form 8-A
(Commission File No. 1-6706)].
(9.1) Badger Meter Officers' Voting Trust Agreement dated December
18, 1991. [Incorporated by reference from Exhibit (9.1) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991].
(10.1)* Badger Meter, Inc. 1989 Stock Option Plan. [Incorporated by
reference from Exhibit (4.1) to the Registrant's Form S-8
Registration Statement (Registration No. 33-27650)].
(10.2)* Badger Meter, Inc. 1993 Stock Option Plan. [Incorporated by
reference from Exhibit (4.3) to the Registrant's Form S-8
Registration Statement (Registration No. 33-65618)].
(10.3)* Badger Meter, Inc. 1995 Stock Option Plan. [Incorporated by
reference from Exhibit (4.1) to the Registrant's Form S-8
Registration Statement (Registration No. 33-62239)].
* A management contract or compensatory plan or arrangement.
12
EXHIBIT INDEX (CONTINUED)
Exhibit No. Exhibit Description
(10.4)* Badger Meter, Inc. 1997 Stock Option Plan. [Incorporated by
reference from Exhibit (4.1) to the Registrant's Form S-8
Registration Statement (Registration No. 333-28617)].
(10.5)* Badger Meter, Inc. Deferred Compensation Plan. [Incorporated
by reference from Exhibit (10.5) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993].
(10.6) Badger Meter, Inc. Employee Savings and Stock Ownership Plan.
[Incorporated by reference from Exhibit (4.1) to the
Registrant's Form S-8 Registration Statement (Registration No.
033-62241)].
(10.7)* Long-Term Incentive Plan. [Incorporated by reference from
Exhibit (10.6) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995].
(10.8)* Badger Meter, Inc. Supplemental Non-Qualified Unfunded Pension
Plan. [Incorporated by reference from Exhibit (10.7) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995].
(10.9)* Forms of the Key Executive Employment and Severance Agreements
between Badger Meter, Inc. and the applicable executive
officers. [Incorporated by reference from Exhibit (10.0) to
the Registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1999].
(10.10)* Badger Meter, Inc. 1999 Stock Option Plan. [Incorporated by
reference from Exhibit (4.1) to the Registrant's Form S-8
Registration Statement (Registration No. 333-73228)].
(10.11)* Badger Meter, Inc. Amendment to Deferred Compensation Plan.
[Incorporated by reference from Exhibit (10.11) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000.]
(10.12)* Retirement Agreement between Robert D. Belan and the
Registrant, dated January 28, 2002.
(13.0) Portions of the Annual Report to Shareholders that are
incorporated by reference.
(21.0) Subsidiaries of the Registrant.
(23.0) Consent of Ernst & Young LLP, Independent Auditors.
(99.0) Definitive Proxy Statement for the Annual Meeting of
Shareholders to be held April 19, 2002. [To be filed with the
Securities and Exchange Commission under Regulation 14A within
120 days after the end of the Registrant's fiscal year. With
the exception of the information incorporated by reference
into Items 10, 11, 12 and 13 of this Form 10-K, the definitive
Proxy Statement is not deemed filed as part of this report].
* A management contract or compensatory plan or arrangement.
13