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<SEC-DOCUMENT>0000950124-02-000766.txt : 20020415
<SEC-HEADER>0000950124-02-000766.hdr.sgml : 20020415
ACCESSION NUMBER: 0000950124-02-000766
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020312
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BADGER METER INC
CENTRAL INDEX KEY: 0000009092
STANDARD INDUSTRIAL CLASSIFICATION: TOTALIZING FLUID METERS & COUNTING DEVICES [3824]
IRS NUMBER: 390143280
STATE OF INCORPORATION: WI
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-06706
FILM NUMBER: 02572790
BUSINESS ADDRESS:
STREET 1: 4545 WEST BROWN DEER ROAD
CITY: MILWAUKEE
STATE: WI
ZIP: 53223
BUSINESS PHONE: 4143715702
MAIL ADDRESS:
STREET 1: 4545 W BROWN DEER RD
CITY: MILWAUKEE
STATE: WI
ZIP: 53223
FORMER COMPANY:
FORMER CONFORMED NAME: BADGER METER MANUFACTURING CO
DATE OF NAME CHANGE: 19710729
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>c67956e10-k405.txt
<DESCRIPTION>ANNUAL REPORT FOR FISCAL YEAR ENDED 12/31/01
<TEXT>
<PAGE>
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].
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Approximate Area
Location Principal Use (Square Feet)
- -------- ------------- -------------
<S> <C> <C>
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
</TABLE>
(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
<PAGE>
Executive Officers of the Company
The following table sets forth certain information regarding the
executive officers of the company.
<TABLE>
<CAPTION>
Age at
Name Position 2/28/2002
- ---- -------- ---------
<S> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
BADGER METER, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page References
Annual Report
to
Shareholders Form 10-K
Page Number Page Number
----------- -----------
<S> <C> <C>
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
</TABLE>
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
<PAGE>
BADGER METER, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
beginning charged to from at end
of year earnings allowances of year
<S> <C> <C> <C> <C>
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
========== ========== ========== ==========
</TABLE>
Note:
(a) Accounts receivable written off, less recoveries, against the allowance.
F-1
11
<PAGE>
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
<PAGE>
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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>3
<FILENAME>c67956ex3-1.txt
<DESCRIPTION>RESTATED BY-LAWS
<TEXT>
<PAGE>
Exhibit (3.1)
RESTATED BY-LAWS
OF
BADGER METER, INC.
(AS AMENDED NOVEMBER 9, 2001)
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the
shareholders (the "Annual Meeting") shall be held on the second Saturday in
April of each year, or at such other time and date as may be fixed by resolution
of the Board of Directors. In fixing a meeting date for any Annual Meeting, the
Board of Directors may consider such factors as it deems relevant within the
good faith exercise of its business judgment. At each Annual Meeting, the
shareholders shall elect that number of directors equal to the number of
directors in the class whose term expires at the time of such meeting. At any
such Annual Meeting, only other business properly brought before the meeting in
accordance with Section 12 of Article I of these By-laws may be transacted. If
the election of directors shall not be held on the date designated herein, or
fixed as herein provided, for any Annual Meeting, or any adjournment thereof,
the Board of Directors shall cause the election to be held at a special meeting
of shareholders (a "Special Meeting") as soon thereafter as is practicable.
Section 2. Special Meetings.
(a) A Special Meeting may be called only by (i) the Chairman,
(ii) the Chief Executive Officer or (iii) the Board of Directors and shall be
called by the Chief Executive Officer upon the demand, in accordance with this
Section 2, of the holders of record of shares representing at least 10% of all
the votes entitled to be cast on any issue proposed to be considered at the
Special Meeting.
(b) In order that the Corporation may determine the
shareholders entitled to demand a Special Meeting, the Board of Directors may
fix a record date to determine the shareholders entitled to make such a demand
(the "Demand Record Date"). The Demand Record Date shall not precede the date
upon which the resolution fixing the Demand Record Date is adopted by the Board
of Directors and shall not be more than ten days after the date upon which the
resolution fixing the Demand Record Date is adopted by the Board of Directors.
Any shareholder of record seeking to have shareholders demand a Special Meeting
shall, by sending written notice to the Secretary of the Corporation by hand or
by certified or registered mail, return receipt requested, request the Board of
Directors to fix a Demand Record Date. The Board of Directors shall promptly,
but in all events within ten days after the date on which a valid request to fix
a Demand Record Date is received, adopt a resolution fixing the Demand Record
Date and shall make a public announcement of such Demand Record Date. If no
Demand Record Date has been fixed by the Board of Directors within ten days
after the date on which such request is received by the Secretary, the Demand
Record Date shall be the 10th day after the first date on which a valid written
request to set a Demand Record Date is received by the Secretary. To be valid,
such written request shall set forth the purpose or purposes for which the
Special Meeting is to be held, shall be signed by one or more shareholders of
record (or their duly authorized proxies or other representatives), shall bear
the date of signature of each such shareholder (or proxy or other
representative) and shall set forth all information about each such shareholder
and about the beneficial owner or owners, if any, on whose behalf the request is
made that would be required to be set forth in a shareholder's notice described
in paragraph (a) (ii) of Section 12 of Article I of these By-laws.
(c) In order for a shareholder or shareholders to demand a
Special Meeting, a written demand or demands for a Special Meeting by the
holders of record as of the Demand Record Date of shares representing at least
10% of all the votes entitled to be cast on any issue proposed to be considered
at the Special Meeting must be delivered to the Corporation. To be valid, each
written demand by a shareholder for a Special Meeting shall set forth the
specific purpose or purposes for which the Special Meeting is to be held (which
purpose or purposes shall be limited to the purpose or purposes set forth in the
written request to set a Demand Record Date received by the Corporation pursuant
to paragraph (b) of this Section 2), shall be signed by one or more persons who
as of the Demand Record Date are shareholders of record (or their
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duly authorized proxies or other representatives), shall bear the date of
signature of each such shareholder (or proxy or other representative), and shall
set forth the name and address, as they appear in the Corporation's books, of
each shareholder signing such demand and the class and number of shares of the
Corporation which are owned of record and beneficially by each such shareholder,
shall be sent to the Secretary by hand or by certified or registered mail,
return receipt requested, and shall be received by the Secretary within seventy
days after the Demand Record Date.
(d) The Corporation shall not be required to call a Special
Meeting upon shareholder demand unless, in addition to the documents required by
paragraph (c) of this Section 2, the Secretary receives a written agreement
signed by each Soliciting Shareholder (as defined below), pursuant to which each
Soliciting Shareholder, jointly and severally, agrees to pay the Corporation's
costs of holding the Special Meeting, including the costs of preparing and
mailing proxy materials for the Corporation's own solicitation, provided that if
each of the resolutions introduced by any Soliciting Shareholder at such meeting
is adopted, and each of the individuals nominated by or on behalf of any
Soliciting Shareholder for election as a director at such meeting is elected,
then the Soliciting Shareholders shall not be required to pay such costs. For
purposes of this paragraph (d), the following terms shall have the meanings set
forth below:
(i) "Affiliate" of any Person (as defined herein)
shall mean any Person controlling, controlled by or under common
control with such first Person.
(ii) "Participant" shall have the meaning assigned to
such term in Rule 14a-11 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(iii) "Person" shall mean any individual, firm,
corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(iv) "Proxy" shall have the meaning assigned to such
term in Rule 14a-1 promulgated under the Exchange Act.
(v) "Solicitation" shall have the meaning assigned to
such term in Rule 14a-11 promulgated under the Exchange Act.
(vi) "Soliciting Shareholder" shall mean, with
respect to any Special Meeting demanded by a shareholder or
shareholders, any of the following Persons:
(A) if the number of shareholders signing
the demand or demands of meeting delivered to the Corporation
pursuant to paragraph (c) of this Section 2 is ten or fewer,
each shareholder signing any such demand;
(B) if the number of shareholders signing
the demand or demands of meeting delivered to the Corporation
pursuant to paragraph (c) of this Section 2 is more than ten,
each Person who either (I) was a Participant in any
Solicitation of such demand or demands or (II) at the time of
the delivery to the Corporation of the documents described in
paragraph (c) of this Section 2 had engaged or intended to
engage in any Solicitation of Proxies for use at such Special
Meeting (other than a Solicitation of Proxies on behalf of the
Corporation); or
(C) any Affiliate of a Soliciting
Shareholder, if a majority of the directors then in office
determine, reasonably and in good faith, that such Affiliate
should be required to sign the written notice described in
paragraph (c) of this Section 2 and/or the written agreement
described in this paragraph (d) in order to prevent the
purposes of this Section 2 from being evaded.
(e) Except as provided in the following sentence, any Special
Meeting shall be held at such hour and day as may be designated by whichever of
the Chief Executive Officer, the Secretary or the Board of Directors shall have
called such meeting. In the case of any Special Meeting called by the Chief
Executive Officer upon the demand of shareholders (a "Demand Special Meeting"),
such meeting shall be held at such hour and day as may be designated by the
Board of Directors; provided, however, that the date of any Demand Special
Meeting shall be not more than seventy days after the Meeting Record Date (as
defined in Section 5 of Article I of these By-laws); and provided further that
in the event that the directors then in office fail to designate an hour and
date for a Demand Special Meeting within ten days after the date that valid
written demands for such meeting by the holders of record as of the Demand
Record Date of shares representing at least 10% of all the votes entitled to be
cast on each issue proposed to be considered at the Special Meeting are
delivered to the Corporation (the "Delivery Date"), then such meeting shall be
held at 2:00 P.M. local time on the 100th day after the Delivery Date or, if
such 100th day is not a Business Day (as defined below), on the first preceding
Business Day. In fixing a
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meeting date for any Special Meeting, the Chief Executive Officer, the Secretary
or the Board of Directors may consider such factors as he or it deems relevant
within the good faith exercise of his or its business judgment, including,
without limitation, the nature of the action proposed to be taken, the facts and
circumstances surrounding any demand for such meeting, and any plan of the Board
of Directors to call an Annual Meeting or a Special Meeting for the conduct of
related business.
(f) The Corporation may engage regionally or nationally
recognized independent inspectors of elections to act as an agent of the
Corporation for the purpose of promptly performing a ministerial review of the
validity of any purported written demand or demands for a Special Meeting
received by the Secretary. For the purpose of permitting the inspectors to
perform such review, no purported demand shall be deemed to have been delivered
to the Corporation until the earlier of (i) five Business Days following receipt
by the Secretary of such purported demand and (ii) such date as the independent
inspectors certify to the Corporation that the valid demands received by the
Secretary represent at least 10% of all the votes entitled to be cast on each
issue proposed to be considered at the Special Meeting. Nothing contained in
this paragraph (f) shall in any way be construed to suggest or imply that the
Board of Directors or any shareholder shall not be entitled to contest the
validity of any demand, whether during or after such five Business Day period,
or to take any other action (including, without limitation, the commencement,
prosecution or defense of any litigation with respect thereto).
(g) For purposes of these By-laws, "Business Day" shall mean
any day other than a Saturday, a Sunday or a day on which banking institutions
in the State of Wisconsin are authorized or obligated by law or executive order
to close.
Section 3. Place of Meeting. The Chairman, the Chief Executive
Officer, the Board of Directors or the Secretary may designate any place, either
within or without the State of Wisconsin, as the place of meeting for an Annual
Meeting or Special Meeting. If no designation is made, the place of meeting
shall be the principal office of the Corporation. Any meeting may be adjourned
to reconvene at any place designated by vote of the Board of Directors or by the
Chief Executive Officer or the Secretary.
Section 4. Notice of Meeting. Written notice stating the date,
time and place of any meeting of shareholders shall be delivered not less than
ten days nor more than sixty days before the date of the meeting (unless a
different time period is provided by the Wisconsin Business Corporation Law (the
"WBCL") or the Articles of Incorporation), either personally or by mail, by or
at the direction of the Chairman, the President or the Secretary, to each
shareholder of record entitled to vote at such meeting and to such other persons
as required by the WBCL. In the event of any Demand Special Meeting, such notice
of meeting shall be sent not more than thirty days after the Delivery Date. If
mailed, notice pursuant to this Section 4 shall be deemed to be effective when
deposited in the United States mail, addressed to the shareholder at his or her
address as it appears on the stock record books of the Corporation, with postage
thereon prepaid. Unless otherwise required by the WBCL or the Articles of
Incorporation, a notice of an Annual Meeting need not include a description of
the purpose for which the meeting is called. In the case of any Special Meeting,
(a) the notice of meeting shall describe any business that the Board of
Directors shall have theretofore determined to bring before the meeting and (b)
in the case of a Demand Special Meeting, the notice of meeting (i) shall
describe any business set forth in the statement of purpose of the demands
received by the Corporation in accordance with Section 2 of Article I of these
By-laws and (ii) shall contain all of the information required in the notice
received by the Corporation in accordance with Section 12(b) of Article I of
these By-laws. If an Annual Meeting or Special Meeting is adjourned to a
different date, time or place, the Corporation shall not be required to give
notice of the new date, time or place if the new date, time or place is
announced at the meeting before adjournment; provided, however, that if a new
Meeting Record Date for an adjourned meeting is or must be fixed, the
Corporation shall give notice of the adjourned meeting to persons who are
shareholders as of the new Meeting Record Date.
Section 5. Fixing of Record Date. The Board of Directors may
fix in advance a date not less than ten days and not more than seventy days
prior to the date of an Annual Meeting or Special Meeting as the record date for
the determination of shareholders entitled to notice of, or to vote at, such
meeting (the "Meeting Record Date"). In the case of any Demand Special Meeting,
(i) the Meeting Record Date shall be not later than the 30th day after the
Delivery Date and (ii) if the Board of Directors fails to fix the Meeting Record
Date within thirty days after the Delivery Date, then the close of business on
such 30th day shall be the Meeting Record Date. The shareholders of record on
the Meeting Record Date shall be the shareholders entitled to notice of and to
vote at the meeting. Except as provided by the WBCL for a court-ordered
adjournment, a determination of shareholders entitled to notice of and to vote
at an Annual Meeting or Special Meeting is effective for any adjournment of such
meeting unless the Board of Directors fixes a new Meeting Record Date, which it
shall do if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting. The Board of Directors may also fix in advance a
date as the record date for the purpose of determining shareholders entitled to
take any other action or determining shareholders for any other purpose. Such
record date shall be not more than seventy days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
The record date for determining shareholders entitled to a distribution (other
than a distribution involving a purchase, redemption or other acquisition of the
Corporation's shares) or a share dividend is the date on which the Board of
Directors authorizes the distribution or share dividend, as the case may be,
unless the Board of Directors fixes a different record date.
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Section 6. Shareholders' List for Meetings. After a Meeting
Record Date has been fixed, the Corporation shall prepare a list of the names of
all of the shareholders entitled to notice of the meeting. The list shall be
arranged by class or series of shares, if any, and show the address of and
number of shares held by each shareholder. Such list shall be available for
inspection by any shareholder, beginning two business days after notice of the
meeting is given for which the list was prepared and continuing to the date of
the meeting, at the Corporation's principal office or at a place identified in
the meeting notice in the city where the meeting will be held. A shareholder or
his or her agent may, on written demand, inspect and, subject to the limitations
imposed by the WBCL, copy the list, during regular business hours and at his or
her expense, during the period that it is available for inspection pursuant to
this Section 6. The Corporation shall make the shareholders' list available at
the meeting and any shareholder or his or her agent or attorney may inspect the
list at any time during the meeting or any adjournment thereof. Refusal or
failure to prepare or make available the shareholders' list shall not affect the
validity of any action taken at a meeting of shareholders.
Section 7. Quorum and Voting Requirements; Postponements;
Adjournments.
(a) Shares entitled to vote as a separate voting group may
take action on a matter at any Annual Meeting or Special Meeting only if a
quorum of those shares exists with respect to that matter. If the Corporation
has only one class of stock outstanding, such class shall constitute a separate
voting group for purposes of this Section 7. Except as otherwise provided in the
Articles of Incorporation or the WBCL, a majority of the votes entitled to be
cast on the matter shall constitute a quorum of the voting group for action on
that matter. Once a share is represented for any purpose at any Annual Meeting
or Special Meeting, other than for the purpose of objecting to holding the
meeting or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new Meeting Record Date is or
must be set for the adjourned meeting. If a quorum exists, except in the case of
the election of directors, action on a matter shall be approved if the votes
cast within the voting group favoring the action exceed the votes cast opposing
the action, unless the Articles of Incorporation or the WBCL requires a greater
number of affirmative votes. Unless otherwise provided in the Articles of
Incorporation, each director to be elected shall be elected by a plurality of
the votes cast by the shares entitled to vote in the election of directors at an
Annual Meeting or Special Meeting at which a quorum is present.
(b) The Board of Directors acting by resolution may postpone
and reschedule any previously scheduled Annual Meeting or Special Meeting;
provided, however, that a Demand Special Meeting shall not be postponed beyond
the 100th day following the Delivery Date. Any Annual Meeting or Special Meeting
may be adjourned from time to time, whether or not there is a quorum, (i) at any
time, upon a resolution by shareholders if the votes cast in favor of such
resolution by the holders of shares of each voting group entitled to vote on any
matter theretofore properly brought before the meeting exceed the number of
votes cast against such resolution by the holders of shares of each such voting
group or (ii) at any time prior to the transaction of any business at such
meeting, by the President or pursuant to a resolution of the Board of Directors.
No notice of the time and place of adjourned meetings need be given except as
required by the WBCL. At any adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 8. Voting of Shares. Each outstanding share shall be
entitled to one vote upon each matter submitted to a vote at an Annual Meeting
or Special Meeting, except to the extent that the voting rights of the shares of
any class or classes are enlarged, limited or denied by the WBCL or the Articles
of Incorporation.
Section 9. Proxies. At any Annual Meeting or Special Meeting,
a shareholder may vote his or her shares in person or by proxy. A shareholder
may appoint a proxy to vote or otherwise act for the shareholder by signing an
appointment form, either personally or by his or her attorney-in-fact. An
appointment of a proxy is effective when received by the Secretary or other
officer or agent of the Corporation authorized to tabulate votes. An appointment
is valid for eleven months from the date of its signing unless a different
period is expressly provided in the appointment form. Unless otherwise provided,
a proxy may be revoked at any time before it is voted, either by written notice
filed with the Secretary or the acting secretary of the meeting or by oral
notice given by the shareholder to the presiding officer during the meeting. The
presence of a shareholder who has filed his or her appointment of proxy shall
not itself constitute a revocation. The Board of Directors shall have the power
and authority to make rules establishing presumptions as to the validity and
sufficiently of proxies.
Section 10. Acceptance of Instruments Showing Shareholder
Action. If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the Corporation, if acting in good
faith, may accept the vote, consent, waiver or proxy appointment and give it
effect as the act of a shareholder. If the name signed on a vote, consent,
waiver or proxy appointment does not correspond to the name of a shareholder,
the Corporation, if acting in good faith, may accept the vote, consent, waiver
or proxy appointment and give it effect as the act of the shareholder if any of
the following apply:
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(a) The shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity.
(b) The name purports to be that of a personal representative,
administrator, executor, guardian or conservator representing the shareholder
and, if the Corporation requests, evidence of fiduciary status acceptable to the
Corporation is presented with respect to the vote, consent, waiver or proxy
appointment.
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation requests,
evidence of this status acceptable to the Corporation is presented with respect
to the vote, consent, waiver or proxy appointment.
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the Corporation
requests, evidence acceptable to the Corporation of the signatory's authority to
sign for the shareholder is presented with respect to the vote, consent, waiver
or proxy appointment.
(e) Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
The Corporation may reject a vote, consent, waiver or proxy appointment if the
Secretary or other officer or agent of the Corporation who is authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
Section 11. Waiver of Notice. A shareholder may waive any
notice required by the WBCL, the Articles of Incorporation or these By-laws
before or after the date and time stated in the notice. The waiver shall be in
writing and signed by the shareholder entitled to the notice, contain the same
information that would have been required in the notice under applicable
provisions of the WBCL (except that the time and place of meeting need not be
stated) and be delivered to the Corporation for inclusion in the corporate
records. A shareholder's attendance at any Annual Meeting or Special Meeting, in
person or by proxy, waives objection to all of the following: (a) lack of notice
or defective notice of the meeting, unless the shareholder at the beginning of
the meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (b) consideration of a particular
matter at the meeting that is not within the purpose described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
Section 12. Notice of Shareholder Business and Nomination of
Directors.
(a) Annual Meetings.
(i) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be
considered by the shareholders may be made at an Annual Meeting (A)
pursuant to the Corporation's notice of meeting, (B) by or at the
direction of the Board of Directors or (C) by any shareholder of the
Corporation who is a shareholder of record at the time of giving of
notice provided for in this By-law and who is entitled to vote at the
meeting and complies with the notice procedures set forth in this
Section 12.
(ii) For nominations or other business to be properly
brought before an Annual Meeting by a shareholder pursuant to clause
(C) of paragraph (a)(i) of this Section 12, the shareholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice shall be received by
the Secretary of the Corporation at the principal offices of the
Corporation not less than sixty days nor more than ninety days prior to
the second Saturday in the month of April; provided, however, that in
the event that the date of the Annual Meeting is advanced by more than
thirty days or delayed by more than sixty days from the second Saturday
in the month of April, notice by the shareholder to be timely must be
so received not earlier than the 90th day prior to the date of such
Annual Meeting and not later than the close of business on the later of
(x) the 60th day prior to such Annual Meeting and (y) the 10th day
following the day on which public announcement of the date of such
meeting is first made. Such shareholder's notice shall be signed by the
shareholder of record who intends to make the nomination or introduce
the other business (or his duly authorized proxy or other
representative), shall bear the date of signature of such shareholder
(or proxy or other representative) and shall set forth: (A) the name
and address, as they appear on this corporation's books, of such
shareholder and the beneficial owner or owners, if any, on whose behalf
the nomination or proposal is made; (B) the class and number of shares
of the Corporation which are beneficially owned by such shareholder or
beneficial owner or owners; (C) a representation that such shareholder
is a holder of record of shares of the Corporation entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting
to make the nomination or introduce the other business specified in the
notice; (D) in the case of any proposed nomination for election or
re-election as a director, (I) the name and residence address of the
person or
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persons to be nominated, (II) a description of all arrangements or
understandings between such shareholder or beneficial owner or owners
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination is to be made by such
shareholder, (III) such other information regarding each nominee
proposed by such shareholder as would be required to be disclosed in
solicitations of proxies for elections of directors, or would be
otherwise required to be disclosed, in each case pursuant to Regulation
14A under the Exchange Act, including any information that would be
required to be included in a proxy statement filed pursuant to
Regulation 14A had the nominee been nominated by the Board of Directors
and (IV) the written consent of each nominee to be named in a proxy
statement and to serve as a director of the Corporation if so elected;
and (E) in the case of any other business that such shareholder
proposes to bring before the meeting, (I) a brief description of the
business desired to be brought before the meeting and, if such business
includes a proposal to amend these By-laws, the language of the
proposed amendment, (II) such shareholder's and beneficial owner's or
owners' reasons for conducting such business at the meeting and (III)
any material interest in such business of such shareholder and
beneficial owner or owners.
(iii) Notwithstanding anything in the second sentence of
paragraph (a)(ii) of this Section 12 to the contrary, in the event that
the number of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement naming all
of the nominees for director or specifying the size of the increased
Board of Directors made by the Corporation at least seventy days prior
to the second Saturday in the month of April, a shareholder's notice
required by this Section 12 shall also be considered timely, but only
with respect to nominees for any new positions created by such
increase, if it shall be received by the Secretary at the principal
offices of the Corporation not later than the close of business on the
10th day following the day on which such public announcement is first
made by the Corporation.
(b) Special Meetings. Only such business shall be conducted at
a Special Meeting as shall have been described in the notice of meeting sent to
shareholders pursuant to Section 4 of Article I of these By-laws. Nominations of
persons for election to the Board of Directors may be made at a Special Meeting
at which directors are to be elected pursuant to such notice of meeting (i) by
or at the direction of the Board of Directors or (ii) by any shareholder of the
Corporation who (A) is a shareholder of record at the time of giving of such
notice of meeting, (B) is entitled to vote at the meeting and (C) complies with
the notice procedures set forth in this Section 12. Any shareholder desiring to
nominate persons for election to the Board of Directors at such a Special
Meeting shall cause a written notice to be received by the Secretary of the
Corporation at the principal offices of the Corporation not earlier than ninety
days prior to such Special Meeting and not later than the close of business on
the later of (x) the 60th day prior to such Special Meeting and (y) the 10th day
following the day on which public announcement is first made of the date of such
Special Meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. Such written notice shall be signed by the shareholder
of record who intends to make the nomination (or his duly authorized proxy or
other representative), shall bear the date of signature of such shareholder (or
proxy or other representative) and shall set forth: (A) the name and address, as
they appear on the Corporation's books, of such shareholder and the beneficial
owner or owners, if any, on whose behalf the nomination is made; (B) the class
and number of shares of the Corporation which are beneficially owned by such
shareholder or beneficial owner or owners; (C) a representation that such
shareholder is a holder of record of shares of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
make the nomination specified in the notice; (D) the name and residence address
of the person or persons to be nominated; (E) a description of all arrangements
or understandings between such shareholder or beneficial owner or owners and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination is to be made by such shareholder; (F) such
other information regarding each nominee proposed by such shareholder as would
be required to be disclosed in solicitations of proxies for elections of
directors, or would be otherwise required to be disclosed, in each case pursuant
to Regulation 14A under the Exchange Act, including any information that would
be required to be included in a proxy statement filed pursuant to Regulation 14A
had the nominee been nominated by the Board of Directors; and (G) the written
consent of each nominee to be named in a proxy statement and to serve as a
director of the Corporation if so elected.
(c) General.
(i) Only persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be eligible to serve as
directors. Only such business shall be conducted at an Annual Meeting
or Special Meeting as shall have been brought before such meeting in
accordance with the procedures set forth in this Section 12. The
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this
Section 12 and, if any proposed nomination or business is not in
compliance with this Section 12, to declare that such defective
proposal shall be disregarded.
(ii) For purposes of this Section 12, "public announcement"
shall mean disclosure in a press
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release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this
Section 12, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 12.
Nothing in this Section 12 shall be deemed to limit the Corporation's
obligation to include shareholder proposals in its proxy statement if
such inclusion is required by Rule 14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers and Number. All corporate powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation managed under, the direction of its Board of
Directors, which shall consist of nine (9) directors. The Board of Directors
shall elect one of its members as Chairman, who, when present, shall preside at
all meetings of the shareholders and Board of Directors.
Section 2. Tenure and Qualifications. Each director shall hold office
until the annual meeting of shareholders at which his term expires and until his
successor shall have been elected, or until his prior death, resignation or
removal. A director shall not be eligible to stand for re-election at any annual
meeting of shareholders following his 70th birthday, except that any directors
who are over 70 years old on or before November 1, 1999, may be appointed as
director emeritus to serve until he resigns or his appointment is terminated by
resolution of the Board of Directors, and shall serve in an advisory capacity to
the Board of Directors, shall be entitled to attend meetings of the Board and
its committees, shall be reimbursed for his expense in attending meetings, and
shall receive the same fees and compensation paid to directors, but shall have
no vote and shall not be considered as a director under the Articles of
Incorporation or By-laws of the Corporation except for purposes of officers' and
directors' liability insurance. A director may resign at any time by delivering
written notice which complies with the Wisconsin Business Corporation Law to the
Board of Directors, to the Chairman of the Board, if any, or to the Corporation.
A director's resignation is effective when such notice is delivered unless the
notice specifies a later date. Directors need not be residents of the State of
Wisconsin or shareholders of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this By-law immediately after,
and at the same place as, the annual meeting of shareholders, and each adjourned
session thereof. The Board of Directors may provide, by resolution, the time and
place, either within or without the State of Wisconsin, for the holding of
additional regular meetings without other notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman, the Chief Executive Officer,
Secretary or any two directors. The person or persons calling any special
meeting of the Board of Directors may fix any place, either within or without
the State of Wisconsin, as the place for holding any special meeting of the
Board of Directors called by them, and if no other place is fixed, the place of
meeting shall be the principal business office of the Corporation in the State
of Wisconsin.
Section 5. Notice; waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 4, Article II)
shall be given by written notice delivered personally or given by telegram,
teletype, facsimile or other form of wire or wireless communication not less
than twenty-four (24) hours prior to the meeting or mailed or delivered by
private carrier not less than forty-eight (48) hours prior to the meeting to
each director at his business address or at such other address as such director
shall have designated in writing filed with the Secretary. If mailed or
delivered by a private carrier, such notice shall be deemed to be delivered when
deposited in the United States mail or delivered to the private carrier so
addressed, with postage or delivery cost thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. If notice be given by teletype, facsimile or
other form of wire or wireless communication, such notice shall be deemed to be
delivered when evidence of its transmittal is received. Whenever any notice
whatever is required to be given to any director of the Corporation under the
Articles of Incorporation or By-laws or any provision of law, a waiver thereof
in writing, signed at any time, whether before or after the time of meeting, by
the director entitled to such notice, shall be deemed equivalent to the giving
of such notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such
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meeting, except where a director attends a meeting and objects thereat to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 6. Quorum. A majority of the directors shall constitute a
quorum for the transaction of business; and, except as otherwise provided by law
or by the Articles of Incorporation or these By-laws, a majority of the votes
cast at any meeting of the Board of Directors at which a quorum is present shall
be decisive of any action. A majority of the directors present at a meeting,
though less than quorum, may adjourn the meeting from time to time without
further notice.
Section 7. Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of the directors then in office, though less than a quorum of the Board
of Directors; provided, that in case of a vacancy created by the removal of a
director by vote of the shareholders, the shareholders shall have the right to
fill such vacancy at the same meeting or any adjournment thereof.
Section 8. Compensation. The Board of Directors, by affirmative vote of
a majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the Corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors, officers and employees
and to their estates, families, dependents or beneficiaries on account of prior
services rendered by such directors, officers and employees to the Corporation.
Section 9. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 10. Committees. The Board of Directors by resolution adopted by
the affirmative vote of a majority of the number of directors set forth in
Section 1 of this Article II may designate one or more committees, each
committee to consist of three or more directors elected by the Board of
Directors, which shall have and may exercise, when the Board of Directors is not
in session, the powers of the Board of Directors in the management of the
business and affairs of the Corporation, in the committee's designated area of
responsibility, except action in respect to dividends to shareholders, election
of the principal officers or the filling of vacancies on the Board of Directors
or committees created pursuant to this section, with respect to the approval or
proposal of actions that the law requires to be approved by the shareholders,
amendment of the Articles of Incorporation, the adoption, amendment or repeal of
the by-laws, the approval of a plan of merger not requiring shareholder
approval, the authorization or approval of the re-acquisition of shares other
than according to a method prescribed by the Board of Directors, and the
authorization for approval of the issuance or sale or contract for sale of
shares, or the determination of the designation and relative rights, preferences
and limitations of a class or series of shares, unless authorized to do so by
the Board of Directors within prescribed limits. The Board of Directors may
elect one or more of its members as alternate members of any such committee who
may take the place of any absent member or members at any meeting of such
committee, upon request by the Chairman or upon request by the chairman of such
meeting. Each such committee shall fix its own rules governing the conduct of
its activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.
Section 11. Unanimous Consent Without Meeting. Any action required or
permitted by the Articles of Incorporation or By-laws or any provision of law to
be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors then in office.
Section 12. Telephonic Meetings. Notwithstanding any place set forth in
the notice of the meeting or these By-laws, members of the Board of Directors
may participate in regular or special meetings of the Board of Directors and all
Committees of the Board of Directors by or through the use of any means of
communication by which all directors participating may simultaneously hear each
other, such as by conference telephone; provided, however, that the Chairman of
the Board or the chairman of the respective Committee and the Board or other
person or persons calling a meeting may
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determine that the directors cannot participate by such means, in which case the
notice of the meeting, or other notice to directors given prior to the meeting,
shall state that each director's physical presence shall be required. If a
meeting is conducted through the use of such means of communication, then at the
commencement of such meeting all participating directors shall be informed that
a meeting is taking place at which official business may be transacted. A
director participating in a meeting by such means shall be deemed present in
person at such meeting.
ARTICLE III
OFFICERS
Section 1. General Officers. The general officers of the Corporation
shall be the Chief Executive Officer, the President, one or more Vice
Presidents, a Secretary, a Treasurer, a Controller, and one or more Assistant
Secretaries and one or more Assistant Treasurers, each of whom shall be elected
annually by the Board of Directors and shall hold office until his or her
successor shall have been duly elected and qualified. The Chief Executive
Officer of the Corporation shall exercise general supervision of the business
and affairs of the Corporation subject to the directives of the Board of
Directors. Further, each general officer shall have such powers and duties as
generally pertain to his or her respective office; provided, that such powers
and duties may from time to time be modified, enlarged, restricted or augmented
by the Board of Directors.
Section 2. Additional Officers. The Board of Directors may appoint such
additional corporate officers as it may deem necessary, each of whom shall have
such powers and duties as from time to time may be conferred by the Board of
Directors, and shall serve for such terms as the Board may fix.
Section 3. Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment, the best interests of the Corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
Section 4. Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be filled by
the Board of Directors for the unexpired portion of the term. The resignation of
an officer by the delivery of written notice to the Chief Executive Officer or
Secretary of the Corporation is effective upon delivery of the notice, unless
the notice specifies a later date and the Corporation accepts the later date.
ARTICLE IV
SPECIAL CORPORATE ACTS
Section 1. Voting of Securities Owned by This Corporation. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other corporation and owned or controlled by this
Corporation may be voted at any meeting of security holders of such other
corporation by the Chairman of this Corporation if he be present, or in his
absence by the President or any Vice President of this Corporation who may be
present, and (b) whenever, in the judgment of the Chairman, or in his absence,
of the President or any Vice President, it is desirable for this Corporation to
execute a proxy or give a shareholder's consent in respect to any shares or
other securities issued by any other corporation and owned by this Corporation,
such proxy or consent shall be executed in the name of this Corporation by the
Chairman, or the President or one of the Vice Presidents of this Corporation
without necessity of any authorization by the Board of Directors, affixation of
corporate seal or countersignature or attestation by another officer. Any person
or persons designated in the manner above stated as the proxy or proxies of this
Corporation shall have full right, power and authority to vote the share or
shares of stock issued by such other corporation and owned by this Corporation
the same as such share or shares might be voted by this Corporation.
Section 2. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute or deliver
any instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages, and instruments of assignment or
pledge made by the Corporation shall be executed in the name of the Corporation
by the Chairman or the President or one of the Vice Presidents and by the
Secretary, an Assistant Secretary, the Treasurer or an
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Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or
required, shall affix the corporate seal thereto; and when so executed no other
party to such instrument or any third party shall be required to make any
inquiry into the authority of the signing officer or officers.
ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman or the President or
a Vice President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except as provided in Section 6 of this Article V.
Section 2. Facsimile Signatures and Seal. The seal of the corporation
on any certificates for shares may be a facsimile. The signatures of the
Chairman or President or Vice President and the Secretary or Assistant Secretary
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the Corporation itself
or an employee of the Corporation.
Section 3. Signature by Former Officers. In case any officer, who has
signed or whose facsimile signature has been placed upon any certificate for
shares, shall have ceased to be such officer before such certificate is issued,
it may be issued by the Corporation with the same effect as if he were such
officer at the date of its issue.
Section 4. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the Corporation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications and otherwise to exercise all the rights and powers of
an owner. Where a certificate for shares is presented to the Corporation with a
request to register for transfer, the Corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the Corporation had no duty to inquire into adverse claims
or has discharged any such duty. The Corporation may require reasonable
assurance that said endorsements are genuine and effective and in compliance
with such other regulations as may be prescribed under the authority of the
Board of Directors.
Section 5. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the Corporation upon the transfer of such shares.
Section 6. Lost, Destroyed or Stolen Certificates. Where the owner
claims that his certificate for shares has been lost, destroyed or wrongfully
taken, then a new certificate shall be issued in place thereof if the owner (a)
so requests before the Corporation has notice that such shares have been
acquired by a bona fide purchaser, and (b) files with the Corporation a
sufficient indemnity bond, and (c) satisfied such other reasonable requirements
as the Board of Directors may prescribe.
Section 7. Consideration for Shares. The shares of the Corporation may
be issued for such consideration as shall be fixed from time to time by the
Board of Directors, provided that any shares having a par value shall not be
issued for a consideration less than the par value thereof. The consideration to
be paid for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
Corporation. When payment of the consideration for which shares are to be issued
shall have been received by the Corporation, such shares shall be deemed to be
fully paid and nonassessable by the Corporation. No certificate shall be issued
for any share until such share is fully paid.
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Section 8. Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Wisconsin as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation.
ARTICLE VI
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words, "Corporate Seal".
ARTICLE VII
AMENDMENTS
Section 1. By Shareholders. These By-laws may be altered, amended,
repealed, augmented and new By-laws may be adopted by the shareholders by
affirmative vote of not less than a majority of the votes represented by the
shares present or represented at any annual or special meeting of the
shareholders at which a quorum is in attendance.
Section 2. By Directors. These By-laws may also be altered, amended,
repealed, augmented and new By-laws may be adopted by the Board of Directors by
affirmative vote of a majority of the number of directors present at any meeting
at which a quorum is in attendance; but no By-law adopted by the shareholders
shall be amended or repealed by the Board of Directors if the By-law so adopted
so provides.
Section 3. Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
By-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
By-laws so that the By-laws would be consistent with such action, shall be given
the same effect as though the By-laws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
ARTICLE VIII
INDEMNIFICATION
Section 1.01. Certain Definitions. All capitalized terms used in this
Article VIII and not otherwise hereinafter defined in this Section 1.01 shall
have the meaning set forth in Section 180.0850 of the Statute (as hereinafter
defined). The following capitalized terms (including any plural forms thereof)
used in this Article VIII shall be defined as follows:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the Corporation.
(b) "Authority" shall mean the entity selected by the Director
or Officer to determine his or her right to indemnification pursuant to Section
1.04 of this Article.
(c) "Board" shall mean the entire then elected and serving
board of directors of the Corporation, including all members thereof who are
Parties to the subject Proceeding or any related Proceeding.
(d) "Breach of Duty" shall mean the Director or Officer
breached or failed to perform his or her duties to the Corporation and his or
her breach of or failure to perform those duties is determined, in accordance
with Section 1.04 of this Article, to constitute misconduct under Section
180.0851 (2) (a) 1, 2, 3 or 4 of the Statute.
(e) "Corporation, " as used herein and as defined in the
Statute and incorporated by reference into the definitions of certain
capitalized terms used herein, shall mean this Corporation, including, without
limitation, any successor
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corporation or entity to the Corporation by way of merger, consolidation or
acquisition of all or substantially all of the capital stock or assets of this
Corporation.
(f) "Director or Officer" shall have the meaning set forth in
the Statute; provided, that, for purposes of this Article, it shall be
conclusively presumed that any Director or Officer serving as a director,
officer, partner, trustee, member of any governing or decision-making committee,
employee or agent of an Affiliate shall be so serving at the request of the
Corporation.
(g) "Disinterested Quorum" shall mean a quorum of the Board
who are not Parties to the subject Proceeding or any related Proceeding.
(h) "Party" shall have the meaning set forth in the Statute;
provided, that, for purposes of this Article, the term "Party" shall also
include any Director, Officer or employee who is or was a witness in a
Proceeding at a time when he or she has not otherwise been formally named a
Party thereto.
(i) "Proceeding" shall have the meaning set forth in the
Statute; provided, that, for purposes of this Article, "Proceeding" shall
include all Proceedings (i) brought under (in whole or in part) the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, their
respective state counterparts, and/or any rule or regulation promulgated under
any of the foregoing; (ii) brought before an Authority or otherwise to enforce
rights hereunder; (iii) any appeal from a Proceeding; and (iv) any Proceeding in
which the Director or Officer is a plaintiff or petitioner because he or she is
a Director or Officer, provided, however, that such Proceeding is authorized by
a majority vote of a Disinterested Quorum.
(j) "Statute" shall mean Sections 180.0850 through 180.0859,
inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the
Wisconsin Statutes, including any amendments thereto, but, in the case of any
such amendment, only to the extent such amendment permits or requires the
Corporation to provide broader indemnification rights than the Statute permitted
or required the Corporation to provide prior to such amendment.
Section 1.02. Mandatory Indemnification. To the fullest extent
permitted or required by the Statute, the Corporation shall indemnify a Director
or Officer against all Liabilities incurred by or on behalf of such Director or
Officer in connection with a Proceeding in which the Director or Officer is a
Party because he or she is a Director or Officer.
Section 1.03. Procedural Requirements.
(a) A Director or Officer who seeks indemnification under Section 1.02
of this Article shall make a written request therefor to the Corporation.
Subject to Section 1.03 (b) of this Article, within sixty days of the
Corporation's receipt of such request, the Corporation shall pay or reimburse
the Director or Officer for the entire amount of Liabilities incurred by the
Director or Officer in connection with the subject Proceeding (net of any
Expenses previously advanced pursuant to Section 1.05 of this Article).
(b) No indemnification shall be required to be paid by the Corporation
pursuant to Section 1.03 (a) of this Article if, within such sixty-day period:
(i) a Disinterested Quorum, by a majority vote thereof, determines that the
Director or Officer requesting indemnification engaged in misconduct
constituting a Breach of Duty; or (ii) a Disinterested Quorum cannot be
obtained.
(c) In either case of nonpayment pursuant to Section 1.03 (b) of this
Article, the Board shall immediately authorize by resolution that an Authority,
as provided in Section 1.04 of this Article, determine whether the Director's or
Officer's conduct constituted a Breach of Duty and, therefore, whether
indemnification should be denied hereunder.
(d) (i) If the Board does not authorize an Authority to determine the
Director's or Officer's right to indemnification hereunder within such sixty-day
period and/or (ii) if indemnification of the requested amount of Liabilities is
paid by the Corporation, then it shall be conclusively presumed for all purposes
that a Disinterested Quorum has determined that the Director or Officer did not
engage in misconduct constituting a Breach of Duty and, in the case of
subsection (i) above (but not subsection (ii)), indemnification by the
Corporation of the requested amount of Liabilities shall be paid to the Officer
or Director immediately.
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Section 1.04. Determination of Indemnification.
(a) When the Board authorized an Authority to determine a Director's or
Officer's right to indemnification pursuant to Section 1.03 of this Article,
then the Director or Officer requesting indemnification shall have the absolute
discretionary authority to select one of the following as such Authority:
(i) An independent legal counsel; provided, that such counsel
shall be mutually selected by such Director or Officer and by a majority vote of
a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by
a majority vote of the Board;
(ii) A panel of three arbitrators selected from the panels of
arbitrators of the American Arbitration Association in Milwaukee, Wisconsin;
provided, that (A) one arbitrator shall be selected by such Director or Officer,
the second arbitrator shall be selected by a majority vote of a Disinterested
Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote
of the Board, and the third arbitrator shall be selected by the two previously
selected arbitrators; and (B) in all other respects, such panel shall be
governed by the American Arbitration Association's then existing Commercial
Arbitration Rules; or
(iii) A court pursuant to and in accordance with Section 180.0854
of the Statute.
(b) In any such determination by the selected Authority there shall
exist a rebuttable presumption that the Director's or Officer's conduct did not
constitute a Breach of Duty and that indemnification against the requested
amount of Liabilities is required. The burden of rebutting such a presumption by
clear and convincing evidence shall be on the Corporation or such other party
asserting that such indemnification should not be allowed.
(c) The Authority shall make its determination within sixty days of
being selected and shall submit a written opinion of its conclusion
simultaneously to both the Corporation and the Director or Officer.
(d) If the Authority determines that indemnification is required
hereunder, the Corporation shall pay the entire requested amount of Liabilities
(net of any Expenses previously advanced pursuant to Section 1.05 of this
Article), including interest thereon at a reasonable rate, as determined by the
Authority, within ten days of receipt of the Authority's opinion; provided,
that, if it is determined by the Authority that a Director or Officer is
entitled to indemnification as to some claims, issues or matters, but not as to
other claims, issues or matters, involved in the subject Proceeding, the
Corporation shall be required to pay (as set forth above) only the amount of
such requested Liabilities as the Authority shall deem appropriate in light of
all of the circumstances of such Proceeding.
(e) The determination by the Authority that indemnification is required
hereunder shall be binding upon the Corporation regardless of any prior
determination that the Director or Officer engaged in a Breach of Duty.
(f) All Expenses incurred in the determination process under this
Section 1.04 by either the Corporation or the Director or Officer, including,
without limitation, all Expenses of the selected Authority, shall be paid by the
Corporation.
Section 1.05. Mandatory Allowance of Expenses.
(a) The Corporation shall pay or reimburse, within ten days after the
receipt of the Director's or Officer's written request therefor, the reasonable
Expenses of the Director or Officer as such Expenses are incurred, provided the
following conditions are satisfied:
(i) The Director or Officer furnishes to the Corporation an
executed written certificate affirming his or her good faith belief that he or
she has not engaged in misconduct which constitutes a Breach of Duty; and
(ii) The Director or Officer furnishes to the Corporation an
unsecured executed written agreement to repay any advances made under this
Section 1.05 if it is ultimately determined by an Authority that he or she is
not entitled to be indemnified by the Corporation for such Expenses pursuant to
Section 1.04 of this Article.
(b) If the Director or Officer must repay any previously advanced
Expenses pursuant to this Section 1.05, such Director or Officer shall not be
required to pay interest on such amounts.
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Section 1.06. Indemnification and Allowance of Expenses of Certain
Others.
(a) The Corporation shall indemnify a director or officer of an
Affiliate (who is not otherwise serving as a Director or Officer) against all
Liabilities, and shall advance the reasonable Expenses, incurred by such
director or officer in a Proceeding to the same extent hereunder as if such
director or officer incurred such Liabilities because he or she was a Director
or Officer, if such director or officer is a Party thereto because he or she is
or was a director or officer of the Affiliate.
(b) Except as hereinafter provided, the Corporation shall indemnify
each employee of the Corporation or an Affiliate of the Corporation acting
within the scope of his or her duties as such, against all Liabilities, and
shall advance Reasonable Expenses, incurred by or on behalf of such employee in
connection with a Proceeding in which he or she is a Party by virtue of being an
employee of the Corporation or an Affiliate of the Corporation, to the same
extent and in the same manner as a Director or Officer hereunder. The foregoing
provision shall not apply, and the Corporation shall not indemnify any employee,
with respect to any Liability to the extent covered by insurance maintained by
or on behalf of such employee (other than insurance maintained by the
Corporation or an Affiliate of the Corporation).
(c) The Board may, in its sole and absolute discretion as it deems
appropriate, pursuant to a majority vote thereof, indemnify against Liabilities
incurred by, and/or provide for the allowance of reasonable Expenses of, an
authorized agent of the Corporation acting within the scope of his or her duties
as such and who is not otherwise a Director or Officer.
Section 1.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of a Director, Officer and/or any individual who is or was
an authorized employee or agent of the Corporation against any Liability
asserted against or incurred by such individual in his or her capacity as such
or arising from his or her status as such, regardless of whether the Corporation
is required or permitted to indemnify against any such Liability under this
Article.
Section 1.08. Notice to the Corporation. A Director, Officer or
employee shall promptly notify the Corporation in writing when he or she has
actual knowledge of a Proceeding which may result in a claim or indemnification
against Liabilities or allowance of Expenses hereunder, but the failure to do so
shall not relieve the Corporation of any liability to the Director, Officer or
employee hereunder unless the Corporation shall have been irreparably prejudiced
by such failure (as determined by an Authority).
Section 1.09. Report to Shareholders. In the event that the Corporation
indemnifies or advances expenses to a Director or Officer in connection with a
proceeding brought in the right of the Corporation, the Corporation shall report
the indemnification or advance in writing to shareholders with or before the
notice of the next meeting of shareholders. The report shall be delivered to
shareholders who are entitled to receive notice of the next meeting of
shareholders.
Section 1.10. Severability. If any provision of this Article shall be
deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this Article contravene public policy,
this Article shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such provisions
which are invalid or inoperative or which contravene public policy shall be
deemed, without further action or deed by or on behalf of the Corporation, to be
modified, amended and/or limited, but only to the extent necessary to render the
same valid and enforceable.
Section 1.11. Nonexclusivity of this Article. The rights of a Director,
Officer or employee (or any other person) granted under this Article shall not
be deemed exclusive of any other rights to indemnification against Liabilities
or advancement of Expenses which the Director, Officer or employee (or such
other person) may be entitled to under any written agreement, Board resolution,
vote of shareholders of the Corporation or otherwise, including without
limitation under the Statute. Nothing contained in this Article shall be deemed
to limit the Corporation's obligations to indemnify a Director, Officer or
employee under the Statute.
Section 1.12. Contractual Nature of this Article; Repeal or Limitation
of Rights. This Article shall be deemed to be a contract between the Corporation
and each Director, Officer and employee and any repeal or other limitation of
this Article or any repeal or limitation of the Statute or any other applicable
law shall not limit any rights of indemnification against Liabilities or
allowance of Expenses then existing or arising out of events, acts or omissions
occurring prior to such repeal or limitation, including, without limitation, the
right of indemnification against Liabilities or allowance of Expenses for
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Proceedings commenced after such repeal or limitation to enforce this Article
with regard to acts, omissions or events arising prior to such repeal or
limitation.
Section 1.13. Subrogation Rights. Notwithstanding any provision to the
contrary set forth herein, the Corporation's obligations hereunder are not
intended to constitute, and shall not constitute, a waiver of any right to
subrogation which the Corporation may have against any person or entity.
28
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>4
<FILENAME>c67956ex10-12.txt
<DESCRIPTION>RETIREMENT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT (10.12)
RETIREMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as
of this 28th day of January, 2002, by and between BADGER METER, INC., a
corporation organized and existing under the laws of the State of Wisconsin
("Company"), and ROBERT D. BELAN, an individual resident of the State of
Wisconsin ("Belan"):
WITNESSETH:
WHEREAS, Belan has been employed by the Company and currently
holds the position of Executive Vice President; and
WHEREAS, Belan desires to continue in the employ of the
Company, but to retire from employment with the Company on September 30, 2002
(the "Retirement Date"); and
WHEREAS, Belan and the Company are currently parties to a
certain Key Executive Employment and Severance Agreement, dated as of August 16,
1999 (the "KEEP"); and
WHEREAS, Belan is willing to continue as an Executive Vice
President of the Company until the Retirement Date, and to agree not to compete
with the Company for the period set forth below.
NOW, THEREFORE, in consideration for the mutual promises
contained herein, the parties, intending to be legally bound, agree as follows:
1. Employment Until Retirement Date; Duties. During the period from the date of
this Agreement until the Retirement Date (the "Employment Period"), Belan shall
be employed by the Company as an Executive Vice President and shall perform such
duties as the Company's Board of Directors ("Board") and/or President may
reasonably assign to him from time to time. Without limiting the generality of
the foregoing, Belan shall generally assist in the smooth and orderly transition
of: (i) his current duties and responsibilities to the appropriate individuals
within the Company and (ii) Company customer and vendor relationships to the
appropriate individuals within the Company. Belan shall report directly to the
Company's President. Belan will continue to be a member of the Company's
Executive Committee.
2. Compensation and Benefits During the Employment Period. During the Employment
Period, Belan shall be entitled to receive the following compensation and other
benefits:
(a) Belan's base salary shall be at an annual rate identical to his
current base salary of $285,000.
(b) Belan shall be entitled to participate in the Company's Long-Term
Management Incentive Plan ("LTIP") in the same manner as other Company
officers. Belan shall be entitled to participate in the Company's
short-term incentive plan (maximum potential of 60% of annual base
salary) in the same manner as other Company officers, except that any
amount Belan may be entitled to receive under the short-term incentive
plan shall be equitably prorated based upon that portion of calendar
year 2002 that Belan is actually employed by the Company.
(c) Belan shall continue to be eligible to participate in any Company
health insurance plan that is made available by the Company to its
officers generally.
(d) Belan shall continue to be eligible to participate in any Company
pension, retirement or similar plan made available by the Company to
its officers generally; provided, however, that Belan shall not be
entitled to receive any additional stock options under any Company
stock option plan.
(e) Belan shall continue to receive Company-paid term life insurance
under the Company's current group term life insurance plan in a face
amount equal to $427,500, which is 150% of Belan's annual base salary.
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(f) Belan shall continue to be eligible for long-term disability
insurance coverage, pursuant to which the benefits, paid on a monthly
basis, would be in an amount equal to sixty percent (60%) of Belan's
monthly base salary, provided that Belan continues to pay the premiums
associated with such long-term disability insurance coverage.
(g) Belan shall be entitled to receive such number of weeks of vacation
(equitably adjusted for the period of employment) consistent with the
number of weeks of vacation that Belan was entitled to during the
calendar year 2001; provided, however, that Belan shall use all of his
earned vacation prior to the Retirement Date.
(h) Belan shall be entitled to continue to use and occupy his current
office.
(i) Belan's KEEP shall remain in full force and effect, although the
KEEP shall automatically terminate in accordance with its terms and
without the need for any action on the part of any party on October 1,
2002, since Belan will on that date no longer be an employee of the
Company. In the event that a Change of Control (as that term is defined
in the KEEP) occurs on or before September 30, 2002, the terms and
conditions of such KEEP shall govern the parties hereto, and shall
supercede any conflicting or contradictory provision contained herein.
(j) Belan shall be entitled to reimbursement in accordance with the
then prevailing Company policy for any reasonable and necessary
business expenses incurred by him in connection with the performance of
his duties hereunder upon submission of appropriate documentation.
(k) Belan will continue to participate in the Company's Officers'
Voting Trust on terms consistent with those made available to other
officers of the Company.
3. Benefits After Retirement Date. After the Retirement Date, Belan shall be
entitled to receive the following benefits from the Company:
(a) Belan will be eligible to participate in the Company's retiree
health plan (including prescription drugs) until he is eligible for
Medicare coverage (currently at age 65) and thereafter in the Company's
health plan for retirees on Medicare and over age 65, subject to the
same terms and conditions applicable to other participants generally.
Belan's spouse will similarly be eligible to participate in such
Company health plan until she is eligible for Medicare coverage and
thereafter as the current spouse (including surviving spouse) of an
eligible retiree over age 65, subject to the same terms and conditions
applicable to other participants generally. To the extent consistent
with law, the Company, upon reasonable request or as required, will
confirm the health plan coverage available to Belan and/or his spouse
to any third party, including without limitation, any health care
provider or third party administrator. If other group health coverage
is available to Belan or his spouse, then Belan and/or his spouse, as
the case may be , will not be eligible to participate in the Company's
retiree health plan. As a retiree, Belan and his current spouse will
receive credit for eighteen (18) years of service, which will partially
offset the premiums required to be paid by retirees under such retiree
health plan.
(b) The Company will pay to Belan (or his beneficiary) a non-qualified
supplemental retirement benefit in an amount which is designed to place
Belan in the same position that he would be in if he had an additional
five (5) years of credited service under the Company's defined benefit
pension plan ("Pension Plan"), at the same compensation as that earned
in 2001.
(c) In addition to the non-qualified supplemental retirement benefit
provided under (b) above, the Company shall also pay Belan (or his
beneficiary) an additional non-qualified supplemental retirement
benefit of $1,187.50 per month for the 10-year period commencing
October 1, 2002, and ending on September 30, 2012.
(d) On and after the Retirement Date, Belan will no longer be entitled
to participate in the Company's group term life insurance program, but
may, subject to the terms and conditions of the then existing group
term life insurance policy, convert his pre-Retirement Date life
insurance coverage to individual coverage.
(e) Belan shall be entitled to exercise his rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") to continue dental insurance coverage after the Retirement
Date upon payment of the required premiums and compliance with the
provisions of COBRA.
(f) Belan shall have the same right that has been made available to
other retired Company officers under the Company's Officers' Voting
Trust to pay off any outstanding loans from the Company as of the
Retirement Date over a three (3) year period.
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(g) Belan shall continue to enjoy all of his vested rights under one or
more Company Plans as provided in Paragraph 5 hereof.
4. Material Breach By Belan; Consequences. In the event Belan breaches this
Agreement in a material way and such material breach continues, after written
notice from the Company to Belan and a reasonable opportunity for him to cure,
then the Company shall have the right to terminate this Agreement upon written
notice to Belan and Belan shall not be entitled to any compensation under this
Agreement from and after such date of termination. Under all other
circumstances, the compensation and fringe benefits payable to Belan hereunder
shall be paid, except that the compensation and fringe benefits payable to Belan
pursuant to Paragraph 2 above shall terminate upon his death.
5. Other Benefits. Nothing in this Agreement shall affect the rights of Belan or
the Company under any profit-sharing plan, pension plan, insurance plan or other
benefit plan of the Company (individually a "Plan" and collectively "Plans") in
which Belan participates or receives benefits, or under the KEEP; provided,
however, that Belan's participation in the Company's employee deferred
compensation program, in the LTIP or in any other Plan as an employee shall
cease as of the Retirement Date. On the Retirement Date, all outstanding stock
options granted by the Company to Belan under one or more Company stock option
plans and held by Belan on that date shall fully vest. Belan shall be entitled
to exercise all outstanding stock options in effect as of the Retirement Date
and granted to him under one or more Company stock option plans at any time, or
from time to time, through September 30, 2004; provided, however, that Belan's
exercise of any such stock option is subject in all cases to the express terms
of any governing Company stock option plan and applicable stock option
agreement.
6. No Assignment of Benefits. Unless ordered by a court of competent
jurisdiction, Belan shall have no right to assign or transfer the right to
receive any benefits hereunder, and in the event of any attempted assignment or
transfer, whether voluntary or involuntary, other than pursuant to an order of a
court of competent jurisdiction, the Company shall have no further liability
hereunder.
7. Taxes. The Company shall deduct from all payments made hereunder any
applicable federal, state, or local taxes required by law to be withheld from
such payments.
8. Covenant Not To Compete.
(a) Belan covenants and agrees that during the Employment Period and
for a period of two (2) years thereafter, neither he nor any of his
affiliates (including, but not limited to, any corporation (other than
the Company), partnership, limited liability company, firm or other
entity in which he or they own in the aggregate two percent (2%) or
more of any class of equity securities) will:
(i) Directly or indirectly engage in, continue or carry on the
business of the design, manufacture and/or sale of flow
measurement and control products, including, but not limited
to, water meters and associated systems, wastewater meters,
industrial meters, small valves and instrumentation related to
any of the foregoing meters, or any business substantially
similar thereto, including owning or controlling any financial
interest in any person, corporation, partnership, limited
liability company, firm or other business entity which
competes with or is engaged in or carries on any aspect of
such business or any business substantially similar thereto.
(ii) Consult with, advise or assist in any way, whether or not
for consideration, any person, corporation, partnership,
limited liability company, firm or other business entity which
is now, becomes or may become a competitor of the Company in
any material respect, including, but not limited to:
advertising or otherwise endorsing the products of any such
competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or
rendering any other form of financial assistance to or
engaging in any business transaction with any such competitor
on other than on an arms' length basis.
(iii) Sell, assign or otherwise transfer, whether or not for
consideration, any customer lists, product specifications or
designs, internal memoranda, bills, receipts or any other form
of business records or documents or other materials in any
form (tangible or intangible) concerning the Company's
business.
(iv) Disclose or cause to be disclosed to any person,
corporation, partnership, limited liability company, firm or
other business entity, any of the trade secrets, techniques,
formulae or processes relating to the Company's business or
any other information about the confidential affairs of such
business (including information about its customers and
employees) the secrecy of which is of value to the Company.
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(v) Engage in any practice the purpose of which is to evade
the provisions of this covenant not to compete or commit any
act which is detrimental to the successful continuation of the
Company's business.
(b) The parties agree that the geographic scope of this covenant not to
compete shall extend worldwide.
(c) The parties agree that the Company may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any
person, corporation, limited liability company, firm or other business
entity that purchases all or any part of the Company's business.
(d) In the event of any breach of this covenant not to compete, the
parties recognize that the remedies at law will be inadequate and that
the Company shall be entitled to equitable remedies (including an
injunction) and other such relief as a court of competent jurisdiction
may deem appropriate.
(e) In the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as to
duration, geographic scope, prohibited activities or otherwise, the
parties agree that this covenant not to compete shall be reduced or
curtailed to the extent necessary to render it enforceable.
9. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to Belan:
Robert D. Belan
106 W. Vintage Drive
Mequon, WI 53092
If to the Company:
Badger Meter, Inc.
Attention: President
4545 West Brown Deer Road
Milwaukee, Wisconsin 53233
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. Entire Agreement. Except for the KEEP, this Agreement supersedes all prior
agreements or understandings between the parties with respect to the services to
be provided by Belan to the Company and represents the entire agreement among
the parties hereto with respect to such matter, and there are no agreements,
representations or warranties with respect to the matters provided for herein
other than those set forth herein.
11. Headings. The headings set forth in this Agreement are provided for
convenience only and shall not be considered a part of, or employed in the
construction of, this Agreement.
12. Successors. This Agreement shall be binding upon and inure to the benefit of
any successors and assigns of the Company. The term "successor" as used herein
shall include any person, firm, corporation, or other business entity which at
any time, by merger, consolidation, purchase or otherwise, acquires all or
substantially all of the Company's capital stock, assets or business.
13. Amendment. This Agreement may not be released, discharged, abandoned,
changed or amended in any manner except by a written instrument signed by the
parties hereto.
14. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the internal law of the State of Wisconsin.
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15. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of such together will
constitute one and the same instrument.
16. Waiver. No waiver by any party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
IN WITNESS WHEREOF, this Agreement has been executed effective
as of the day and year first above written.
BADGER METER, INC.
("Company")
By: (SEAL)
------------------------------------- -------------------------------
James L. Forbes Robert D. Belan ("Belan")
Chairman and Chief Executive Officer
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>c67956ex13.txt
<DESCRIPTION>PORTIONS OF THE ANNUAL REPORT
<TEXT>
<PAGE>
EXHIBIT (13.0)
Portions of Annual Report to Shareholders that are incorporated by reference.
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(Page 1 of Annual Report to Shareholders)
BADGER METER, INC.
F I N A N C I A L H I G H L I G H T S
December 31, 2001 and 2000
<TABLE>
<CAPTION>
2001 2000 % CHANGE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS (dollars in thousands)
Net sales $ 138,537 $ 146,389 (5.4)
Net earnings $ 3,364 $ 6,941 (51.5)
- -------------------------------------------------------------------------------------------------------------------
PER SHARE
Net earnings:
Basic $ 1.06 $ 2.10 (49.5)
Diluted $ 1.03 $ 2.00 (48.5)
Cash dividends $ 1.00 $ .86 16.3
Net book value $ 13.52 $ 13.51 .1
- -------------------------------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION (dollars in thousands)
Total assets $ 98,836 $ 98,023 .8
Total debt (long-term and short-term) $ 28,762 $ 28,961 (.7)
Shareholders' equity $ 43,002 $ 43,319 (.7)
Debt as a percent of total debt and equity 40.1% 40.1% 0
Net earnings as a percent of equity 7.8% 16.0% (51.3)
===================================================================================================================
OTHER
Number of employees 936 956 (2.1)
Number of shareholders:
Common Stock:
In employee plans 683 712 (4.1)
Of record 509 530 (4.0)
Shares outstanding at December 31
Common Stock 3,179,641 3,207,039 (.9)
===================================================================================================================
</TABLE>
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(Page 12 to 15 of Annual Report to Shareholders)
MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS DESCRIPTION
Badger Meter is a leading marketer and manufacturer of products using flow
measurement and control technologies developed both internally and with other
technology companies. Its products are used to measure and control the flow of
liquids in a variety of applications. The company has five primary worldwide
product lines: residential and commercial/industrial water meters (with various
meter reading technology systems), automotive fluid meters, small precision
valves and industrial process meters (with related accessories and
instrumentation).
Water meters and related systems provide the majority of the company's sales. A
"water meter system" generally consists of a water meter, a register (some with
a digital interface technology for communicating the reading), packaging and the
monitoring or computerized management system used to collect and relay the
reading. Badger Meter's strategy is to solve customers' metering needs with its
proprietary meter reading systems or other systems available through alliances
within the marketplace. In both alternatives, the company provides the meter
that generates a mechanical signal and the device that converts the signal into
a digital form. That signal may then be read by either a proprietary meter
reading system or systems developed by other technology companies.
The company's significant accounting policies, disclosures and commitments are
described in the Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
SALES
Badger Meter's sales decreased nearly $7.9 million or 5.4% for 2001 as compared
to 2000. The decrease was primarily due to lower sales of automated water meter
systems, offset somewhat by volume increases in lower priced local (or manual)
read systems. The company's automotive fluid products, small precision valves
and industrial products also saw volume declines, offset slightly by higher
prices. Another factor in the decline was the discontinuance of certain product
lines. Sales related to those lines totaled $1,430,000 in 2001 compared with
$5,609,000 in 2000.
Badger Meter's sales decreased $4.5 million or 3.0% for 2000 compared to 1999.
This decrease was primarily due to lower domestic sales of water meters, lower
international sales of industrial products, and lower domestic sales of certain
industrial products.
Sales trends are primarily affected by new product sales, water meter sales to
large municipalities and general market conditions. Residential water meter
sales are influenced by both privatizations of water services and a continued
industry movement away from manual-read meters to automated meter reading
technologies. However, in 2000, many water utilities delayed such conversion
activities due to confusion in the marketplace resulting from the financial
difficulties of several fixed-base network providers, certain new entrants into
the market and various competitive pressures that have lengthened the sales
cycle. The competitive pressures continued in 2001 and were further impacted by
the general economic slowdown. For utility products, increased competition and
price pressures had a negative impact on sales, particularly on the higher
priced automated meter reading products. These market conditions contributed to
utility officials moving cautiously when making decisions on automated metering
systems.
The terrorist attack on September 11, 2001, had some impact on the company's
sales in 2001, and may have more negative impact in early 2002 as water
utilities shift their time and resources to focus on the security of their water
systems. The economic slowdown also affected the company's other products
(precision valves, automotive and industrial products) as more customers delayed
purchasing decisions until economic conditions improve.
Sales during the first half of 2000 were also affected by several other factors.
A September 1999 fire at the facility of one of the company's principal vendors
continued to negatively impact sales in the first half of 2000, although the
impact of those lost sales on net income was offset by business interruption
insurance proceeds. The six-month Federal Communications Commission freeze,
which ended in December 1999, continued to have an impact on sales of certain
automatic meter reading products due to the disruption of the sales cycle.
Competitive market pressures and the stronger U.S. dollar had a negative impact
on sales of certain industrial products, particularly in Europe. Increased sales
of water meters to commercial/industrial and submetering customers only
partially offset these negative factors.
International sales are comprised primarily of sales of automotive fluid meters
and small valves in Europe, sales of water
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meters and related technologies in Mexico, and sales of valves and other
metering products throughout the world. In Europe, sales are made in both U.S.
dollars and euros. Most other international sales are made in U.S. dollars. The
company is able to partially hedge its euro exposure by holding euro-denominated
debt.
GROSS MARGINS
Gross margins were 32.1%, 36.2% and 39.2% for 2001, 2000 and 1999, respectively.
In 1999, the company invested in additional capacity, resulting in decreased
margins for 2001 and 2000 as compared to the 1999 level as actual sales did not
meet expected levels to absorb the costs of the increased capacity. Also,
margins were affected by lower sales of automated meter reading products, which
have higher margins than manual (or local read) meters.
Margins in 2001 and 2000 were also impacted by a higher mix of international
sales of water meters with lower margins than domestic water meter sales. A
one-time manufacturing problem resulted in increased scrap levels and further
reduced margins during the second quarter of 2000. This problem was identified
by the company and corrected during the second quarter of that year.
OTHER FACTORS
Selling, engineering and administration costs decreased 8.5% in 2001 compared to
2000 due to lower incentive accruals and costs controls, as well as reductions
in costs associated with discontinued product lines, offsetting personnel and
expense increases. Selling, engineering and administration costs decreased 1.2%
for 2000 compared to 1999, due primarily to reductions of incentive compensation
due to lower sales and profits. This decrease in 2000 was partially offset by
increases in marketing and engineering expenses.
Interest expense decreased $825,000 in 2001 compared to 2000. The decrease was
the result of significantly lower interest rates and the company's prepayment in
2001 of a term loan that had a higher interest rate than commercial paper
borrowing. For the majority of 2001, the company used commercial paper at very
favorable rates to finance its operations. Interest expense increased $950,000
in 2000 as compared to 1999 as a result of a new $15 million long-term debt
borrowing in August of 1999, which was primarily used to repurchase the
company's stock from various trusts and individual shareholders.
Other income and expense in 2001 relates primarily to foreign exchange gains.
Other income and expense (net) for 2000 and 1999 included $2,230,000 and
$750,000 of proceeds, respectively, from business interruption insurance, which
offset lost sales and margins associated with a fire at the facility of one of
the company's principal vendors during 1999. Without these proceeds, other
income and expense (net) for 2000 and 1999 would have been expenses of $316,000
and $495,000, respectively.
INCOME TAXES
Income tax as a percentage of earnings before income taxes was 32.9%, 35.3% and
38.1% for 2001, 2000 and 1999, respectively. The decrease in 2001 from 2000 was
due to lower state and foreign taxes on lower pre-tax income, as well as the
percentage effects of certain permanent book-to-tax differences on lower pre-tax
income in 2001 as compared to 2000. The decrease in 2000 from 1999 was due to
increased Foreign Sales Corporation tax credits, lower taxes on foreign income,
credits generated as a result of distributions of foreign subsidiary profits,
and a favorable settlement of a tax audit. Most of the foreign credits impacted
the fourth quarter of 2000, resulting in a 21.9% average tax rate for that
quarter.
NET EARNINGS AND EARNINGS PER SHARE
As a result of the above mentioned items, net earnings were $3,364,000,
$6,941,000 and $9,700,000 in 2001, 2000 and 1999, respectively. On a diluted
basis, earnings per share were $1.03, $2.00 and $2.60, respectively, for the
same periods. Earnings were also impacted by share repurchases that reduced the
number of shares used in the calculations.
LIQUIDITY AND CAPITAL RESOURCES
The main sources of liquidity for the company are cash from operations and
borrowing capacity. Cash provided by operations decreased 35.2% in 2001 compared
to 2000 primarily as a result of lower earnings, increased inventory and a $4.4
million payment to the company's pension plan, offset partially by increased
payables. Cash provided by operations decreased 15.3% from 2000 to 1999 due to
lower earnings, increased inventory and decreased payables, partially offset by
lower receivables.
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Receivables decreased 1.6% during 2001, primarily due to lower sales in the
fourth quarter of 2001 compared to the fourth quarter of 2000. Inventories
increased 9.3% in 2001, primarily due to increased purchases of bronze castings
as a result of the timing of orders.
Capital expenditures totaled $5.0 million in 2001, down from $6.4 million in
2000 and $10.0 million in 1999. The higher 1999 expenditures related to facility
expansions. The company believes it is able to substantially increase production
with minimal additional capital expenditures. Prepaid pension increased $3.5
million due to a $4.4 million payment offset by normal pension expense. The
company's measurement date for annual pension expense is September 30.
Net deferred tax assets declined from 2000 reflecting the net temporary
differences between financial reporting and tax reporting, including the effect
of the pension payment referenced above.
Payables increased $2.4 million during 2001 due to the timing of purchases.
Accrued compensation and employee benefits decreased $352,000 due to lower
incentive compensation accruals. Current income taxes decreased $715,000 in
2001, due to the tax effects of certain timing differences between book and tax
reporting and the timing of certain payments. The $576,000 decrease in accrued
non-pension postretirement benefits was related to normal retiree medical
expenditures exceeding amounts required to be accrued under accounting rules.
Other accrued employee benefits increased $378,000 due primarily to increased
employee deferred compensation.
Total outstanding debt at December 31, 2001 decreased $200,000 from December 31,
2000. This decrease was primarily the result of increased operating cash flow
requirements offset by a new $1.7 million borrowing to finance a new
manufacturing facility in the Czech Republic and a $400,000 repayment of the
company's ESSOP loan. During 2001, the company prepaid the remaining balance on
the $15 million term loan (of which $8.7 million was outstanding at December 31,
2000). This amount was replaced with commercial paper available at lower
interest rates.
In January 2002, the company refinanced $20 million of commercial paper
borrowings with an unsecured, fixed-rate, five-year term loan. This created
additional borrowing capacity for the company as it reduced the amount of
commercial paper outstanding under the company's $44.1 million short-term credit
lines (of which $31 million may be used for commercial paper borrowings).
The company guarantees the outstanding debt of the ESSOP that was recorded in
long-term debt, offset by a similar amount in shareholders' equity. The loan
amount is collateralized by shares of the company's Common Stock. A payment of
$400,000 in 2001 has reduced the loan to $1.9 million at December 31, 2001. The
company also guarantees the debt of a trust from which officers may obtain loans
in order to purchase shares of the company's Common Stock. The loan amount is
collateralized by the company's shares that were purchased with the loan's
proceeds.
Common stock and capital in excess of par value both increased during 2001 due
to stock issued in connection with the exercise of stock options and ESSOP
transactions. Employee benefit stock decreased by $400,000 due to shares
released as a result of payments made on the ESSOP loan. Treasury stock
increased due to shares repurchased during the year.
Badger Meter's financial condition remains strong. The company believes that its
operating cash flows, available borrowing capacity and ability to raise capital
provide adequate resources to fund ongoing operating requirements and future
capital expenditures related to expansion of capacity and development of new
products.
OTHER MATTERS
The company believes it is in compliance with the various environmental statutes
and regulations to which the company's domestic and international operations are
subject. Currently, the company is in the process of resolving issues 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. Provision has been made for all known settlement costs.
The company utilizes its independent auditors primarily for audit services and
minimizes the amount of consulting and other services that are performed. The
amount of non-audit services as compared to the total payments to the auditors
was 21.5% in 2001 and 26.1% in 2000.
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MARKET RISK
In the ordinary course of business, the company is exposed to various market
risks, including commodity prices, foreign currency rates and interest rates.
The company typically does not hold or issue derivative instruments and has a
policy specifically prohibiting the use of such instruments for trading
purposes.
Commodity price risk is managed by keeping abreast of economic conditions and
locking in purchase prices for quantities that correspond to the company's
forecasted usage.
Badger Meter's foreign currency risk relates to the sale of products to foreign
customers, specifically European customers, as most other foreign sales are made
in U.S. dollars. The company uses lines of credit with German banks to offset
currency exposure related to European receivables and other monetary assets. The
company's exposure to European currency fluctuations has been further reduced by
the stabilization of inter-European currencies through the introduction of the
euro. As of December 31, 2001 and 2000, the company's foreign currency net
monetary assets were substantially offset by comparable debt, resulting in no
material exposure.
All of the outstanding debt at December 31, 2001, was floating-rate debt with
market values approximating carrying values. In January 2002, the company
entered into a $20 million fixed-rate term loan at a 6.73% interest rate, which
reduces the amount of floating-rate debt. For the floating rate debt, future
annual interest costs will fluctuate based on short-term interest rates.
Accordingly, an increase in future interest rates would increase the company's
borrowing costs.
FORWARD LOOKING STATEMENTS
Certain statements contained in this document, as well as other information
provided from time to time by the company or its employees, may contain forward
looking statements that involve risks and uncertainties that could cause actual
results to differ materially from those in the forward looking statements. The
words "anticipate," "believe," "estimate," "expect," "think," "should" and
"objective" or similar expressions are intended to identify forward looking
statements. The forward looking statements are based on the company's current
views and assumptions and involve risks and uncertainties that include, among
other things:
- the success or failure of new product offerings
- the actions and financial condition of competitors and
alliance partners
- changes in competitive pricing and bids in the marketplace
- changes in domestic conditions, including housing starts
- changes in foreign economic conditions, including currency
fluctuations
- changes in laws and regulations
- changes in customer demand and fluctuations in the prices of
and availability of purchased raw materials and parts.
Some or all of these factors are beyond the company's control. Shareholders,
potential investors and other readers are urged to consider these factors
carefully in evaluating the forward looking statements and are cautioned not to
place undue reliance on such forward looking statements. The forward looking
statements made herein are made only as of the date of this document and the
company undertakes no obligation to publicly update such forward looking
statements to reflect subsequent events or circumstances.
39
<PAGE>
(Page 16 of Annual Report to Shareholders)
BADGER METER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
(In thousands except per share amounts) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 138,537 $ 146,389 $ 150,877
Cost of sales 94,042 93,375 91,722
- -------------------------------------------------------------------------------------------------------------------
Gross margin 44,495 53,014 59,155
Selling, engineering and administration 38,430 41,995 42,495
- -------------------------------------------------------------------------------------------------------------------
Operating earnings 6,065 11,019 16,660
Interest expense 1,381 2,206 1,256
Other expense (income), net (326) (1,914) (255)
- -------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 5,010 10,727 15,659
Provision for income taxes 1,646 3,786 5,959
- -------------------------------------------------------------------------------------------------------------------
Net earnings $ 3,364 $ 6,941 $ 9,700
===================================================================================================================
Earnings per share:
Basic $ 1.06 $ 2.10 $ 2.78
Diluted $ 1.03 $ 2.00 $ 2.60
===================================================================================================================
Shares used in computation of:
Basic 3,163 3,308 3,494
Impact of dilutive stock options 112 162 234
- -------------------------------------------------------------------------------------------------------------------
Diluted 3,275 3,470 3,728
===================================================================================================================
</TABLE>
See accompanying notes.
40
<PAGE>
(Page 17 of Annual Report to Shareholders)
BADGER METER, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,410 $ 4,237
Receivables (Note 3) 18,700 19,006
Inventories:
Finished goods 5,260 3,870
Work in process 8,190 8,092
Raw materials 8,037 7,673
- -------------------------------------------------------------------------------------------------------------------
Total inventories 21,487 19,635
Prepaid expenses 767 952
- -------------------------------------------------------------------------------------------------------------------
Total current assets 44,364 43,830
Property, plant and equipment:
Land and improvements 2,550 2,619
Buildings and improvements 20,860 20,533
Machinery and equipment 68,033 66,564
- -------------------------------------------------------------------------------------------------------------------
91,443 89,716
Less accumulated depreciation (50,319) (47,122)
- -------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 41,124 42,594
Intangible assets, at cost less accumulated amortization 773 1,097
Prepaid pension (Note 7) 8,965 5,440
Deferred income taxes (Note 8) 49 1,396
Other assets 3,561 3,666
- -------------------------------------------------------------------------------------------------------------------
Total assets $ 98,836 $ 98,023
===================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (Note 4) $ 5,129 $ 17,769
Current portion of long-term debt (Note 9) 3,135 5,248
Payables 8,887 6,501
Accrued compensation and employee benefits 2,992 3,344
Other accrued liabilities 3,453 3,245
Income and other taxes 186 901
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 23,782 37,008
Accrued non-pension postretirement benefits (Note 7) 6,093 6,669
Other accrued employee benefits 5,461 5,083
Long-term debt (Notes 7 and 9) 20,498 5,944
Shareholders' equity: (Notes 2, 5 and 7)
Common Stock, $1.00 par; authorized 40,000,000 shares;
issued 4,676,840 shares in 2001 and 4,610,140 shares in 2000 4,677 4,610
Capital in excess of par value 16,168 14,713
Reinvested earnings 50,736 50,536
Less: Employee benefit stock (1,900) (2,300)
Treasury stock, at cost, 1,497,199 shares in 2001
and 1,403,101 shares in 2000 (26,679) (24,240)
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 43,002 43,319
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 98,836 $ 98,023
===================================================================================================================
</TABLE>
See accompanying notes.
41
<PAGE>
(Page 18 of Annual Report to Shareholders)
BADGER METER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 3,364 $ 6,941 $ 9,700
Adjustments to reconcile net earnings to net cash
provided by operations:
Depreciation 6,477 5,925 5,276
Amortization 324 148 357
Tax benefit on stock options 232 387 258
Noncurrent employee benefits (3,323) 648 611
Deferred income taxes 1,347 817 717
Changes in:
Receivables 306 5,272 (4,464)
Inventories (1,852) (1,529) 3,932
Current liabilities other than short-term debt 1,527 (5,349) (856)
Prepaid expenses and other 185 (9) 121
- -------------------------------------------------------------------------------------------------------------------
Total adjustments 5,223 6,310 5,952
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 8,587 13,251 15,652
- -------------------------------------------------------------------------------------------------------------------
Investing activities:
Property, plant and equipment (5,007) (6,403) (9,981)
Other - net 105 76 (654)
- -------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (4,902) (6,327) (10,635)
- -------------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase (decrease) in short-term debt (12,640) 6,067 (2,585)
Issuance of long-term debt 21,700 0 15,396
Repayments of long-term debt (9,259) (5,188) (1,644)
Dividends (3,164) (2,850) (2,453)
Stock options and ESSOP 1,290 1,023 1,461
Purchase of treasury stock (2,439) (5,491) (13,811)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (4,512) (6,439) (3,636)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (827) 485 1,381
Cash - beginning of year 4,237 3,752 2,371
- -------------------------------------------------------------------------------------------------------------------
Cash - end of year $ 3,410 $ 4,237 $ 3,752
===================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 624 $ 1,839 $ 5,442
Interest (including $40 of interest capitalized
during facility construction during 2001) $ 1,430 $ 2,255 $ 1,257
===================================================================================================================
</TABLE>
See accompanying notes.
42
<PAGE>
(Page 19 of Annual Report to Shareholders)
BADGER METER, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
Class B Capital in Employee
Common Common excess of Reinvested benefit Treasury
(In thousands except per share amounts) Stock Stock par value earnings stock stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $3,392 $111 $12,732 $39,198 $(2,606) $ (4,979) $47,848
Net earnings 9,700 9,700
Cash dividends, $.72 per Common share (2,104) (2,104)
Cash dividends, $.32 per Class B Common share (349) (349)
Restricted stock transactions 62 6 68
Stock options exercised (Note 5) 51 569 620
Tax benefit on stock options and dividends 258 258
ESSOP transactions 21 758 779
Treasury stock purchased (13,811) (13,811)
Exchange of Class B for Common shares 1,067 (111) (997) 41 0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 4,531 0 13,382 46,445 (2,600) (18,749) 43,009
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings 6,941 6,941
Cash dividends, $.86 per Common share (2,850) (2,850)
Stock options exercised (Note 5) 75 895 970
Tax benefit on stock options and dividends 387 387
ESSOP transactions 4 5 300 309
Treasury stock purchase (5,491) (5,491)
Other 44 44
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 4,610 0 14,713 50,536 (2,300) (24,240) 43,319
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings 3,364 3,364
Cash dividends, $1.00 per Common share (3,164) (3,164)
Stock options exercised (Note 5) 44 788 832
Tax benefit on stock options and dividends 232 232
ESSOP transactions 23 435 400 858
Treasury stock purchase (2,439) (2,439)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 $4,677 $ 0 $16,168 $50,736 $(1,900) $(26,679) $43,002
====================================================================================================================================
</TABLE>
See accompanying notes.
43
<PAGE>
(Page 20 to 26 of Annual Report to Shareholders)
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROFILE Badger Meter, Inc. (the company) is a leading marketer and
manufacturer of products using flow measurement and control technology developed
both internally and with other technology companies. Its products are used to
measure and control the flow of liquids in a variety of applications. The
company's products include water meters and associated systems, wastewater
meters, industrial process meters, automotive fluid meters and small valves.
CONSOLIDATION The consolidated financial statements include the accounts
of the company and its wholly owned subsidiaries.
REVENUE RECOGNITION Revenues are recognized upon shipment of product,
which corresponds with the transfer of title. The costs of shipping are billed
to the customer upon shipment and are included in cost of sales. The company
estimates and records provisions for warranties and other after-sale costs in
the period the sale is reported. Such provisions are included in other accrued
liabilities.
INVENTORIES Inventories are valued at the lower of cost (first-in,
first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at
cost. Depreciation is provided over the estimated useful lives of the respective
assets, principally by the straight-line method.
INTANGIBLE ASSETS Costs of purchased patents are amortized over the lives
of the patents. Accumulated amortization at December 31, 2001 and 2000, was
$355,000 and $741,000, respectively.
RESEARCH AND DEVELOPMENT Research and development costs are charged to
expense as incurred and amounted to $5,422,000, $6,562,000 and $6,012,000 in
2001, 2000 and 1999, respectively.
OTHER EXPENSE (INCOME), NET Other income and expense includes foreign
currency gains and losses, which are recognized as incurred. The company's
functional currency for all of its foreign subsidiaries is the U.S. dollar.
Other income for 2000 and 1999 also includes $2,230,000 and $750,000,
respectively, of business interruption insurance proceeds related to lost sales
and margins as a result of a fire at a vendor's facility in 1999.
USE OF ESTIMATES The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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.
ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards
Board (FASB) issued two new Statements of Financial Accounting Standards: No.
141 (SFAS 141) "Business Combinations" and No. 142 (SFAS 142) "Goodwill and
Other Intangible Assets". In October 2001, the FASB issued No. 144 (SFAS 144)
"Accounting for the Impairment or Disposal of Long-Lived Assets". Certain
provisions of SFAS No. 141 became effective for the company on July 1, 2001. All
other provisions of the above noted statements become effective for the company
beginning January 1, 2002. The company does not believe any of these recently
issued Statements will have a material effect on the company's results of
operations, financial position or disclosures.
RECLASSIFICATIONS Certain reclassifications have been made to the 2000 and
1999 consolidated financial statements to conform to the 2001 presentation.
44
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
2 COMMON STOCK
During 1999, the holders of Class B Common Stock converted all shares held
into Common Stock, resulting in only one class of stock for the company. The
company also has a Shareholder Rights Plan, which grants certain rights to
existing holders of Common Stock. Subject to certain conditions, the rights are
redeemable by the Board of Directors and are exchangeable for shares of Common
Stock. The rights have no voting power and expire on May 26, 2008.
3 TRANSACTIONS WITH AFFILIATED COMPANY
The company carries its 15% interest in a Mexican company, Medidores
Azteca, S.A. (Azteca) at cost ($75,000). During 2001, 2000 and 1999, the company
sold $689,000, $654,000 and $2,602,000 of product to Azteca. Trade receivables
from Azteca at December 31, 2001 and 2000, were $750,000 and $755,000,
respectively.
4 SHORT-TERM DEBT AND CREDIT LINES
Short-term debt at December 31, 2001 and 2000, consisted of:
<TABLE>
<CAPTION>
(In thousands) 2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
Notes payable to banks $ 2,213 $ 2,048
Commercial paper 22,916 15,721
- --------------------------------------------------------------------------------
Subtotal 25,129 17,769
Reclassification to long-term debt (Note 9) (20,000) 0
- --------------------------------------------------------------------------------
Total $ 5,129 $ 17,769
================================================================================
</TABLE>
The company has $44,145,000 of short-term credit lines with domestic and
foreign banks which include a $31,000,000 commercial paper line of credit. At
December 31, 2001, $25,129,000 was outstanding under these lines with the
weighted-average interest rate on the outstanding balance of 2.86% and 6.92% at
December 31, 2001 and 2000, respectively.
45
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
5 STOCK OPTION PLANS
The company has five stock option plans which provide for the issuance of
options to key employees and directors of the company. Each plan authorizes the
issuance of options to purchase up to an aggregate of 200,000 shares of Common
Stock, with vesting periods of up to ten years and maximum option terms of ten
years. As of December 31, 2001, options to purchase 129,912 shares are available
for grant.
The following table summarizes the transactions of the company's stock
option plans for the three-year period ended December 31, 2001:
<TABLE>
<CAPTION>
Weighted-Average
Number of Shares Exercise Price
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Unexercised options outstanding -
December 31, 1998 494,600 $16.35
Options granted 72,200 $40.25
Options exercised (50,852) $12.34
Options forfeited (7,228) $26.90
- -------------------------------------------------------------------------------------------------
Unexercised options outstanding -
December 31, 1999 508,720 $19.99
Options granted 35,200 $32.15
Options exercised (74,168) $13.07
Options forfeited (11,500) $25.90
- -------------------------------------------------------------------------------------------------
Unexercised options outstanding -
December 31, 2000 458,252 $21.90
Options granted 91,000 $28.50
Options exercised (43,504) $12.13
Options forfeited (12,052) $27.18
- -------------------------------------------------------------------------------------------------
Unexercised options outstanding -
December 31, 2001 493,696 $18.59
=================================================================================================
Price range $8.38 - $12.38
(weighted-average contractual life of
2.5 years) 136,200 $10.53
Price range $14.81 - $24.13
(weighted-average contractual life of
5.2 years) 139,896 $21.67
Price range $28.50 - $40.25
(weighted-average contractual life of
7.6 years) 217,600 $33.58
=================================================================================================
Exercisable options -
December 31, 1999 297,843 $12.91
December 31, 2000 251,516 $15.26
December 31, 2001 288,937 $20.65
=================================================================================================
</TABLE>
46
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
As allowed by SFAS 123, "Accounting for Stock-Based Compensation", the
company has elected to continue to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25), in accounting for
its stock option plans. Under APB 25, the company does not recognize
compensation expense upon the issuance of its stock options because the option
terms are fixed and the exercise price equals the market price of the underlying
stock on the grant date. The company has determined the pro-forma information as
if the company had accounted for stock options granted since January 1, 1995,
under the fair value method of SFAS 123. The Black-Scholes option pricing model
was used with the following weighted-average assumptions for options issued in
each year:
<TABLE>
<CAPTION>
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 5.0% 6.8% 5.6%
Dividend yield 4% 3% 3%
Volatility factor 29% 30% 38%
Weighted-average expected life 5.0 years 6.6 years 5.0 years
==========================================================================================================
</TABLE>
The weighted-average fair values of options granted in 2001, 2000 and
1999, were $6.28, $10.12 and $12.84 per share, respectively. If the company had
recognized compensation expense based on these values, the company's pro-forma
net earnings and both basic and diluted earnings per share would have been
reduced by approximately $385,000 or $.12 per share for 2001, $368,000 or $.11
per share for 2000, and $306,000 or $.09 per share for 1999. These pro-forma
calculations only include the effects of options granted since January 1, 1995.
As such, the impacts are not necessarily indicative of the effects on net income
of future years.
6 COMMITMENTS AND CONTINGENCIES
A. COMMITMENTS
The company leases equipment and facilities under operating leases, some
of which contain renewal options. Future minimum lease payments consisted of the
following at December 31, 2001:
<TABLE>
<CAPTION>
Total
(In thousands) Leases
----------------------------------------------------------------------
<S> <C>
2002 $ 506
2003 458
2004 232
2005 205
2006 and thereafter 0
----------------------------------------------------------------------
Lease obligations $ 1,401
=======================================================================
</TABLE>
Total rental expense charged to operations under all operating leases was
$1,447,000, $1,586,000 and $1,510,000 in 2001, 2000 and 1999, respectively.
47
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
B. CONTINGENCIES
In the normal course of business, the company is named in legal
proceedings. There are currently no material legal proceedings pending with
respect to the company.
The company is subject to contingencies relative to environmental laws and
regulations. 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 claim will have a material adverse effect on the company's
financial position or results of operations. Provision has been made for all
known settlement costs.
The company makes commitments in the normal course of business. At
December 31, 2001, these commitments were not significant individually or in the
aggregate.
The company has evaluated its worldwide operations to determine if any
risks and uncertainties exist that could severely impact its operations in the
near term. The company does not believe that there are any significant risks.
However, the company does rely on single suppliers for certain castings and
components in several of its product lines. Although alternate sources of supply
exist for these items, loss of certain suppliers could temporarily disrupt
operations. The company attempts to mitigate these risks by working closely with
key suppliers, purchasing minimal amounts from alternative suppliers, and by
purchasing business interruption insurance where appropriate.
The company reevaluates its exposures on a periodic basis and makes
adjustments to reserves as appropriate.
48
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
7 EMPLOYEE BENEFIT PLANS
A. PENSION PLAN
The company maintains a non-contributory defined benefit pension plan for
its employees. The following table sets forth the components of net periodic
pension expense for the years ended December 31, 2001, 2000 and 1999, based on a
September 30 measurement date:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 1,798 $ 1,758 $ 1,793
Interest cost on projected benefit obligations 2,799 2,816 2,648
Expected return on plan assets (3,593) (3,700) (3,617)
Net amortization and deferral (88) (522) (353)
- -------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 916 $ 352 $ 471
===================================================================================================================
</TABLE>
The following table provides a reconciliation of benefit obligations, plan
assets and funded status:
<TABLE>
<CAPTION>
(In thousands) 2001 2000
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 37,321 $ 37,549
Service cost 1,798 1,758
Interest cost 2,799 2,816
Plan amendments 32 558
Actuarial gain (588) (148)
Benefits paid (4,361) (5,212)
- --------------------------------------------------------------------------------------------------
Projected benefit obligation
as of September 30 $ 37,001 $ 37,321
- --------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets as of
beginning of year $ 40,330 $ 41,076
Actual return on plan assets (4,782) 4,466
Benefits paid (4,361) (5,212)
- --------------------------------------------------------------------------------------------------
Fair value of plan assets as of
September 30 $ 31,187 $ 40,330
- --------------------------------------------------------------------------------------------------
Reconciliation:
Funded status as of September 30 $ (5,814) $ 3,009
Unrecognized prior service cost (1,474) (1,629)
Unrecognized net actuarial loss 11,812 4,060
Company contribution 4,441 0
- --------------------------------------------------------------------------------------------------
Prepaid pension asset
as of September 30 and December 31 $ 8,965 $ 5,440
==================================================================================================
</TABLE>
Actuarial assumptions used in the preparation of the above data:
<TABLE>
<CAPTION>
2001 2000
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.5% 7.5%
Expected return on plan assets 9.0% 9.0%
Rate of compensation increase 5.0% 5.0%
=================================================================================================
</TABLE>
The fair value of the pension plan assets was $36,901,000 at December
31, 2001. The variation in the fair value of the assets between September 2001
and December 2001, is primarily from the change in the market value of the
underlying investments as well as a $4.4 million contribution.
49
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
B. OTHER POSTRETIREMENT BENEFITS
The company has certain postretirement plans that provide medical benefits
for retirees and eligible dependents. The following table sets forth the
components of net periodic postretirement benefit cost for the years ended
December 31, 2001, 2000 and 1999:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost, benefits attributed for service
of active employees for the period $ 97 $ 96 $ 105
Interest cost on the accumulated
postretirement benefit obligation 474 491 456
Unrecognized prior service credit (236) (236) (236)
Unrecognized net loss 61 67 53
- -------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 396 $ 418 $ 378
===================================================================================================================
</TABLE>
The following table provides a reconciliation of benefit obligations. It
is the company's policy to fund health care benefits on a cash basis. Since
there are no plan assets, the plan is unfunded.
<TABLE>
<CAPTION>
(In thousands) 2001 2000
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $6,629 $6,884
Service cost 97 96
Interest cost 474 491
Actuarial (gain) loss 217 (67)
Benefits paid (971) (775)
- --------------------------------------------------------------------------------------------------
Projected benefit obligation and
unfunded status as of December 31 6,446 6,629
Unrecognized prior service credit 1,354 1,590
Unrecognized net actuarial loss (1,707) (1,550)
- --------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost
as of December 31 $6,093 $6,669
=================================================================================================
</TABLE>
The discount rate used to measure the accumulated postretirement benefit
obligation was 7.5% for 2001 and 2000. Since the company has established fixed
company contribution amounts for retiree health care benefits, future health
care cost trends do not impact the company's accruals or provisions.
50
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
C. BADGER METER EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Badger Meter Employee Savings and Stock Ownership Plan (the ESSOP) has
used proceeds from loans, guaranteed by the company, to purchase Common Stock of
the company from shares held in treasury. The company is obligated to contribute
sufficient cash to the ESSOP to enable it to repay the loan principal and
interest. The principal amount of the loan was $1,900,000 as of December 31,
2001, and $2,300,000 as of December 31, 2000. This principal amount has been
recorded as long-term debt and a like amount of unearned compensation has been
recorded as a reduction of shareholders' equity in the accompanying Consolidated
Balance Sheets.
The company made principal payments of $400,000, $300,000 and $0 in 2001,
2000 and 1999, respectively. These payments released shares of Common Stock
(19,451 in 2001, 14,591 in 2000, and 0 in 1999) for allocation to participants
in the ESSOP. The ESSOP held unreleased shares of 92,393, 111,844 and 126,435 as
of December 31, 2001, 2000 and 1999, respectively. Unreleased shares are not
considered outstanding for purposes of computing earnings per share.
The ESSOP includes a voluntary 401(k) savings plan which allows domestic
employees to defer up to 15% of their income on a pretax basis. The company
matches 25% of each employee's contribution, with the match percentage applying
to a maximum of 7% of the employee's salary. The match is paid using company
stock released through the ESSOP loan payments. For ESSOP shares purchased prior
to 1993, compensation expense is recognized based on the original purchase price
of the shares released and dividends on unreleased shares are charged to
retained earnings. For shares purchased after 1992, expense is based on the
market value of the shares on the date released and dividends on unreleased
shares are accounted for as additional interest expense. At December 31, 2001,
the company committed to contribute $365,000 to the ESSOP in 2002 to be used to
pay down the existing loan. This commitment releases shares to satisfy the
401(k) match for 2001. Compensation expense of $268,000, $289,000 and $274,000
was recognized for the match for 2001, 2000, and 1999, respectively.
51
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
8 INCOME TAX EXPENSE
Details of earnings before income taxes and the related provision for
income taxes are as follows:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings before income taxes:
Domestic $ 4,656 $ 10,200 $ 15,126
Foreign 354 527 533
- ----------------------------------------------------------------------------------------------------------
Total $ 5,010 $ 10,727 $ 15,659
==========================================================================================================
Income taxes:
Current:
Federal $ 379 $ 2,292 $ 3,837
State (96) 535 923
Foreign 16 142 148
Deferred:
Federal 847 653 787
State 354 223 163
Foreign 146 (59) 101
- ----------------------------------------------------------------------------------------------------------
Total $ 1,646 $ 3,786 $ 5,959
==========================================================================================================
</TABLE>
The components of the net deferred tax asset as of December 31, were as
follows (in thousands):
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS: 2001 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Receivables $ 227 $ 242
Inventories 272 137
Accrued compensation 589 667
Other payables 1,711 1,629
Non-pension postretirement benefits 2,456 2,605
Accrued employee benefits 2,265 2,065
- ----------------------------------------------------------------------------------------
Total deferred tax assets 7,520 7,345
DEFERRED TAX LIABILITIES:
- ----------------------------------------------------------------------------------------
Depreciation 3,844 3,636
Prepaid pension 3,480 2,125
Other 147 188
- ----------------------------------------------------------------------------------------
Total deferred tax liabilities 7,471 5,949
- ----------------------------------------------------------------------------------------
Net deferred tax asset included in balance sheet $ 49 $ 1,396
========================================================================================
</TABLE>
52
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
The provision for income tax differs from the amount which would be
provided by applying the statutory U.S. corporate income tax rate in each year
due to the following items:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision at statutory rate $ 1,703 $ 3,648 $ 5,355
State income taxes, net
of federal tax benefit 170 500 715
Foreign income taxes (11) (97) 67
Tax benefit of FSC (57) (68) (32)
Other (159) (197) (146)
- ----------------------------------------------------------------------------------------------------------
Actual provision $ 1,646 $ 3,786 $ 5,959
==========================================================================================================
</TABLE>
No provision for federal income taxes is made on the earnings of foreign
subsidiaries that are considered permanently invested or that would be offset by
foreign tax credits upon distribution. Such undistributed earnings at December
31, 2001, were $809,000.
9 LONG-TERM DEBT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(In thousands) 2001 2000
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ESSOP debt (Note 7C) $ 1,900 $ 2,300
Capital lease 33 166
Bank note 1,700 8,726
Term loan (Note 4) 20,000 0
- -------------------------------------------------------------------------------------------------
Total debt 23,633 11,192
Less: current maturities (3,135) (5,248)
- -------------------------------------------------------------------------------------------------
Net long-term debt $ 20,498 $ 5,944
=================================================================================================
</TABLE>
Interest on the ESSOP debt may be charged at either prime rate or at LIBOR
plus 1.5%. As of December 31, 2001, the LIBOR-based loan had an interest rate of
3.4%. The terms of the loan allow variable payments of principal with the final
principal and interest payment due December 31, 2005. The interest expense on
the ESSOP debt was $76,000, $125,000 and $121,000, which was net of dividends on
unallocated ESSOP shares of $54,000, $57,000 and $51,000 for 2001, 2000 and
1999, respectively.
During 2001, the company prepaid the remaining balance on its $15,000,000
long-term loan, of which $8,726,000 was outstanding at December 31, 2000.
In July 2001, the company borrowed $1,700,000 in connection with the
construction of a new manufacturing facility in the Czech Republic. The debt
bears interest at LIBOR plus 1.75% and the rate is set daily. Payments are due
in quarterly installments through April 2005. Principal payments total $486,000
per year for 2002, 2003 and 2004, with a final principal payment of $242,000 in
2005.
In January 2002, the company borrowed $20,000,000 of long-term, unsecured
debt from a local bank. The purpose of the loan is to replace short-term
borrowings. As a result of obtaining the loan, $20,000,000 of commercial paper
has been reclassified to long-term debt for financial statement presentation.
The debt bears interest at 6.73% and is due in quarterly installments through
January 2007. Principal payments are as follows: for 2002, $2,616,000; for 2003,
$3,661,000; for 2004, $3,915,000; for 2005, $4,191,000; for 2006, $4,484,000;
and $1,133,000 thereafter.
53
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
Cash, receivables and payables are reflected in the financial statements
at fair value. Short-term debt is comprised of notes payable drawn against the
company's lines of credit and commercial paper. Because of the short-term nature
of these instruments, the carrying value approximates the fair value. Long-term
debt related to the company's guarantee of the ESSOP debt is offset by a similar
amount in shareholders' equity. The $1,700,000 bank note is a term loan with
variable interest based upon daily LIBOR rates; accordingly, carrying value
approximates the fair market value. The remaining long-term debt of $20,000,000
was obtained in January 2002 at market rates.
The company guarantees the bank borrowings made by a trust from which
officers may obtain loans in order to purchase shares of the company's Common
Stock. The officers' loan amount is collateralized by the company's shares that
were purchased with the loan's proceeds. The bank loan balances were $2,167,000
and $2,046,000 at December 31, 2001 and 2000, respectively.
10 INDUSTRY SEGMENT
The company is a marketer and manufacturer of flow measurement and control
instruments, which comprise one reportable segment. The company manages and
evaluates its operations as one segment primarily due to similarities in the
nature of the products, production processes, customers and methods of
distribution. Information regarding geographic areas is as follows:
<TABLE>
<CAPTION>
(In thousands) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
United States $ 120,811 $ 124,402 $ 132,924
Foreign $ 17,726 $ 21,987 $ 17,953
Long-Lived Assets:
United States $ 50,961 $ 51,060 $ 51,504
Foreign $ 3,462 $ 1,737 $ 1,390
==========================================================================================================
</TABLE>
54
<PAGE>
BADGER METER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
11 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), COMMON STOCK PRICE AND DIVIDENDS
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- -------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
2001
Net sales $ 35,454 $ 33,949 $ 35,575 $ 33,559
Gross margin $ 12,027 $ 10,942 $ 11,368 $ 10,158
Net earnings $ 934 $ 529 $ 951 $ 950
Earnings per share:
Basic $ .29 $ .17 $ .30 $ .30
Diluted $ .28 $ .16 $ .29 $ .29
Dividends declared:
Common $ .25 $ .25 $ .25 $ .25
Stock price:
High $ 29.24 $ 33.22 $ 29.47 $ 25.04
Low $ 22.80 $ 27.77 $ 23.20 $ 19.76
Quarter-end close $ 28.50 $ 28.75 $ 25.30 $ 22.43
- -------------------------------------------------------------------------------------------------------------------
2000
Net sales $ 36,907 $ 35,845 $ 39,508 $ 34,129
Gross margin $ 14,289 $ 11,994 $ 14,479 $ 12,252
Net earnings $ 2,357 $ 1,534 $ 1,948 $ 1,102
Earnings per share:
Basic $ .71 $ .46 $ .59 $ .34
Diluted $ .67 $ .44 $ .56 $ .32
Dividends declared:
Common $ .22 $ .22 $ .22 $ .22
Stock price:
High $ 36.63 $ 37.38 $ 29.50 $ 28.01
Low $ 30.00 $ 25.00 $ 25.38 $ 23.00
Quarter-end close $ 36.25 $ 25.50 $ 27.63 $ 23.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Badger Meter, Inc. Common Stock is listed on the American Stock Exchange
under the symbol BMI. Earnings per share is computed independently for each
quarter. As such, the annual per share amount may not equal the sum of the
quarterly amounts due to rounding. Shareholders of record as of December 31,
2001 and 2000, totaled 509 and 530, respectively, for Common Stock. Voting
trusts are counted as single shareholders for this purpose.
55
<PAGE>
BADGER METER, INC.
REPORT OF INDEPENDENT AUDITORS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Badger Meter, Inc.
We have audited the accompanying consolidated balance sheets of Badger
Meter, Inc. as of December 31, 2001 and 2000, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 2001. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits 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 consolidated financial position of Badger Meter,
Inc. at December 31, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
Ernst & Young LLP
Milwaukee, Wisconsin
January 30, 2002
56
<PAGE>
(Page 27 of Annual Report to Shareholders)
BADGER METER, INC.
TEN YEAR SUMMARY OF SELECTED DATA
Years ended December 31 (in thousands except per share data)
<TABLE>
<CAPTION>
2001 2000 1999 1998 1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 138,537 146,389 150,877 143,813 130,771 116,018 108,644 99,155 84,497 82,106
Research and development $ 5,422 6,562 6,012 6,105 4,397 3,851 3,858 3,278 3,642 4,119
Earnings before income taxes $ 5,010 10,727 15,659 13,364 10,205 8,167 5,911 4,974 3,306 1,160
Earnings before changes in
accounting $ 3,364 6,941 9,700 8,247 6,522 5,127 3,719 3,216 2,164 802
Cumulative effect of changes
in accounting $ 0 0 0 0 0 0 0 0 0 (4,684)
Net earnings (loss) $ 3,364 6,941 9,700 8,247 6,522 5,127 3,719 3,216 2,164 (3,882)
Earnings to sales * 2.4% 4.7% 6.4% 5.7% 5.0% 4.4% 3.4% 3.2% 2.6% 1.0%
- ------------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Basic earnings before changes in
accounting $ 1.06 2.10 2.78 2.28 1.83 1.46 1.06 .93 .64 .24
Cumulative effect of changes
in accounting $ 0 0 0 0 0 0 0 0 0 (1.38)
Basic earnings (loss) $ 1.06 2.10 2.78 2.28 1.83 1.46 1.06 .93 .64 (1.14)
Cash dividends declared:
Common Stock $ 1.00 .86 .72 .60 .48 .43 .39 .35 .32 .30
Class B Common Stock $ 0 0 .32 .54 .44 .39 .36 .32 .29 .28
Price range - high $ 33.22 37.38 41.00 40.63 57.50 20.81 13.50 14.00 11.00 8.88
Price range - low $ 19.76 23.00 29.38 25.00 18.13 12.38 11.06 9.50 8.88 7.38
Closing price $ 22.43 23.00 30.13 35.63 40.75 19.19 13.25 11.94 9.56 8.75
Book value $ 13.52 13.51 12.88 13.13 11.62 10.32 9.16 8.38 7.66 7.31
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
Common Stock 3,180 3,207 3,340 2,538 2,444 2,426 2,387 2,377 2,281 2,282
Class B Common Stock 0 0 0 1,108 1,126 1,126 1,126 1,126 1,126 1,126
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 20,582 6,822 11,150 10,776 13,870 17,645 16,178 14,569 12,010 9,876
Current ratio 1.9 to 1 1.2 to 1 1.3 to 1 1.3 to 1 1.5 to 1 2.0 to 1 2.1 to 1 1.7 to 1 1.6 to 1 1.6 to 1
Net cash provided by
operations $ 8,587 13,251 15,652 15,007 5,178 9,878 12,026 6,342 2,969 3,833
Capital expenditures $ 5,007 6,403 9,981 17,926 8,349 5,382 4,493 3,553 3,121 3,496
Total assets $ 98,836 98,023 102,186 96,945 82,297 66,133 60,527 61,993 57,627 53,895
Long-term debt $ 20,498 5,944 11,493 2,600 928 1,091 1,000 1,200 1,400 1,700
Shareholders' equity $ 43,002 43,319 43,009 47,848 41,467 36,638 32,163 29,351 26,074 24,894
Debt to total capitalization 40.1% 40.1% 39.5% 26.1% 22.7% 9.2% 16.8% 28.4% 34.9% 34.2%
Return on shareholders' equity * 7.8% 16.0% 22.6% 17.2% 15.7% 14.0% 11.6% 11.0% 8.3% 3.2%
Price/earnings ratio * 21.2 11.0 10.8 15.6 22.3 13.1 12.5 12.8 15.1 37.2
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* PRIOR TO ACCOUNTING CHANGES
57
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>c67956ex21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>
EXHIBIT (21.0)
BADGER METER, INC.
SUBSIDIARIES OF THE REGISTRANT
The company's subsidiaries are listed below. All of the subsidiaries of the
company listed below are included in the company's consolidated financial
statements.
<TABLE>
<CAPTION>
Percentage State or Country
Name of ownership in which organized
- ---- ------------ ------------------
<S> <C> <C>
Badger Meter Europe, GmbH 100% Federal
Republic
of Germany
Badger Meter de Mexico, S.A. de C.V. 100% Mexico
Badger Meter Limited 100% United Kingdom
Badger Meter de Las Americas, S.A. de C.V. 100% Mexico
Badger Meter Export, Inc. 100% Virgin Islands
(a large FSC) (U.S.)
Badger Meter Canada 100% Canada
Badger Meter Czech Republic 100% Czech Republic
(a subsidiary of Badger Meter Europe, GmbH)
</TABLE>
58
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>c67956ex23.txt
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP
<TEXT>
<PAGE>
EXHIBIT (23.0)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form 10-K
of Badger Meter, Inc., of our report dated January 30, 2002, included in the
2001 Annual Report to Shareholders of Badger Meter, Inc.
Our audits also included the financial statement schedule of Badger Meter, Inc.
listed in Item 14(a). This schedule is the responsibility of the company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects, the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8 (File Nos. 33-27650, 33-65618, 33-62239, 33-62241, 333-28617 and
333-73228) pertaining to the Badger Meter, Inc. 1989 Stock Option Plan, Badger
Meter, Inc. 1993 Stock Option Plan, Badger Meter, Inc. 1995 Stock Option Plan,
Badger Meter, Inc. Employee Savings and Stock Ownership Plan, Badger Meter, Inc.
1997 Stock Option Plan and Badger Meter, Inc. 1999 Stock Option Plan, of our
report dated January 30, 2002, with respect to the consolidated financial
statements incorporated herein by reference, and our report included in the
preceding paragraph with respect to the financial statement schedule included in
this Annual Report (Form 10-K) of Badger Meter, Inc. for the year ended December
31, 2001.
Ernst & Young LLP
Milwaukee, Wisconsin
March 11, 2002
59
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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