FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 15-(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15-(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
---------------------- -----------------------
Commission file number 1-6706
A. Full title of the Plan and the address of the Plan, if different from that
of the issuer named below:
BADGER METER EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Badger Meter, Inc.
4545 W. Brown Deer Road
Milwaukee, WI 53223
REQUIRED INFORMATION
The Badger Meter Employee Savings and Stock Ownership Plan (the Plan) is subject
to the requirements of the Employee Retirement Income Security Act of 1974
(ERISA). Attached hereto is a copy of the most recent financial statements and
schedules of the Plan prepared in accordance with the financial reporting
requirements of ERISA.
2
Badger Meter Employee Savings and Stock
Ownership Plan
Financial Statements and Additional Information
December 31, 2004 and 2003
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Table of Contents
Report of Independent Registered Public Accounting Firm..........................4
Financial Statements
Statements of Net Assets Available for Benefits...............................5
Statement of Changes in Net Assets Available for Benefits.....................6
Notes to Financial Statements.................................................7
Additional Information
Schedule H Item 4i - Schedule of Assets Held for Investment Purposes.........19
Schedule H Item 4j - Schedule of Reportable Transactions.....................20
3
WIPFLi LLP
Report of Independent Registered Public Accounting Firm
Employee Benefit Plans Committee of the Board of Directors of Badger Meter, Inc.
Badger Meter Employee Savings and Stock Ownership Plan
Milwaukee, Wisconsin
We have audited the accompanying statements of net assets available for benefits
of Badger Meter Employee Savings and Stock Ownership Plan as of December 31,
2004 and 2003, and the related statement of changes in net assets available for
benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2004 and 2003, and the changes in its net assets available for
benefits for the year ended December 31, 2004 in conformity with U.S. generally
accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information of assets held
for investment purposes as of December 31, 2004 and reportable transactions for
the year ended December 31, 2004 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Wipfli LLP
April 22, 2005
Milwaukee, Wisconsin
4
Badger Meter Employee Savings and Stock
Ownership Plan
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
--------------------------------------------------------------------------------
2004 2003
----------- -----------
Cash $ 309,948 $ 174,674
Investments, at fair value 52,011,439 41,487,833
Receivables:
Company contributions 154,386 223,952
Interest 4,773 5,400
----------- -----------
Total receivables 159,159 229,352
----------- -----------
Total assets 52,480,546 41,891,859
----------- -----------
Liabilities:
Notes payable 1,065,000 1,285,000
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $51,415,546 $40,606,859
=========== ===========
See accompanying notes to financial statements. 5
Badger Meter Employee Savings and Stock
Ownership Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2004
--------------------------------------------------------------------------------
2004
-----------
Additions:
Investment income:
Net appreciation in fair value of investments $ 9,484,656
Interest and dividends 982,974
-----------
Total investment income 10,467,630
-----------
Contributions:
Company 154,386
Roll over 505,125
Participants 2,679,409
-----------
Total contributions 3,338,920
-----------
Total additions 13,806,550
-----------
Deductions:
Benefits paid to participants 2,962,941
Interest expense 32,293
Loan fees 2,629
-----------
Total deductions 2,997,863
-----------
Net increase 10,808,687
-----------
Net assets available for benefits:
Balance at beginning of year 40,606,859
-----------
Balance at end of year $51,415,546
===========
See accompanying notes to financial statements. 6
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 1
Description of the Plan
General
The following description of Badger Meter Employee Savings and Stock Ownership
Plan ("the Plan") is for general information purposes only. Participants should
refer to the summary plan description for a more complete description of the
Plan. The Plan is a defined-contribution plan adopted under Section 401(k) of
the Internal Revenue Code (the "Code"). The Plan was established as of January
1, 1991, to consolidate the Badger Meter Savings Plan, the Badger Meter
Payroll-Based Employee Stock Ownership Plan, and the Badger Meter Employee Stock
Ownership Plan into a single plan.
Substantially all domestic employees of Badger Meter, Inc. ("the Company") are
eligible to participate in the Plan. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
Contributions
Participant contributions may be made up to a maximum of 20% of their
compensation on a pretax basis, not to exceed the amount allowed by the Code.
Company contributions are made at a rate of 25% of the participant
contributions, with the Company contribution percentage applying to a maximum of
7% of the participant's compensation for the year. The Company may also
contribute additional amounts over and above the required contribution at the
discretion of the Company's Board of Directors. No such contributions were made
in 2004.
Participant contributions are directed into various investment options
(currently totaling nine) at the participant's discretion. Company contributions
are made in cash and are used by the Plan to repay principal and interest on the
note payable (see Note 5). As principal and interest payments are made on the
note payable, unallocated shares of Badger Meter, Inc. common stock, which serve
as collateral for the note payable, are released to Plan participants and
provide the Company matching contribution at current market values. Participant
contributions may be temporarily invested in a money market common trust fund
before being invested in the aforementioned investments.
7
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 1
Description of the Plan (Continued)
Contributions (Continued)
All contributions are excluded from the participant's current wages for federal
income tax purposes. No federal income tax is paid for the pretax contributions
and growth thereon until the participant withdraws them from the Plan.
Participant Accounts
Each participant's account is credited with the participant's contribution, the
Company's matching contribution, an allocation of the Company's discretionary
contribution, if any, and Plan earnings. The Company's discretionary
contribution is allocated equally to all participants. Plan earnings are
allocated based on the participant's account balances in relation to total
participant account balances. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's account.
Vesting
Participants are fully vested in all amounts in their accounts.
Payment of Benefits
Upon retirement, death, disability, or termination of employment, the
participant's account shall generally be distributed in a single lump sum at the
participant's option. Final distributions will be made either in shares of
Company common stock plus cash in lieu of fractional shares or entirely in cash.
8
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 1
Description of the Plan (Continued)
Withdrawals
A participant's contribution may not be withdrawn prior to retirement, death,
disability, termination of employment, or termination of the Plan, except for
financial hardship, a one-time distribution after age 59 1/2, or in the form of
loans to participants. The Plan defines financial hardship as expenses related
to college education, uninsured major medical expense, purchase of the
participant's principal residence, or other financial need that cannot be met
from other resources of the participant. All withdrawals are subject to approval
by the Plan Administrator.
Loans to Participants
Participants are allowed to borrow from their separate account balance. The
amount of a loan shall not be less than $1,000 or more than $50,000 and shall
not exceed 50% of the participant's account balance.
Loan maturities cannot exceed 60 months and are secured by the participants'
vested interests in the Plan. Amounts loaned to a participant do not share in
the allocations of Plan earnings (see Participant's Accounts above), but are
credited with the interest earned on the loan balance payable by the participant
charged at a reasonable rate as determined by the Plan Administrator.
Note 2
Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements are prepared using the accrual basis of
accounting in accordance with U.S. generally accepted accounting principles.
9
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 2
Summary of Significant Accounting Policies (Continued)
Investment Valuation
The investment in the guaranteed income group annuity insurance contract is
valued at contract value as reported by Massachusetts Mutual Life Insurance
Company ("Mass Mutual"). Contract value represents contributions made under the
contract, plus interest at the contract rate, less funds used to pay benefits
and the insurance company's administrative expenses. The Mass Mutual contract is
a "fully benefit-responsive" investment contract, as defined in Statement of
Position 94-4, "Reporting of Investment Contracts Held by Health and Welfare
Benefit Plans and Defined Contribution Pension Plans." As such, this contract is
stated at contract value as reported by the insurance company. Crediting
interest rates are adjusted annually on January 1.
The investments in mutual funds are valued at the redemption price established
by the fund's trustee based upon the quoted prices of the underlying assets.
Units of common trust funds are valued at quoted redemption price.
The investment in Badger Meter, Inc. common stock, which is traded on the
American Stock Exchange, is valued at the last reported sales price on the last
business day of the Plan year.
The money market fund is valued at fair value based on quoted market or
redemption price on the last business day of the Plan year.
Loans receivable from participants are reported at their unpaid principal
balance, which approximates fair value.
10
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 2
Summary of Significant Accounting Policies (Continued)
Use of Estimates in Preparation of Financial Statements
The preparation of the accompanying financial statements in conformity with U.S.
generally accepted accounting principles, requires the administrators to make
estimates and assumptions that directly affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements. Actual results may differ from these estimates.
Expenses
Expenses related to the administration of the Plan are paid by the Company.
Investment expenses are payable by the Plan and reimbursed by the Company at its
discretion.
Payment of Benefits
Benefits are recorded when paid.
Risk and Uncertainties
The Plan's investments are exposed to various risks, such as interest rate,
market and credit risks. Due to the level of risk associated with certain
investments and the level of uncertainty related to changes in the values of
investments, it is at least reasonably possible that changes in risks in the
near term would materially affect participants' account balances and the amounts
reported in the statements of net assets available for benefits and the
statement of changes in net assets available for benefits.
11
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 3
Investments
Guaranteed Income Group Annuity Contract No. IG 4178
This contract is an unallocated insurance contract with Mass Mutual, which is
credited at least annually for interest earned. Interest rates for 2004 and 2003
were 4.4% and 5.0%, respectively. Mass Mutual determines the annual guaranteed
interest rate each January 1. The average yields for 2004 and 2003 were 4.4% and
5.0%, respectively.
Badger Meter, Inc. Common Stock
The Plan's investment in Badger Meter, Inc. stock consists of 675,451 shares and
732,528 shares (adjusted for a two-for-one stock split in December 2004) as of
December 31, 2004 and 2003, respectively. At December 31, 2004 and 2003, the
fair value of the Plan's investment in Badger Meter, Inc. common stock, as
determined by quoted market price, was $20,230,793 and 13,972,972, respectively.
During 2004, the Plan's investments (including investments purchased, sold, as
well as held during the year) appreciated in fair value as follows:
2004
-----------
Badger Meter, Inc. common stock $7,506,025
Common trust funds 874,558
Mutual funds 1,104,073
-----------
Net appreciation in fair value of investments $9,484,656
==========
12
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 3
Investments (Continued)
Investments that represent 5% or more of fair value of the Plan's net assets are
as follows:
December 31,
2004
-----------
Badger Meter, Inc. common stock $20,230,793
M&I Growth Balanced Portfolio 3,722,937
M&I Diversified Stock Portfolio 5,029,529
Massachusetts Mutual Unallocated Insurance Contract 11,286,573
Heartland Value Plus Fund 4,877,378
-----------
Total $45,147,210
===========
Note 4
Allocated and Unallocated Net Assets Available For Benefits
Information about net assets available for benefits as of December 31, 2004 and
2003 and the significant components of changes in net assets available for
benefits during 2004 related to allocated and unallocated net assets is as
follows:
2004 2003
------------ ------------
Cash (allocated) $ 218,447 $ 108,626
Cash (unallocated) 91,501 66,048
Investments, at fair value:
Badger Meter, Inc. common stock (allocated) 17,127,596 11,589,093
Badger Meter, Inc. common stock (unallocated) 3,103,197 2,383,879
Investments (allocated) 31,780,646 27,514,861
Receivables:
Company (unallocated) 154,386 223,952
Interest (allocated) 4,773 5,361
Interest (unallocated) 0 39
Note payable (unallocated) (1,065,000) (1,285,000)
------------ ------------
Total $ 51,415,546 $ 40,606,859
============ ============
13
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
NOTE 4
Allocated and Unallocated Net Assets Available For Benefits (Continued)
2004
--------------------------------------------------
Unallocated Allocated Total
----------- --------- ----------
Change in net assets:
Net appreciation in fair value of
investments $1,123,494 $8,361,162 $9,484,656
Interest and dividends 57,784 925,190 982,974
Contributions:
Company 154,386 0 154,386
Roll over 0 505,125 505,125
Participants 0 2,679,409 2,679,409
Benefits paid to participants 0 (2,962,941) (2,962,941)
Interest expense (32,293) 0 (32,293)
Loan fees (76) (2,553) (2,629)
Transfers (408,129) 408,129 0
---------- ---------- -----------
Total $895,166 $9,913,521 $10,808,687
========== ========== ===========
Effective January 1, 2003, all participants have the ability to direct the
investments within their accounts. Accordingly, all allocated investments are
fully participant directed.
Note 5
Note Payable
At December 31, 2004, the outstanding balance on the loan is $1,065,000. The
terms of the loan allow variable payments of principal with the final principal
and interest payment due April 30, 2008. Interest is payable at the prime
interest rate (effective rate of 5.25% at December 31, 2004) or at the LIBOR
rate plus 1.50% (effective rate of 3.70% at December 31, 2004). At December 31,
2004, the Plan has exercised its option to designate the outstanding balance as
a LIBOR rate loan. The note payable is secured by the unallocated shares of
Badger Meter, Inc. common stock held by the Plan (see summary below). In
addition, the Company has guaranteed the note payable and is obligated to
contribute sufficient cash to the Plan to enable it to repay the loan principal
and interest in the event the Plan is unable to settle its obligation.
14
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 5
Note Payable (Continued)
The pledged unallocated shares of Badger Meter, Inc. common stock are released
as principal and interest payments are made on the note payable. The shares
released, less any shares that are distributed as benefit payments, are
considered available and are allocated to the participants' accounts just prior
to each annual principal due date on the note payable.
The note agreement contains certain restrictions and covenants, including a
limitation on additional borrowings.
The Company contributions are used to make principal and interest payments on
the note payable. The Plan will release unallocated shares with a value in
excess of the principal payments made due to appreciation of the Company's
stock.
As of December 31, 2003, $1,285,000 was due under a note payable with terms and
conditions similar to the note payable described above. The note was refinanced
during 2004.
At December 31, 2004 and 2003, the breakdown between allocated and unallocated
shares was as follows:
2004
---------------------------------------------------
Shares Available
for Benefits Cost Fair Value
---------------------------------------------------
Allocated 571,873 $4,974,934 $17,127,596
Unallocated 103,578 1,064,989 3,103,197
------- ---------- -----------
Total 675,451 $6,039,923 $20,230,793
======= ========== ===========
Per share $29.95
======
15
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 5
Note Payable (Continued)
2003
---------------------------------------------------
Shares Available
for Benefits* Cost Fair Value
---------------------------------------------------
Allocated 607,554 $4,462,679 $11,589,093
Unallocated 124,974 1,284,983 2,383,879
------- ---------- -----------
Total 732,528 $5,747,662 $13,972,972
======= ========== ===========
Per share $19.08
======
*Restated to reflect a 2 for 1 stock split during 2004.
Note 6
Plan Termination
Although it has not expressed any intent to do so, the Company has the right to
discontinue its contributions at any time and to terminate the Plan subject to
the provisions of ERISA.
Note 7
Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated August 3, 1995, stating that the Plan is qualified under Section 401(a)
and 401(k) of the Code and, therefore, the related trust is exempt from
taxation. Subsequent to the issuance of the determination letter, the Plan was
amended. A new determination letter has been requested in 2002 but not yet
received. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan Administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is
tax-exempt.
16
Badger Meter Employee Savings and Stock
Ownership Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 8
Related Party Transactions
During 2004 and 2003, the Plan received $386,189 and $398,904, respectively, in
common stock dividends from the Company.
Note 9
Voting Rights
Each participant is entitled to exercise voting rights attributable to the
shares allocated to his or her account. Unallocated shares are voted on by the
Plan's administrative committee on behalf of the collective best interest of
plan participants and beneficiaries.
17
Additional Information
--------------------------------------------------------------------------------
Badger Meter Employee Savings and
Stock Ownership Plan
Schedule H Item 4i - Schedule of Assets Held for Investment Purposes
EIN: 39-0143280 Plan Number: 009
Year Ended December 31, 2004
--------------------------------------------------------------------------------
Description of Current
Identity of Issue Investment Cost Value
-------------------------------------------------------------------------------------------------------------------------
Badger Meter, Inc. Common Stock * 675,451 shares $6,039,923 $20,230,793
Massachusetts Mutual Life Insurance Company Insurance
Contract ** 11,286,573
Heartland Value Plus Fund 181,653 shares ** 4,877,378
Marshall Government Income Fund * 148,141 shares ** 1,425,115
Marshall International Stock Fund * 98,334 shares ** 1,239,009
M&I Growth Balanced Portfolio * 152,838 shares ** 3,722,937
M&I Diversified Stock Portfolio * 176,867 shares ** 5,029,529
Fidelity Advisor Mid Cap Fund 55,608 shares ** 1,402,443
Managers Special Equity Fund 10,707 shares ** 968,026
Goldman Sachs Small Cap Value 5,154 shares ** 219,912
Davis N Y Venture Fund 20,363 shares ** 624,944
Participant loans Interest rates ranging $ 984,780 984,780
between 4.0% and 9.5% with
various maturity dates
Total Assets Held for Investment Purposes $52,011,439
===========
* Party-in-interest.
** Cost information not required for participant-directed investments.
See report of independent registered public accounting firm. 19
Badger Meter Employee Savings and
Stock Ownership Plan
Schedule H Item 4j - Schedule of Reportable Transactions
EIN: 39-0143280 Plan Number: 009
Year Ended December 31, 2004
--------------------------------------------------------------------------------
Current Value
of Asset on
Description of Cost of Transaction Net Gain
Identity of Issue Asset Purchase Price Selling Price Asset Date or (Loss)
------------------------------------------------------------------------------------------------------------------------------------
Category (iii) - Series of security transactions in excess of 5% of plan assets:
Marshall & Ilsley Bank Cash $579,389 $0 $579,389 $579,389 $0
Marshall & Ilsley Bank Cash $0 $560,988 $560,988 $560,988 $0
Marshall & Ilsley Bank Badger Meter, Inc. $464,781 $0 $464,781 $464,781 $0
Common Stock
Marshall & Ilsley Bank Badger Meter, Inc. $0 $1,683,020 $331,563 $1,351,457 $1,019,894
Common Stock
====================================================================================================================================
There were no category (i), (ii) or (iv) reportable transactions for the year
ended December 31, 2004.
See report of independent registered public accounting firm. 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
Badger Meter
Employee Savings and Stock
Ownership Plan
Date: June 17, 2005 By: /s/ Richard A. Meeusen
--------------------------------
Richard A. Meeusen
Trustee
By: /s/ Ronald H. Dix
--------------------------------
Ronald H. Dix
Trustee
21
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
23 Consent of Wipfli LLP, Independent Registered Public Accounting
Firm
22