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1
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 [Fee Required]
For the fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
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
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. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $31,095,900 as of February 29, 1996. At February 29, 1996, the
registrant had 1,199,507 shares of Common Stock outstanding and 562,785 shares
of Class B Common Stock outstanding.
Documents Incorporated by Reference:
Parts I and II incorporate information by reference from the Company's
1995 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, 1996
[to be filed with the Securities and Exchange Commission under Regulation 14A
within 120 days after the end of the registrant's fiscal year].
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Part I
Item 1. Business
Badger Meter, Inc. (the Company) is a marketer and manufacturer of
products using flow measurement and control technology serving industrial and
utility markets worldwide. The Company's two major markets are within a single
business segment. The Company was incorporated in 1905.
The Company serves the flow measurement and control market with products
including water meters and associated systems, wastewater meters, industrial
meters, small valves and natural gas instrumentation. Because of marketing
differences, the water meters and associated systems have been assigned to the
Utility Division, and all of the other products to the Industrial Division.
Beginning in 1997, the Company will expand into three operating units:
Utility, Industrial and International. The Utility and Industrial Divisions
will market their products in the United States and Canada while the
International Division will market both Utility and Industrial products
throughout the world except for the United States and Canada.
Industrial Division
The Industrial Division markets and manufactures products which are sold
to industrial, certain municipal, and OEM (original equipment manufacturer)
customers. There are six major markets for Industrial Division products:
energy and petroleum; food and beverage; pharmaceutical; chemical; water,
wastewater and process waters; and concrete. Sub-markets, niches, and
applications within each market are numerous and many products serve more than
one market. Many industrial products are custom engineered for highly
technical, unique applications. The Industrial Division's products include
ultrasonic flowmeters, precision control valves, flowmeters, energy
instruments, disc meters, turbo meters, oscillating piston meters, flow tubes,
lube meters, process controllers, allied instrumentation and parts.
Industrial Division products are sold throughout the world through various
selling arrangements including direct sales, distributors and independent sales
representatives. A variety of products are available to satisfy the customers'
needs. Within the sub-markets and niches, several of the products, including
the research control valve, turbo valves for concrete batch plants and the
lubrication meter, enjoy a strong market position.
There are several competitors in each of the markets in which the Company
sells the foregoing products, and the competition varies from moderate to
intense. 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 high precision valves, energy instruments and
ultrasonic flowmeters. Technological differentiation and customization to
various flow applications are important. As a result of significant research
and development activities, the Company enjoys a favorable patent position for
its natural gas instrumentation products.
At December 31, 1995, the backlog for Industrial Division products was
$5,570,000 versus $4,584,000 at year-end 1994. The Industrial Division is not
dependent on a single customer or group of customers, and there is only a
modest seasonal impact on sales.
There is no single-source dependency for raw materials used in Industrial
Division products. Industrial products utilize microprocessors, plastic
resins, and metals or alloys, such as aluminum, stainless steel, cast iron,
brass and stellite.
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Utility Division
The Utility Division markets and manufactures products which are sold to
public and private water and natural gas utilities. Principal products include
disc meters, turbo and compound meters, and automated and automatic remote
meter reading systems. The Utility Division also supplies custom molded
plastic products on an OEM basis to non-utility customers from its Rio Rico,
Arizona facility.
Water meters and meter reading devices purchased by utilities to generate
income from residential water usage constitute the Company's only class of
product which contributed 10% or more to total sales. The percent of the
Company's total sales attributable to sales of such class of products for the
past three years is as follows: 1995, 66%; 1994, 62%; 1993, 58%.
Some of the sales in the Utility Division markets are by competitive bid.
In addition to price, some customers consider quality and customer service in
making purchasing decisions. Public bids for water meters may include both
small and large meters.
At December 31, 1995, the Utility Division backlog was $7,442,000 versus
the December 31, 1994 backlog of $11,929,000. The 1994 backlog included
approximately $4,000,000 of a large Mexican order, most of which was shipped in
1995. The Company believes that its sales exceed 25% of the total sales in the
domestic small-meter market, and considerably less of the total sales in the
domestic large-meter market. Major competitors include Sensus Technologies,
Inc., Schlumberger Industries, Inc. and ABB-Kent Meters, Inc.
The Utility Division products are sold by direct salespersons and through
distributors. The Utility Division products are marketed throughout North
America and, to a lesser extent, in Central and South America and Europe.
The most important raw materials for Utility Division products are bronze
castings, plastic resins, electronic subassemblies and glass. There are
multiple sources for these raw materials, but the Company purchases bronze
castings from a single supplier. The Company believes bronze castings would be
available from other sources, but that the loss of its current supplier would
result in higher cost of castings, short-term increases in inventory and higher
quality control costs. Prices may be affected by world commodity markets.
No single customer accounts for 10% or more of the total sales of the
Company.
Backlog
The dollar amount of the Company's total backlog of unshipped orders at
December 31, 1995 and 1994 was $13,012,000 and $16,513,000, respectively. All
of the December 31, 1995 backlog is expected to be shipped in 1996.
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 $3,858,000 during 1995, as compared to
$3,278,000 during 1994 and $3,642,000 during 1993. Research and development
activities are primarily sponsored by the Company.
Intangible Assets
The Company owns or controls many patents, trademarks, tradenames and
license agreements, in the United States and other countries, related to its
products and technologies in both the Industrial and Utility Divisions. No
single patent, trademark, tradename or license is material to the Company's
business as a whole.
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Environmental Protection
The Company is subject to contingencies relative to the 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
several cases relative to Superfund sites. Provision has been made for any
known settlement costs. Expenditures during 1995 for compliance with
environmental control provisions and regulations were not material.
To insure compliance with all environmental regulations at all company
sites, in 1991 the Board of Directors established a Compliance Committee which
provides monitoring of the Company's compliance with all regulatory authorities
in regard to, among other things, environmental matters.
Employees
The Company and its subsidiaries employed 904 persons at December 31,
1995.
International Operations
The Company has distributors throughout the world. Additionally, the
Company has a sales, assembly, and distribution facility in Stuttgart, Germany,
a sales and customer service office in Mexico City and an assembly facility in
Nogales, Sonora, Mexico.
The Company exports products manufactured in Milwaukee, WI., Tulsa, OK.,
and Rio Rico, AZ.
In January 1996, a Vice President - International was hired. His
responsibility will be to manage the distribution of all of the Company's
products in all countries outside of the United States and Canada.
Financial Information about Foreign Operations and Export Sales
Information about the Company's foreign operations and export sales is
included on page 26 of the Company's 1995 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 products.
Item 2. Properties
The principal facilities utilized by the Company at December 31, 1995, are
listed below. Except as indicated, all of such facilities are owned in fee
simple by the Company.
Approximate Area
Location Principal Use (Square Feet)
----------- ----------------------------------- ------------------
Brown Deer,
Wisconsin Manufacturing and offices 287,000
Tulsa,
Oklahoma Manufacturing and offices 89,500(1)
Rio Rico,
Arizona Manufacturing and offices 36,000
Nogales,
Mexico Assembly, manufacturing and offices 41,700(2)
Stuttgart,
Germany Assembly, manufacturing and offices 8,253(3)
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(1) Includes 30,000 sq. ft. leased facility. Lease term expires
December 31, 1996.
(2) Leased facility. Lease term exprires January 31, 1998.
(3) Leased facility. Lease expires December, 1998.
In addition to the foregoing facilities, the Company leases several sales
offices. The Company believes that its facilities are generally well
maintained and have sufficient capacity for its current needs.
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, 1995.
Executive Officers of the Company
The following table sets forth certain information regarding the executive
officers of the Company.
Age at
Name Position 2/29/96
------------------------ --------------------------------------- -------
James L. Forbes President and Chief 63
Executive Officer
Robert D. Belan Vice President - Utility Division 55
William H. Vander Heyden Vice President - Industrial Division 59
Ronald H. Dix Vice President Administration 51
and Human Resources
Deirdre C. Elliott Vice President - Corporate Counsel 39
and Secretary
Richard A. Meeusen Vice President - Finance, Treasurer and 41
Chief Financial Officer
William J. Shinners Vice President-Controller 61
Theodore N. Townsend Vice President - International 51
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 has served as President and Chief Executive Officer for more
than five years.
Mr. Belan was elected Vice President - Utility Divison in March 1992. In
October 1991, he was appointed President of the Utility Division and currently
also serves in that capacity. From September 1989 to October 1991, he was Vice
President of Operations in the Utility Division.
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Mr. Vander Heyden was elected Vice President - Industrial Division in
April 1993. From April 1989 to April 1993, Mr. Vander Heyden was Executive
Vice President and Chief Technical Officer. Mr. Vander Heyden was appointed
President of the Industrial Division in 1990 and currently also serves in that
capacity.
Mr. Dix has served as Vice President of Administration and Human Resources
for more than five years.
Ms. Elliott was elected Vice President - Corporate Counsel and Secretary
in December 1993. From October 1991 to December 1993, she served as Vice
President - Corporate Counsel. Ms. Elliott joined the Company in February 1991
as Corporate Counsel.
Mr. Meeusen joined the Company and was elected Vice President - Finance
and elected Chief Financial Officer in November 1995 and was elected Treasurer
in January 1996. Prior to joining the Company, Mr. Meeusen was Vice President
- - Finance and Treasurer for Zenith Sintered Products for more than five years.
Mr. Shinners was elected Vice President-Controller of the Company in April
1989.
Mr. Townsend joined the Company and was elected Vice President -
International in February 1996. From 1993 to 1995, Mr. Townsend was Managing
Director of International Gas Measurement, based in London England for twelve
companies related to Elster/Kromshroder and American Meter Companies. From
1990 to 1992, Mr. Townsend was a Vice President of American Meter Company.
Part II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The information set forth on page 26 in the Company's 1995 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 28 in the Company's 1995
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 14,15 and 16 in the Company's 1995
Annual Report to Shareholders is incorporated herein by reference in
response to this Item.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Company at December 31, 1995
and 1994 and for each of the three years in the period ended December
31, 1995 and the auditor's report thereon and the Company's unaudited
quarterly financial data for the two-year period ended December 31,
1995 are incorporated herein by reference from the 1995 Annual Report
to Shareholders, pages 17 through 27.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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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 "Other
Matters" in the Company's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on April 19, 1996, 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,
1996, and is incorporated herein by reference; provided, however, that
the subsection entitled "Executive Compensation-Board Compensation
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, 1996, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information required by this Item is included under the headings
"Compensation 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,
1996, 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.
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 required to be filed by the Registrant
during the quarter ended December 31, 1995.
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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 A. Meeusen By: /s/ Deirdre C. Elliott
-------------------------------------- ------------------------------
Richard A. Meeusen Deirdre C. Elliott
Vice President - Finance and Treasurer Vice President - Corporate
Chief Financial Officer Counsel and Secretary
February 16, 1996 February 16, 1996
By: /s/ William J. Shinners
--------------------------------------
William J. Shinners
Vice President - Controller
Chief Accounting Officer
February 16, 1996
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 O. Wright /s/ James L. Forbes
- ------------------------- ------------------------
James O. Wright James L. Forbes
Director and Chairman Director, President and
February 16, 1996 Chief Executive Officer
February 16, 1996
/s/ Robert M. Hoffer /s/ Pamela B. Strobel
- ------------------------- ------------------------
Robert M. Hoffer Pamela B. Strobel
Director Director
February 16, 1996 February 16, 1996
/s/ Charles F. James, Jr. /s/ Warren R. Stumpe
- ------------------------- ------------------------
Charles F. James, Jr. Warren R. Stumpe
Director Director
February 16, 1996 February 16, 1996
/s/ Donald J. Schuenke /s/ Edwin P. Wiley
- ------------------------- ------------------------
Donald J. Schuenke Edwin P. Wiley
Director Director
February 16, 1996 February 16, 1996
/s/ John J. Stollenwerk /s/ James O. Wright, Jr.
- ------------------------- ------------------------
John J. Stollenwerk James O. Wright, Jr.
Director Director
February 16, 1996 February 16, 1996
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BADGER METER, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Page References
Annual Report
to
Shareholders Form 10-K
Page Number Page Number
------------- -----------
Item 14(a) 1
Financial statements:
Consolidated balance sheets at
December 31, 1995 and 1994 18
Consolidated statements of operations
for each of the three years in the
period ended December 31, 1995 17
Consolidated statements of cash flows
for each of the three years in the
period ended December 31, 1995 19
Consolidated statements of shareholders'
equity for each of the three years in
the period ended December 31, 1995 20
Notes to consolidated financial
statements 21 - 26
Item 14(a) 2
Financial statement schedules:
Consolidated schedules for each of
the three years in the period ended
December 31, 1995:
II - Valuation and qualifying accounts F-1
All other schedules are omitted since the required information is not present
or is not present in amounts sufficient to require submission of the schedules,
or because the information required is included in the financial statements and
the notes thereto.
F-0
10
BADGER METER, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994, and 1993
Balance at Additions Deductions Balance
beginning charged to from at end
of year earnings allowances of year
Allowance for doubtful receivables:
1995 $135,000 $137,000 $56,000(a) $216,000
======== ======== ========== ========
1994 $ 99,000 $ 62,000 $26,000(a) $135,000
======== ======== ========== ========
1993 $ 88,000 $ 40,801 $29,801(a) $ 99,000
======== ======== ========== ========
Note:
(a) Accounts receivable written off, less recoveries, against the
allowance.
F-1
11
EXHIBIT INDEX
Exhibit No. Exhibit Description Page No.
- ----------- ------------------- --------
(3.0) Restated Articles of Incorporation effective April 23, 1993. [Incorporated --
by reference from Exhibit (4.3) to the Registrant's Form S-8 Registration
Statement (Registration No. 33-65618)].
(3.1) Restated By-Laws as amended February 16, 1996. Included
(4.0) Loan Agreement between the First Wisconsin National Bank of Milwaukee --
and the Badger Meter Employee Stock Ownership Plan and Trust, dated
June 22, 1984. [Incorporated by reference from Exhibit (4.1) to the
Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1984].
(4.1) 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].
(4.2) Loan Agreement between the First Wisconsin National Bank of Milwaukee and --
the Badger Meter Employee Stock Ownership Plan and Trust, dated August 2, 1990.
[Incorporated by reference from Exhibit (10.0) to the Registrant's Quarterly Report
on Form 10-Q for the period ended September 30, 1990].
(4.3) Loan Agreement between Firstar Bank Milwaukee, N.A. and The Badger Meter Employee Included
Savings and Stock Ownership Plan and Trust, dated December 1, 1995.
(9.0) Badger Meter, Inc. Voting Trust Agreement dated June 1, 1953 as amended. --
[Incorporated by reference from Exhibit (13) to the Registrant's Form 10 dated
April 28, 1967].
(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].
(10.0) * Badger Meter, Inc. Restricted Stock Plan, as amended. [Incorporated by --
reference from Exhibit (4.1) to the Registrant's Form S-8 Registration Statement
(Registration No. 33-27649)].
(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. 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].
(10.4) * Badger Meter, Inc. 1995 Stock Option Plan [Incorporated by reference --
from Exhibit (4.1) to the Registrants Form S-8 Registration Statement
(Registration No. 033-62239)].
* A management contract or compensatory plan or arrangement.
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EXHIBIT INDEX (CONTINUED)
Exhibit No. Exhibit Description Page No.
- ----------- ------------------- ---------
(10.5) Badger Meter, Inc. Employee Savings and Stock Ownership Plan --
[Incorporated by reference from Exhibit (4.1) to the Registrants
Form S-8 Registration Statement (Registration No. 033-62241)].
(10.6) * Long-Term Incentive Plan. Included
(10.7) * Badger Meter, Inc. Supplemental Non-Qualified Unfunded Pension Plan. Included
(11.0) Computation of fully diluted earnings per share. Included
(13.0) Portions of the Annual Report to Shareholders that are incorporated by reference. Included
(21.0) Subsidiaries of the Registrant. Included
(23.0) Consent of Ernst & Young LLP, Independent Auditors. Included
(27.0) Financial Data Schedule. Included
(99.0) Definitive Proxy Statement for the Annual Meeting of Shareholders to be held --
April 19, 1996. [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].