UNITEDTable STATES SECURITIESof AND EXCHANGE COMMISSIONContents

~~WASHINGTON, D.C.~~UNITED ~~20549~~STATES

~~FORM~~SECURITIES ~~10-Q~~AND EXCHANGE COMMISSION

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended July 3, 2004
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

WASHINGTON, D.C. 20549

~~Commission~~FORM ~~file number 333~~10-~~113658~~Q

Sensus Metering Systems (Bermuda 2) Ltd.		Sensus Metering Systems Inc.
(Exact name of registrant as specified in its charter)		(Exact name of registrant as specified in its charter)
Bermuda	98-0413362	Delaware	51-0338883
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~8601~~For ~~Six~~the ~~Forks~~quarterly ~~Road,~~period ~~Suite~~ended ~~300,~~January ~~Raleigh~~1, ~~North~~ ~~Carolina~~2005 ~~27615~~

~~(Address~~¨ ofTRANSITION ~~principal~~REPORT ~~executive~~PURSUANT ~~offices)~~TO SECTION 13 OR 15(~~Zip Code~~d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~(919)~~For ~~845-4017~~the transition period from to

~~(Registrants’~~Commission ~~telephone~~file number~~, including~~ ~~area~~333-113658 ~~code)~~

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý


Sensus Metering Systems (Bermuda 2) Ltd.				Sensus Metering Systems Inc.
(Exact name of registrant as specified in its charter)				(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Bermuda

98-0413362

Delaware

51-0338883

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer

Identification No.)

~~Number~~8601 ofSix ~~Common~~Forks ~~Shares~~Road, ~~$1.00~~Suite ~~par value~~300, ~~outstanding at August 30~~Raleigh, ~~2004:~~North ~~12,000,~~Carolina ~~all~~27615 (Address of ~~which~~principal ~~are~~executive ~~owned~~offices) by(Zip ~~Sensus~~Code) ~~Metering~~(919) ~~Systems~~ 845-4017 (~~Bermuda~~Registrants’ 1)telephone ~~Ltd.~~number, including area code)

Part I—Financial Statements
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of July 3, 2004 and March 31, 2004
	Condensed Consolidated Statements of Operations for the fiscal quarter ended July 3, 2004 and for the Predecessor for the fiscal quarter ended June 28, 2003
	Condensed Consolidated Statements of Cash Flows for the fiscal quarter ended July 3, 2004 and for the Predecessor for the fiscal quarter ended June 28, 2003
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
Part II—Other Information
Item 1.	Legal Proceedings
Item 2.	Changes in Securities and Use of Proceeds
Item 3.	Defaults upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

~~PART~~Number ~~I—FINANCIAL~~of ~~INFORMATION~~Common Shares, $1.00 par value, outstanding at January 31, 2005: 12,000, all of which are owned by Sensus Metering Systems (Bermuda 1) Ltd.

ItemTable 1.of Financial Statements.Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD. CONDENSED CONSOLIDATED BALANCE SHEETS


		Page
	Part I—Financial Statements

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets of the Company as of January 1, 2005 (unaudited) and March 31, 2004	3

	Condensed Consolidated Statements of Operations of the Company for the fiscal quarter and nine months ended January 1, 2005 and for the period from Inception (December 18, 2003) through December 28, 2003 (unaudited) and of the Predecessor for the period from October 1, 2003 through December 17, 2003 (unaudited) and for the period from April 1, 2003 through December 17, 2003	4

	Condensed Consolidated Statements of Cash Flows of the Company for the nine months ended January 1, 2005 and for the period from Inception (December 18, 2003) through December 28, 2003 (unaudited) and of the Predecessor for the period from April 1, 2003 through December 17, 2003	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	35

	Part II—Other Information

Item 1.	Legal Proceedings	37

Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	37

Item 3.	Defaults upon Senior Securities	37

Item 4.	Submission of Matters to a Vote of Security Holders	37

Item 5.	Other Information	38

Item 6.	Exhibits and Reports on Form 8-K	38

~~(In~~2 ~~millions)~~

	July 3, 2004			March 31, 2004
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	36.6		$	48.5
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1.2 and $1.3 at July 3, 2004 and March 31, 2004, respectively	82.1			82.5
Other	0.7			2.4
Inventories, net	47.9			46.5
Prepayments and other current assets	9.1			8.9
Deferred income taxes	1.2			1.2
Total current assets	177.6			190.0
PROPERTY, PLANT AND EQUIPMENT, net	115.7			116.4
Intangible assets, net	253.9			254.4
Goodwill	348.0			347.6
Deferred income taxes	18.0			18.0
Other long-term assets	26.0			25.0
Total assets	$	939.2		$	951.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	43.3		$	43.7
Current portion of long-term debt	2.3			2.3
Short-term borrowings	—			2.2
Income taxes payable	0.8			0.7
Restructuring accruals	8.9			8.6
Accruals and other current liabilities	43.6			51.7
Total current liabilities	98.9			109.2
Long-term debt, less current portion	501.6			502.1
Pensions	37.6			37.6
Deferred income tax liabilities	91.3			91.9
Other long-term liabilities	6.7			6.2
Minority interests	6.0			6.4
Total liabilities	742.1			753.4
STOCKHOLDERS’ EQUITY:
Common stock, par value $1.00 per share, 12,000 shares authorized, issued and outstanding	—			—
Paid-in capital	200.0			200.0
Retained deficit	(2.6		)	(1.9		)
Accumulated other comprehensive loss	(0.3		)	(0.1		)
Total stockholders’ equity	197.1			198.0
Total liabilities and stockholders’ equity	$	939.2		$	951.4

~~The~~ ~~accompanying~~PART ~~notes~~I—FINANCIAL ~~are~~INFORMATION ~~an integral part of these condensed consolidated financial statements.~~

3Item 1. Financial Statements.

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

CONDENSED CONSOLIDATED ~~STATEMENTS~~BALANCE OFSHEETS ~~OPERATIONS~~

($ In ~~millions~~Millions)

				Predecessor (Note 1)
	January 1,2005				March 31,2004
	Fiscal quarter Ended July 3, 2004			Fiscal quarter Ended June 28, 2003
	(unaudited)
	(unaudited)			(unaudited)
ASSETS
NET SALES:
CURRENT ASSETS:
To third parties	$	140.7		$	125.5
Cash and cash equivalents	$	38.1			$	48.5
To affiliates	—			1.8
Accounts receivable:
TOTAL SALES	140.7			127.3
Trade, net of allowance for doubtful accounts of $2.2 and $1.3 at January 1, 2005 and March 31, 2004, respectively		69.5				82.5
COST OF SALES	99.1			87.5
Other		1.9				2.4
GROSS PROFIT	41.6			39.8
Inventories, net		55.5				46.5
OPERATING EXPENSES:
Prepayments and other current assets		5.5				8.9
Selling, general and administrative expenses	24.5			23.6
Deferred income taxes		2.7				1.2
Restructuring and other similar costs	2.0			6.3
Total current assets		173.2				190.0
Amortization of intangible assets	5.0			0.1
Property, plant and equipment, net		121.0				116.4
Other operating expense (income), net	0.5			(0.2		)
Intangible assets, net		238.8				254.4
OPERATING INCOME	9.6			10.0
Goodwill		344.5				347.6
NON-OPERATING INCOME (EXPENSE):
Deferred income taxes		18.9				18.0
Interest income (expense):
Other long-term assets		25.5				25.0
From/to third parties	(9.4		)	—
Total assets	$	921.9			$	951.4
From/to affiliates	—			1.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST	0.2			11.0
CURRENT LIABILITIES:
PROVISION FOR INCOME TAXES	0.8			4.5
Accounts payable	$	36.0			$	43.7
INCOME (LOSS) BEFORE MINORITY INTEREST	(0.6		)	6.5
Current portion of long-term debt		1.2				2.3
MINORITY INTEREST	(0.1		)	(0.1		)
Short-term borrowings		—				2.2
NET INCOME (LOSS)	$	(0.7	)	$	6.4
Income taxes payable		—				0.7
Restructuring accruals		8.1				8.6
Accruals and other current liabilities		45.8				51.7
Total current liabilities		91.1				109.2
Long-term debt, less current portion		500.4				502.1
Pensions		43.4				37.6
Deferred income tax liabilities		91.1				91.9
Other long-term liabilities		6.0				6.2
Minority interests		0.6				6.4
Total liabilities		732.6				753.4
STOCKHOLDERS’ EQUITY:
Common stock, par value $1.00 per share, 12,000 shares authorized, issued and outstanding		—				—
Paid-in capital		200.0				200.0
Accumulated deficit		(13.4	)			(1.9	)
Accumulated other comprehensive gain (loss)		2.7				(0.1	)
Total stockholders’ equity		189.3				198.0
Total liabilities and stockholders’ equity	$	921.9			$	951.4

The accompanying notes are an integral part of these condensed consolidated financial statements.

SENSUSTable METERINGof SYSTEMS (BERMUDA 2) LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSContents

SENSUS METERING SYSTEMS (InBERMUDA ~~millions~~2) LTD.

				Predecessor (Note 1)
	July 3, 2004			June 28, 2003
	(unaudited)			(unaudited)
OPERATING ACTIVITIES:
Net income (loss)	$	(0.7	)	$	6.4
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation	4.5			3.9
Amortization of intangible assets	5.0			0.1
Deferred income taxes	(0.8		)	0.2
Non-cash restructuring charges	—			0.8
Minority interests	0.1			0.1
Changes in operating assets and liabilities:
Accounts receivable	0.4			(14.3		)
Inventories	(1.1		)	(3.2		)
Accounts payable and other current liabilities	(5.4		)	(13.0		)
Other current assets	1.4			(3.5		)
Other long-term assets	(2.8		)	0.1
Other long-term liabilities	(1.3		)	(1.3		)
Pensions	0.3			0.3
Net cash used in operating activities	(0.4		)	(23.4		)
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment	(3.4		)	(2.8		)
Acquisitions, net of cash acquired	(5.0		)	—
Net cash used in investing activities	(8.4		)	(2.8		)
FINANCING ACTIVITIES:
Decrease in short-term borrowings	(2.4		)	(4.1		)
Payments of long-term debt	(0.6		)	—
Other, net	—			0.3
Other activity with affiliates	—			(2.6		)
Net change in amounts due from affiliates (a component of invested capital)	—			21.1
Net cash provided by (used in) financing activities	(3.0		)	14.7
Effect of exchange rate changes	(0.1		)	—
DECREASE IN CASH AND CASH EQUIVALENTS	(11.9		)	(11.5		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	48.5			17.1
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	36.6		$	5.6

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~The~~($ ~~accompanying~~In ~~notes~~Millions) ~~are an integral part of these condensed consolidated financial statements.~~


							Predecessor (Note 1)									Predecessor (Note 1)
	Fiscal Quarter Ended January 1, 2005			Period from Inception (December 18, 2003) to December 28, 2003			Period from October 1, 2003 to December 17, 2003			Nine Months Ended January 1, 2005			Period from Inception (December 18, 2003) to December 28, 2003			Period from April 1, 2003 to December 17, 2003
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
NET SALES:
To third parties	$	124.3		$	6.6		$	97.2		$	406.9		$	6.6		$	361.9
To affiliates		—			—			—			—			—			2.7

TOTAL SALES		124.3			6.6			97.2			406.9			6.6			364.6

COST OF SALES		89.0			6.6			72.6			287.3			6.6			254.9

GROSS PROFIT		35.3			—			24.6			119.6			—			109.7

OPERATING EXPENSES:
Selling, general and administrative expenses		25.3			4.1			24.0			74.7			4.1			69.7
Restructuring and other similar costs		1.4			—			1.4			5.9			—			9.6
Amortization of intangible assets		5.4			0.5			0.1			15.9			0.5			0.3
Other operating expense (income), net		0.5			(0.5	)		0.3			2.2			(0.5	)		(0.9	)

OPERATING INCOME FROM CONTINUING OPERATIONS		2.7			(4.1	)		(1.2	)		20.9			(4.1	)		31.0

NON-OPERATING (EXPENSE) INCOME:
Interest (expense) income:
From/to third parties		(9.7	)		(3.5	)		0.9			(28.2	)		(3.5	)		—
From/to affiliates		—			—			—			—			—			1.9
Other income (expense)		1.3			(0.4	)		—			1.3			(0.4	)		0.1

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		(5.7	)		(8.0	)		(0.3	)		(6.0	)		(8.0	)		33.0
PROVISION (BENEFIT) FOR INCOME TAXES		2.4			(2.2	)		9.1			5.0			(2.2	)		22.6

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST		(8.1	)		(5.8	)		(9.4	)		(11.0	)		(5.8	)		10.4
MINORITY INTEREST		—			0.1			(0.1	)		0.1			0.1			(0.4	)

(LOSS) INCOME FROM CONTINUING OPERATIONS		(8.1	)		(5.7	)		(9.5	)		(10.9	)		(5.7	)		10.0

DISCONTINUED OPERATIONS:
(Loss) income from discontinued operations, net of taxes		—			—			0.2			(0.3	)		—			(0.2	)
Loss on disposition of discontinued operations, net of taxes		—			—			—			(0.3	)		—			—

(LOSS) INCOME FROM DISCONTINUED OPERATIONS		—			—			0.2			(0.6	)		—			(0.2	)

NET (LOSS) INCOME	$	(8.1	)	$	(5.7	)	$	(9.3	)	$	(11.5	)	$	(5.7	)	$	9.8

~~SENSUS~~The ~~METERING~~accompanying notes ~~SYSTEMS~~are ~~(BERMUDA~~an 2)integral ~~LTD~~part of these condensed consolidated financial statements.

~~NOTES~~4 ~~TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

1.Table Description of Business and Summary of Significant Accounting PoliciesContents

~~Description~~ SENSUS ofMETERING ~~Business~~SYSTEMS (BERMUDA 2) LTD.

~~Sensus~~CONDENSED ~~Metering~~CONSOLIDATED ~~Systems~~STATEMENTS ~~(Bermuda~~OF ~~2) Ltd.,~~CASH ~~together~~FLOWS with its subsidiaries, referred to herein as the Company, is a leading provider of advanced metering and related communications solutions to the worldwide utility industry. The Company is a global manufacturer of water meters, gas meters, heat meters, electricity meters and automatic meter reading devices. In addition, the Company produces pipe joining and repair products for water and natural gas utilities and is a supplier of precision-manufactured aluminum die-castings.

~~The Acquisition~~($ In Millions)

The Company was formed on December 17, 2003 through the acquisition (the “Acquisition”) of the metering systems and certain other businesses of Invensys plc (“Invensys”). Prior to the Acquisition, the Company had no active business operations. The Acquisition was completed pursuant to the terms of a Stock Purchase Agreement, dated as of October 21, 2003 (the “Stock Purchase Agreement”) between Invensys and certain of its affiliates and Sensus Metering Systems Inc. Sensus Metering Systems Inc. is a wholly owned subsidiary of Sensus Metering Systems (Bermuda 2) Ltd. The businesses acquired from Invensys are referred to herein as Invensys Metering Systems, or the Predecessor, and form the basis for the financial information of the Predecessor included herein.


							Predecessor (Note 1)
	Nine Months Ended January 1, 2005			Period from Inception (December 18, 2003) to December 28, 2003			Period from April 1, 2003 to December 17, 2003
	(unaudited)			(unaudited)
OPERATING ACTIVITIES:
Net (loss) income	$	(11.5	)	$	(5.7	)	$	9.8
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation		13.1			0.2			12.0
Amortization of intangible assets		15.9			0.5			0.3
Deferred income taxes		(2.3	)		(2.3	)		(2.0	)
Net (gain) on sale of assets		(0.1	)		—			—
Non-cash restructuring charges		—			—			0.8
Non-cash currency translation gain		(1.3	)		—			—
Minority interests		—			—			(0.1	)
Changes in operating assets and liabilities:
Accounts receivable		15.8			7.7			(5.3	)
Inventories		(6.7	)		2.4			(7.7	)
Accounts payable and other current liabilities		(16.7	)		(1.2	)		(20.7	)
Other current assets		4.2			(0.1	)		(6.3	)
Other long-term assets		(1.8	)		—			(3.0	)
Other long-term liabilities		(3.4	)		1.5			(0.7	)
Income taxes		(0.8	)		—			(10.5	)
Pensions		1.0			0.1			0.6

Net cash provided by (used in) operating activities		5.4			3.1			(32.8	)

INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(14.6	)		(0.1	)		(8.4	)
Nexus acquisition		(6.0	)		—			—
Invensys acquisition, net of cash acquired		—			(648.1	)		—
Proceeds from Invensys acquisition adjustment		7.0			—			—
Proceeds from sale of assets		2.1			—			—

Net cash used in investing activities		(11.5	)		(648.2	)		(8.4	)

FINANCING ACTIVITIES:
Cash dividends		—			—			(0.7	)
Principal payments on short-term borrowings		(2.4	)		—			(14.1	)
Principal payments on debt		(2.9	)		—			—
Proceeds from debt issuance, net		—			487.2			—
Proceeds from issuance of common stock		—			195.0			—
Net change in amounts due from affiliates		—			—			47.3

Net cash (used in) provided by financing activities		(5.3	)		682.2			32.5

Effect of exchange rate changes		1.0			—			0.8

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(10.4	)		37.1			(7.9	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	48.5		$	—		$	17.1

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	38.1		$	37.1		$	9.2

The ~~initial~~ ~~purchase~~accompanying ~~price~~notes ~~for~~are ~~Invensys~~an ~~Metering~~integral ~~Systems of $657.3 million (subject to final adjustment) was financed through a combination of borrowings under a $230.0 million term loan facility which is~~ part of ~~the~~these ~~Company’s~~condensed ~~senior~~consolidated ~~credit facilities,~~financial ~~the issuance of $275~~statements.~~0 million of senior subordinated notes, and~~ ~~equity contributions from the principal investors in the Company and certain officers and directors of the Company.~~

~~The~~5 consolidated financial statements of the Company included herein include the accounts of Sensus Metering Systems (Bermuda 2) Ltd. for periods subsequent to the Acquisition, which was completed on December 18, 2003.

The financialTable statements of the Predecessor are presented for comparative purposes and include the combined historical statements of the subsidiaries and operations of Invensys Metering Systems, which were acquired by the Company. Numerous factors related to the Acquisition, including the Company’s increased leverage, the impact of purchase accounting, and significant modifications to the Company’s employee benefit arrangements and management structure, will have a material impact on the Company’s financial condition and results of operations. As a result, the results of operations of the Predecessor may have only limited comparability to the results of operation of the Company.Contents

~~Principles~~ ofSENSUS ~~Presentation~~METERING SYSTEMS (BERMUDA 2) LTD.

~~The~~NOTES ~~accompanying~~TO ~~condensed~~UNAUDITED ~~consolidated~~CONDENSED ~~financial~~CONSOLIDATED ~~statements~~FINANCIAL ~~are unaudited~~STATEMENTS and have been prepared by the Company’s management in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information related to the Company’s organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments unless otherwise disclosed in a separate note, considered necessary for the fair presentation of the unaudited, condensed consolidated financial statements have been included, and the unaudited, condensed consolidated financial statements present fairly the financial position and results of operations for the interim periods presented. These unaudited, condensed consolidated financial statements should be read in conjunction with the audited, consolidated financial statements for the year ended March 31, 2004 and related notes

61. Description of Business and Summary of Significant Accounting Policies

~~thereto included~~Description inof ~~the~~Business ~~Company’s Registration Statement on Form S-4 (SEC File No. 333-113658) as filed with the Securities and Exchange Commission (the “Form S-4”).~~

~~The~~Sensus ~~accompanying~~Metering ~~condensed~~Systems ~~consolidated~~(Bermuda ~~financial~~2) ~~statements~~Ltd., ~~present results~~together ~~for~~with ~~the~~its ~~fiscal~~subsidiaries, ~~quarter~~referred ~~ended~~to ~~July 3~~herein as the Company, ~~2004~~is ~~and~~a ~~the~~leading ~~fiscal~~provider ~~quarter ended~~of ~~June 28,~~advanced ~~2003.~~metering ~~The~~and ~~Company~~related ~~operates~~communications onsolutions ato 4the ~~week,~~worldwide 4utility ~~week,~~industry. 5The ~~week financial~~Company ~~and~~is ~~business~~a global ~~closing~~manufacturer ~~schedule for~~of ~~all~~water ~~periods~~meters, ~~except~~gas ~~year-end which~~meters, isheat ~~March 31~~meters, electricity meters and ~~the~~automatic ~~fiscal~~meter ~~half~~reading devices. In addition, ~~which~~the isCompany ~~September 30. Operating~~produces ~~results~~pipe ~~for~~joining ~~interim~~and ~~periods~~repair ~~are~~products ~~not necessarily~~for ~~indicative~~water ofand ~~the~~natural ~~results~~gas ~~that~~utilities ~~may~~and beis ~~achieved~~a ~~for~~supplier ~~the~~of precision-manufactured ~~full~~aluminum ~~year~~die-castings.

~~Use~~The ~~of Estimates~~Acquisition

The ~~preparation~~Company ofwas ~~financial~~formed ~~statements~~on inDecember ~~conformity~~17, ~~with~~2003 ~~United~~through the ~~States~~acquisition ~~GAAP~~(the ~~requires~~“Acquisition”) ~~management~~of tothe ~~make~~metering ~~estimates~~systems and ~~assumptions~~certain ~~that~~other ~~affect~~ businesses of Invensys plc (“Invensys”). Prior to the ~~financial~~Acquisition, ~~statements~~the Company had no active business operations. ~~Due~~The Acquisition was completed pursuant to the ~~various~~terms ~~factors~~of ~~affecting~~a ~~future~~Stock ~~costs~~Purchase Agreement, dated as of October 21, 2003 (the “Stock Purchase Agreement”) between Invensys and certain of its affiliates and Sensus Metering Systems Inc. Sensus Metering Systems Inc. is a wholly owned ~~operations,~~subsidiary ~~actual~~of ~~results~~Sensus ~~could~~Metering ~~differ~~Systems (Bermuda 2) Ltd. The businesses acquired from ~~those~~Invensys ~~estimates~~are referred to herein as Invensys Metering Systems, or the Predecessor, and form the basis for the financial information of the Predecessor included herein.

The initial purchase price for Invensys Metering Systems of $657.3 million was financed through a combination of borrowings under a $230.0 million term loan facility which is part of the Company’s senior credit facilities, the issuance of $275.0 million of senior subordinated notes (“the Notes”), and equity contributions from the principal investors in the Company and certain officers and directors of the Company. The purchase price payable under the Stock~~-Based~~ ~~Compensation~~Purchase Agreement for Invensys Metering Systems was subject to adjustment based on (i) the level of working capital as of the closing date of the Acquisition, (ii) the projected pension benefit obligations of Invensys Metering Systems as of the closing date, and (iii) the net level of intercompany payables and receivables as of the closing date. Following the closing of the Acquisition, discussions were held by Invensys and the Company regarding the appropriate level of the adjustment, and on July 27, 2004, the parties reached agreement on the adjustment amount which resulted in a cash payment of $5.0 million by Invensys to the Company and a corresponding reduction to the purchase price. In December 2004, Invensys paid $2.0 million to the Company related to bonus obligations. The $2.0 million payment is reflected as a reduction of goodwill. The Company has also adjusted the purchase price allocation by $2.4 million, reflecting the final adjustment to the fair value of the net assets acquired and for Acquisition transaction costs incurred. The $2.4 million decrease in net assets is reflected as an increase to goodwill.

The ~~Company’s~~consolidated ~~parent,~~financial ~~Sensus~~statements ~~Metering Systems (Bermuda 1) Ltd., maintains a Restricted Share Plan that provides for the award~~ of ~~restricted common shares to officers, directors and consultants of~~ the Company. ~~The restricted~~included ~~shares~~herein ~~issued~~include ~~pursuant to~~ the ~~plan~~accounts ~~will be service time vested ratably over each~~ of ~~the~~Sensus ~~five~~Metering ~~years~~Systems ~~from~~(Bermuda ~~the~~2) ~~date of grant, provided, that no vesting will occur until the second anniversary of the date of grant~~Ltd. ~~In addition,~~for ~~the~~periods ~~vesting~~subsequent ~~of the restricted shares may accelerate upon the occurrence of certain stated liquidity events. Common shares awarded under the Restricted Share Plan are generally subject~~ to ~~restrictions on transfer, repurchase rights and other limitations as set forth in~~ the ~~management subscription and shareholders’ agreement. The Company accounts for this plan under the intrinsic value method prescribed by APB Opinion No. 25~~Acquisition, ~~Accounting~~which ~~for Stock Issued to Employees (“APB 25”), and related Interpretations. No compensation expense~~ was ~~recognized~~completed ~~during~~on ~~the fiscal~~December ~~quarter ended July 3~~18, ~~2004 as the recipients of the restricted~~ ~~shares paid the fair value thereof~~2003.

2The financial statements of the Predecessor are presented for comparative purposes and include the combined historical statements of the subsidiaries and operations of Invensys Metering Systems, which were acquired by the Company. Numerous factors related to the Acquisition, including the Company’s increased leverage, the impact of purchase accounting, and significant modifications to the Company’s employee benefit arrangements and management structure, will have a material impact on the Company’s financial condition and results of operations. Consequently, the results of operations of the Predecessor may have only limited comparability to the results of operation of the Company.

~~As of~~Principles ~~June 4, 2004, the Company purchased certain assets~~ of ~~NexusData,~~Presentation Inc. (“Nexus”). This purchase provides the Company with full ownership of a fixed network AMR system for the water, gas and electric utility markets. Prior to the acquisition, the Company had an exclusive distribution agreement with Nexus for the water utility market.

~~This~~The ~~transaction~~accompanying ~~has~~condensed consolidated financial statements are unaudited and have been ~~accounted~~prepared ~~for~~by the Company’s management in accordance with ~~Statement~~the rules and regulations of ~~Financial~~ ~~Accounting~~the ~~Standards~~Securities and Exchange Commission (the “~~FAS~~SEC”) No. ~~141,~~ ~~Business Combinations.~~Certain ~~The~~information ~~unaudited~~related ~~condensed~~to ~~consolidated~~the ~~financial statements~~Company’s ~~herein~~organization, ~~include~~significant ~~Nexus’~~accounting ~~results~~policies ofand ~~operations~~footnote ~~for~~disclosures ~~the~~normally ~~period~~included ~~from~~in financial statements ~~June 4,~~prepared ~~2004~~in ~~through~~accordance ~~July 3,~~with ~~2004.~~accounting principles generally accepted in the

~~The~~- ~~Company~~6 ~~has~~- completed its preliminary purchase price allocation attributable to the Nexus acquisition. The final allocation will be completed within one year of the transaction and any resulting adjustment is not expected to have a material impact on the Company’s financial position or results of operations. The preliminary purchase price allocation based on management’s estimates at the date of the acquisition, is as follows (in millions):

Inventories	$	0.4
Property, plant and equipment	0.6
Goodwill	0.5
Intangible assets	4.5
Total assets acquired	6.0
Fair value of net assets acquired	$	6.0

~~The~~ United ~~preliminary~~States ~~allocation~~(“GAAP”) ofhave been condensed or omitted. In the ~~purchase~~opinion ~~price~~of ~~resulted~~management, all adjustments, consisting of normal recurring adjustments unless otherwise disclosed in a separate note, considered necessary for the ~~recognition~~ offair ~~$0.5 million~~presentation of ~~goodwill~~the ~~primarily~~unaudited, ~~attributable~~condensed toconsolidated financial statements have been included, and the unaudited, condensed consolidated financial statements present ~~anticipated~~fairly ~~future~~the ~~earnings~~financial position and ~~cash~~results ~~flows~~of ~~related~~operations tofor ~~this~~the ~~acquisition~~interim periods presented. ~~The~~These unaudited, condensed consolidated financial statements should be read in conjunction with the audited, consolidated financial statements for the year ended March 31, 2004 and related notes thereto included in the Company’s Registration Statement on Form S-4 (SEC File No. 333-113658) as filed with the SEC.

7The accompanying condensed consolidated financial statements present results of the Company for the fiscal quarter and nine months ended January 1, 2005 and for the period from Inception (December 18, 2003) through December 28, 2003 and of the Predecessor for the period from October 1, 2003 through December 17, 2003 and for the period from April 1, 2003 through December 17, 2003. The Company operates on a 4 week, 4 week, 5 week financial and business closing schedule for all periods, except year-end which is March 31, and the fiscal half, which is September 30. Operating results for interim periods are not necessarily indicative of the results that may be achieved for the full year.

~~preliminarily~~Recent ~~allocated~~Accounting ~~$4.5 million~~Pronouncements of the purchase price to intangible assets, $4.0 million of which was related to intellectual property that will be amortized over 3 years. The remaining $0.5 million of intangible assets was related to non-competition agreements that will be amortized over 7 years.

3In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. ~~Inventories~~ 151, Inventory Costs (“SFAS 151”). SFAS 151 amends the guidance in Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company adopted SFAS 151 during the fiscal quarter ended January 1, 2005. The adoption of SFAS 151 did not have a material effect on the Company’s consolidated financial position or results of operations.

~~Inventories~~On ~~are~~December ~~stated~~16, at2004, the ~~lower~~Financial ofAccounting ~~cost~~Standards orBoard ~~market~~issued ~~using~~a ~~the~~revised Statement No. 123, Accounting for ~~first~~Share-inBased Payment, ~~first-out~~Revised Statement (“~~FIFO~~FAS 123(R)”). ~~method~~FAS 123(R) supersedes APB Opinion No. ~~Cost~~25, isAccounting ~~determined~~for ~~based~~Stock onIssued ~~standard~~to ~~cost~~Employees, and amends FASB Statement No. 95, Statement of Cash Flows. FAS 123(R) requires ~~with~~that ~~appropriate~~the ~~adjustments~~compensation cost related to ~~approximate~~share-based ~~FIFO~~payment transactions be recognized in the financial statements. The cost recognized in the financial statements will be based on the fair value of the equity or liability instruments issued. ~~Market~~FAS 123(R) isalso ~~determined~~offers additional guidance on measuring the fair value of share-based payment awards. Sensus Metering Systems (Bermuda 1) Ltd. maintains a Restricted Share Plan that provides for the award of restricted common shares to officers, directors and consultants of the ~~basis~~Company. The Company will adopt FAS 123(R), in the second quarter of ~~estimated~~fiscal ~~realizable~~year ~~values~~2006. As permitted by FAS 123(R), the Company currently accounts for share-based payments to employees using APB Opinion No. 25’s intrinsic value method and, as such, generally recognizes no compensation for employee stock options. The adoption of FAS 123(R) may have an impact on our results of operation; however, it will have no impact on our overall financial position.

~~Inventories~~Use ~~consist~~ of ~~the~~Estimates ~~following (in millions):~~

	July 3, 2004			March 31, 2004
Raw materials, parts and supplies	$	26.4		$	21.3
Work in process	14.3			17.5
Finished goods	9.9			10.0
Provision	(2.7		)	(2.3		)
Inventories	$	47.9		$	46.5

The preparation of financial statements in conformity with US Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the financial statements. Due to various factors affecting future costs and operations, actual results could differ from those estimates.

~~4. Intangible~~Stock-Based ~~Assets~~Compensation

~~Intangible~~The ~~assets~~Company’s ~~consist~~parent, ofSensus ~~goodwill,~~Metering ~~tradenames,~~Systems ~~patents~~(Bermuda 1) Ltd., ~~non-competition~~maintains ~~agreements,~~a ~~and~~Restricted ~~customer~~Share ~~and~~Plan ~~distributor~~that ~~relationships. Goodwill~~provides atfor ~~July 3,~~the ~~2004~~award ~~represents~~of ~~the~~restricted ~~excess~~common ofshares ~~the~~to ~~purchase~~officers, ~~price~~directors ~~paid by~~and consultants of the Company. ~~for~~The ~~the~~restricted ~~Predecessor~~shares ~~over~~issued pursuant to the ~~fair~~plan ~~value~~will ofbe ~~the~~service ~~net~~time ~~assets acquired,~~vested ~~and~~ratably ~~the~~over ~~excess~~each of the five ~~purchase~~years ~~price~~from ~~paid by~~ the ~~Company~~date ~~for~~of ~~Nexus (see~~grant, ~~note~~provided ~~2).~~that ~~The~~no ~~initial~~vesting ~~purchase~~will ~~price~~occur ~~allocation~~until ~~for~~ the ~~Predecessor resulted~~second inanniversary ~~$347.6 million~~ of ~~goodwill~~the ~~being~~date ~~recorded~~of grant. ~~The~~In ~~goodwill~~addition, ~~can~~the ~~be attributed~~vesting toof the ~~value~~restricted ~~placed~~shares onmay accelerate upon the ~~Company~~occurrence ~~being~~of ancertain ~~industry~~stated ~~leader~~liquidity ~~with~~events. Common ~~market~~shares ~~leading~~awarded ~~positions~~under in the ~~North~~Restricted ~~American~~Share ~~water~~Plan ~~metering~~are ~~market,~~generally ~~the European~~subject ~~water~~to ~~metering~~restrictions ~~market~~on transfer, repurchase rights and ~~the~~other ~~North~~limitations ~~American~~as ~~clamps~~set forth in the management subscription and ~~couplings market~~shareholders’ agreement. The ~~initial~~Company ~~purchase~~accounts ~~price~~for this ~~allocation~~plan ~~for~~under ~~Nexus~~the ~~resulted~~intrinsic invalue ~~$0.5~~method ~~million~~prescribed ofby ~~goodwill~~APB ~~and~~Opinion $4No.5 ~~million~~25, ~~of intangible~~Accounting ~~assets~~for ~~being~~Stock ~~recorded~~Issued to Employees, and related Interpretations. ~~The goodwill~~ ~~can~~No becompensation ~~attributed~~expense towas ~~the~~recognized ~~anticipated~~during ~~future~~the ~~earnings~~fiscal quarter and ~~cash~~nine ~~flows~~months ofended January 1, 2005, as the ~~businesses~~recipients ~~acquired~~of the restricted shares paid the fair value thereof.

~~Intangible~~- ~~assets~~7 ~~are~~- ~~summarized as follows (in millions):~~

	July 3, 2004					March 31, 2004
	Cost		Accumulated Amortization			Cost		Accumulated Amortization
Intangible assets not subject to amortization:
Goodwill	$	348.0	$	—		$	347.6	$	—
Tradenames (indefinite lived)	27.3		—			27.3		—
	375.3		—			374.9		—
Intangible assets subject to amortization:
Distributor relationships	191.8		(5.7		)	191.8		(3.1		)
Non-competition agreements	30.5		(4.0		)	30.0		(2.1		)
Patents	15.0		(1.0		)	11.0		(0.5		)
	237.3		(10.7		)	232.8		(5.7		)
Total intangible assets	$	612.6	$	(10.7	)	$	607.7	$	(5.7	)

82. Intangible Assets

~~The~~Intangible ~~following~~assets consist of goodwill, tradenames, patents, non-competition agreements and customer and distributor relationships. Goodwill at January 1, 2005 represents athe ~~reconciliation~~excess of the ~~changes~~purchase price paid by the Company for the Predecessor over the fair value of the net assets acquired, and the excess of the purchase price paid by the Company for NexusData, Inc. (“Nexus”) (see Note 10) over the fair value of the net assets acquired. The purchase price allocation for the Predecessor and Nexus resulted in $344.5 million of goodwill being recorded as of January 1, 2005. The goodwill can be attributed to the value placed on the (Company being an industry leader with market-leading positions in ~~millions)~~the North American water metering market and the North American clamps and couplings market. The purchase price payable under the Stock Purchase Agreement for Invensys Metering Systems was subject to adjustment based on the ~~periods~~level ~~presented:~~of working capital as of the closing date of the Acquisition, the projected pension benefit obligations of Invensys Metering Systems as of the closing date, and the net level of intercompany payables and receivables as of the closing date. Following the closing of the Acquisition, discussions were held by Invensys and the Company regarding the appropriate level of the adjustments, and on July 27, 2004, the parties reached agreement on the adjustment amount which resulted in a cash payment of $5.0 million by Invensys to the Company and a corresponding reduction to the purchase price. The $5.0 million price reduction is reflected as a reduction of goodwill. In December 2004, Invensys paid $2.0 million to the Company related to bonus obligations. The $2.0 million payment is reflected as a reduction of goodwill. The Company has also adjusted the purchase price allocation by $2.4 million, reflecting the final adjustment to the fair value of the net assets acquired and for Acquisition transaction costs incurred. The $2.4 million decrease in net assets is reflected as an increase to goodwill.

Goodwill at March 31, 2004	$	347.6
Goodwill arising from Nexus purchase price allocation	0.5
Currency translation adjustment	(0.1		)
Goodwill at July 3, 2004	$	348.0

The purchase price allocation for Nexus has resulted in $1.7 million of goodwill and $4.5 million of identifiable intangible assets being recorded through the period ended January 1, 2005. The purchase agreement also included provisions for payment of additional considerations, up to a total of $1.5 million, to be paid to Nexus based on specific performance criteria of the acquired business through June 4, 2007. Payments made based on these criteria will adjust the Nexus purchase price and be allocated to goodwill. The goodwill can be attributed to the anticipated future earnings and cash flows of the businesses acquired.

~~5. Restructuring~~Intangible ~~and~~assets ~~Other~~are summarized as follows (in ~~Similar~~millions): ~~Costs~~

The following table reflects activity for the fiscal quarters ended July 3, 2004 and June 28, 2003 which are associated with restructuring and other similar costs related to the Company’s restructuring initiatives (in millions):


	January 1, 2005					March 31, 2004
	Cost		Accumulated Amortization			Cost		Accumulated Amortization
Intangible assets not subject to amortization:
Goodwill	$	344.5	$	—		$	347.6	$	—
Tradenames (indefinite lived)		27.3		—			27.3		—

		371.8		—			374.9		—

Intangible assets subject to amortization:
Distributor relationships		187.4		(11.3	)		191.8		(3.1	)
Non-competition agreements		30.5		(7.7	)		30.0		(2.1	)
Patents		15.2		(2.6	)		11.0		(0.5	)

		233.1		(21.6	)		232.8		(5.7	)

Total intangible assets	$	604.9	$	(21.6	)	$	607.7	$	(5.7	)

			Predecessor (Note 1)
	Fiscal quarter Ended July 3, 2004		Fiscal quarter Ended June 28, 2003
Severance and other related costs:
Related to headcount reduction initiatives	$	2.0	$	0.2
Related to outsourcing	—		0.1
Related to plant closures	—		5.1
	2.0		5.4
Asset impairments:
Related to outsourcing	—		0.8
	—		0.8
Other	—		0.1
	—		0.1
Restructuring and other similar costs charged to operations	$	2.0	$	6.3

- 8 -

PriorTable to the closing date of the Acquisition, the Company identified opportunities to improve the operating performance of Invensys Metering Systems via the closure of a manufacturing facility in Europe. Subsequent to the closing date of the Acquisition, the Company approved restructuring actions of $5.1 million related to the previously identified opportunities. These actions principally reflect severance benefits and asset impairments. These restructuring actions will commence in 2004 and the Company expects the actions will be completed by March 31, 2005.Contents

~~For~~The ~~the~~following ~~fiscal~~represents ~~quarter~~a ~~ended~~reconciliation ~~July 3, 2004, the Company incurred $2.0 million~~ of ~~restructuring costs related to ongoing activities to rationalize its water meter product line in Europe and to align~~ the ~~South~~changes ~~American structure with current market conditions. Actions~~ in ~~Europe~~goodwill ~~affect both direct and indirect personnel and will result~~ (in amillions) ~~headcount~~for ~~reduction of 16 employees. These programs are concentrated in~~ the ~~Company’s German water meter production facility. South~~periods ~~American~~presented: ~~reorganization, affecting both direct and indirect personnel, will reduce headcount by 11 employees. The Company anticipates that these initiatives will be completed by March 31, 2005.~~

The charge for restructuring and other similar costs is comprised of the following (in millions):


Goodwill at March 31, 2004	$	347.6
Goodwill arising from Nexus purchase price allocation		1.7
Goodwill reduction from Invensys plc purchase price payment		(5.0	)
Goodwill reduction from Invensys plc bonus payment		(2.0	)
Goodwill increase from Invensys plc purchase price allocation for fair value		2.4
Other		(0.2	)

Goodwill at January 1, 2005	$	344.5

			Predecessor (Note 1)
	Fiscal Quarter Ended July 3, 2004		Fiscal Quarter Ended June 28, 2003
Employee severance and exit costs accrued	$	2.0	$	5.2
Impairment of long-lived assets	—		0.8
Expensed as incurred	—		0.3
	$	2.0	$	6.3

3. Inventories

9Inventories are stated at the lower of cost or market using the first-in, first-out (“FIFO”) method. Cost is determined based on standard cost with appropriate adjustments to approximate FIFO cost. Market is determined on the basis of estimated realizable values.

~~Restructuring~~Inventories ~~accruals~~consisted ~~are~~of ~~summarized~~the asfollowing ~~follows~~ (in millions):

				Predecessor (Note 1)
	January 1, 2005				March 31, 2004
	Fiscal Quarter Ended July 3, 2004			Fiscal Quarter Ended June 28, 2003
Raw materials, parts and supplies	$	30.5			$	21.3
Balance at beginning of period	$	8.6		$	7.1
Work in process		15.9				17.5
Cash Payments	(1.7		)	(1.3		)
Finished goods		13.7				10.0
Accrue for new committed/announced programs	2.0			5.2
Provision for obsolescence		(4.6	)			(2.3	)
Effect of foreign currency translation	—			0.5
Inventories, net	$	55.5			$	46.5
Balance at end of period	$	8.9		$	11.5

~~Restructuring~~4. ~~expense~~Discontinued ~~accruals have been classified as current~~Operations ~~liabilities as of July 3, 2004 and June 28, 2003.~~

6On September 10, 2004, the Company sold the assets of its utility billing software company, IMSofTech, Inc. ~~Comprehensive~~(“IMSofTech”) ~~Income~~for $1.1 million. The sale allows Sensus Metering Systems to focus on its business strategy to provide intelligent metering systems based solutions to the global utility markets. The sale price of $1.1 million includes (~~Loss~~1) an initial cash payment of $850,000 received in September 2004, and (2) $250,000 cash to be paid by the purchaser six months after closing, which is subject to adjustment for any indemnification claims.

~~Comprehensive~~On ~~income~~September 30, 2004, the Company sold its fifty-one percent (~~loss~~51%) ~~consists~~interest in Measurement Solutions International LLC (“MSI”), a full service meter asset management organization based in Paulsboro, New Jersey, for $0.6 million. The sale was part of ~~the~~Sensus ~~following~~Metering Systems’ strategy to focus on its core business. The sales price consisted of (1) $300,000 cash received in ~~millions~~September 2004, (2): $30,000 cash received in December 2004, (3) $225,000 cash, receivable upon renewal of specific service contracts, and (4) an amount in cash equal to 2% of revenue earned by MSI on new service contracts generated by the Company through August 31, 2006. The contingent consideration will be recognized once collectibility is assured.

				Predecessor (Note 1)
	Fiscal Quarter Ended July 3, 2004			Fiscal Quarter Ended June 28, 2003
Net income (loss)	$	(0.7	)	$	6.4
Other comprehensive income:
Foreign currency translation adjustments	(0.2		)	6.3
Comprehensive income (loss)	$	(0.9	)	$	12.7

- 9 -

7.Table Warrantyof ObligationsContents

~~Product warranty~~These ~~reserves~~dispositions ~~are~~have ~~established~~been inaccounted ~~the~~for ~~same~~as ~~period~~discontinued ~~that~~operations ~~revenue~~in ~~from~~accordance ~~the~~with ~~sale~~ Statement of Financial ~~the~~Accounting ~~related~~Standard ~~products is recognized~~No. ~~The~~144, ~~amounts~~Accounting offor ~~those~~the ~~reserves~~Impairment ~~are~~or ~~based on~~Disposal ~~established~~of ~~terms~~Long-Lived Assets and, accordingly, amounts in the ~~Company’s~~consolidated ~~best~~condensed ~~estimate~~statement of ~~the~~operations ~~amounts~~for ~~necessary to~~all ~~settle~~periods ~~future~~presented ~~and~~have ~~existing~~been ~~claims~~reclassified onto ~~products~~reflect the ~~sold~~dispositions as discontinued operations. The results of operations for the ~~balance~~discontinued ~~sheet date.~~businesses are as follows:

The following represents a reconciliation of the changes in product warranty reserves for the periods presented (in millions):


						Predecessor									Predecessor
	Fiscal Quarter Ended January 1, 2005		Period from Inception (December 18, 2003) to December 28, 2003			(Note 1) Period from October 1, 2003 to December 17, 2003			Nine Months Ended January 1, 2005			Period from Inception (December 18, 2003) to December 28, 2003			(Note 1) Period from April 1, 2003 to December 17, 2003
	(unaudited)		(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	—	$	0.3		$	0.9		$	2.2		$	0.3		$	3.2
Cost of sales		—		0.1			0.7			1.7			0.1			2.0

Gross profit		—		0.2			0.2			0.5			0.2			1.2

Operating expenses:
Selling, general and administrative expenses		—		0.2			0.4			0.7			0.2			1.4
Other operating expense (income), net		—		0.1			(0.1	)		—			0.1			—

Operating (loss) income from discontinued operations		—		(0.1	)		(0.1	)		(0.2	)		(0.1	)		(0.2	)
Non-operating (expense) income		—		0.3			(0.2	)		—			0.3			(0.4	)

Income (loss) from discontinued operations before income taxes and minority interest		—		0.2			(0.3	)		(0.2	)		0.2			(0.6	)
Provision (benefit) for income taxes		—		—			(0.5	)		—			—			(0.5	)

Income (loss) from discontinued operations before minority interest		—		0.2			0.2			(0.2	)		0.2			(0.1	)

Minority interest		—		(0.2	)		—			(0.1	)		(0.2	)		(0.1	)

Income (loss) from discontinued operations	$	—	$	—		$	0.2		$	(0.3	)	$	—		$	(0.2	)

Loss on disposition of discontinued operations, net of taxes of $0.3 million	$	—	$	—		$	—		$	(0.3	)	$	—		$	—

Net loss from discontinued operations	$	—	$	—		$	0.2		$	(0.6	)	$	—		$	(0.2	)

				Predecessor (Note 1)
	July 3, 2004			June 28, 2003
Balance at beginning of period	$	8.6		$	9.1
Warranties issued	0.6			0.1
Settlements made	(0.6		)	(0.7		)
Balance at end of period	$	8.6		$	8.5
Current portion	3.5			2.0
Non-current portion	5.1			6.5
Total	$	8.6		$	8.5

Assets and liabilities related to discontinued operations consisted of the following:


	March 31, 2004
ASSETS RELATED TO DISCONTINUED OPERATIONS
Cash and cash equivalents	$	0.2
Accounts receivable, net		0.3
Prepayments and other current assets		0.3
Property, plant and equipment, net		0.4
Intangible assets		1.5

Total assets related to discontinued operations	$	2.7

LIABILITIES RELATED TO DISCONTINUED OPERATIONS
Accounts payable	$	0.1
Accruals and other current liabilities		1.0
Other liabilities		0.2

Total liabilities related to discontinued operations	$	1.3

~~8. Income~~- ~~Taxes~~10 -

The effectiveTable tax rate for the quarter ended July 3, 2004 of 400% is the result of income tax being incurred on the taxable income of the Company’s U.S. operations while no income tax benefit has been recorded on the operating losses incurred in certain foreign jurisdictions on which the realization of related deferred tax asset is considered uncertain.Contents

			Predecessor (Note 1)
	Fiscal Quarter Ended July 3, 2004		Fiscal Quarter Ended June 28, 2003
Statutory tax rate	35.0	%	35.0	%
State and local income taxes, net of federal benefit	3.2	%	5.8	%
Statutory tax rate difference between the U.S. and foreign locations	(0.1	)%	—
Foreign net operating losses for which the benefit was not provided	361.8	%	—
Foreign dividend, and withholding	—		—
Other	0.1	%	—
Effective income tax rate	400.0	%	40.8	%

5. Restructuring and Other Similar Costs

9.The ~~Retirement~~following ~~Benefits~~table reflects activity of the Company for the fiscal quarter and nine months ended January 1, 2005 and for the period from Inception (December 18, 2003) through December 28, 2003 (unaudited) and of the Predecessor for the period from October 1, 2003 through December 17, 2003 and for the period from April 1, 2003 through December 17, 2003, which are associated with restructuring and other similar costs related to the Company’s restructuring initiatives (in millions):

The Company has defined benefit plans, principally in Germany, where such plans are typically unfunded and provide for monthly pension payments to eligible employees upon retirement. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. The Company’s policy is to fund its pension obligations in conformity with the funding requirements of laws and governmental regulations applicable in the respective country.


				Predecessor					Predecessor
	Fiscal Quarter Ended January 1, 2005		Period from Inception (December 18, 2003) to December 28, 2003	(Note 1) Period from October 1, 2003 to December 17, 2003		Nine Months Ended January 1, 2005		Period from Inception (December 18, 2003) to December 28, 2003	(Note 1) Period from April 1, 2003 to December 17, 2003
Severance and other related costs:
Related to headcount reduction initiatives	$	1.4	—	$	1.3	$	5.5	—	$	3.1
Related to outsourcing		—	—		—		0.1	—		0.1
Related to plant closures and consolidation		—	—		—		0.3	—		5.2

		1.4	—		1.3		5.9	—		8.4
Asset impairments:
Related to outsourcing		—	—		—		—	—		0.4
Related to plant closures and consolidation		—	—		—		—	—		0.4

		—	—		—		—	—		0.8
Other		—	—		0.1		—	—		0.4

		—	—		—		—	—
Restructuring and other similar costs charged to operations	$	1.4	—	$	1.4	$	5.9	—	$	9.6

~~The~~Prior ~~following~~to ~~information~~the ~~reflects~~closing date of the ~~benefit obligation~~Acquisition, ~~plan~~the ~~assets and~~Company ~~net~~identified ~~liability~~opportunities ~~information~~to ~~for~~improve ~~participants~~the operating performance of Invensys Metering Systems via the closure of a manufacturing operation in Europe. Subsequent to the ~~Company’s~~closing ~~significant~~date of the Acquisition, the Company ~~retirement~~approved ~~benefit~~restructuring ~~plans~~actions of approximately $6.0 ~~That~~million ~~information~~related isto ~~summarized~~previously asidentified ~~follows~~opportunities. (These actions principally reflect severance benefits and asset impairments. These restructuring actions commenced in 2004 and the Company ~~millions):~~expects the actions will be completed by March 31, 2005.

	Fiscal Quarter Ended
				Predecessor (Note 1)
	July 3, 2004			June 28,2003
Benefit obligation at beginning period	$	37.1		$	31.2
Service cost	0.2			0.3
Interest cost	0.4			0.5
Benefits paid	(0.5		)	(0.5		)
Expected return on plan assets.	—			—
Currency translation	(0.1		)	1.6
Benefit obligation at end period.	$	37.1		$	33.1
Net periodic benefit cost	$	0.6		$	0.8

For the fiscal quarter and nine months ended January 1, 2005, the Company incurred $1.4 million and $5.9 million, respectively, of restructuring costs related to ongoing activities to rationalize its water and gas meter product lines in Europe and to align the South American structure with current market conditions. Actions in Europe affect both direct and indirect personnel and will result in a headcount reduction of 39 employees. These programs are concentrated in the Company’s German water meter and UK gas meter production facilities. The South American reorganization, which affected both direct and indirect personnel, reduced headcount by 11 employees. The Company anticipates that these initiatives will be completed by March 31, 2005.

~~The~~- ~~Company~~11 ~~expects~~- ~~to continue to make contributions sufficient to fund benefits paid under its pension plans. Such contributions are expected to total approximately $1.8 million in fiscal 2005.~~

11Table of Contents

~~10.~~The ~~Guarantor~~charge ~~Subsidiaries~~for restructuring and other similar costs was comprised of the following (in millions):

The following tables present condensed consolidating unaudited financial information for the Company at July 3, 2004 and March 31, 2004 and for the period from April 1, 2004 through July 3, 2004, condensed combining financial unaudited information of the Predecessor for the period from April 1, 2003 through June 28, 2003 for: (a) Sensus Metering Systems (Bermuda 2) Ltd. (referred to as Parent), (b) Sensus Metering Systems Inc. the issuer of the Notes (referred to as Issuer), (c) on a combined basis, the subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd. that are guaranteeing the Notes, which include all of the wholly-owned U.S. domestic subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd. other than IMSoftech Inc. (“Guarantor Subsidiaries”), and (d) on a combined basis, the subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd. that are not guaranteeing the Notes (“Non-Guarantor Subsidiaries”). Separate financial statements of neither Issuer nor the Guarantor Subsidiaries are presented because their guarantees are full and unconditional and joint and several, and the Company believes separate financial statements and other disclosures regarding Issuer and the Guarantor Subsidiaries are not material to investors. The Notes were issued by Sensus Metering Systems Inc. in connection with the Acquisition of Invensys Metering Systems (see note 1).


				Predecessor					Predecessor
	Fiscal Quarter Ended January 1, 2005		Period from Inception (December 18, 2003) to December 28, 2003	(Note 1) Period from October 1, 2003 to December 17, 2003		Nine Months Ended January 1, 2005		Period from Inception (December 18, 2003) to December 28, 2003	(Note 1) Period from April 1, 2003 to December 17, 2003
Employee severance and exit costs accrued	$	1.4	—	$	1.3	$	5.9	—	$	8.2
Impairment of long-lived assets		—	—		—		—	—		0.8
Expensed as incurred		—	—		0.1		—	—		0.6

	$	1.4	—	$	1.4	$	5.9	—	$	9.6

12Restructuring accruals are summarized as follows (in millions):

Condensed Consolidating Balance Sheets (unaudited)


	Fiscal Quarter Ended January 1, 2005			Combined Fiscal Quarter Ended December 28, 2003			Nine Months Ended January 1, 2005			Combined Nine Months Ended December 28, 2003
Balance at beginning of period	$	8.5		$	10.4		$	8.6		$	7.1
Cash payments		(2.6	)		(6.6	)		(7.3	)		(10.1	)
Accrue for new committed/announced programs		1.4			3.2			5.9			9.9
Effect of foreign currency translation		0.8			0.5			0.9			0.6

Balance at end of period	$	8.1		$	7.5		$	8.1		$	7.5

~~July 3~~Restructuring expense accruals were recorded within restructuring accruals as of January 1, 2005, December 28, 2003 and March 31, 2004.

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—		$	12.5		$	9.4		$	14.7		$	—		$	36.6
Accounts receivable:
Trade, net of allowance for doubtful accounts	—			—			49.0			33.1			—			82.1
From affiliates	(5.2		)	(6.4		)	15.2			(3.6		)	—			—
Other	—			—			0.5			0.2			—			0.7
Inventories	—			—			25.5			22.4			—			47.9
Prepayments and other current assets	0.2			0.2			3.0			5.7			—			9.1
Deferred income taxes	—			—			1.2			—			—			1.2
Total current assets	(5.0		)	6.3			103.8			72.5			—			177.6
Notes receivable from affiliates	—			433.2			—			29.1			(462.3		)	—
Property, plant, and equipment, net	—			—			65.5			50.2			—			115.7
Intangible assets, net	—			26.0			179.3			48.6			—			253.9
Goodwill	—			—			320.7			27.3			—			348.0
Investment in subsidiaries	664.4			579.2			9.3			—			(1,252.9		)	—
Long-term deferred tax asset	—			—			18.0			—			—			18.0
Other long-term assets	—			21.1			2.2			2.7			—			26.0
Total assets	$	659.4		$	1,065.8		$	698.8		$	230.4		$	(1,715.2	)	$	939.2
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	—			—			31.0			12.3			—			43.3
Current portion of long-term debt	—			2.0			—			0.3			—			2.3
Short-term borrowings	—			—			—			—			—			—
Income taxes payable	—			(5.0		)	5.8			—			—			0.8
Restructuring accruals	—			—			1.1			7.8			—			8.9
Accruals and other current liabilities	—			2.6			18.2			22.8			—			43.6
Total current liabilities	—			(0.4		)	56.1			43.2			—			98.9
Notes payable to affiliates	462.3			10.8			(13.2		)	2.4			(462.3		)	—
Long-term debt, less current portion	—			472.0			—			29.6			—			501.6
Pensions	—			—			0.4			37.2			—			37.6
Deferred income taxes	—			—			70.1			21.2			—			91.3
Other long-term liabilities	—			—			6.2			0.5			—			6.7
Minority interests	—			—			—			6.0			—			6.0
Total liabilities	462.3			482.4			119.6			140.1			(462.3		)	742.1
Stockholders’ equity	197.1			583.4			579.2			90.3			(1,252.9		)	197.1
Total liabilities and stockholders’ equity	$	659.4		$	1,065.8		$	698.8		$	230.4		$	(1,715.2	)	$	939.2

6. Comprehensive Income (Loss)

13Comprehensive income (loss) consisted of the following (in millions):

Condensed Consolidating Balance Sheets


							Predecessor									Predecessor
	Fiscal Quarter Ended January 1, 2005			Period from Inception (December 18, 2003) to December 28, 2003			(Note 1) Period from October 1, 2003 to December 17, 2003			Nine Months Ended January 1, 2005			Period from Inception (December 18, 2003) to December 28, 2003			(Note 1) Period from April 1, 2003 to December 17, 2003
Net (loss) income	$	(8.1	)	$	(5.7	)	$	(9.3	)	$	(11.5	)	$	(5.7	)	$	9.8
Other comprehensive income:
Foreign currency translation adjustments		2.4			—			4.2			2.8			—			11.5

Comprehensive (loss) income	$	(5.7	)	$	(5.7	)	$	(5.1	)	$	(8.7	)	$	(5.7	)	$	21.3

~~March 31,~~7. ~~2004~~Warranty Obligations

	Parent		Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	12.7	$	18.1		$	17.7		$	—		$	48.5
Accounts receivable:
Trade, net of allowance for doubtful accounts	—		—		47.4			35.1			—			82.5
From affiliates	—		1.0		(0.5		)	(0.5		)	—			—
Other	—		—		2.3			0.1			—			2.4
Inventories	—		—		24.0			22.5			—			46.5
Prepayments and other current assets	—		—		3.2			5.7			—			8.9
Deferred income taxes	—		—		1.2			—			—			1.2
Total current assets	—		13.7		95.7			80.6			—			190.0
Notes receivable from affiliates	—		433.2		—			29.1			(462.3		)	—
Property, plant, and equipment, net	—		—		65.8			50.6			—			116.4
Intangible assets, net	—		27.9		181.5			45.0			—			254.4
Goodwill	—		—		320.3			27.3			—			347.6
Investment in subsidiaries	660.3		568.9		9.4			—			(1,238.6		)	—
Long-term deferred tax asset	—		—		18.0			—			—			18.0
Other long-term assets	—		21.4		1.2			2.4			—			25.0
Total assets	$	660.3	$	1,065.1	$	691.9		$	235.0		$	(1,700.9	)	$	951.4
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	—	$	—	$	30.0		$	13.7		$	—		$	43.7
Current portion of long-term debt	—		2.0		—			0.3			—			2.3
Short-term borrowings	—		—		—			2.2			—			2.2
Income taxes payable	—		—		0.6			0.1			—			0.7
Restructuring accruals	—		—		1.2			7.4			—			8.6
Accruals and other current liabilities	—		8.1		18.3			25.3			—			51.7
Total current liabilities	—		10.1		50.1			49.0			—			109.2
Notes payable to affiliates	462.3		2.7		(3.8		)	1.1			(462.3		)	—
Long-term debt, less current portion	—		472.5		—			29.6			—			502.1
Pensions	—		—		0.4			37.2			—			37.6
Deferred income taxes	—		—		70.8			21.1			—			91.9
Other long-term liabilities	—		—		5.5			0.7			—			6.2
Minority interests	—		—		—			6.4			—			6.4
Total liabilities	462.3		485.3		123.0			145.1			(462.3		)	753.4
Stockholders’ equity	198.0		579.8		568.9			89.9			(1,238.6		)	198.0
Total liabilities and stockholders’ equity	$	660.3	$	1,065.1	$	691.9		$	235.0		$	(1,700.9	)	$	951.4

Product warranty reserves are established in the same period that revenue from the sale of the related products is recognized. The amounts of those reserves are based on established terms and the Company’s best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Warranty reserves are reflected within accruals and other current liabilities and other long-term liabilities in the accompanying financial statements.

14- 12 -

CondensedTable Consolidating Statements of Operations (unaudited)Contents

~~Fiscal~~The ~~Quarter~~following ~~Ended~~represents ~~July 3,~~a ~~2004~~reconciliation of the changes in product warranty reserves for the periods presented (in millions):

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	January 1,2005				December 28,2003
	(in millions)
Beginning balance	$	8.6			$	9.1
Net sales	$	—		$	—		$	98.2		$	43.9		$	(1.4	)	$	140.7
Warranties issued		1.8				4.6
Cost of sales	—			—			67.2			33.3			(1.4		)	99.1
Settlements made		(2.6	)			(5.9	)
Gross profit (loss)	—			—			31.0			10.6			—			41.6
Foreign currency translation adjustments		0.2				0.1
Selling, general, and administrative expenses	—			—			12.3			12.2			—			24.5
Balance at end of period	$	8.0			$	7.9
Restructuring and other similar costs	—			0.4			—			1.6			—			2.0
Current portion		3.9				3.6
Amortization of intangible assets	—			1.9			2.6			0.5			—			5.0
Non-current portion		4.1				4.3
Other operating expenses, net	—			—			0.5			—			—			0.5
Total	$	8.0			$	7.9
Operating income (loss)	—			(2.3		)	15.6			(3.7		)	—			9.6
Non-operating income (expense):
Interest income (expense):
From/to third parties	—			(9.0		)	—			(0.4		)	—			(9.4		)
From/to affiliates	—			—			—			—			—			—
Equity in earnings of subsidiaries	(0.7		)	10.3			(0.1		)	—			(9.5		)	—
Other, net	—			—			—			—			—			—
Income (loss) before income taxes	(0.7		)	(1.0		)	15.5			(4.1		)	(9.5		)	0.2
Provision (benefit) for income taxes	—			(4.6		)	5.2			0.2			—			0.8
Income (loss) after income taxes	(0.7		)	3.6			10.3			(4.3		)	(9.5		)	(0.6		)
Minority interest	—			—			—			(0.1		)	—			(0.1		)
Net income (loss)	$	(0.7	)	$	3.6		$	10.3		$	(4.4	)	$	(9.5	)	$	(0.7	)

158. Income Taxes

~~Condensed~~The ~~Combining~~current ~~Statements~~fiscal period effective tax rates were the result of ~~Operations—Predecessor~~income ~~(unaudited)~~taxes being incurred on the taxable income of the Company’s U.S. operations while no income tax benefit was recorded on the operating losses incurred in certain foreign jurisdictions where the realization of related deferred tax assets is considered uncertain.

~~Fiscal~~9. ~~Quarter~~Retirement ~~Ended~~Benefits ~~June 28, 2003~~

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Combined
	(in millions)
Net sales	$	85.5		$	43.4		$	(1.6	)	$	127.3
Cost of sales	57.4			31.7			(1.6		)	87.5
Gross profit	28.1			11.7			—			39.8
Selling, general, and administrative expenses	12.5			11.1			—			23.6
Restructuring and other similar costs	0.3			6.0			—			6.3
Amortization of intangible assets	0.1			—			—			0.1
Other operating income, net	(0.8		)	0.6			—			(0.2		)
Operating income (loss)	16.0			(6.0		)	—			10.0
Non-operating income (expense):
Interest income (expense):
From/to third parties	—			—			—			—
From/to affiliates	7.7			(6.7		)	—			1.0
Equity in earnings of subsidiaries	—			—			—			—
Other, net	—			—			—			—
Income (loss) before income taxes	23.7			(12.7		)	—			11.0
Provision for income taxes	3.7			0.8			—			4.5
Income (loss) after income taxes	20.0			(13.5		)	—			6.5
Minority interest	—			(0.1		)	—			(0.1		)
Net income (loss)	$	20.0		$	(13.6	)	$	—		$	6.4

The Company has defined benefit plans, principally in Europe, where such plans are typically unfunded and provide for monthly pension payments to eligible employees upon retirement. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. The Company’s policy is to fund its pension obligations in conformity with the funding requirements of the laws and governmental regulations applicable in the respective country.

16The following information reflects the net period benefit cost for participants in the Company’s significant European retirement benefit plans. That information is summarized as follows (in millions):

Condensed Consolidating Statements of Cash Flows (unaudited)


					Predecessor						Predecessor
	Fiscal Quarter Ended January 1, 2005		Period from Inception (December 18, 2003) to December 28, 2003		(Note 1) Period from October 1, 2003 to December 17, 2003		Nine Months Ended January 1, 2005		Period from Inception (December 18, 2003) to December 28, 2003		(Note 1) Period from April 1, 2003 to December 17, 2003
Service cost	$	0.2	$	0.1	$	—	$	0.6	$	0.1	$	0.5
Interest cost		0.6		0.1		0.5		1.6		0.1		1.4
Expected return on plan assets		—		—		—		—		—		—

Net periodic benefit cost	$	0.8	$	0.2	$	0.5	$	2.2	$	0.2	$	1.9

~~Fiscal~~The ~~Quarter~~Company ~~Ended~~expects ~~July~~ to continue to make contributions sufficient to fund benefits paid under its pension plans. Such contributions are expected to total approximately $3,.0 ~~2004~~million in fiscal 2005.

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Operating activities
Net income (loss)	$	(0.7	)	$	3.6		$	10.3		$	(4.4	)	$	(9.5	)	$	(0.7	)
Non-cash adjustments	—			1.9			4.6			2.7			—			9.2
Undistributed equity in earnings of subsidiaries	0.7			(10.3		)	0.1			—			9.5			—
Changes in operating assets and liabilities	—			2.1			(12.1		)	1.1			—			(8.9		)
Cash provided by (used in) operating activities	—			(2.7		)	2.9			(0.6		)	—			(0.4		)
Investing activities
Expenditures for property, plant, and equipment	—			—			(2.3		)	(1.1		)	—			(3.4		)
Acquisition, net	—			—			—			(5.0		)	—			(5.0		)
Cash provided by (used in) investing activities	—			—			(2.3		)	(6.1		)	—			(8.4		)
Financing activities
Activity with affiliates	—			3.1			(9.3		)	6.2			—			—
Payments of dividends	—			—			—			—			—			—
Debt issuance costs	—			—			—			—			—			—
Decrease in short-term borrowings	—			—			—			(2.4		)	—			(2.4		)
Proceeds from debt issuance	—			—			—			—			—			—
Proceeds from common stock issuance	—			—			—			—			—			—
Payments of long-term debt	—			(0.6		)	—			—			—			(0.6		)
Net cash provided by (used in) financing activities	—			2.5			(9.3		)	3.8			—			(3.0		)
Effect of exchange rate changes on cash	—			—			—			(0.1		)	—			(0.1		)
Decrease in cash and cash equivalents	$	—		$	(0.2	)	$	(8.7	)	(3.0		)	$	—		$	(11.9	)
Cash and cash equivalents at beginning of period	$	—		$	12.7		$	18.1		$	17.7		$	—		$	48.5
Cash and cash equivalents at end of period	$	—		$	12.5		$	9.4		$	14.7		$	—		$	36.6

- 13 -

17Table of Contents

~~Condensed~~10. ~~Combining~~Acquisition ~~Statements of Cash Flows—Predecessor (unaudited)~~

~~Fiscal~~As ~~Quarter~~of ~~Ended~~ June 28 4, ~~2003~~2004, the Company purchased certain assets of Nexus for $6.0 million. This purchase provides the Company with full ownership of a fixed network AMR system for the water, gas and electric utility markets. Prior to the acquisition, the Company had an exclusive distribution agreement with Nexus for the water utility market.

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Combined
	(in millions)
Operating activities
Net income (loss)	$	20.0		$	(13.6	)	$	—	$	6.4
Non-cash adjustments	2.8			2.3			—		5.1
Equity in earnings of subsidiaries	—			—			—		—
Changes in operating assets and liabilities	(20.5		)	(14.4		)	—		(34.9		)
Cash provided by (used in) operating activities	2.3			(25.7		)	—		(23.4		)
Investing activities
Expenditures for property, plant, and equipment	(2.5		)	(0.3		)	—		(2.8		)
Cash used in investing activities	(2.5		)	(0.3		)	—		(2.8		)
Financing activities
Decrease in short-term borrowings	0.8			(4.9		)	—		(4.1		)
Other financing activities	(4.7		)	23.5			—		18.8
Net cash provided by (used in) financing activities	(3.9		)	18.6			—		14.7
Effect of exchange rate changes on cash	—			—			—		—
Decrease in cash and cash equivalents	$	(4.1	)	$	(7.4	)	$	—	$	(11.5	)
Cash and cash equivalents at beginning of period	$	6.1		$	11.0		$	—	$	17.1
Cash and cash equivalents at end of period	$	2.0		$	3.6		$	—	$	5.6

This transaction has been accounted for as a purchase. The unaudited condensed consolidated financial statements contained herein include Nexus’ results of operations for the period from June 4, 2004 through January 1, 2005.

18The Company has completed its preliminary purchase price allocation attributable to the Nexus acquisition. The final allocation will be completed within one year of the transaction and any resulting adjustment is not expected to have a material impact on the Company’s financial position or results of operations. The preliminary purchase price allocation based on management’s estimates at the date of the acquisition is as follows (in millions):

11. Commitments and Contingent Liabilities


Property, plant and equipment			$ 0.5
Goodwill			1.7
Intangible assets			4.5

Total assets acquired			6.7

Fair value of net assets acquired			$ 6.7

The ~~Company~~preliminary allocation isof ~~involved~~the purchase price resulted in ~~various~~the ~~unresolved~~recognition ~~legal~~of ~~actions, administrative~~$1.7 ~~proceedings,~~million ~~and~~of ~~claims~~goodwill inattributable to the ~~ordinary~~anticipated ~~course~~future ofearnings ~~its~~and ~~business involving~~cash ~~product~~flows ~~liability,~~and ~~product~~transaction ~~warranty,~~costs ~~property~~of ~~damage,~~$0.7 ~~insurance coverage,~~million ~~patents,~~related ~~and~~to ~~environmental~~this ~~matters~~acquisition. ~~Although~~The itCompany ispreliminarily allocated ~~not~~$4.5 ~~possible~~million ~~to predict~~of ~~with~~the ~~certainty~~purchase ~~the~~price ~~outcome~~to ofintangible ~~these~~assets, ~~unresolved~~$4.0 ~~legal~~million ~~actions~~of orwhich ~~the range~~was ofrelated ~~possible~~to ~~loss~~intellectual orproperty ~~recovery,~~that ~~based~~will ~~upon~~be ~~current~~amortized ~~information,~~over ~~management believes~~3 ~~these~~years. ~~unresolved~~The ~~legal~~remaining ~~actions~~$0.5 ~~will~~million ~~not~~of ~~have~~intangible aassets ~~material~~was ~~effect~~related onto ~~the~~non-competition ~~financial~~agreements ~~position~~that orwill ~~results~~be ofamortized ~~operations~~over of7 ~~the Company~~years.

The ~~Company,~~purchase agreement asalso ~~well~~included asprovisions ~~many~~for ~~other~~payment ~~third~~of ~~parties~~additional considerations, ~~has~~up ~~been~~to ~~named as~~ a ~~defendant in~~total ~~several~~of ~~lawsuits filed related to illnesses from exposure to asbestos or asbestos-containing products~~$1.5 ~~The complaints fail to specify which plaintiffs allegedly were involved with the Company’s products~~million, and because the cases are in initial stages, it is uncertain whether any plaintiffs have an asbestos-related illnesses or dealt with the Company’s products, much less whether any plaintiffs were exposed to anbe ~~asbestos-containing~~paid ~~component part of the Company’s product or whether such party could have been a substantial contributing factor~~ to ~~the~~Nexus ~~alleged~~based ~~illness.~~on ~~The~~specific ~~Company~~performance iscriteria ~~unable~~of ~~to estimate~~ the ~~amount~~acquired ofbusiness ~~its~~through ~~exposure,~~June ~~if any~~4, ~~related to these claims at this time~~2007. ~~The Company~~Any ~~does~~payments ~~not~~made ~~believe~~based ~~the~~on ~~ultimate resolution of~~ these criteria ~~issues~~ will ~~have~~adjust ~~a material~~the ~~adverse~~Nexus ~~affect~~purchase onprice ~~the~~and ~~Company’s~~be ~~net~~allocated ~~earnings~~to ~~or financial position~~goodwill.

1211. ~~Subsequent~~ ~~Events~~Guarantor Subsidiaries

The following ~~purchase~~tables ~~price~~present ~~payable~~condensed ~~under~~consolidating ~~the~~unaudited ~~Stock~~financial ~~Purchase~~information ~~Agreement~~of ~~for~~the ~~Invensys~~Company ~~Metering Systems~~at ~~was~~January ~~subject~~1, to2005 ~~adjustment~~and ~~based~~the onaudited ~~(i)~~financial information of the ~~level~~Company ofat ~~working~~March ~~capital~~31, ~~as of~~2004 and the ~~closing~~unaudited ~~date~~financial information of the ~~Acquisition~~Company for the fiscal quarter and nine months ended January 1, 2005 and for the period from Inception (iiDecember 18, 2003) ~~the~~through ~~projected~~December ~~pension~~28, ~~benefit obligations~~2003, ofand ~~Invensys~~condensed ~~Metering~~combining ~~Systems~~unaudited asfinancial information of the ~~closing~~Predecessor ~~date~~for the period from October 1, 2003 through December 17, 2003 and for the period from April 1, 2003 through December 17, 2003, for: (~~iii~~a) ~~the net~~Sensus ~~level~~Metering ofSystems ~~intercompany~~(Bermuda ~~payables~~2) ~~and~~Ltd. ~~receivables~~(referred to as ofParent), ~~the~~(b) ~~closing~~Sensus ~~date~~Metering Systems Inc. ~~Following~~ the ~~closing~~issuer of the ~~Acquisition~~Notes (referred to as Issuer), (c) on a ~~discussions~~combined ~~were~~basis, ~~held~~the bysubsidiaries ~~Invensys~~of ~~and~~Sensus ~~the~~Metering ~~Company~~Systems ~~regarding~~(Bermuda 2) Ltd. that are guaranteeing the ~~appropriate level~~Notes, which include all of the ~~adjustments~~wholly-owned U.S. domestic subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd. other than IMSofTech Inc. (“Guarantor Subsidiaries”), and (d) on ~~July 27,~~a ~~2004~~combined basis, the ~~parties~~subsidiaries ~~reached agreement~~of onSensus ~~the~~Metering ~~adjustment~~Systems ~~amount~~(Bermuda ~~which~~2) ~~resulted~~Ltd. inthat aare ~~cash~~not ~~payment~~guaranteeing ofthe $5Notes, including IMSofTech (“Non-Guarantor Subsidiaries”).0 ~~million~~Separate financial bystatements ~~Invensys~~for tothe Issuer and the ~~Company~~Guarantor Subsidiaries are not presented because their guarantees are full and aunconditional ~~corresponding~~and ~~reduction~~joint toand several, and the ~~purchase~~Company believes separate financial statements and other disclosures are not material to ~~price~~investors. The ~~$5.0~~Notes ~~million~~were ~~price~~issued ~~reduction will~~by beSensus ~~reflected~~Metering asSystems aInc. ~~reduction~~in connection with the Acquisition of ~~goodwill~~Invensys Metering Systems (see Note 1).

19- 14 -

ItemTable 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsContents

~~This~~Condensed ~~Quarterly~~Consolidating ~~Report~~Balance onSheets Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to Sensus Metering Systems are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, sales, cash flow and other operating results, business strategy, financing plans, forecasted trends related to the markets in which we operate, legal proceedings and similar matters, other than those of historical fact, are forward-looking statements. We cannot assure you that our expectations expressed or implied in these forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various risks. These risks, some of which are discussed under the caption “Risk Factors-Risks Relating to Our Business” in our Registration Statement on Form S-4 (SEC File No. 333-113658) filed with the Securities and Exchange Commission, and include our dependence on new product development and intellectual property, and our dependence on independent distributors and third party contract manufacturers, our substantial financial leverage, debt service and other cash requirements, liquidity constraints and risks related to future growth and expansion. Other important risk factors that could cause actual events or results to differ from those contained or implied in the forward-looking statements include, without limitation, our ability to integrate acquired companies, general economic and business conditions, competition, adverse changes in the regulatory or legislative environment in which the company operates, and other factors beyond the Company’s control. The following management’s discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements for the quarter ended July 3, 2004 and the related notes thereto included in this report and the audited consolidated financial statements for the year ended March 31, 2004 and related notes thereto included in our Registration Statement on Form S-4 (SEC File No. 333-113658).

~~Unless~~January ~~we indicate otherwise~~1, references below to “we,” “us,” “our” and “Sensus Metering Systems” mean Sensus Metering Systems (Bermuda 2) Ltd. and its subsidiaries. Unless we indicate otherwise, we have rounded dollar amounts to the nearest hundred thousand dollars.2005

General


	Parent		Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	12.6		$	10.7	$	14.8		$	—		$	38.1
Accounts receivable:
Trade, net of allowance for doubtful accounts		—		—			40.8		28.7			—			69.5
From affiliates		—		(48.4	)		58.4		(10.0	)		—			—
Other		—		—			1.4		0.5			—			1.9
Inventories, net		—		—			28.0		27.5			—			55.5
Prepayments and other current assets		0.1		0.5			1.3		3.6			—			5.5
Deferred income taxes		—		—			2.0		0.7			—			2.7

Total current assets		0.1		(35.3	)		142.6		65.8			—			173.2

Notes receivable from affiliates		—		433.2			—		29.1			(462.3	)		—
Property, plant, and equipment, net		—		—			66.8		54.2			—			121.0
Intangible assets, net		—		22.2			174.1		42.5			—			238.8
Goodwill		—		—			316.9		27.6			—			344.5
Investment in subsidiaries		651.5		595.2			8.0		—			(1,254.7	)		—
Long-term deferred tax asset		—		—			18.9		—			—			18.9
Other long-term assets		—		21.9			1.0		2.6			—			25.5

Total assets	$	651.6	$	1,037.2		$	728.3	$	221.8		$	(1,717.0	)	$	921.9

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	—	$	—		$	22.8	$	13.2		$	—		$	36.0
Current portion of long-term debt		—		1.0			—		0.2			—			1.2
Income taxes payable		—		(16.8	)		14.2		2.6			—			—
Restructuring accruals		—		—			0.6		7.5			—			8.1
Accruals and other current liabilities		—		2.8			19.1		23.9			—			45.8

Total current liabilities		—		(13.0	)		56.7		47.4			—			91.1
Notes payable to affiliates		462.3		(2.1	)		0.3		1.8			(462.3	)		—
Long-term debt, less current portion		—		471.0			—		29.4			—			500.4
Pensions		—		—			0.7		42.7			—			43.4
Deferred income taxes		—		—			70.1		21.0			—			91.1
Other long-term liabilities		—		—			5.3		0.7			—			6.0
Minority interests		—		—			—		0.6			—			0.6

Total liabilities		462.3		455.9			133.1		143.6			(462.3	)		732.6

Stockholders’ equity		189.3		581.3			595.2		78.2			(1,254.7	)		189.3

Total liabilities and stockholders’ equity	$	651.6	$	1,037.2		$	728.3	$	221.8		$	(1,717.0	)	$	921.9

We are a leading provider of advanced metering and related communications systems to the worldwide utility industry and have over a century of experience in designing and manufacturing metering products. We are the largest global manufacturer of water meters, the fastest growing segment of the metering industry, and have a substantial share of the sales of automatic metering reading, or AMR, devices to North American water utilities. Additionally, we are a leading global developer and manufacturer of gas and heat metering systems and recently entered the North American electric metering market with iCon, our solid-~~state~~ ~~electricity~~15 ~~meter. In addition to our metering business, we believe that, through our Smith~~-~~Blair,~~ Inc. subsidiary, we are the leading North American producer of pipe joining and repair products for water and natural gas utilities and, through our Sensus Precision Die Casting, Inc. subsidiary, are a premier supplier of precision-manufactured, thin-wall, low-porosity aluminum die castings.

DuringTable theof fiscal quarter ended July 3, 2004, we:Contents

~~• Increased sales~~Condensed ~~from~~Consolidating ~~the~~Balance ~~same~~Sheets ~~period in 2003 by 11%;~~

~~• Successfully acquired~~March ~~certain~~31, ~~assets~~2004 ~~of Nexus;~~

• Developed replacement services and systems key for administrative functions at our headquarters resulting from the separation from Invensys; and


	Parent		Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	12.7	$	18.1		$	17.7		$	—		$	48.5
Accounts receivable:
Trade, net of allowance for doubtful accounts		—		—		47.4			35.1			—			82.5
From affiliates		—		1.0		(0.5	)		(0.5	)		—			—
Other		—		—		2.3			0.1			—			2.4
Inventories, net		—		—		24.0			22.5			—			46.5
Prepayments and other current assets		—		—		3.2			5.7			—			8.9
Deferred income taxes		—		—		1.2			—			—			1.2

Total current assets		—		13.7		95.7			80.6			—			190.0

Notes receivable from affiliates		—		433.2		—			29.1			(462.3	)		—
Property, plant, and equipment, net		—		—		65.8			50.6			—			116.4
Intangible assets, net		—		27.9		181.5			45.0			—			254.4
Goodwill		—		—		320.3			27.3			—			347.6
Investment in subsidiaries		660.3		568.9		9.4			—			(1,238.6	)		—
Long-term deferred tax asset		—		—		18.0			—			—			18.0
Other long-term assets		—		21.4		1.2			2.4			—			25.0

Total assets	$	660.3	$	1,065.1	$	691.9		$	235.0		$	(1,700.9	)	$	951.4

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	—	$	—	$	30.0		$	13.7		$	—		$	43.7
Current portion of long-term debt		—		2.0		—			0.3			—			2.3
Short-term borrowings		—		—		—			2.2			—			2.2
Income taxes payable		—		—		0.6			0.1			—			0.7
Restructuring accruals		—		—		1.2			7.4			—			8.6
Accruals and other current liabilities		—		8.1		18.3			25.3			—			51.7

Total current liabilities		—		10.1		50.1			49.0			—			109.2

Notes payable to affiliates		462.3		2.7		(3.8	)		1.1			(462.3	)		—
Long-term debt, less current portion		—		472.5		—			29.6			—			502.1
Pensions		—		—		0.4			37.2			—			37.6
Deferred income taxes		—		—		70.8			21.1			—			91.9
Other long-term liabilities		—		—		5.5			0.7			—			6.2
Minority interests		—		—		—			6.4			—			6.4

Total liabilities		462.3		485.3		123.0			145.1			(462.3	)		753.4

Stockholders’ equity		198.0		579.8		568.9			89.9			(1,238.6	)		198.0

Total liabilities and stockholders’ equity	$	660.3	$	1,065.1	$	691.9		$	235.0		$	(1,700.9	)	$	951.4

~~• Initiated restructuring~~- ~~programs~~16 to- ~~lower our cost base in our European and South American operations.~~

HistoryTable andof the AcquisitionContents

~~Although~~Condensed ~~Sensus~~Consolidating ~~Metering~~Statements ~~Systems~~of ~~and~~Operations ~~its predecessors have been supplying metering and related products for over a century, our current business was created in early 1999 when BTR plc and Siebe plc merged to form Invensys plc~~ (~~“Invensys”~~unaudited). Since this merger, and until we acquired the metering systems and certain other businesses (“Invensys Metering Systems”) from Invensys, our business was generally operated as a single product group within

20Fiscal Quarter Ended January 1, 2005

Invensys. During this time period, our business participated in various strategic initiatives implemented by Invensys, including customer development, services, and project management and lean supply chain programs. Invensys Metering Systems was acquired by us on December 17, 2003. This acquisition is described herein under “The Acquisition.” Although we plan to continue our focus on improved operating efficiency, the programs previously implemented by Invensys may be modified or terminated. As a result of such modifications or terminations and other factors, the historical results of operations of Invensys Metering Systems may not be indicative of our results of operations on a stand-alone basis.


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	($ in millions)
Net sales	$	—		$	—		$	88.1		$	37.5		$	(1.3	)	$	124.3
Cost of sales		—			—			63.0			27.3			(1.3	)		89.0

Gross profit (loss)		—			—			25.1			10.2			—			35.3

Selling, general, and administrative expenses		—			0.3			12.6			12.4			—			25.3
Restructuring costs		—			—			(0.1	)		1.5			—			1.4
Amortization of intangible assets		—			1.8			2.7			0.9			—			5.4
Other operating (income) expense, net		—			(0.2	)		0.4			0.3			—			0.5

Operating (loss) income		—			(1.9	)		9.5			(4.9	)		—			2.7

Non-operating (expense) income:
Interest (expense) income:
From/to third parties		(0.1	)		(9.2	)		0.3			(0.7	)		—			(9.7	)
Equity in earnings (loss) of subsidiaries		(8.0	)		7.3			0.7			—			—			—
Other (expense) income, net		—			—			(0.1	)		1.4			—			1.3

(Loss) income for continuing operations before income taxes		(8.1	)		(3.8	)		10.4			(4.2	)		—			(5.7	)

Provision (benefit) for income taxes		—			(4.6	)		3.1			3.9			—			2.4

(Loss) income for continuing operations after income taxes		(8.1	)		0.8			7.3			(8.1	)		—			(8.1	)

Minority interest		—			—			—			—			—			—

Net (loss) income	$	(8.1	)	$	0.8		$	7.3		$	(8.1	)	$	—		$	(8.1	)

~~Recent~~- ~~Restructuring~~17 ~~and~~- ~~Cost Savings Initiatives~~

SensusTable Metering Systems and its Predecessor have undertaken significant cost savings initiatives over the last several years to reduce its overall cost base and improve operating margins. Through July 3, 2004, we estimate that approximately 97.0% of our five-year restructuring and cost reduction programs have been initiated and have realized $38.8 million of cumulative annual cost savings since the program’s initiation.Contents

InCondensed ~~fiscal~~Consolidating ~~2005,~~Statements ~~we are continuing the implementation~~ of ~~these initiatives. We~~Operations expect to incur additional restructuring costs of approximately $5.1 million in fiscal 2005 to conclude the ongoing initiatives, generating cost savings from reductions of facility costs, direct labor costs, manufacturing overhead costs and general and administrative costs of an estimated $2.3 million. For the fiscal quarter ended July 3, 2004, we incurred $2.0 million of restructuring costs, primarily related to employee severance and exit activities.(unaudited)

~~Other~~Nine ~~Information~~months ~~About~~Ended ~~Our~~January ~~Business~~1, 2005

The following table presents, as of the dates indicated, additional information about our operations and business.


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	($ in millions)
Net sales	$	—		$	—		$	288.2		$	122.8		$	(4.1	)	$	406.9
Cost of sales		—			—			199.3			92.1			(4.1	)		287.3

Gross profit (loss)		—			—			88.9			30.7			—			119.6

Selling, general, and administrative expenses		—			0.5			38.2			36.0			—			74.7
Restructuring costs		—			0.3			(0.1	)		5.7			—			5.9
Amortization of intangible assets		—			5.6			8.0			2.3			—			15.9
Other operating expenses, net		—			—			1.5			0.7			—			2.2

Operating income (loss)		—			(6.4	)		41.3			(14.0	)		—			20.9

Non-operating (expense) income:
Interest (expense) income:
From/to third parties		—			(27.2	)		0.5			(1.5	)		—			(28.2	)
Equity in earnings (loss) of subsidiaries		(10.9	)		24.0			(3.0	)		—			(10.1	)		—
Other income (expense), net		—			—			—			1.3			—			1.3

(Loss) income before income taxes		(10.9	)		(9.6	)		38.8			(14.2	)		(10.1	)		(6.0	)

Provision (benefit) for income taxes		—			(13.7	)		14.7			4.0			—			5.0

(Loss) income after income taxes		(10.9	)		4.1			24.1			(18.2	)		(10.1	)		(11.0	)

Minority interest		—			—			—			0.1			—			0.1

(Loss) income from continuing operations		(10.9	)		4.1			24.1			(18.1	)		(10.1	)		(10.9	)

(Loss) income from discontinued operations		(0.6	)		(0.1	)		(0.1	)		(0.5	)		0.7			(0.6	)

Net (loss) income	$	(11.5	)	$	4.0		$	24.0		$	(18.6	)	$	(9.4	)	$	(11.5	)

	Fiscal Quarter Ended
	July 3, 2004		March 31, 2004		December 28, 2003		September 30, 2003		June 28, 2003		March 31, 2003
Orders (in millions)	$	143.2	$	148.6	$	119.2	$	133.4	$	128.9	$	137.4
Backlog (in millions)	$	58.3	$	56.0	$	67.2	$	48.9	$	57.9	$	54.8
Sales (in millions)	$	140.7	$	159.4	$	104.2	$	142.4	$	127.3	$	143.7
Employees	3,459		3,363		3,164		3,321		3,431		3,405

- 18 -

21Table of Contents

~~Results~~Condensed Consolidating Statements of Operations (unaudited)

~~Fiscal~~From Inception ~~Quarter~~(December ~~Ended July 3~~18, ~~2004 Compared~~2003) ~~with~~to ~~Fiscal~~December ~~Quarter Ended June~~ 28, 2003

(in millions)	Fiscal Quarter Ended July 3, 2004			%		Predecessor Fiscal Quarter Ended June 28, 2003			%
	Parent				Issuer				Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net sales	$	140.7		100	%	$	127.3		100	%
	($ in millions)
Gross profit	41.6			30	%	39.8			31	%
Net sales	$	—			$	—			$	4.1		$	2.5		$	—	$	6.6
Selling, general and administrative expenses	24.5			17	%	23.6			18	%
Cost of sales		—				—				3.9			2.7			—		6.6
Restructuring and other similar costs	2.0			2	%	6.3			5	%
Gross profit (loss)		—				—				0.2			(0.2	)		—		—
Amortization of intangible assets	5.0			4	%	0.1			—
Selling, general, and administrative expenses		—				1.8				1.5			0.8			—		4.1
Other operating income, net	0.5			—		(0.2		)	—
Restructuring costs		—				—				(0.1	)		0.1			—		—
Operating income (loss)	9.6			7	%	10.0			8	%
Amortization of intangible assets		0.2				—				0.3			—			—		0.5
Interest income (expense), net	(9.4		)	(7	)%	1.0			1	%
Other operating expense (income), net		—				—				0.1			(0.6	)		—		(0.5	)
Income (loss) before income taxes and minority interest	0.2			—		11.0			9	%
Operating income (loss)		(0.2	)			(1.8	)			(1.6	)		(0.5	)		—		(4.1	)
Provision (benefit) for income taxes	0.8			—		4.5			4	%
Non-operating (expense) income:
Income (loss) before minority interest	(0.6		)	—		6.5			5	%
Interest (expense) income:
Minority interest	(0.1		)	—		(0.1		)	—
From/to third parties		—				(3.4	)			0.1			(0.2	)		—		(3.5	)
Net income (loss)	$	(0.7	)	—		$	6.4		5	%
From/to affiliates		—				—				(0.1	)		0.1			—		—
Equity in earnings (loss) of subsidiaries		(5.5	)			(1.7	)			(0.1	)		—			7.3		—
Other (expense) income, net		—				—				—			(0.4	)		—		(0.4	)
(Loss) income before income taxes		(5.7	)			(6.9	)			(1.7	)		(1.0	)		7.3		(8.0	)
Provision (benefit) for income taxes		—				(1.8	)			—			(0.4	)		—		(2.2	)
(Loss) income after income taxes		(5.7	)			(5.1	)			(1.7	)		(0.6	)		7.3		(5.8	)
Minority interest		—				—				—			0.1			—		0.1
(Loss) income from continuing operations		(5.7	)			(5.1	)			(1.7	)		(0.5	)		7.3		(5.7	)
(Loss) income from discontinued operations		—				—				—			—			—		—
Net (loss) income	$	(5.7	)		$	(5.1	)		$	(1.7	)	$	(0.5	)	$	7.3	$	(5.7	)

~~Net~~- ~~Sales. Sales~~19 ~~increased~~- $13.4 million, or approximately 11%, from $127.3 million in the fiscal quarter ended June 28, 2003 to $140.7 million in the fiscal quarter ended July 3, 2004. Favorable currency translation, due primarily to the appreciation of the Euro against the U.S. dollar, accounted for $2.4 million of the increase in sales compared with the prior year fiscal period results. The remaining increase was due primarily to strong demand for metering systems, with particular buoyancy in North American water meters, that showed an increase in sales of $5.6 million, or 11%, over the prior period, due to continued growth of AMR applications and strong product sales. The increased sales were also attributable to continued growth in sales of our iCon electric meter products to electric utilities. Sales for pipe joining and repair products increased by $1.6 million, or 13%, compared to the prior year fiscal period, due to improved pricing and an increase in North American construction activities. Sales from our precision die casting products also demonstrated improvement in the fiscal quarter ended July 3, 2004, increasing by $1.0 million, or 11% over the prior year period, as we took advantage of new platform offerings to the top five suppliers to the U.S. automotive industry, known as the Tier I automotive suppliers. In addition, sales increased over the prior year period as a result of the fiscal quarter ended July 3, 2004 containing 3 working days more than the fiscal quarter ended June 28, 2003.

OurTable top ten customers accounted for approximately 33% of net sales during the fiscal quarter ended July 3, 2004. Approximately 12% and 10% of net sales for the fiscal quarters ended July 3, 2004 and June 28, 2003, respectively, were with one customer and its affiliates. No single affiliate of the customer accounted for more than 1% of net sales in any of the periods presented.Contents

WeCondensed ~~expect~~Combining ~~that~~Statements ~~net sales will remain strong for the remainder~~ of ~~the fiscal~~Operations—Predecessor year, with increases over the prior fiscal year due to demand for AMR systems, ongoing demand for iCon electric meters, expansion of precision die casting products and favorable general economic trends.(unaudited)

~~Gross~~Period ~~Profit. Gross~~from ~~profit~~October ~~increased by $~~1~~.8 million~~, ~~or 5%, from $39.8 million for the fiscal quarter ended June 28,~~ 2003 to ~~$41.6 million~~December ~~for the fiscal quarter ended July 3~~17, ~~2004. As~~2003 a percentage of sales, however, gross profit in the most recent quarter decreased by approximately one percentage point from the prior year period. The increase in the gross profit was the result of increased net sales and favorable currency translation, due primarily to the appreciation of


	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Combined
	($ in millions)
Net sales	$	64.8		$	33.2		$	(0.8	)	$	97.2
Cost of sales		48.6			24.8			(0.8	)		72.6

Gross profit		16.2			8.4			—			24.6

Selling, general, and administrative expenses		11.8			12.2			—			24.0
Restructuring and other similar costs		—			1.4			—			1.4
Amortization of intangible assets		0.1			—			—			0.1
Other operating expense, net		—			0.3			—			0.3

Operating income (loss)		4.3			(5.5	)		—			(1.2	)

Non-operating income (expense):
Interest income (expense):
From/to affiliates		4.6			(3.7	)		—			0.9
Equity in earnings (loss) of subsidiaries		(0.2	)		—			0.2			—

Income (loss) before income taxes		8.7			(9.2	)		0.2			(0.3	)

Provision for income taxes		3.4			5.7			—			9.1

Income (loss) after income taxes		5.3			(14.9	)		0.2			(9.4	)

Minority interest		—			(0.1	)		—			(0.1	)

Income (loss) from continuing operations		5.3			(15.0	)		0.2			(9.5	)

Loss from discontinued operations		—			0.2			—			0.2

Net income (loss)	$	5.3		$	(14.8	)	$	0.2		$	(9.3	)

~~the~~- ~~Euro~~20 ~~versus~~- the dollar that pushed gross margins up $0.6 million compared with the prior year period. The decrease in gross profit as a percentage of net sales was primarily attributable to the following factors:

•Table Increased prices for aluminum, altered pricing mechanisms to automotive customers and increased natural gas prices negatively affected margins on precision die casting products and gas meters; • An unfavorable mix of higher electric meter sales at comparatively lower margins; • Competitive pricing environments in European meter markets; and • Continued softness in South American water meter markets, particularly in Brazil.Contents

~~Selling,~~Condensed ~~General~~Combining ~~and~~Statements Administrative Expenses. Selling, general and administrative expenses for the fiscal quarter ended July 3, 2004 increased by $0.9 million, or approximately 4%, from $23.6 million from the fiscal quarter ended June 28, 2003 to $24.5 million for the fiscal quarter ended July 3, 2004. Selling, general and administrative expense, as a percentage of ~~net~~Operations—Predecessor sales, however, decreased from 18% for the fiscal quarter ended June 28, 2003 to 17% for the fiscal quarter ended July 3, 2004. The increase in expense was due primarily to foreign currency translation that resulted in an increase in foreign-based administrative costs of $0.9 million, as expressed in US dollars. In addition, we incurred incremental management fee expenses of approximately $0.5 million. Prior restructuring efforts and ongoing cost containment activities lowered base operating expenses and operating expenses in Europe, Mid East and Africa (“EMEA”) were flat year over year, excluding the impacts of foreign currency. Selling, general and administration expenses in South America and in North America were level for the fiscal quarters ended July 3, 2004 and June 28, 2003

~~Restructuring~~Period ~~Costs. Restructuring costs decreased by $4.3 million, or approximately 68%,~~ from ~~$6.3~~April ~~million for the fiscal quarter ended June 28~~1, 2003 to ~~$2.0~~December ~~million for the fiscal quarter ended July 3~~17, ~~2004. The~~ ~~decrease~~2003 is primarily the result of the scaling down of our European restructuring activities as final plans are essentially underway to achieve our targeted manufacturing footprint in the region. Actions to close the French production facility and to downsize German operations constitute the majority of current activities. We expect to incur additional restructuring costs of approximately $3.1 million in fiscal 2005.

Amortization of Intangible Assets. Amortization of intangible assets increased by $4.9 million from $0.1 million for the fiscal quarter ended June 28, 2003 to $5.0 million for the fiscal quarter ended July 3, 2004. Amortization expense primarily relates to the intangible assets created at the time of the Acquisition for non-competition agreements, customer relationships and patents (see note 4). These intangible assets were not recorded on the balance sheet of the Predecessor. As a result, the Predecessor did not incur as much amortization expense in the fiscal quarter ended June 28, 2003. We expect that amortization of intangible assets will remain higher than historical levels of the Predecessor for the foreseeable future as a result of higher levels of intangible assets recorded in connection with the Acquisition.


	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Combined
	($ in millions)
Net sales	$	247.1		$	120.8		$	(3.3	)	$	364.6
Cost of sales		168.0			90.2			(3.3	)		254.9

Gross profit		79.1			30.6			—			109.7

Selling, general, and administrative expenses		36.1			33.6			—			69.7
Restructuring and other similar costs		0.4			9.2			—			9.6
Amortization of intangible assets		0.3			—			—			0.3
Other operating income, net		—			(0.9	)		—			(0.9	)

Operating income (loss)		42.3			(11.3	)		—			31.0

Non-operating income (expense):
Interest income (expense):
From/to third parties		(0.1	)		0.1			—			—
From/to affiliates		13.6			(11.7	)		—			1.9
Equity in earnings of subsidiaries		0.4			—			(0.4	)		—
Other, net		—			0.1			—			0.1

Income (loss) before income taxes		56.2			(22.8	)		(0.4	)		33.0

Provision for income taxes		21.3			1.3			—			22.6

Income (loss) after income taxes		34.9			(24.1	)		(0.4	)		10.4

Minority interest		—			(0.4	)		—			(0.4	)

Income (loss) from continuing operations		34.9			(24.5	)		(0.4	)		10.0

Loss from discontinued operations		—			(0.2	)		—			(0.2	)

Net income (loss)	$	34.9		$	(24.7	)	$	(0.4	)	$	9.8

~~Interest~~- ~~Income~~21 ~~(Expense). Interest~~- expense of $9.4 million for the fiscal quarter ended July 3, 2004 increased by $10.4 million compared with interest income of $1.0 million for the fiscal quarter ended June 28, 2003. Prior to the Acquisition, the Predecessor had no debt. The Acquisition was financed with $230.0 million in term loan financing and the issuance of $275.0 million of senior subordinated notes. The increase in interest expense is the result of the debt created to support the Acquisition. We expect that interest expense will remain higher than historical levels of the Predecessor for the foreseeable future as a result of higher levels of debt incurred in connection with acquisitions.

IncomeTable Tax Expense. Income tax expense for the fiscal quarter ended July 3, 2004 decreased by $3.7 million, or 82%, compared with the fiscal quarter ended June 28, 2003 from $4.5 million to $0.8 million. The decrease is primarily the result of lower pre-tax income for the period. Despite our lower pre-tax income, our effective tax rate was 400% for the fiscal quarter ended July 3, 2004 (compared with 40.8% for the fiscal quarter ended June 28, 2003) as a result of foreign net operating losses for which no tax benefit was recorded.Contents

~~Minority~~Condensed ~~Interest. Minority~~Consolidating ~~interest~~Statements ~~for the fiscal quarters ended July 3, 2004 and June 28, 2003 remain consistent and relate to our partner’s share~~ of ~~earnings~~Cash ofFlows ~~our~~(unaudited) ~~United States, China and India joint ventures.~~

23Nine months Ended January 1, 2005

Net Income. Net income for the fiscal quarter ended July 3, 2004 decreased by $7.1 million compared with the fiscal quarter ended June 28, 2003 due primarily to:


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	($ in millions)
Operating activities
Net (loss) income	$	(11.5	)	$	4.0		$	24.0		$	(18.6	)	$	(9.4	)	$	(11.5	)
Non-cash adjustments		—			5.6			13.4			6.3			—			25.3
Undistributed equity in earnings (loss) of subsidiaries		11.6			(24.0	)		3.0			—			9.4			—
Changes in operating assets and liabilities		(0.2	)		25.6			(46.8	)		13.0			—			(8.4	)

Cash provided by (used in) operating activities		(0.1	)		11.2			(6.4	)		0.7			—			5.4

Investing activities
Expenditures for property, plant, and equipment		—			—			(10.0	)		(4.6	)					(14.6	)
Proceeds from sale of assets		—			—			0.3			1.8						2.1
Acquisitions, net		—			7.0			(1.0	)		(5.0	)		—			1.0

Cash provided by (used in) investing activities		—			7.0			(10.7	)		(7.8	)		—			(11.5	)

Financing activities
Activity with affiliates		0.1			(15.4	)		9.7			5.6			—			—
Decrease in short-term borrowings		—			—			—			(2.4	)		—			(2.4	)
Payments of long-term debt		—			(2.9	)		—			—			—			(2.9	)

Net cash (used in) provided by financing activities		0.1			(18.3	)		9.7			3.2			—			(5.3	)

Effect of exchange rate changes on cash		—			—			—			1.0			—			1.0
Decrease in cash and cash equivalents	$	—		$	(0.1	)		(7.4	)		(2.9	)	$	—		$	(10.4	)

Cash and cash equivalents at beginning of period	$	—		$	12.7		$	18.1		$	17.7		$	—		$	48.5

Cash and cash equivalents at end of period	$	—		$	12.6		$	10.7		$	14.8		$	—		$	38.1

~~• higher interest~~- ~~expense~~22 ~~incurred~~- ~~during the period;~~

• greater amortizationTable of intangible assets related to acquisitions;Contents

~~• our inability~~Condensed toConsolidating ~~record~~Statements anof ~~income~~Cash ~~tax~~Flows ~~benefit~~(unaudited) ~~on foreign net operating loss carry-forwards in certain jurisdictions; and~~

~~• management fees~~From ~~associated~~Inception ~~with~~(December ~~the~~18, ~~Acquisition.~~2003) to December 28, 2003

EBITDA. EBITDA increased by $5.1 million, or approximately 36%, from $14.0 million in the fiscal quarter ended June 28, 2003 to $19.1 million in the fiscal quarter ended July 3, 2004. The increase in EBITDA during the period is generally attributable to the following factors:


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	($ in millions)
Operating activities
Net income (loss)	$	(5.7	)	$	(5.1	)	$	(1.7	)	$	(0.5	)	$	7.3		$	(5.7	)
Non-cash adjustments		—			0.2			(1.9	)		0.2			—			(1.5	)
Undistributed equity in earnings of subsidiaries		5.7			1.7			(0.1	)		—			(7.3	)		—
Changes in operating assets and liabilities		—			(4.7	)		12.5			2.5			—			10.3

Cash (used in) provided by operating activities		—			(7.9	)		8.8			2.2			—			3.1

Investing activities
Expenditures for property, plant, and equipment		—			—			—			(0.1	)		—			(0.1	)
Acquisitions, net		(657.3	)		—			(1.6	)		10.8			—			(648.1	)

Cash (used in) provided by investing activities		(657.3	)		—			(1.6	)		10.7			—			(648.2	)

Financing activities
Activity with affiliates		462.3			(433.2	)		—			(29.1	)		—			—
Proceeds from debt issuance		—			458.1			—			29.1			—			487.2
Proceeds from common stock issuance		195.0			—			—			—			—			195.0

Net cash provided by financing activities		657.3			24.9			—			—			—			682.2

Effect of exchange rate changes on cash		—			—			—			—			—			—
Increase in cash and cash equivalents	$	—		$	17.0		$	7.2		$	12.9		$	—		$	37.1

Cash and cash equivalents at beginning of period	$	—		$	—		$	—		$	—		$	—		$	—

Cash and cash equivalents at end of period	$	—		$	17.0		$	7.2		$	12.9		$	—		$	37.1

~~• increased sales~~- ~~resulting~~23 in- ~~higher gross profits;~~

• lower operatingTable expenses,of excluding depreciation and amortization;Contents

~~• significantly lower~~Condensed ~~restructuring~~Combining ~~expenses;~~Statements ~~and~~of Cash Flows—Predecessor

~~• the impact~~Period offrom ~~favorable~~April ~~foreign~~1, ~~currency~~2003 ~~translation.~~to December 17, 2003

The discussion of EBITDA is being provided because management considers EBITDA to be an important measure of financial performance. Among other things, our management believes that EBITDA provides useful information for our investors because it is useful for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with the historical performance of our predecessor because significant line items within our income statements such as depreciation, amortization and interest expense are significantly impacted by the Acquisition. Internally, EBITDA is used as a financial measure to assess the performance of our business and is an important measure in our incentive compensation plans. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity.


	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Combined
	($ in millions)
Operating activities
Net income (loss)	$	34.9		$	(24.7	)	$	(0.4	)	$	9.8
Non-cash adjustments		5.5			5.6			—			11.1
Equity in earnings of non-guarantor subsidiaries		(0.4	)		—			0.4			—
Changes in operating assets and liabilities		(38.5	)		(12.5	)		(2.7	)		(53.7	)

Cash provided by (used in) operating activities		1.5			(31.6	)		(2.7	)		(32.8	)

Investing activities
Expenditures for property, plant, and equipment		(6.1	)		(2.3	)		—			(8.4	)

Cash used in investing activities		(6.1	)		(2.3	)		—			(8.4	)

Financing activities
Decrease in short-term borrowings		(7.7	)		(6.4	)		—			(14.1	)
Other financing activities		4.5			39.4			2.7			46.6

Net cash (used in) provided by financing activities		(3.2	)		33.0			2.7			32.5

Effect of exchange rate changes on cash		—			0.8			—			0.8

Decrease in cash and cash equivalents	$	(7.8	)	$	(0.1	)	$	—		$	(7.9	)

Cash and cash equivalents at beginning of period	$	6.1		$	11.0		$	—		$	17.1

Cash and cash equivalents at end of period	$	(1.7	)	$	10.9		$	—		$	9.2

~~The~~- ~~following~~24 ~~table~~- sets forth a quantitative reconciliation of the differences between EBITDA and net income (loss) calculated in accordance with generally accepted accounting principles for the fiscal quarters ended July 3, 2004 and June 28, 2003:

HistoricalTable EBITDAof ReconciliationContents

	Fiscal Quarter Ended
				Predecessor
	July 3, 2004			June 28,2003
Net income (loss)	$	(0.7	)	$	6.4
Depreciation and amortization	9.5			4.0
Interest expense, net of interest income	9.4			(1.0		)
Income taxes	0.8			4.5
Minority interest	0.1			0.1
EBITDA	$	19.1		$	14.0

12. Commitments and Contingent Liabilities

24The Company is involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of its business involving product liability, product warranty, property damage, insurance coverage, patents, and environmental matters. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes these unresolved legal actions will not have a material effect on the financial position or results of operations of the Company.

~~Liquidity~~The Company, as well as many other third parties, has been named as a defendant in several lawsuits filed related to illnesses from exposure to asbestos or asbestos-containing products. The complaints fail to specify which plaintiffs allegedly were involved with the Company’s products, and ~~Capital~~because ~~Resources~~the cases are in initial stages, it is uncertain whether any plaintiffs have asbestos-related illnesses or dealt with the Company’s products, much less whether any plaintiffs were exposed to an asbestos-containing component part of the Company’s product or whether such part could have been a substantial contributing factor to the alleged illness. The Company is unable to estimate the amount of its exposure, if any, related to these claims at this time. The Company does not believe the ultimate resolution of these issues will have a material adverse effect on the Company’s net earnings or financial position. See Part II-Other Information, Item 1: Legal Proceedings.

~~During~~The ~~the~~Company ~~fiscal~~entered ~~quarter~~into ~~ended~~contracts ~~July 3,~~that ~~2004,~~contain weguarantees ~~funded~~that ~~our~~could require performance or payment under certain ~~operating~~conditions. ~~and~~The ~~capital~~Company ~~requirements~~has ~~through~~entered ainto ~~combination~~various ofagreements ~~cash~~that ~~flows~~require ~~from operating~~letters ~~activities~~of ~~and~~credit ~~cash~~for onfinancial ~~hand~~assurance purposes. ~~Going~~These ~~forward,~~letters ~~operating~~of ~~and~~credit ~~capital requirements~~are ~~will~~available beto ~~funded~~fund ~~from~~the apayment ~~combination~~ of ~~cash~~such onobligations. ~~hand~~At January 1, ~~cash~~2005, ~~flows~~we ~~from~~had $4.3 million of ~~operating~~letters ~~activities~~of ~~and~~credit ~~borrowings~~outstanding ~~under~~with ~~our~~expiration ~~senior~~dates ~~credit~~ranging ~~facilities~~from one month to twelve months.

~~Net cash flow provided by operating activities in the fiscal quarters ended July 3, 2004 and June 28, 2003 was $(0~~13.~~4) million~~ ~~and $(23.4)~~Subsequent ~~million,~~Event respectively. The negative cash flow from operations for the fiscal quarter ended July 3, 2004 was primarily the result of interest payments of $14.3 million, which were attributable primarily to the Notes. The $23.0 million increase in net cash provided by operating activities in the fiscal quarter ended July 3, 2004 as compared to the fiscal quarter ended June 28, 2003 was primarily attributable to prior year cash flows from operations being negatively impacted by higher accounts receivable balances and lower accounts payable balances. Net income during the current fiscal quarter was $7.1 million lower than the prior year period, which was partially offset by increased amortization of intangible assets of $5.0 million due to the Acquisition.

~~Working~~The ~~capital~~Company asand Advanced Metering Data Systems, L.L.C. (“AMDS”), a ~~percentage~~wireless ofconnectivity ~~net~~company, entered into a marketing and sales ~~increased~~agreement toin ~~14%~~January ~~for~~2005. The terms of the agreement grant the Company exclusive rights in the ~~fiscal~~North ~~quarter~~American ~~ended~~electric ~~July 3~~markets to market and sell the AMDS automated meter reading (AMR) systems, ~~2004~~to asmanufacture ~~compared~~electric ~~with~~meter 8%modules for the ~~fiscal quarter~~iCon ~~ended~~solid-state ~~June 28~~electricity meter, ~~2003.~~and ~~This~~to ~~increase~~retrofit ~~was~~AMDS ~~primarily~~meter ~~due~~modules tofor currently installed ~~(i) an~~electromechanical ~~increase~~electricity inmeters ~~cash~~that ~~and~~are ~~cash~~linked ~~equivalents~~to ofthe ~~$36~~AMDS AMR fixed network.2 ~~million~~The ~~resulting from~~agreement also grants the ~~Acquisition,~~Company ~~and~~non-exclusive ~~(ii)~~rights anto ~~increase~~AMDS intechnology ~~accounts~~for ~~receivable~~the ofNorth $5America gas and water markets.~~3 million~~ ~~due~~The toagreement ~~increased~~expires ~~sales~~in 2014.

~~Historically,~~- ~~cash~~25 provided by or used in investing activities has been used for capital expenditures, business acquisitions and other investments, offset by proceeds from the disposition of property, plant and equipment. Capital expenditures in the fiscal quarter ended July 3, 2004 were $3.4 million as compared with capital expenditures of $2.8 million for the fiscal quarter ended June 28, 2003. Capital expenditure requirements are comprised of equipment, molds and tooling for replacement and expenditures for cost reduction, maintenance, safety and expansion. For the full fiscal year 2005, we expect to make capital expenditures of approximately $21.0 million reflecting a shift from maintenance level capital expenditures of Invensys to a more growth-~~focused~~ capital expenditures program. Business acquisition expenditures in the fiscal quarter ended July 3, 2004 were $5.0 million and were attributed entirely to the purchase of certain assets of Nexus described elsewhere in this report. We evaluate potential acquisition opportunities on an ongoing basis. We seek candidates whose acquisition would enhance our competitive position in the market place.

RestructuringTable cash expense over the fiscal quarters ended July 3, 2004 and June 28, 2003 amounted to $2.0 million and $1.5 million, respectively. As of July 3, 2004, we had $8.9 million of restructuring accruals reflected on our balance sheet. Additional restructuring costs of approximately $3.1 million are expected to be incurred in fiscal 2005 as the current restructuring program is completed.Contents

~~Historically,~~Item ~~cash provided by or used in financing activities represented payments to or funding from Invensys, and, to a lesser extent, changes in indebtedness to third parties~~2. ~~As a result of the Acquisition, we~~ ~~incurred~~Management’s ~~substantial~~Discussion ~~third-party indebtedness. As of July 3, 2004, we had approximately $503.9 million of total indebtedness outstanding~~ and ~~interest~~ ~~expense,~~Analysis ~~including amortization~~ of ~~deferred~~Financial ~~financing~~Condition costs, was approximately $9.4 million for the fiscal quarter ended July 3, 2004. Our senior credit facilities provided for senior secured financing of $298.9 million, consisting of (a) two term loan facilities in an aggregate amount of $228.9 million, including a $199.0 million U.S. term loan facility and aResults ~~$29.9 million European term loan facility and (b) two revolving credit facilities in an aggregate amount~~ of ~~$70.0 million,~~Operations under one of which $40.0 million is available to Sensus in the form of U.S. dollar-denominated loans and under the other of which $30.0 million is available in the form of U.S. dollar-denominated loans, or in the form of euro- or UK sterling-denominated loans. The full amount of the term loan facilities was drawn on December 17, 2003, and the term loan facilities will mature on December 17, 2010. Up to $30.0 million of the revolving credit facilities is available in the form of letters of credit, and amounts repaid under the revolving credit facilities may be re-borrowed (subject to satisfaction of the applicable borrowing conditions) at any time prior to the maturity of the revolving credit facilities, which will be six years after the closing date. There were no borrowings outstanding under the revolving credit facility at July 3, 2004; however, $3.7 million of the facility was utilized in connection with outstanding letters of credit. The Company was in compliance with all credit facility covenants at July 3, 2004.

25This Quarterly Report on Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to Sensus Metering Systems are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, sales, cash flow and other operating results, business strategy, financing plans, forecasted trends related to the markets in which we operate, legal proceedings and similar matters, other than those of historical fact, are forward-looking statements. We cannot assure you that our expectations expressed or implied in these forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various risks. These risks, some of which are discussed under the caption “Risk Factors-Risks Relating to Our Business” in our Registration Statement on Form S-4 (SEC File No. 333-113658) filed with the Securities and Exchange Commission, include our dependence on new product development and intellectual property, and our dependence on independent distributors and third-party contract manufacturers, our substantial financial leverage, debt service and other cash requirements, liquidity constraints and risks related to future growth and expansion. Other important risk factors that could cause actual events or results to differ from those contained or implied in the forward-looking statements include, without limitation, our ability to integrate acquired companies, general economic and business conditions, competition, adverse changes in the regulatory or legislative environment in which the company operates, and other factors beyond the Company’s control. The following management’s discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements for the quarter ended January 1, 2005 and the related notes thereto included in this report and the audited consolidated financial statements for the year ended March 31, 2004 and related notes thereto included in our Registration Statement on Form S-4 (SEC File No. 333-113658).

AtUnless ~~July 3,~~we ~~2004~~indicate otherwise, ~~approximately~~references ~~$3.7 million~~below ofto ~~borrowing capacity~~“we,” ~~under~~“us,” ~~the~~“our” ~~revolving~~and ~~credit~~“Sensus ~~facilities were used to support letters of~~Metering ~~credit~~Systems” tomean ~~guarantee~~Sensus ~~our~~Metering ~~performance~~Systems ~~under~~(Bermuda ~~certain~~2) ~~contracts~~Ltd. ~~or as collateral for bid~~ and ~~performance~~its ~~bonds~~subsidiaries. ~~The~~Unless ~~borrowings~~we ~~under~~indicate ~~the~~otherwise, ~~revolving~~we ~~credit facilities~~have ~~are~~rounded ~~available~~dollar amounts to ~~fund~~the ~~working~~nearest ~~capital~~hundred ~~requirements,~~thousand ~~capital expenditures and other general corporate purposes~~dollars.

WeGeneral believe that cash on hand and cash flow we expect from operations, together with available borrowings under the revolving credit facilities constituting part of our senior secured credit facilities, will provide sufficient funds to enable us to fund our planned capital expenditures, make scheduled principal and interest payments and meet our other cash requirements for at least the next few years.

~~Our~~We ~~ability~~are a leading provider of advanced metering and related communications systems to ~~make~~the ~~scheduled~~worldwide ~~payments~~utility industry and have over a century of ~~principal~~experience in designing and manufacturing metering products. We are the largest global manufacturer of water meters, orthe tofastest ~~pay interest~~growing ~~on,~~segment orof tothe ~~refinance~~metering industry, ~~our~~and ~~indebtedness,~~have ~~including~~a substantial share of the ~~Notes~~sales of automatic metering reading, or toAMR, ~~fund~~devices ~~planned~~to ~~capital~~North ~~expenditures~~American ~~will~~water ~~depend~~utilities. onAdditionally, ~~our~~we ~~ability~~are toa ~~generate~~leading ~~cash~~global indeveloper and manufacturer of gas and heat metering systems and recently entered the ~~future.~~ ~~Our~~North ~~ability~~American toelectric ~~generate~~metering ~~cash~~market iswith ~~subject~~iCon, our solid-state electricity meter. In addition to ~~general~~our ~~economic~~metering business, ~~financial~~we believe that, ~~competitive~~ through our Smith-Blair, ~~legislative~~Inc. subsidiary, ~~regulatory~~we are the leading North American producer of pipe joining and ~~other~~repair ~~factors~~products ~~that~~for ~~are~~water ~~beyond~~and natural gas utilities and, through our Sensus Precision Die ~~control~~Casting, Inc. subsidiary, are a premier supplier of precision-manufactured, thin-wall, low-porosity aluminum die castings.

~~Item~~During 3.the ~~Quantitative~~fiscal quarter and ~~Qualitative~~nine ~~Disclosures~~months ~~About~~ended ~~Market~~January ~~Risk~~1, 2005, we:

~~The~~• ~~following~~increased ~~discussion~~sales ~~about~~over ~~our~~the ~~market~~comparable ~~risk~~periods ~~disclosures involves forward-looking statements. Actual results could differ materially from those projected~~ in ~~forward-looking~~2003 ~~statements. We~~by ~~are~~20% ~~exposed to various market risk factors such as fluctuating interest rates~~ and ~~changes~~10%, ~~in foreign currency rates. At present we do not utilize any derivative instruments to manage this risk.~~respectively;

~~Currency translation. The~~• ~~results~~more ~~of operations~~than ofdoubled our foreign subsidiaries are translated into U.S. dollars at the average exchange rates for each period concerned. This translation has no impact on cash flow. The balance sheets of foreign subsidiaries are translated into U.S. dollars at the closing exchange rates. Any adjustments resulting from the translation are recorded as other comprehensive income. As of July 3, 2004, assets of foreign subsidiaries constituted approximately 29% of total assets. Foreign currency exchange rate exposure is most significant with respect to the euro. For the fiscal quarter ended July 3, 2004, net sales ~~were~~ ~~positively impacted by the appreciation of foreign currencies, primarily the euro, versus the U.S. dollar by approximately $2.4 million. Similarly,~~ for ~~the~~iCon ~~fiscal~~products ~~quarter~~over ~~ended June 28, 2003, net sales were positively impacted by~~ the ~~appreciation~~comparable ofprior ~~foreign~~year ~~currencies,~~nine-month ~~primarily the euro, versus the U.S. dollar by approximately $1.6 million.~~period;

~~Currency~~• ~~transaction~~maintained ~~exposure. Currency~~gross ~~transaction~~margin ~~exposure~~percentages ~~arises~~at ~~where~~historic ~~a business~~levels, ordespite ~~company~~double ~~makes~~digit ~~actual~~price ~~sales~~increases ~~and~~worldwide ~~purchases~~for inkey ~~a currency other than its own functional currency. The majority of our businesses source raw~~ materials ~~and sell their products within their local markets in their functional currencies and therefore have limited transaction exposure.~~;

~~Interest~~• ~~rate~~completed ~~risk. Historically,~~purchase ~~the~~accounting ~~business of our predecessor was exposed to market risk relating to changes in interest rates relating to intercompany funding receivable~~ and ~~payable~~goodwill ~~balances~~adjustments ~~and~~related ~~its other affiliates, which carried variable interest rates. Subsequent~~ to the Acquisition, we have a significant amount of debt, with a large portion being at variable rates. Total debt as of July 3, 2004 was $503.9 million, of which approximately $228.9 million bears interest at variable rates. As of July 3, 2004, the weighted average interest rate on our variable-rate term debt was 4.2%, all of which was outstanding under the senior credit facilities. Variable-rate borrowings under the senior credit facilities are, at our option, at the adjusted LIBOR plus 3.00% or the alternative base rate plus 2.00%. Holding all other variables constant, an increase in the interest rate of 1.0% on variable rate debt would increase annual interest cost by $2.3 million. We have not sought to hedge exposure to variable interest rates.;

~~Item~~• 4.continued ~~Controls~~restructuring ~~and~~activities ~~Procedures~~in our European subsidiaries to align operations with current market conditions;

~~In connection~~• ~~with~~completed ~~the~~restructuring ~~audit~~activities ofin ~~our~~South ~~financial~~America ~~statements~~to ~~for~~better ~~the~~align ~~year ended March 31, 2004,~~ our ~~independent~~footprint ~~auditors identified a number of reportable conditions under standards established by the American Institute of Certified Public Accountants~~ with ~~regard~~market ~~to the design or operation of internal control that, in their judgment,~~conditions;

26• successfully entered the Algerian water meter market through the formation of a joint venture; and

~~constitute~~• ~~“material~~established ~~weaknesses”~~a ~~within~~subsidiary ~~the meaning of the Statement of Auditing Standards No. 60. The reportable conditions identified by our independent auditors resulted,~~ in ~~large part,~~China ~~from circumstances arising from our transition from a division of Invensys plc, a U.K. publicly traded company,~~ to amanufacture ~~standalone~~clamps ~~business~~and ~~enterprise~~couplings. ~~(See the disclosure under “the Acquisition” including elsewhere in this report.) The reportable conditions include:~~

~~(1) Inadequate review~~- at26 ~~the~~- ~~business unit and corporate levels of the financial close process; and~~

(2) InadequateTable controlsof over the consolidation process.Contents

~~We have~~History ~~assigned a high priority to the short-term~~ and ~~long-term improvement of our internal controls over financial reporting. The process began in~~ the ~~first~~Acquisition ~~quarter of fiscal 2005 with the development of replacement services and systems that are key for financial functions at our headquarters resulting from the separation from Invensys plc.~~

~~To date,~~Although weSensus ~~have~~Metering ~~implemented~~Systems ~~internal~~and ~~control~~its ~~improvements~~predecessors byhave ~~first~~been ~~strengthening our~~supplying ~~staffing~~metering and ~~monitoring~~related ~~controls~~products for over a century, our ~~accounting~~current business was created in early 1999 when BTR plc and ~~financial reporting~~Siebe ~~processes~~plc merged to form Invensys plc (“Invensys”). ~~For~~ ~~example~~Since that merger, inand until we acquired the ~~first~~ ~~quarter~~metering ofsystems ~~fiscal~~and ~~2005~~certain other businesses (“Invensys Metering Systems”) from Invensys, weour ~~hired~~business was generally operated as a ~~Director~~single ofproduct ~~Financial~~group ~~Reporting~~within Invensys. During this time period, ~~created~~ ~~localized~~our ~~U.S.~~business ~~GAAP~~participated ~~reporting~~in ~~procedures~~various ~~and~~strategic initiatives implemented ~~more~~by ~~rigorous~~Invensys, including customer development, ~~detailed~~services, ~~line~~and ~~item~~project ~~reviews~~management and ~~variance~~lean ~~analyses~~supply ~~with~~chain ~~subsidiary~~programs. ~~controllers and~~We ~~corporate~~acquired ~~staff~~Invensys Metering Systems on December 17, 2003 (see Note 1). ~~Other~~ ~~actions~~Although we ~~have~~ plan to continue our focus on improved operating efficiency, the programs previously implemented ~~include~~by Invensys ~~monthly~~may ~~review~~be modified or terminated. As a result of ~~key~~such ~~account~~modifications ~~activity~~or terminations and ~~balances~~other factors, ~~more~~ ~~rigorous~~the ~~documentation~~historical results of ~~accounting~~operations ~~issues~~of ~~and~~Invensys ~~creation~~Metering Systems may not be indicative of anour ~~audit~~results ~~and reporting~~of ~~checklist~~operations on a stand-alone basis.

~~In addition~~Recent toRestructuring ~~the~~and ~~foregoing~~Cost ~~actions,~~Savings Initiatives ~~we have begun the process of:~~

•Sensus ~~Identifying~~Metering ~~and~~Systems ~~analyzing process~~ and ~~staffing~~its Predecessor ~~improvements~~have ~~related~~undertaken tosignificant ~~interaction~~cost ofsavings ~~our~~initiatives ~~corporate~~over ~~accounting~~the ~~and~~last ~~finance~~several ~~group~~years ~~with~~to ~~our~~reduce ~~subsidiary~~their ~~accounting~~overall ~~and~~cost ~~finance~~base ~~groups; • Restructuring~~ and ~~enhancing~~improve ~~our~~operating ~~financial~~margins. ~~consolidation~~Through ~~system;~~January •1, ~~Developing~~2005, ~~and~~we ~~implementing~~estimate ~~standardized~~that ~~account~~approximately ~~reconciliation~~98% ~~and~~of ~~analysis~~our ~~procedures;~~five-year ~~• Developing~~ restructuring and ~~implementing~~cost areduction ~~company~~programs ~~disclosure~~have ~~policy~~been ~~and~~initiated ~~procedure; • Developing an accounting policies~~ and ~~procedures~~have ~~system;~~realized •approximately ~~Engaging~~$40 ~~outside~~million ~~consultants~~of tocumulative ~~supplement~~annual ~~our~~cost ~~internal~~savings ~~tax~~since ~~staff;~~the ~~and~~program’s ~~• Coordinating quarterly financial training for our staff~~initiation.

~~Management believes~~In ~~that~~fiscal 2005, we are continuing the ~~measures~~implementation ~~noted~~of ~~above~~these ~~will~~initiatives. ~~address~~We ~~the~~expect ~~reportable~~to ~~conditions identified~~incur byadditional ~~our~~restructuring ~~independent~~costs of ~~auditors~~approximately $1. We5 ~~will~~million ~~continue~~in fiscal 2005 to ~~evaluate~~conclude the ~~effectiveness~~ongoing ofinitiatives, ~~our~~generating ~~disclosure controls~~savings in facility costs, direct labor costs, manufacturing overhead costs and ~~procedures~~general and ~~internal~~administrative ~~control~~costs ~~over~~resulting ~~financial~~in ~~reporting~~estimated onannual ansavings of ~~on-going~~$3.7 ~~basis~~million. ~~and~~For ~~will~~the ~~take~~nine ~~further~~months ~~action~~ended ~~and~~January ~~implement~~1, ~~improvements~~2005, ~~as necessary~~we incurred $5.9 million of restructuring costs, primarily related to employee severance and exit activities.

~~Pursuant to~~Other ~~Section 302~~Information ofAbout ~~the~~Our ~~Sarbanes-Oxley~~Business Act and Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”) promulgated thereunder, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as a result of the factors discussed above, our disclosure controls and procedures may not have been effective, at a reasonable assurance level, as of the Evaluation Date to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. However, our Chief Executive Officer and Chief Financial Officer believe that we have acted promptly and appropriately to remedy the deficiencies identified above and that, as of the date this report is being filed, our disclosure controls and procedures

27The following table presents, as of the dates indicated, additional information about our operations and business, including discontinued operations.

are effective, at a reasonable assurance level, to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and Forms. The actions being taken, and to be taken, by us to address the reportable conditions identified above are reasonably likely to have a material impact on our internal controls over financial reporting in future periods.


	Fiscal Quarter Ended
									Combined		Predecessor
	January 1, 2005		September 30, 2004		July 3, 2004		March 31, 2004		December 28, 2003		September 30, 2003
Orders (in millions)	$	138.7	$	138.8	$	143.2	$	148.6	$	119.2	$	133.4
Backlog (in millions)	$	53.4	$	50.0	$	58.3	$	56.0	$	67.2	$	48.9
Sales (in millions)	$	124.3	$	144.1	$	140.7	$	159.4	$	103.8	$	142.4
Employees		3,269		3,366		3,459		3,363		3,164		3,321

28- 27 -

PARTTable II—OTHER INFORMATIONof Contents

~~ITEM~~Results 1:of ~~Legal~~Operations ~~Proceedings~~

InFiscal ~~September,~~Quarter ~~2003,~~and ~~Invensys~~Nine ~~Energy~~Months ~~Metering,~~Ended ~~Inc.,~~January ~~the predecessor of our subsidiary~~1, ~~Sensus~~2005 ~~Metering~~Compared ~~Systems-North~~with ~~America~~Combined ~~Inc.,~~Fiscal ~~was~~Quarter ~~named as a defendant in a wrongful death claim filed in the Fifth Judicial District Court, Park County, Wyoming (W.R. Emmett, Decedent (by P. Rapp~~ and ~~C.R.~~Nine ~~Emmett, co-personal~~Months ~~representatives~~Ended of Decedent’s estate) v. Frannie-Deaver Utilities, and certain predecessors, including Invensys Energy Metering, Inc.) seeking unspecified damages arising from a natural gas explosion at a residence served by a utility gas line that included one of our products. As of July 3, 2004, the case was in the discovery phase. In addition, Smith-Blair, Inc., our subsidiary, was named a defendant in an action filed in the Supreme Court of New York County, New York on December 5, ~~2001 (James Trodden v. Consolidated Edison of New York~~28, ~~Felix Industries and Smith-Blair, Inc.)~~2003 whereby the plaintiff seeks $10 million in damages for alleged personal injuries arising from an underground gas explosion of a pipeline that included one of our products. As of July 3, 2004, the case remains subject to a stay resulting from the bankruptcy of a co-defendant. Pursuant to the terms of the stock purchase agreement for the acquisition of Invensys Metering Systems, we are entitled to full indemnification from the sellers for both of these lawsuits.

~~Our~~Fiscal ~~subsidiary,~~Quarter ~~Sensus~~Ended ~~Metering~~January ~~Systems-North America Inc.~~1, ~~along~~2005 with as many as 200 or more other companies, is a defendant in several lawsuits filed in various state courts in Mississippi by groups of plaintiffs alleging illnesses from exposure to asbestos or asbestos-containing products and ~~seeking unspecified~~Combined ~~compensatory and punitive damages. Because the cases are in initial~~Fiscal ~~stages,~~Quarter itEnded isDecember ~~uncertain whether any plaintiffs have dealt with any of the subsidiary’s products~~28, ~~were~~2003 exposed to an asbestos-containing component part of a product of the subsidiary or whether such part could have been a contributing factor to the alleged illness. One such proceeding has been dismissed to date. There have been no other settlements, verdicts, judgments, or dismissals of these claims. Although we are entitled to indemnification for legal and indemnity costs for asbestos claims related to these products from certain subsidiaries of Invensys pursuant to the stock purchase agreement for the acquisition of Invensys Metering Systems, such indemnities, when aggregated with all other indemnity claims, are limited to the purchase price paid by us in connection with the acquisition. See “The Acquisition Indemnification Obligations.”

In addition, we are, from time to time, party to legal proceedings arising out of the operation of our business. We believe that an adverse outcome of our existing legal proceedings, including the proceedings described above, would not have a material adverse impact on our business, financial condition or results of operation. Nevertheless, unexpected adverse future events, such as an unforeseen development in our existing proceedings, a significant increase in the number of new cases or changes in our current insurance arrangements could result in liabilities that have a material adverse impact on our business, financial condition or results of operations.


($ In Millions)	Fiscal Quarter Ended January 1, 2005			%		Combined Fiscal Quarter Ended December 28, 2003			%		Period from Inception (December 18, 2003) to December 28, 2003			Predecessor Period from October 1, 2003 to December 17, 2003
Net sales	$	124.3		100	%	$	103.8		100	%	$	6.6		$	97.2
Gross profit		35.3		28	%		24.6		24	%		—			24.6
Selling, general and administrative expenses		25.3		21	%		28.1		27	%		4.1			24.0
Restructuring costs		1.4		1	%		1.4		1	%		—			1.4
Amortization of intangible assets		5.4		4	%		0.6		1	%		0.5			0.1
Other operating expense (income), net		0.5		—			(0.2	)	—			(0.5	)		0.3

Operating income (loss)		2.7		2	%		(5.3	)	(5	)%		(4.1	)		(1.2	)
Interest (expense) income		(9.7	)	(8	)%		(2.6	)	(3	)%		(3.5	)		0.9
Other non-operating (expense) income		1.3		1	%		(0.4	)	—			(0.4	)		—

(Loss) income before income taxes and minority interest		(5.7	)	(5	)%		(8.3	)	(8	)%		(8.0	)		(0.3	)
Provision (benefit) for income taxes		2.4		2	%		6.9		6	%		(2.2	)		9.1

(Loss) income before minority interest		(8.1	)	(7	)%		(15.2	)	(14	)%		(5.8	)		(9.4	)
Minority interest		—		—			0.1		—			0.1			—
Income from discontinued operations		—		—			0.1		—			—			0.1

Net (loss) income	$	(8.1	)	(7	)%	$	(15.0	)	(14	)%	$	(5.7	)	$	(9.3	)

~~ITEM~~- 2.28 ~~Changes~~- ~~in Securities, Use of Proceeds and Issuer Purchases of Equity Securities~~

(a) None.Table of Contents

~~(b) None.~~Nine Months Ended January 1, 2005 and Combined Nine Months Ended December 28, 2003


($ In Millions)	Nine Months Ended January 1, 2005			%		Combined Nine Months Ended December 28, 2003			%		Period from Inception (December 18, 2003) to December 28, 2003			Predecessor Period from April 1, 2003 to December 17, 2003
Net sales	$	406.9		100	%	$	371.2		100	%	$	6.6		$	364.6
Gross profit		119.6		29	%		109.7		29	%		—			109.7
Selling, general and administrative expenses		74.7		18	%		73.8		20	%		4.1			69.7
Restructuring costs		5.9		1	%		9.6		3	%		—			9.6
Amortization of intangible assets		15.9		4	%		0.8		—			0.5			0.3
Other operating expense (income), net		2.2		1	%		(1.4	)	(1	)%		(0.5	)		(0.9	)

Operating income (loss)		20.9		5	%		26.9		7	%		(4.1	)		31.0
Interest (expense) income, net		(28.2	)	(7	)%		(1.6	)	(1	)%		(3.5	)		1.9
Other non-operating income (expense)		1.3		—			(0.3	)	—			(0.4	)		0.1

(Loss) income before income taxes and minority interest		(6.0	)	(2	)%		25.0		6	%		(8.0	)		33.0
Provision (benefit) for income taxes		5.0		1	%		20.4		5	%		(2.2	)		22.6

(Loss) income before minority interest		(11.0	)	(3	)%		4.6		1	%		(5.8	)		10.4
Minority interest		0.1		—			(0.2	)	—			0.1			(0.3	)
Loss from discontinued operations		(0.6	)	—			(0.3	)	—			—			(0.3	)

Net (loss) income	$	(11.5	)	(3	)%	$	4.1		1	%	$	(5.7	)	$	9.8

Net Sales. Sales increased $20.5 million, or approximately 20%, from $103.8 million in the combined fiscal quarter ended December 28, 2003 to $124.3 million in the fiscal quarter ended January 1, 2005. For the nine months ended January 1, 2005, sales increased $35.7 million, or approximately 10%, to $406.9 million from $371.2 million in the combined nine months ended December 28, 2003. Sales for the fiscal quarter ended January 1, 2005 are approximately 20% lower than the fiscal quarter ended September 30, 2004 due to business seasonality related to holiday closings, and to European water meter regulatory requirements that tend to shift sales to the first half of the calendar year. Favorable currency translation, due primarily to the appreciation of the Euro against the U.S. dollar, accounted for additional sales of $4.1 million and $10.2 million for the fiscal quarter and nine months ended January 1, 2005, respectively. We continue to experience strong demand for metering systems, due to continued growth of AMR applications and strong product sales for water, gas and electric meters. North American sales of water meters for the nine months ended January 1, 2005 increased by $16.1 million, or 11%, compared to the combined nine months ended December 28, 2003, due primarily to continued buoyancy for AMR applications and products, with particular strength in large meter products. Gas meter sales in North America for the nine months ended January 1, 2005 increased by $6.5 million or 18% versus the combined nine months ended December 28, 2003. Electric meter sales continue to perform well in its first full year of operation with sales for the nine months ended January 1, 2005 more than doubling those reported for the combined nine months ended December 28, 2003. The European water meter market delivered lower sales (dnet of favorable currency translation) ~~Not~~ ~~applicable~~of $3.9 million, or 12%, and $9.5 million, or 9%, for the fiscal quarter and nine months ended January 1, 2005, respectively, as compared to the comparable prior year periods, due to pricing pressures and general market softness. Sales from our precision die casting products increased by $0.9 million, or 10%, compared to the prior year combined fiscal quarter, and by $3.0 million, or 11%, compared to the prior year combined nine-month fiscal period. We were able to continue to leverage new platform offerings and to pass through aluminum indexed price increases to the top five suppliers to the U.S. automotive industry, known as Tier 1 automotive suppliers, to generate increased sales. The combined fiscal quarter and nine months ended December 28, 2003, respectively, were also negatively impacted by the prior year strike at our precision die casting plant. Pipe joining and repair products sales increased by $3.6 million, or 9%, compared to the prior year combined nine

~~(e) Not~~- ~~applicable.~~29 -

ITEMTable 3.of Defaults Upon Senior SecuritiesContents

~~None~~ months, primarily on the strength of increased production days and favorable pricing. Total company sales were favorably impacted as a result of the fiscal periods ended January 1, 2005 containing 6 working days more than the prior year period.

29Our top ten customers accounted for approximately 35% of net sales during the nine months ended January 1, 2005. Approximately 12% of net sales for the nine months ended January 1, 2005 were attributed to one customer and its affiliates. No one affiliate accounted for more than 1% of net sales for the nine-month period.

~~ITEM~~We 4:expect ~~Submission~~that net sales will be strong for the remainder of ~~Matters~~the fiscal year, with increases over the prior fiscal year due to ademand ~~Vote~~for ofAMR systems, ~~Security~~restructuring ~~Holders~~efforts in South America, ongoing demand for iCon electric meters, expansion of precision die casting products and favorable general economic trends.

NoGross ~~matters~~Profit. ~~were~~Gross profit increased by $10.7 million, or 43%, from $24.6 million for the combined fiscal quarter ~~submitted~~ended December 28, 2003 to $35.3 million for the fiscal quarter ended January 1, 2005, and increased as a ~~vote~~percentage of ~~our~~sales ~~shareholders~~by ~~during~~approximately 4 percentage points from 24% to 28% for the same periods. Gross profit increased by $9.9 million, or 9%, from $109.7 million for the combined nine months ended December 28, 2003 to $119.6 million for the nine months ended January 1, 2005, and was unchanged as a percentage of sales at 29%. The increase in gross profit was primarily the result of favorable revenues more than offsetting increased worldwide material prices. Favorable foreign exchange rates due to the appreciation of the Euro versus the dollar, increased gross profit by $0.8 million and $2.3 million for the fiscal quarter and nine months ended January 1, 2005, respectively, compared to the same combined periods in the prior year. Material cost, as a percentage of sales, increased 2.5 percentage points in the fiscal quarter ended January 1, 2005 compared to the combined ~~July 3~~prior year period, ~~2004~~and 2.4 percentage points in the nine months ended January 1, 2005 compared to the combined prior year period.

~~ITEM~~Factors 5.affecting ~~Other~~gross ~~Information~~profit as a percentage of net sales were:

~~None.~~• increased prices for aluminum, altered pricing mechanisms to automotive customers and increased natural gas prices negatively affected margins on precision die casting products and gas meters, some of which are passed on to our customers;

~~ITEM~~• 6.increased ~~Exhibits~~percentage ~~and~~of ~~Reports~~electric onmeter ~~Form~~sales, ~~8-K~~with comparatively lower gross profit margins than other products;

(a)		A list of exhibits filed herewith is contained on the Exhibit Index immediately proceeding such exhibits and is incorporated herein by reference.
(b)		Reports on Form 8-K - None.

•

double digit price increases on key brass castings and steel components, negatively impacting water meter and pipe clamps and couplings gross margins;

30• competitive pricing environments in European meter markets;

~~SIGNATURES~~• softness in South American water meter markets, particularly in Brazil; and

~~Pursuant~~• tooffsets ~~the requirements~~from offavorable ~~the~~product ~~Securities~~mix ~~Exchange~~and ~~Act~~pricing ofactions ~~1934,~~within ~~the~~selected ~~registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized~~markets.

	SENSUS METERING SYSTEMS INC.
Date: September 7, 2004	By:	/s/ Daniel W. Harness
		Daniel W. Harness Chief Executive Officer and President
Date: September 7, 2004	/s/ Peter Mainz
		Peter Mainz Chief Financial Officer

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the fiscal quarter ended January 1, 2005 decreased by $2.8 million, or approximately 10%, to $25.3 million, from $28.1 million for the combined fiscal quarter ended December 28, 2003. Expenses, as a percentage of sales, decreased from 27% to 21% for the combined fiscal quarter ended December 28, 2003 and the fiscal quarter ended January 1, 2005, respectively. Selling, general and administrative expenses for the nine months ended January 1, 2005 increased by $0.9 million, or approximately 1%, to $74.7 million, from $73.8 million for the combined nine months ended December 28, 2003. Expenses, as a percentage of sales, decreased from 20% to 18% for the combined nine months ended December 28, 2003 and the nine months ended January 1, 2005, respectively. The increase in expense was due partially to foreign currency translation that resulted in an increase in foreign-based administrative costs, as expressed in US dollars, of $2.9 million for the nine months ended January 1, 2005. Cost conservation initiatives and restructuring programs partially offset the increases due to foreign currency translation. Selling, general and administrative expenses in Europe, Middle East and Africa (“EMEA”) were down $1.4 million, or 12%, from the combined fiscal quarter ended December 28, 2003 and were down $1.9 million, or 6%, for the 9 months ending January 1, 2005, excluding the impacts of foreign currency, due to prior restructuring efforts and continuous cost containment activities designed to lower base operating expenses. Selling, general and administrative expenses in South America were $0.7 million lower for the fiscal quarter ended January 1, 2005 and were $0.6 million lower for the nine months ended January 1, 2005 compared to the combined periods ended December 28, 2003 due to positive results from restructuring programs. North American and Asia Pacific selling, general and administrative expenses for the fiscal quarter and nine months ended January 1, 2005 were essentially flat versus the combined periods ended December 28, 2003, inclusive of $2.0 million of year-to-date incremental research and development expenses in North America.

31- 30 -

EXHIBIT INDEXTable of Contents

Exhibit No.		Description
3.1*		Certificate of Incorporation of Sensus Metering Systems Inc.
3.2*		By-Laws of Sensus Metering Systems Inc.
3.3*		Memorandum of Association of Company Limited by Shares of Sensus Metering Systems (Bermuda 2) Ltd.
3.4*		Certificate of Incorporation of Sensus Metering Systems (Bermuda 2) Ltd.
4.1*		Indenture, dated as of December 17, 2003, between Sensus Metering Systems Inc., Sensus Metering Systems (Bermuda 2) Ltd, the Subsidiary Guarantors defined therein and U.S. Bank National Association, as Trustee.
4.2*		Form of Senior Subordinated Note due 2013 (included in Exhibit 4.1).
4.3*		Registration Rights Agreement, dated as of December 17, 2003 between Sensus Metering Systems Inc., Sensus Metering Systems (Bermuda 2) Ltd., M&FC Holding LLC, Invensys Metering Headquarters Corporation, Smith-Blair Inc., Invensys Metering Systems-North America Inc., Invensys Precision Die Casting Inc., Sensus Metering Systems IP Holdings, Inc. and Credit Suisse First Boston Corporation and Goldman, Sachs & Co., as initial purchasers.
10.1*		Credit Agreement, dated as of December 17, 2003, among Sensus Metering Systems Inc., Sensus Metering Systems (Luxco 2) S.A.R.L., Sensus Metering Systems (Bermuda 2) Ltd., the lenders party thereto, Credit Suisse First Boston Corporation, as Administrative Agent, Credit Suisse First Boston Corporation and Goldman Sachs Credit Partners L.P., as Joint Bookrunners and Joint Lead Arrangers, Goldman Sachs Credit Partners L.P., as Syndication Agent and National City Bank, as Documentation Agent.
10.2*		U.S. Guarantee and Collateral Agreement, dated as of December 17, 2003, among Sensus Metering Systems Inc., Sensus Metering Systems (Bermuda 2) Ltd., the Subsidiaries of Sensus Metering Systems Inc. identified therein, and Credit Suisse First Boston, as U.S. Collateral Agent.
10.3*		European Guarantee Agreement, dated as of December 17, 2003, among Sensus Metering Systems (Luxco 2) S.AR.L., Sensus Metering Systems (Bermuda 3) Ltd., Sensus Metering Systems (Luxco 1) S.AR.L., the Subsidiaries of Sensus Metering Systems (Luxco 2) S.AR.L. identified therein, and Credit Suisse First Boston, as European Collateral Agent.
10.4*		Pledge Agreement dated December 17, 2003 among Sensus Metering Systems (Luxco 3) S.AR.L. and Credit Suisse First Boston, as European Collateral Agent, relating to shares of Sensus Metering Systems France Holdings.
10.5*		Pledge Agreement, dated December 17, 2003, among Sensus Metering Systems France Holdings and Credit Suisse First Boston, as European Collateral Agent, relating to shares of Financiere Pollux.
10.6*		Pledge Agreement, dated December 17, 2003, among Financiere Pollux and Credit Suisse First Boston, as European Collateral Agent, relating to shares of Invensys Metering Systems SAS.
10.7*		Shareholders Agreement, dated as of December 17, 2003, by and among Sensus Metering Systems (Bermuda 1) Ltd, The Resolute SIE, L.P., The Resolute Fund Netherlands PV I, L.P., The Resolute Fund Netherlands PV II, L.P., The Resolute Fund NQP, L.P., The Resolute Fund Singapore PV, L.P., GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund, L.P., and Goldman Sachs Direct Investment Fund 2000, L.P.
10.8*		Management Subscription and Shareholders Agreement, dated March 5, 2004, by and among Sensus Metering Systems (Bermuda 1) Ltd. and the persons named therein.
10.9*		Employment and Non-Interference Agreement, dated December 17, 2003, by and between Dan Harness and Sensus Metering Systems Inc.
10.10*		Employment and Non-Interference Agreement, dated December 17, 2003, by and between Peter Mainz and Sensus Metering Systems Inc.
10.11*		Restricted Share Plan of Sensus Metering Systems (Bermuda 1) Ltd.
10.12*		Form of Restricted Share Agreement.
10.13*		Consultant Subscription and Shareholder Agreement, dated March 5, 2004, by and among Sensus Metering Systems (Bermuda 1) Ltd. and the person named therein.
10.14*		The Jordan Company, L.P. Management Consulting Agreement, dated December 17, 2003, by and among The Jordan Company, L.P., Sensus Metering Systems Inc. and its direct and indirect subsidiaries party thereto.
10.15*		Letter Agreement, dated December 17, 2003, among The Jordan Company, L.P., Sensus Metering

Restructuring and Other Similar Costs. Restructuring costs were constant at $1.4 million for the fiscal quarter ended January 1, 2005 in comparison to the combined fiscal quarter ended December 28, 2003. Restructuring costs decreased by $3.7 million, or approximately 39%, from $9.6 million for the combined nine months ended December 28, 2003 to $5.9 million for the nine months ended January 1, 2005. The decrease for the nine-month fiscal period compared to the prior year was primarily the result of the winding down of our European restructuring activities as plans to achieve our targeted operational footprint in the region are either well underway or nearing completion. Actions to cease production at our facility in France, to rationalize our UK gas meter operation and to downsize our German manufacturing operations constitute the majority of current year activities. We expect to incur additional restructuring costs of approximately $1.5 million through March 31, 2005.

		Systems Inc. and Goldman, Sachs & Co.
10.16*		Transition Services Agreement, dated December 17, 2003, by and between Sensus Metering Systems Inc., Invensys plc, Invensys Inc., Invensys International Holdings Limited, BTR Industries Limited, Foxboro Iberica SA, BTR France SAS, Invensys Holdings Limited and Invensys SA (Pty) Ltd.
10.17*		Non-Competition Agreement, dated December 17, 2003, by and between Invensys plc and Sensus Metering Systems Inc.
10.18*		Purchase Agreement, dated December 11, 2003 among Sensus Metering Systems, Inc., Sensus Metering Systems (Bermuda 2) LTD. And the Purchasers named therein.
10.19*		Stock Purchase Agreement dated October 21, 2003 by and among the sellers identified therein, Invensys plc and IMS Meter Holdings, Inc.
10.20*		Amendment No. 1 to Stock Purchase Agreement dated December 17, 2003.
31.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32.1		Certificate of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Amortization of Intangible Assets. Amortization of intangible assets increased by $4.8 million from $0.6 million for the combined fiscal quarter ended December 28, 2003 to $5.4 million for the fiscal quarter ended January 1, 2005. Amortization of intangible assets increased by $15.1 million from $0.8 million for the combined nine months ended December 28, 2003 to $15.9 million for the nine months ended January 1, 2005. Amortization expense primarily relates to the intangible assets recorded at the time of the Acquisition for non-competition agreements, customer relationships and patents (see Note 4). These intangible assets were not recorded on the balance sheet of the Predecessor. As a result, the Predecessor did not incur significant amortization expense in the combined fiscal quarter or nine months ended December 28, 2003. We expect that amortization of intangible assets will remain higher than historical levels of the Predecessor for the foreseeable future as a result of higher levels of intangible assets recorded in connection with acquisitions.

* IncorporatedOther Operating Expense (Income). Other operating expense of $0.5 million for the fiscal quarter ended January 1, 2005 increased by ~~reference~~$0.7 million compared to ~~the~~other ~~exhibits~~operating ~~filed~~income ~~with~~of $0.2 million for the ~~Sensus~~combined ~~Metering~~fiscal ~~System~~quarter ~~Inc~~ended December 28, 2003. The increase in other operating expense is related to a management fee of $0.5 million. Other operating ~~Registration~~expense ~~Statement~~of on$2.2 ~~Form~~million Sfor the nine-months ended January 1, 2005 increased by $3.6 million compared with other operating income of $1.4 ~~filed~~million onfor ~~March 16~~the combined nine months ended December 28, ~~2004~~2003. ~~(SEC~~The ~~File~~increase Noin expense is related primarily to management fee and expenses of $1.6 million for the fiscal nine months ended January 1, 2005. In addition, $0.9 million of Brazilian transactional tax gains were recognized in the combined nine months ended December 28, 2003, which did not occur in ~~333-113658)~~the current fiscal period. We expect that other operating expenses will remain higher than historical levels for the foreseeable future as a result of quarterly management fees.

Interest Income (Expense). Interest expense was $9.7 million for the fiscal quarter ended January 1, 2005 compared with $2.6 million for the combined fiscal quarter ended December 28, 2003. Debt incurred due to the Acquisition was only in place for a portion of the combined fiscal quarter ended December 28, 2003. Net interest expense of $28.2 million for the nine months ended January 1, 2005 increased by $26.6 million compared with $1.6 million for the combined nine months ended December 28, 2003. Prior to the Acquisition, the Predecessor had insignificant debt. The Acquisition was financed with $230.0 million in term loan financing and the issuance of $275.0 million of senior subordinated notes. The increase in interest expense is the result of the debt created to support the Acquisition. We expect that interest expense will remain higher than historical levels of the Predecessor for the foreseeable future as a result of higher levels of debt incurred in connection with the Acquisition.

Other Non-Operating Income (Expense). Other non-operating income of $1.3 million for the fiscal quarter and nine months ended January 1, 2005 increase by $1.7 million and $1.6 million compared to the combined fiscal quarter and nine months ended December 28, 2003, respectively. The increase in other non-operating income is related primarily to net foreign exchange gains on intercompany loans in Europe and South America.

Income Tax Expense. Income tax expense for the fiscal quarter ended January 1, 2005 decreased by $9.3 million, or 135%, compared with the combined fiscal quarter ended December 28, 2003 from $6.9 million to $(2.4) million. Income tax expense for the nine months ended January 1, 2005 decreased by $15.4 million, or 75%, compared with the combined nine months ended December 28, 2003 from $20.4 million to $5.0 million. The decrease is primarily the result of lower earnings before taxes due to higher interest expense. The current fiscal period effective tax rates were the result of income taxes being incurred on the taxable income of the Company’s U.S. operations while no income tax benefit was recorded on the operating losses incurred in certain foreign jurisdictions where the realization of related deferred tax assets is considered uncertain.

- 31 -

Minority Interest. Minority interest for the fiscal quarter and nine months ended January 1, 2005 and the combined fiscal quarter and nine months ended December 28, 2003 remained consistent and related to our partner’s share of earnings of our Algeria, China and India joint ventures.

Net Income (Loss). Net loss of $8.1 million for the fiscal quarter ended January 1, 2005 improved by $6.9 million, or 46%, compared with a net loss of $15.0 million for the combined quarter ended December 28, 2003. Net loss of $11.5 million for the nine months ended January 1, 2005 was reduced by $15.6 million as compared with the net income of $4.1 million for the combined nine months ended December 28, 2003 due primarily to:

•

higher interest expense incurred during the period;

•

greater amortization of intangible assets related to acquisitions;

•

losses from discontinued operations;

•

our inability to record an income tax benefit on foreign net operating loss carry-forwards in certain jurisdictions; and

•

management and one-time fees associated with the Acquisition.

EBITDA. EBITDA increased by $14.3 million from $(0.6) million in the combined fiscal quarter ended December 28, 2003 to $13.7 million in the fiscal quarter ended January 1, 2005. EBITDA increased by $12.2 million, or approximately 31%, from $39.1 million in the combined nine months ended December 28, 2003 to $51.3 million in the nine months ended January 1, 2005. The increase in EBITDA during the period is generally attributable to the following factors:

•

increased sales and the resulting increased gross profit;

•

decreased selling and administrative expenses, as a percentage of sales, due to cost containment actions and the result of restructuring activities;

•

reduced restructuring activities and expenses; and

•

favorable foreign currency translations due primarily to appreciation of the Euro.

- 32 -

The following tables set forth a quantitative reconciliation of the differences between EBITDA and net income (loss) calculated in accordance with generally accepted accounting principles for the fiscal quarter and nine months ended January 1, 2005 and for the combined fiscal quarter and combined nine months ended December 28, 2003:

Historical EBITDA Reconciliation for Fiscal Quarter Ended January 1, 2005 and Combined Fiscal

Quarter Ended December 28, 2003


										Predecessor
	Fiscal Quarter Ended January 1, 2005			Combined Fiscal Quarter Ended December 28, 2003			Period from Inception (December 18, 2003) to December 28, 2003			Period from October 1, 2003 to December 17, 2003
Net loss	$	(8.1	)	$	(15.0	)	$	(5.7	)	$	(9.3	)
Depreciation and amortization		9.7			4.9			0.6			4.3
Interest expense (income), net		9.7			2.6			3.5			(0.9	)
Income tax (benefit) provision		2.4			6.9			(2.2	)		9.1
Minority interest		—			0.1			0.1			—

EBITDA		13.7			(0.5	)		(3.7	)		3.2

(Income) loss on discontinued operations		—			(0.1	)		—			(0.1	)

EBITDA (excluding discontinued operations)	$	13.7		$	(0.6	)	$	(3.7	)	$	3.1

Historical EBITDA Reconciliation for Nine Months Ended January 1, 2005 and Combined Nine

Months Ended December 28, 2003


							Predecessor
	Nine Months Ended January 1, 2005			Combined Nine Months Ended December 28, 2003		Period from Inception (December 18, 2003) to December 28, 2003	Period from April 1, 2003 to December 17, 2003
Net (loss) income	$	(11.5	)	$	4.1

Filing Compare · SENSUS (BERMUDA 2) LTD