##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



For the quarterly period ended September 30, 2005



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from              to



Commission file number 333-113658



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|                                                       |  |                                                        |  |  |  | 
|------------------------------------------------------ |  | ------------------------------------------------------ |  |  |  | 
|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)



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|                                                               |  |                                      |  |                                                                |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------ |  | -------------------------------------------------------------- |  | ------------------------------------
|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.)



8601 Six Forks Road,
Suite 300, Raleigh, North Carolina 27615

(Address of principal executive offices) (Zip Code)



(919) 845-4017

(Registrants telephone number, including area code)



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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 ̈No  x



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



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ̈Yes    x  No



As of November 1, 2005, Sensus Metering Systems (Bermuda 2) Ltd. had 12,000 common shares outstanding, all of which were owned by Sensus Metering Systems
(Bermuda 1) Ltd. and Sensus Metering Systems Inc. had 283.603994 shares of common stock outstanding, all of which were owned by Sensus Metering Systems (Bermuda 2) Ltd.



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##### Table of Contents

Part IFinancial Information



|        |  |                                                                                                                                                     |  |     
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                                                                     |  | Page
|Item 1. |  | Financial Statements                                                                                                                                |  |     
|        |  |                                                                                                                                                    
|        |  | Consolidated Balance Sheets as of September 30, 2005 (unaudited) and March 31, 2005                                                                 |  | 3   
|        |  |                                                                                                                                                    
|        |  | Consolidated Statements of Operations for the fiscal quarter and six months ended September 30, 2005 (unaudited) and September 30, 2004 (unaudited) |  | 4   
|        |  |                                                                                                                                                    
|        |  | Consolidated Statements of Cash Flows for the six months ended September 30, 2005 (unaudited) and September 30, 2004 (unaudited)                    |  | 5   
|        |  |                                                                                                                                                    
|        |  | Notes to Unaudited Consolidated Financial Statements                                                                                                |  | 6   
|        |  |                                                                                                                                                    
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                               |  | 23  
|        |  |                                                                                                                                                    
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                          |  | 30  
|        |  |                                                                                                                                                    
|Item 4. |  | Controls and Procedures                                                                                                                             |  | 31  
|        |  |                                                                                                                                                    
|        |  | Part IIOther Information                                                                                                                           |  |     
|        |  |                                                                                                                                                    
|Item 1. |  | Legal Proceedings                                                                                                                                   |  | 32  
|        |  |                                                                                                                                                    
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                         |  | 32  
|        |  |                                                                                                                                                    
|Item 3. |  | Defaults Upon Senior Securities                                                                                                                     |  | 32  
|        |  |                                                                                                                                                    
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                                                                 |  | 32  
|        |  |                                                                                                                                                    
|Item 5. |  | Other Information                                                                                                                                   |  | 32  
|        |  |                                                                                                                                                    
|Item 6. |  | Exhibits                                                                                                                                            |  | 32  



2



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##### Table of Contents

PART IFINANCIAL INFORMATION



Item 1. Financial Statements.



SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



CONSOLIDATED BALANCE SHEETS

(in millions, except per share and share data)



|                                                                                                                      |  |                   |       |   |               |   |       |  
|--------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----- | - | ------------- | - | ----- | -
|                                                                                                                      |  | September 30,2005 |       |   | March 31,2005 |  
|                                                                                                                      |  | (unaudited)       |       |   |               |  
|ASSETS                                                                                                                |  |                   |       |   |               |   |       |  
|CURRENT ASSETS:                                                                                                       |  |                   |       |   |               |   |       |  
|Cash and cash equivalents                                                                                             |  | $                 | 43.1  |   |               | $ | 54.9  |  
|Accounts receivable:                                                                                                  |  |                   |       |   |               |   |       |  
|Trade, net of allowance for doubtful accounts of $1.5 and $1.7 at September 30, 2005 and March 31, 2005, respectively |  |                   | 79.0  |   |               |   | 90.4  |  
|Other                                                                                                                 |  |                   | 3.1   |   |               |   | 2.6   |  
|Inventories, net                                                                                                      |  |                   | 55.3  |   |               |   | 49.2  |  
|Prepayments and other current assets                                                                                  |  |                   | 9.9   |   |               |   | 8.2   |  
|Deferred income taxes                                                                                                 |  |                   | 5.4   |   |               |   | 5.5   |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total current assets                                                                                                  |  |                   | 195.8 |   |               |   | 210.8 |  
|                                                                                                                      |  |                  
|Property, plant and equipment, net                                                                                    |  |                   | 132.5 |   |               |   | 120.2 |  
|Intangible assets, net                                                                                                |  |                   | 226.0 |   |               |   | 235.9 |  
|Goodwill                                                                                                              |  |                   | 331.6 |   |               |   | 331.6 |  
|Deferred income taxes                                                                                                 |  |                   | 18.2  |   |               |   | 18.0  |  
|Other long-term assets                                                                                                |  |                   | 25.3  |   |               |   | 23.7  |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total assets                                                                                                          |  | $                 | 929.4 |   |               | $ | 940.2 |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  |  |                   |       |   |               |   |       |  
|CURRENT LIABILITIES:                                                                                                  |  |                   |       |   |               |   |       |  
|Accounts payable                                                                                                      |  | $                 | 47.1  |   |               | $ | 52.6  |  
|Current portion of long-term debt                                                                                     |  |                   | 0.6   |   |               |   | 0.6   |  
|Short-term borrowings                                                                                                 |  |                   | 4.0   |   |               |   |      |  
|Income taxes payable                                                                                                  |  |                   | 4.1   |   |               |   | 1.2   |  
|Restructuring accruals                                                                                                |  |                   | 2.6   |   |               |   | 4.0   |  
|Accruals and other current liabilities                                                                                |  |                   | 55.5  |   |               |   | 54.6  |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total current liabilities                                                                                             |  |                   | 113.9 |   |               |   | 113.0 |  
|                                                                                                                      |  |                  
|Long-term debt, less current portion                                                                                  |  |                   | 491.2 |   |               |   | 499.8 |  
|Pensions                                                                                                              |  |                   | 36.8  |   |               |   | 38.8  |  
|Deferred income taxes                                                                                                 |  |                   | 82.1  |   |               |   | 82.2  |  
|Other long-term liabilities                                                                                           |  |                   | 10.8  |   |               |   | 11.1  |  
|Minority interest                                                                                                     |  |                   | 7.8   |   |               |   | 1.3   |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total liabilities                                                                                                     |  |                   | 742.6 |   |               |   | 746.2 |  
|                                                                                                                      |  |                  
|STOCKHOLDERS EQUITY:                                                                                                 |  |                   |       |   |               |   |       |  
|Common stock, par value $1.00 per share, 12,000 shares authorized, issued and outstanding                             |  |                   |      |   |               |   |      |  
|Additional paid-in capital                                                                                            |  |                   | 200.0 |   |               |   | 200.0 |  
|Accumulated deficit                                                                                                   |  |                   | (16.0 | ) |               |   | (6.9  | )
|Accumulated other comprehensive income                                                                                |  |                   | 2.8   |   |               |   | 0.9   |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total stockholders equity                                                                                            |  |                   | 186.8 |   |               |   | 194.0 |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total liabilities and stockholders equity                                                                            |  | $                 | 929.4 |   |               | $ | 940.2 |  
|                                                                                                                      |  |                   |       |   |               |   |       |  



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



3



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##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions)

(unaudited)



|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|------------------------------------------------------------------------- |  | ------------------------------------ | ----- | - | ------------------------------------ | - | ----- | --------------------------------- |  | - | --------------------------------- | - |  | - | ----- | -
|                                                                          |  | Fiscal QuarterEndedSeptember 30,2005 |       |   | Fiscal QuarterEndedSeptember 30,2004 |   |       | Six MonthsEnded September 30,2005 |  |   | Six MonthsEnded September 30,2004 |  
|NET SALES                                                                 |  | $                                    | 142.1 |   |                                      | $ | 143.2 |                                   |  | $ | 288.9                             |   |  | $ | 282.6 |  
|COST OF SALES                                                             |  |                                      | 99.8  |   |                                      |   | 100.2 |                                   |  |   | 202.3                             |   |  |   | 198.3 |  
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|GROSS PROFIT                                                              |  |                                      | 42.3  |   |                                      |   | 43.0  |                                   |  |   | 86.6                              |   |  |   | 84.3  |  
|                                                                          |  |                                      |       |  
|OPERATING EXPENSES:                                                       |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|Selling, general and administrative expenses                              |  |                                      | 27.6  |   |                                      |   | 25.3  |                                   |  |   | 54.6                              |   |  |   | 49.4  |  
|Restructuring costs                                                       |  |                                      | 0.8   |   |                                      |   | 2.5   |                                   |  |   | 2.2                               |   |  |   | 4.5   |  
|Amortization of intangible assets                                         |  |                                      | 5.6   |   |                                      |   | 5.5   |                                   |  |   | 11.3                              |   |  |   | 10.5  |  
|Other operating expense, net                                              |  |                                      | 0.8   |   |                                      |   | 1.2   |                                   |  |   | 1.6                               |   |  |   | 1.7   |  
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|OPERATING INCOME FROM CONTINUING OPERATIONS                               |  |                                      | 7.5   |   |                                      |   | 8.5   |                                   |  |   | 16.9                              |   |  |   | 18.2  |  
|                                                                          |  |                                      |       |  
|NON-OPERATING EXPENSE:                                                    |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|                                                                          |  |                                      |       |  
|Interest expense, net                                                     |  |                                      | (9.9  | ) |                                      |   | (9.1  | )                                 |  |   | (19.0                             | ) |  |   | (18.5 | )
|Other expense, net                                                        |  |                                      | (0.2  | ) |                                      |   |      |                                   |  |   | (2.2                              | ) |  |   |      |  
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST |  |                                      | (2.6  | ) |                                      |   | (0.6  | )                                 |  |   | (4.3                              | ) |  |   | (0.3  | )
|                                                                          |  |                                      |       |  
|PROVISION FOR INCOME TAXES                                                |  |                                      | 2.0   |   |                                      |   | 1.8   |                                   |  |   | 4.4                               |   |  |   | 2.6   |  
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST                  |  |                                      | (4.6  | ) |                                      |   | (2.4  | )                                 |  |   | (8.7                              | ) |  |   | (2.9  | )
|                                                                          |  |                                      |       |  
|MINORITY INTEREST                                                         |  |                                      | (0.3  | ) |                                      |   | 0.2   |                                   |  |   | (0.4                              | ) |  |   | 0.1   |  
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|LOSS FROM CONTINUING OPERATIONS                                           |  |                                      | (4.9  | ) |                                      |   | (2.2  | )                                 |  |   | (9.1                              | ) |  |   | (2.8  | )
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|DISCONTINUED OPERATIONS:                                                  |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|Loss from discontinued operations, net of taxes                           |  |                                      |      |   |                                      |   | (0.2  | )                                 |  |   |                                  |   |  |   | (0.3  | )
|Loss on disposition of discontinued operations, net of taxes              |  |                                      |      |   |                                      |   | (0.3  | )                                 |  |   |                                  |   |  |   | (0.3  | )
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|LOSS FROM DISCONTINUED OPERATIONS                                         |  |                                      |      |   |                                      |   | (0.5  | )                                 |  |   |                                  |   |  |   | (0.6  | )
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  
|NET LOSS                                                                  |  | $                                    | (4.9  | ) |                                      | $ | (2.7  | )                                 |  | $ | (9.1                              | ) |  | $ | (3.4  | )
|                                                                          |  |                                      |       |   |                                      |   |       |                                   |  |   |                                   |   |  |   |       |  



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



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##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)



|                                                                                              |  |                                  |       |   |                                  |   |      |  
|--------------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | - | -------------------------------- | - | ---- | -
|                                                                                              |  | Six MonthsEndedSeptember 30,2005 |       |   | Six MonthsEndedSeptember 30,2004 |  
|OPERATING ACTIVITIES:                                                                         |  |                                  |       |   |                                  |   |      |  
|Net loss                                                                                      |  | $                                | (9.1  | ) |                                  | $ | (3.4 | )
|Adjustments to reconcile net loss to net cash provided by operating activities:               |  |                                  |       |   |                                  |   |      |  
|Depreciation                                                                                  |  |                                  | 9.2   |   |                                  |   | 8.7  |  
|Amortization of intangible assets                                                             |  |                                  | 11.3  |   |                                  |   | 10.5 |  
|Amortization of deferred financing costs                                                      |  |                                  | 0.9   |   |                                  |   | 1.3  |  
|Deferred income taxes                                                                         |  |                                  |      |   |                                  |   | (0.8 | )
|Net loss (gain) on sale of assets                                                             |  |                                  | 0.1   |   |                                  |   | (0.1 | )
|Loss on foreign currency remeasurement                                                        |  |                                  | 2.1   |   |                                  |   |     |  
|Minority interest                                                                             |  |                                  | 0.4   |   |                                  |   | (0.1 | )
|Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: |  |                                  |       |   |                                  |   |      |  
|Accounts receivable                                                                           |  |                                  | 10.4  |   |                                  |   | (3.6 | )
|Inventories                                                                                   |  |                                  | (5.2  | ) |                                  |   | (2.6 | )
|Accounts payable, accruals and other current liabilities                                      |  |                                  | (5.9  | ) |                                  |   | 3.8  |  
|Other current assets                                                                          |  |                                  | (0.3  | ) |                                  |   | 2.4  |  
|Other long-term assets                                                                        |  |                                  | (3.0  | ) |                                  |   | (1.7 | )
|Other long-term liabilities                                                                   |  |                                  |      |   |                                  |   | (1.9 | )
|Income taxes                                                                                  |  |                                  | 3.0   |   |                                  |   | (0.7 | )
|Pensions                                                                                      |  |                                  | 0.7   |   |                                  |   | 0.6  |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  
|Net cash provided by operating activities                                                     |  |                                  | 14.6  |   |                                  |   | 12.4 |  
|                                                                                              |  |                                 
|INVESTING ACTIVITIES:                                                                         |  |                                  |       |   |                                  |   |      |  
|Expenditures for property, plant and equipment                                                |  |                                  | (12.5 | ) |                                  |   | (8.6 | )
|Purchases of intangible assets                                                                |  |                                  | (1.4  | ) |                                  |   |     |  
|Business acquisitions                                                                         |  |                                  | (10.2 | ) |                                  |   | (5.0 | )
|Proceeds from Invensys acquisition adjustment                                                 |  |                                  |      |   |                                  |   | 5.0  |  
|Other investments                                                                             |  |                                  | 0.4   |   |                                  |   |     |  
|Proceeds from sale of assets                                                                  |  |                                  | 0.1   |   |                                  |   | 2.0  |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  
|Net cash used in investing activities                                                         |  |                                  | (23.6 | ) |                                  |   | (6.6 | )
|                                                                                              |  |                                 
|FINANCING ACTIVITIES:                                                                         |  |                                  |       |   |                                  |   |      |  
|Decrease in short-term borrowings                                                             |  |                                  |      |   |                                  |   | (2.4 | )
|Principal payments on debt                                                                    |  |                                  | (8.7  | ) |                                  |   | (2.9 | )
|Proceeds from joint venture partner                                                           |  |                                  | 6.0   |   |                                  |   |     |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  
|Net cash used in financing activities                                                         |  |                                  | (2.7  | ) |                                  |   | (5.3 | )
|Effect of exchange rate changes on cash                                                       |  |                                  | (0.1  | ) |                                  |   | 0.1  |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                              |  |                                  | (11.8 | ) |                                  |   | 0.6  |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                |  | $                                | 54.9  |   |                                  | $ | 48.5 |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                    |  | $                                | 43.1  |   |                                  | $ | 49.1 |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW:                                                        |  |                                  |       |   |                                  |   |      |  
|                                                                                              |  |                                 
|Cash paid during the period for:                                                              |  |                                  |       |   |                                  |   |      |  
|                                                                                              |  |                                 
|Interest                                                                                      |  | $                                | 18.4  |   |                                  | $ | 16.8 |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  
|Income taxes                                                                                  |  | $                                | 1.8   |   |                                  | $ | 4.9  |  
|                                                                                              |  |                                  |       |   |                                  |   |      |  



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



5



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##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



1.
Description of Business and Summary of Significant Accounting Policies



Description of Business



Sensus Metering
Systems (Bermuda 2) Ltd., together 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, electric 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



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 metering systems businesses operated by Invensys prior
to the Acquisition are referred to herein as Invensys Metering Systems. The Acquisition was financed through a combination of borrowings under a $230.0 million term loan facility that 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.



Principles of Presentation



The accompanying consolidated financial statements are unaudited 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 U.S. generally accepted accounting principles (GAAP) have been condensed or omitted. In the opinion of management, all adjustments,
consisting of normal recurring adjustments considered necessary for the fair presentation of the unaudited consolidated financial statements have been included, and the unaudited consolidated financial statements present fairly the financial
position and results of operations for the interim periods presented. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2005 and related
notes thereto included in the Companys Annual Report on Form 10-K as filed with the SEC.



The accompanying consolidated financial statements present results of the Company for the fiscal quarters and six months ended September 30, 2005 and 2004. 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.



Reclassifications



Certain reclassifications have been made to the financial statements
for the fiscal quarter and six months ended September 30, 2004 to conform to the fiscal quarter and six months ended September 30, 2005 presentation. The reclassifications had no material impact on our consolidated results of operations reported in
any period presented.



Stock-Based Compensation



The restricted shares issued pursuant to the Restricted Share Plan are
service time vested over five years from the date of grant, provided that no vesting occurs prior to the second anniversary of the date of grant. In addition, the vesting 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 rights, repurchase rights and other limitations as set forth in the management subscription and shareholders agreement.



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##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company accounts for share-based payments to employees using the intrinsic value method in accordance with APB Opinion No.25, Accounting for Stock
Issued to Employees(APB 25). No compensation expense related to the Restricted Share Plan was recognized during the fiscal quarters and six months ended September 30, 2005 and 2004.



Recent Accounting Pronouncements



On December 16, 2004, the Financial Accounting Standards Board
(FASB) issued a revised Statement No. 123, Accounting for Share-Based Payment, Revised Statement(FAS 123(R)). FAS 123(R) supersedes APB 25 and amends FASB Statement No. 95, Statement of Cash Flows. FAS 123(R)
requires that the compensation cost related to share-based 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.
FAS 123(R) also 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 and
directors of the Company. The Company will adopt FAS 123(R) in the first quarter of fiscal 2007. As permitted by FAS 123(R), the Company currently accounts for share-based payments to employees using APB 25s intrinsic value method. The Company
has not assessed the impact the adoption of FAS 123(R) may have on its results of operations, or overall financial position.



Use of Estimates



The preparation of financial statements in accordance with GAAP 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.



2. Intangible Assets



Intangible assets consist of goodwill, tradenames, patents, non-competition agreements and customer and distributor relationships. Goodwill at September
30, 2005 represents the excess of the purchase price paid by the Company for Invensys Metering Systems and NexusData, Inc. (Nexus) over the fair value of the respective net assets acquired. The purchase price allocation for Invensys
Metering Systems and Nexus resulted in $331.6 million of goodwill being recorded. The goodwill can be attributed to the value placed on the Company being an industry leader with market-leading positions in the North American water metering market
and the North American clamps and couplings market, and anticipated future earnings and related cash flows of the acquired businesses.



Intangible assets are summarized as follows (in millions):



|                                               |  |                    |       |                          |                |       |      |  |                          |       |  |   |       |  
|---------------------------------------------- |  | ------------------ | ----- | ------------------------ | -------------- | ----- | ---- |  | ------------------------ | ----- |  | - | ----- | -
|                                               |  | September 30, 2005 |       |                          | March 31, 2005 |      
|                                               |  | Cost               |       | Accumulated Amortization |                |       | Cost |  | Accumulated Amortization |      
|Intangible assets not subject to amortization: |  |                    |       |                          |                |       |      |  |                          |       |  |   |       |  
|Goodwill                                       |  | $                  | 331.6 |                          | $              |      |      |  | $                        | 331.6 |  | $ |      |  
|Tradenames (indefinite lived)                  |  |                    | 27.3  |                          |                |      |      |  |                          | 27.3  |  |   |      |  
|                                               |  |                    |       |                          |                |       |      |  |                          |       |  |   |       |  
|                                               |  |                    | 358.9 |                          |                |      |      |  |                          | 358.9 |  |   |      |  
|Intangible assets subject to amortization:     |  |                    |       |                          |                |       |      |  |                          |       |  |   |       |  
|Distributor and marketing relationships        |  |                    | 191.7 |                          |                | (20.3 | )    |  |                          | 190.3 |  |   | (14.3 | )
|Non-competition agreements                     |  |                    | 30.5  |                          |                | (13.5 | )    |  |                          | 30.5  |  |   | (9.7  | )
|Patents                                        |  |                    | 15.1  |                          |                | (4.8  | )    |  |                          | 15.2  |  |   | (3.4  | )
|                                               |  |                    |       |                          |                |       |      |  |                          |       |  |   |       |  
|                                               |  |                    | 237.3 |                          |                | (38.6 | )    |  |                          | 236.0 |  |   | (27.4 | )
|                                               |  |                    |       |                          |                |       |      |  |                          |       |  |   |       |  
|Total intangible assets                        |  | $                  | 596.2 |                          | $              | (38.6 | )    |  | $                        | 594.9 |  | $ | (27.4 | )
|                                               |  |                    |       |                          |                |       |      |  |                          |       |  |   |       |  



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3. Inventories



Inventories 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.



Inventories consisted of the following (in millions):



|                                      |  |                    |      |   |                |   |      |  
|------------------------------------- |  | ------------------ | ---- | - | -------------- | - | ---- | -
|                                      |  | September 30, 2005 |      |   | March 31, 2005 |  
|Raw materials, parts and supplies     |  | $                  | 31.7 |   |                | $ | 28.3 |  
|Work in process                       |  |                    | 12.9 |   |                |   | 12.4 |  
|Finished goods                        |  |                    | 12.5 |   |                |   | 10.9 |  
|                                      |  |                    |      |   |                |   |      |  
|Allowance for shrink and obsolescence |  |                    | (1.8 | ) |                |   | (2.4 | )
|                                      |  |                    |      |   |                |   |      |  
|Inventories, net                      |  | $                  | 55.3 |   |                | $ | 49.2 |  
|                                      |  |                    |      |   |                |   |      |  



4. Financial Instruments



We use derivative instruments, such as forward contracts,
to manage our exposure to market risks such as foreign exchange risks. We record derivative instruments as assets or liabilities on the consolidated balance sheet, measured at fair value. Corresponding gains and losses on these contracts, as well as
gains and losses on the items being hedged, are included as a component of other non-operating income and expense in our consolidated statements of operations.



As of September 30, 2005, we had various foreign currency forward and option contracts outstanding to purchase approximately $36.0 million net U.S.
dollars by selling approximately a) 20.1 million net, b) £1.2 million, c) CAD 1.4 million, and d) SKK 253.6 million with expiration dates ranging from October 28, 2005 through June 30, 2006. These contracts are arranged to manage the
exposure to foreign currency risks related to certain intercompany receivable and payable balances and third-party receivables denominated in those currencies. The Company recorded a $0.1 million net loss and a $0.1 million net gain on the forward
contracts for the fiscal quarter and six months ended September 30, 2005, respectively, which includes a $0.2 million realized loss in each of those periods upon settlement of certain contracts.



5. Restructuring Costs



The following table reflects activity of the Company for the fiscal quarters and six months ended September 30, 2005 and
September 30, 2004, associated with costs related to the Companys restructuring initiatives (in millions):



|                                            |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    
|------------------------------------------- |  | ------------------------------------- | --- | ------------------------------------- | - | --------------------------------- |  | --------------------------------- | --- |  | - | ---
|                                            |  | Fiscal QuarterEnded September 30,2005 |     | Fiscal QuarterEnded September 30,2004 |   | Six MonthsEnded September 30,2005 |  | Six MonthsEnded September 30,2004
|Severance and other related costs:          |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    
|Related to headcount reduction initiatives  |  | $                                     | 0.8 |                                       | $ | 2.1                               |  | $                                 | 2.2 |  | $ | 4.1
|Related to outsourcing                      |  |                                       |    |                                       |   | 0.1                               |  |                                   |    |  |   | 0.1
|Related to plant closures and consolidation |  |                                       |    |                                       |   | 0.3                               |  |                                   |    |  |   | 0.3
|                                            |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    
|Restructuring costs charged to operations   |  | $                                     | 0.8 |                                       | $ | 2.5                               |  | $                                 | 2.2 |  | $ | 4.5
|                                            |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



For the fiscal quarter and six months ended September 30, 2005, the Company incurred $0.8 million and
$2.2 million, respectively, of restructuring costs related to ongoing activities to rationalize its water meter product lines in Europe and to relocate selected North America pipe joining manufacturing lines. These activities affect both direct and
indirect personnel and will result in a net headcount reduction of 14 employees primarily in the Companys German water meter production facility. The Company anticipates that the majority of these initiatives will be completed by March 31,
2006. However, certain of the cash payments associated with these initiatives will carry over into the next fiscal year.



The charge for restructuring costs was comprised of the following (in millions):



|                                          |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    
|----------------------------------------- |  | ------------------------------------- | --- | ------------------------------------- | - | --------------------------------- |  | --------------------------------- | --- |  | - | ---
|                                          |  | Fiscal QuarterEnded September 30,2005 |     | Fiscal QuarterEnded September 30,2004 |   | Six MonthsEnded September 30,2005 |  | Six MonthsEnded September 30,2004
|Employee severance and exit costs accrued |  | $                                     | 0.5 |                                       | $ | 2.5                               |  | $                                 | 1.4 |  | $ | 4.5
|Expensed as incurred                      |  |                                       | 0.3 |                                       |   |                                  |  |                                   | 0.8 |  |   |   
|                                          |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    
|Total                                     |  | $                                     | 0.8 |                                       | $ | 2.5                               |  | $                                 | 2.2 |  | $ | 4.5
|                                          |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    



Restructuring accruals
are summarized as follows (in millions):



|                                            |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  
|------------------------------------------- |  | ------------------------------------- | ---- | - | ------------------------------------- | - | ---- | --------------------------------- |  | - | --------------------------------- | - |  | - | ---- | -
|                                            |  | Fiscal QuarterEnded September 30,2005 |      |   | Fiscal QuarterEnded September 30,2004 |   |      | Six MonthsEnded September 30,2005 |  |   | Six MonthsEnded September 30,2004 |  
|Balance at beginning of period              |  | $                                     | 5.9  |   |                                       | $ | 8.9  |                                   |  | $ | 7.0                               |   |  | $ | 8.6  |  
|Cash payments                               |  |                                       | (1.0 | ) |                                       |   | (3.0 | )                                 |  |   | (2.5                              | ) |  |   | (4.7 | )
|Accrue for new committed/announced programs |  |                                       | 0.5  |   |                                       |   | 2.5  |                                   |  |   | 1.4                               |   |  |   | 4.5  |  
|Effect of foreign currency translation      |  |                                       |     |   |                                       |   | 0.1  |                                   |  |   | (0.5                              | ) |  |   | 0.1  |  
|                                            |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  
|Balance at end of period                    |  | $                                     | 5.4  |   |                                       | $ | 8.5  |                                   |  | $ | 5.4                               |   |  | $ | 8.5  |  
|                                            |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  
|Current portion                             |  | $                                     | 2.6  |   |                                       | $ | 8.5  |                                   |  | $ | 2.6                               |   |  | $ | 8.5  |  
|Non-current portion                         |  |                                       | 2.8  |   |                                       |   |     |                                   |  |   | 2.8                               |   |  |   |     |  
|                                            |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  
|Total                                       |  | $                                     | 5.4  |   |                                       | $ | 8.5  |                                   |  | $ | 5.4                               |   |  | $ | 8.5  |  
|                                            |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  



The current portion of
the restructuring accrual is reflected within current liabilities, and the non-current portion is reflected in other long-term liabilities on the Companys consolidated balance sheets.



6. Comprehensive Loss



Comprehensive loss consisted of the following (in millions):



|                                        |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  
|--------------------------------------- |  | ------------------------------------- | ---- | - | ------------------------------------- | - | ---- | --------------------------------- |  | - | --------------------------------- | - |  | - | ---- | -
|                                        |  | Fiscal QuarterEnded September 30,2005 |      |   | Fiscal QuarterEnded September 30,2004 |   |      | Six MonthsEnded September 30,2005 |  |   | Six MonthsEnded September 30,2004 |  
|Net loss                                |  | $                                     | (4.9 | ) |                                       | $ | (2.7 | )                                 |  | $ | (9.1                              | ) |  | $ | (3.4 | )
|Other comprehensive income:             |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  
|Foreign currency translation adjustment |  |                                       | 1.3  |   |                                       |   | 0.5  |                                   |  |   | 1.9                               |   |  |   | 0.3  |  
|                                        |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  
|Comprehensive loss                      |  | $                                     | (3.6 | ) |                                       | $ | (2.2 | )                                 |  | $ | (7.2                              | ) |  | $ | (3.1 | )
|                                        |  |                                       |      |   |                                       |   |      |                                   |  |   |                                   |   |  |   |      |  



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



7. Warranty Obligations



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 consolidated financial statements.



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



|                             |  |                                  |      |   |                                  |   |      |  
|---------------------------- |  | -------------------------------- | ---- | - | -------------------------------- | - | ---- | -
|                             |  | Six MonthsEndedSeptember 30,2005 |      |   | Six MonthsEndedSeptember 30,2004 |  
|Balance at beginning of year |  | $                                | 7.8  |   |                                  | $ | 8.6  |  
|Warranties issued            |  |                                  | 1.9  |   |                                  |   | 1.5  |  
|Settlements made             |  |                                  | (1.9 | ) |                                  |   | (3.1 | )
|                             |  |                                  |      |   |                                  |   |      |  
|Balance at end of period     |  | $                                | 7.8  |   |                                  | $ | 7.0  |  
|                             |  |                                  |      |   |                                  |   |      |  
|Current portion              |  |                                  | 4.1  |   |                                  |   | 2.9  |  
|Non-current portion          |  |                                  | 3.7  |   |                                  |   | 4.1  |  
|                             |  |                                  |      |   |                                  |   |      |  
|Total                        |  | $                                | 7.8  |   |                                  | $ | 7.0  |  
|                             |  |                                  |      |   |                                  |   |      |  



8. Income Taxes



The current fiscal period effective tax rates were the result of
income taxes being incurred on the taxable income of the Companys global 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.



9. Acquisition



The Company formed a joint venture in China for its Sensus Precision Die
Casting business with Yangzhou Runlin Investment Co., Ltd. (Runlin). The purpose of the joint venture is to secure low-cost manufacturing capability in China, as well as pursue precision die casting product opportunities on a global
basis. The joint venture is called SensusRongtai Precision Die Casting (Yangzhou) Co., Ltd. (PDC Rongtai) and is headquartered in Jiangdu, China. The joint venture was capitalized with $9.0 million of cash from the Company and $6.0
million of cash from Runlin. The capital was used to purchase certain operating assets of Yangzhou Rongtai Industrial Development Co., Ltd. (Rongtai), a leading producer of aluminum die-casting parts for Chinese automotive and motorcycle
manufacturers. The initial purchase price for the net assets acquired of Rongtai was $11.7 million, consisting of $10.2 million paid on July 27, 2005 and approximately $1.5 million to be paid half within 90 days of closing and the remaining half one
year after closing, subject to adjustment for any indemnification claims.



This acquisition of Rongtai has been accounted for in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. The Company owns 60% of the joint venture and fully consolidates
the financial statements of PDC Rongtai. The consolidated financial statements herein include the results of operations of PDC Rongtai for the period from July 27, 2005.



The Company has completed its preliminary purchase price allocation attributable to the Rongtai 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.



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The preliminary purchase price allocation based on managements estimates at the date of the acquisition is as follows (in millions):



|                                  |  |   |      |  
|--------------------------------- |  | - | ---- | -
|Other receivables                 |  | $ | 2.0  |  
|Inventories                       |  |   | 2.1  |  
|Property, plant and equipment     |  |   | 12.2 |  
|Accounts payable                  |  |   | (0.1 | )
|Short-term debt                   |  |   | (4.0 | )
|Other liabilities                 |  |   | (0.5 | )
|                                  |  |   |      |  
|Total net assets acquired         |  |   | 11.7 |  
|                                  |  |   |      |  
|Fair value of net assets acquired |  | $ | 11.7 |  
|                                  |  |   |      |  



10. Discontinued Operations



On September 10, 2004, the Company sold the assets of its
utility billing software company, IMSofTech, Inc. (IMSofTech) for $1.1 million. IMSofTech was not considered by the Company to be a core component of its metering systems business strategy of providing intelligent metering systems-based
solutions to the global utility markets. The sales price included (1) an initial cash payment of $850,000 received in September 2004, and (2) a subsequent cash payment of $225,000 received in March 2005.



On September 30, 2004, the Company sold its 51% 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 also effected as part of the Companys strategy to focus on its core business
within the metering systems segment. The sales price consisted of (1) $300,000 cash received in 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.



These dispositions were accounted for as discontinued operations in
accordance with Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and accordingly, amounts in the consolidated statements of operations for the fiscal quarter and six months
ended September 30, 2004 were reclassified to reflect the dispositions as discontinued operations. Neither operation had activity or results of operations in the fiscal quarter or six months ended September 30, 2005. The results of operations for
the discontinued businesses are as follows (in millions):



|                                                                             |  |                                       |      |   |                                   |   |      |  
|---------------------------------------------------------------------------- |  | ------------------------------------- | ---- | - | --------------------------------- | - | ---- | -
|                                                                             |  | Fiscal QuarterEnded September 30,2004 |      |   | Six MonthsEnded September 30,2004 |  
|Net sales                                                                    |  | $                                     | 0.9  |   |                                   | $ | 2.2  |  
|Cost of sales                                                                |  |                                       | 0.7  |   |                                   |   | 1.7  |  
|                                                                             |  |                                       |      |   |                                   |   |      |  
|Gross profit                                                                 |  |                                       | 0.2  |   |                                   |   | 0.5  |  
|                                                                             |  |                                       |      |   |                                   |   |      |  
|Operating expenses:                                                          |  |                                       |      |   |                                   |   |      |  
|Selling, general and administrative expenses                                 |  |                                       | 0.3  |   |                                   |   | 0.7  |  
|                                                                             |  |                                       |      |   |                                   |   |      |  
|Operating loss from discontinued operations                                  |  |                                       | (0.1 | ) |                                   |   | (0.2 | )
|Loss from discontinued operations before minority interest                   |  |                                       | (0.1 | ) |                                   |   | (0.2 | )
|                                                                             |  |                                       |      |   |                                   |   |      |  
|Minority interest                                                            |  |                                       | (0.1 | ) |                                   |   | (0.1 | )
|                                                                             |  |                                       |      |   |                                   |   |      |  
|Loss from discontinued operations                                            |  | $                                     | (0.2 | ) |                                   | $ | (0.3 | )
|                                                                             |  |                                       |      |   |                                   |   |      |  
|Loss on disposition of discontinued operations, net of taxes of $0.3 million |  | $                                     | (0.3 | ) |                                   | $ | (0.3 | )
|                                                                             |  |                                       |      |   |                                   |   |      |  
|Loss from discontinued operations                                            |  | $                                     | (0.5 | ) |                                   | $ | (0.6 | )
|                                                                             |  |                                       |      |   |                                   |   |      |  



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11. Retirement Benefits



The Company has defined benefit plans in Germany and the United States. The U.S. defined benefit plan consists of only
unionized hourly employees. Pension benefits in Germany 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.



The following information reflects the benefit obligation, plan assets and
net liability information for participants in the German retirement benefit plans (in millions):



|                                            |  |                      |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  
|------------------------------------------- |  | -------------------- | ---- | - | ----------------- | - | ---- | ----------------- |  | - | ----------------- | - |  | - | ---- | -
|                                            |  | Fiscal Quarter Ended |      |   | Six Months Ended  |  
|                                            |  | September 30,2005    |      |   | September 30,2004 |   |      | September 30,2005 |  |   | September 30,2004 |  
|Benefit obligation at beginning of period   |  | $                    | 37.2 |   |                   | $ | 36.3 |                   |  | $ | 39.9              |   |  | $ | 36.2 |  
|Service cost                                |  |                      | 0.1  |   |                   |   | 0.2  |                   |  |   | 0.3               |   |  |   | 0.4  |  
|Interest cost                               |  |                      | 0.5  |   |                   |   | 0.6  |                   |  |   | 1.0               |   |  |   | 1.0  |  
|Benefits paid                               |  |                      | (0.5 | ) |                   |   | (0.4 | )                 |  |   | (1.0              | ) |  |   | (0.9 | )
|Currency translation                        |  |                      |     |   |                   |   | 0.6  |                   |  |   | (2.9              | ) |  |   | 0.6  |  
|                                            |  |                      |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  
|Benefit obligation at end period            |  | $                    | 37.3 |   |                   | $ | 37.3 |                   |  | $ | 37.3              |   |  | $ | 37.3 |  
|                                            |  |                      |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  
|Net periodic benefit cost                   |  | $                    | 0.6  |   |                   | $ | 0.8  |                   |  | $ | 1.3               |   |  | $ | 1.4  |  
|                                            |  |                      |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  
|Net liability on balance sheet consists of: |  |                      |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  
|Current pension liability                   |  | $                    | 1.9  |   |                   | $ |     |                   |  | $ | 1.9               |   |  | $ |     |  
|Long-term pension liability                 |  |                      | 35.4 |   |                   |   | 37.3 |                   |  |   | 35.4              |   |  |   | 37.3 |  
|                                            |  |                      |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  
|Net liability on balance sheet              |  | $                    | 37.3 |   |                   | $ | 37.3 |                   |  | $ | 37.3              |   |  | $ | 37.3 |  
|                                            |  |                      |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  



The accumulated
benefit obligation for the U.S. retirement benefit plan was $1.4 million and $0.6 million at September 30, 2005 and 2004, respectively. The U.S. net periodic benefit cost was $0.4 million and $0.2 million for the fiscal quarters ended September 30,
2005 and 2004, respectively, and $0.6 million and $0.4 million for the six months ended September 30, 2005 and 2004, respectively.



The Company expects to continue to make contributions sufficient to fund benefits paid under its pension plans. Such contributions are expected to total
approximately $2.9 million in fiscal 2006, of which $1.9 million has been paid through September 30, 2005.



12. Guarantor Subsidiaries



The following tables present condensed consolidating unaudited financial information of the Company at September 30, 2005 and the audited financial information of the Company at March 31, 2005 and the unaudited financial information of the
Company for the fiscal quarters and six months ended September 30, 2005 and September 30, 2004, 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.
(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 for the
Issuer and the Guarantor Subsidiaries are not presented because their guarantees are full and unconditional and joint and several, and the Company believes separate financial statements and other disclosures are not material to investors.



12



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Balance Sheets (unaudited)

September 30, 2005



|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|--------------------------------------------- |  | ------------- | ----- | - | ------ | - | ------- | --------------------- |  | ------------------------- | ----- |  | ------------ | ----- | - | ------------ | - | -------- | - |  | - | -----
|                                              |  | Parent        |       |   | Issuer |   |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |       |  | Eliminations |       |   | Consolidated
|                                              |  | (in millions)
|Assets                                        |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Current assets:                               |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Cash and cash equivalents                     |  | $             |      |   |        | $ |        |                       |  | $                         | 26.5  |  | $            | 16.6  |   |              | $ |         |   |  | $ | 43.1 
|Accounts receivable:                          |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Trade, net of allowance for doubtful accounts |  |               |      |   |        |   |        |                       |  |                           | 46.5  |  |              | 32.5  |   |              |   |         |   |  |   | 79.0 
|From affiliates                               |  |               | (1.7  | ) |        |   | (64.0   | )                     |  |                           | 82.7  |  |              | (17.0 | ) |              |   |         |   |  |   |     
|Other                                         |  |               |      |   |        |   | (0.2    | )                     |  |                           | 0.7   |  |              | 2.6   |   |              |   |         |   |  |   | 3.1  
|Inventories, net                              |  |               |      |   |        |   |        |                       |  |                           | 28.9  |  |              | 26.4  |   |              |   |         |   |  |   | 55.3 
|Prepayments and other current assets          |  |               |      |   |        |   | 0.2     |                       |  |                           | 5.8   |  |              | 3.9   |   |              |   |         |   |  |   | 9.9  
|Deferred income taxes                         |  |               |      |   |        |   |        |                       |  |                           | 4.9   |  |              | 0.5   |   |              |   |         |   |  |   | 5.4  
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Total current assets                          |  |               | (1.7  | ) |        |   | (64.0   | )                     |  |                           | 196.0 |  |              | 65.5  |   |              |   |         |   |  |   | 195.8
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Notes receivable from affiliates              |  |               |      |   |        |   | 433.2   |                       |  |                           |      |  |              | 29.1  |   |              |   | (462.3   | ) |  |   |     
|Property, plant and equipment, net            |  |               |      |   |        |   |        |                       |  |                           | 70.2  |  |              | 62.3  |   |              |   |         |   |  |   | 132.5
|Intangible assets, net                        |  |               |      |   |        |   | 16.6    |                       |  |                           | 169.1 |  |              | 40.3  |   |              |   |         |   |  |   | 226.0
|Goodwill                                      |  |               |      |   |        |   |        |                       |  |                           | 300.7 |  |              | 30.9  |   |              |   |         |   |  |   | 331.6
|Investment in subsidiaries                    |  |               | 650.8 |   |        |   | 620.7   |                       |  |                           | 8.3   |  |              |      |   |              |   | (1,279.8 | ) |  |   |     
|Deferred income taxes                         |  |               |      |   |        |   |        |                       |  |                           | 16.7  |  |              | 1.5   |   |              |   |         |   |  |   | 18.2 
|Other long-term assets                        |  |               |      |   |        |   | 20.0    |                       |  |                           | 3.2   |  |              | 2.1   |   |              |   |         |   |  |   | 25.3 
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Total assets                                  |  | $             | 649.1 |   |        | $ | 1,026.5 |                       |  | $                         | 764.2 |  | $            | 231.7 |   |              | $ | (1,742.1 | ) |  | $ | 929.4
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Liabilities and stockholders equity          |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Current liabilities:                          |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Accounts payable                              |  | $             |      |   |        | $ |        |                       |  | $                         | 31.8  |  | $            | 15.3  |   |              | $ |         |   |  | $ | 47.1 
|Current portion of long-term debt             |  |               |      |   |        |   | 0.5     |                       |  |                           |      |  |              | 0.1   |   |              |   |         |   |  |   | 0.6  
|Short-term borrowings                         |  |               |      |   |        |   |        |                       |  |                           |      |  |              | 4.0   |   |              |   |         |   |  |   | 4.0  
|Income taxes payable                          |  |               |      |   |        |   | (19.8   | )                     |  |                           | 23.5  |  |              | 0.4   |   |              |   |         |   |  |   | 4.1  
|Restructuring accruals                        |  |               |      |   |        |   |        |                       |  |                           | 0.3   |  |              | 2.3   |   |              |   |         |   |  |   | 2.6  
|Accruals and other current liabilities        |  |               |      |   |        |   | 8.9     |                       |  |                           | 19.9  |  |              | 26.7  |   |              |   |         |   |  |   | 55.5 
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Total current liabilities                     |  |               |      |   |        |   | (10.4   | )                     |  |                           | 75.5  |  |              | 48.8  |   |              |   |         |   |  |   | 113.9
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Notes payable to affiliates                   |  |               | 462.3 |   |        |   | (1.5    | )                     |  |                           |      |  |              | 1.5   |   |              |   | (462.3   | ) |  |   |     
|Long-term debt, less current portion          |  |               |      |   |        |   | 462.0   |                       |  |                           |      |  |              | 29.2  |   |              |   |         |   |  |   | 491.2
|Pensions                                      |  |               |      |   |        |   |        |                       |  |                           | 1.4   |  |              | 35.4  |   |              |   |         |   |  |   | 36.8 
|Deferred income taxes                         |  |               |      |   |        |   |        |                       |  |                           | 60.0  |  |              | 22.1  |   |              |   |         |   |  |   | 82.1 
|Other long-term liabilities                   |  |               |      |   |        |   |        |                       |  |                           | 6.6   |  |              | 4.2   |   |              |   |         |   |  |   | 10.8 
|Minority interest                             |  |               |      |   |        |   |        |                       |  |                           |      |  |              | 7.8   |   |              |   |         |   |  |   | 7.8  
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities                             |  |               | 462.3 |   |        |   | 450.1   |                       |  |                           | 143.5 |  |              | 149.0 |   |              |   | (462.3   | ) |  |   | 742.6
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Stockholders equity                          |  |               | 186.8 |   |        |   | 576.4   |                       |  |                           | 620.7 |  |              | 82.7  |   |              |   | (1,279.8 | ) |  |   | 186.8
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities and stockholders equity    |  | $             | 649.1 |   |        | $ | 1,026.5 |                       |  | $                         | 764.2 |  | $            | 231.7 |   |              | $ | (1,742.1 | ) |  | $ | 929.4
|                                              |  |               |       |   |        |   |         |                       |  |                           |       |  |              |       |   |              |   |          |   |  |   |      



13



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##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Balance Sheets

March 31, 2005



|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|--------------------------------------------- |  | ------------- | ----- | ------ | - | ------- | --------------------- |  | - | ------------------------- | - |  | ------------ | ----- | - | ------------ | - | -------- | - |  | - | -----
|                                              |  | Parent        |       | Issuer |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |       |   | Consolidated
|                                              |  | (in millions)
|Assets                                        |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Current assets:                               |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Cash and cash equivalents                     |  | $             |      |        | $ |        |                       |  | $ | 39.1                      |   |  | $            | 15.8  |   |              | $ |         |   |  | $ | 54.9 
|Accounts receivable:                          |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Trade, net of allowance for doubtful accounts |  |               |      |        |   |        |                       |  |   | 50.7                      |   |  |              | 39.7  |   |              |   |         |   |  |   | 90.4 
|From affiliates                               |  |               |      |        |   | (38.4   | )                     |  |   | 44.5                      |   |  |              | (6.1  | ) |              |   |         |   |  |   |     
|Other                                         |  |               |      |        |   |        |                       |  |   | 1.3                       |   |  |              | 1.3   |   |              |   |         |   |  |   | 2.6  
|Inventories, net                              |  |               |      |        |   |        |                       |  |   | 27.1                      |   |  |              | 22.1  |   |              |   |         |   |  |   | 49.2 
|Prepayments and other current assets          |  |               |      |        |   | 0.4     |                       |  |   | 4.9                       |   |  |              | 2.9   |   |              |   |         |   |  |   | 8.2  
|Deferred income taxes                         |  |               |      |        |   |        |                       |  |   | 4.9                       |   |  |              | 0.6   |   |              |   |         |   |  |   | 5.5  
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total current assets                          |  |               |      |        |   | (38.0   | )                     |  |   | 172.5                     |   |  |              | 76.3  |   |              |   |         |   |  |   | 210.8
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Notes receivable from affiliates              |  |               |      |        |   | 433.2   |                       |  |   |                          |   |  |              | 29.1  |   |              |   | (462.3   | ) |  |   |     
|Property, plant and equipment, net            |  |               |      |        |   |        |                       |  |   | 66.9                      |   |  |              | 53.3  |   |              |   |         |   |  |   | 120.2
|Intangible assets, net                        |  |               |      |        |   | 20.4    |                       |  |   | 173.6                     |   |  |              | 41.9  |   |              |   |         |   |  |   | 235.9
|Goodwill                                      |  |               |      |        |   |        |                       |  |   | 300.7                     |   |  |              | 30.9  |   |              |   |         |   |  |   | 331.6
|Investment in subsidiaries                    |  |               | 656.3 |        |   | 596.4   |                       |  |   | 6.5                       |   |  |              |      |   |              |   | (1,259.2 | ) |  |   |     
|Deferred income taxes                         |  |               |      |        |   |        |                       |  |   | 16.8                      |   |  |              | 1.2   |   |              |   |         |   |  |   | 18.0 
|Other long-term assets                        |  |               |      |        |   | 21.0    |                       |  |   | 1.0                       |   |  |              | 1.7   |   |              |   |         |   |  |   | 23.7 
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total assets                                  |  | $             | 656.3 |        | $ | 1,033.0 |                       |  | $ | 738.0                     |   |  | $            | 234.4 |   |              | $ | (1,721.5 | ) |  | $ | 940.2
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Liabilities and stockholders equity          |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Current liabilities:                          |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Accounts payable                              |  | $             |      |        | $ |        |                       |  | $ | 32.2                      |   |  | $            | 20.4  |   |              | $ |         |   |  | $ | 52.6 
|Current portion of long-term debt             |  |               |      |        |   | 0.5     |                       |  |   |                          |   |  |              | 0.1   |   |              |   |         |   |  |   | 0.6  
|Income taxes payable                          |  |               |      |        |   | (21.5   | )                     |  |   | 22.6                      |   |  |              | 0.1   |   |              |   |         |   |  |   | 1.2  
|Restructuring accruals                        |  |               |      |        |   |        |                       |  |   | 0.5                       |   |  |              | 3.5   |   |              |   |         |   |  |   | 4.0  
|Accruals and other current liabilities        |  |               |      |        |   | 8.9     |                       |  |   | 19.2                      |   |  |              | 26.5  |   |              |   |         |   |  |   | 54.6 
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total current liabilities                     |  |               |      |        |   | (12.1   | )                     |  |   | 74.5                      |   |  |              | 50.6  |   |              |   |         |   |  |   | 113.0
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Notes payable to affiliates                   |  |               | 462.3 |        |   | (0.8    | )                     |  |   | (0.5                      | ) |  |              | 1.3   |   |              |   | (462.3   | ) |  |   |     
|Long-term debt, less current portion          |  |               |      |        |   | 470.5   |                       |  |   |                          |   |  |              | 29.3  |   |              |   |         |   |  |   | 499.8
|Pensions                                      |  |               |      |        |   |        |                       |  |   | 0.8                       |   |  |              | 38.0  |   |              |   |         |   |  |   | 38.8 
|Deferred income taxes                         |  |               |      |        |   |        |                       |  |   | 60.0                      |   |  |              | 22.2  |   |              |   |         |   |  |   | 82.2 
|Other long-term liabilities                   |  |               |      |        |   |        |                       |  |   | 6.8                       |   |  |              | 4.3   |   |              |   |         |   |  |   | 11.1 
|Minority interest                             |  |               |      |        |   |        |                       |  |   |                          |   |  |              | 1.3   |   |              |   |         |   |  |   | 1.3  
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities                             |  |               | 462.3 |        |   | 457.6   |                       |  |   | 141.6                     |   |  |              | 147.0 |   |              |   | (462.3   | ) |  |   | 746.2
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Stockholders equity                          |  |               | 194.0 |        |   | 575.4   |                       |  |   | 596.4                     |   |  |              | 87.4  |   |              |   | (1,259.2 | ) |  |   | 194.0
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities and stockholders equity    |  | $             | 656.3 |        | $ | 1,033.0 |                       |  | $ | 738.0                     |   |  | $            | 234.4 |   |              | $ | (1,721.5 | ) |  | $ | 940.2
|                                              |  |               |       |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      



14



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##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Statements of Operations (unaudited)

Fiscal Quarter Ended September 30, 2005



|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ---- | ---------------------- |  | - | -------------------------- | - |  | ------------ | ---- | - | ------------ | - | ---- | - |  | - | ----- | -
|                                                        |  | Parent        |      |   | Issuer |   |      | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Eliminations |      |   | Consolidated |  
|                                                        |  | (in millions) |     
|Net sales                                               |  | $             |     |   |        | $ |     |                        |  | $ | 98.8                       |   |  | $            | 45.2 |   |              | $ | (1.9 | ) |  | $ | 142.1 |  
|Cost of sales                                           |  |               |     |   |        |   |     |                        |  |   | 68.4                       |   |  |              | 33.3 |   |              |   | (1.9 | ) |  |   | 99.8  |  
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Gross profit                                            |  |               |     |   |        |   |     |                        |  |   | 30.4                       |   |  |              | 11.9 |   |              |   |     |   |  |   | 42.3  |  
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Selling, general and administrative expenses            |  |               |     |   |        |   |     |                        |  |   | 14.8                       |   |  |              | 12.8 |   |              |   |     |   |  |   | 27.6  |  
|Restructuring costs                                     |  |               |     |   |        |   |     |                        |  |   | 0.1                        |   |  |              | 0.7  |   |              |   |     |   |  |   | 0.8   |  
|Amortization of intangible assets                       |  |               |     |   |        |   | 2.0  |                        |  |   | 2.9                        |   |  |              | 0.7  |   |              |   |     |   |  |   | 5.6   |  
|Other operating expense, net                            |  |               |     |   |        |   |     |                        |  |   | 0.8                        |   |  |              |     |   |              |   |     |   |  |   | 0.8   |  
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Operating (loss) income                                 |  |               |     |   |        |   | (2.0 | )                      |  |   | 11.8                       |   |  |              | (2.3 | ) |              |   |     |   |  |   | 7.5   |  
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Non-operating (expense) income:                         |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Interest (expense) income, net                          |  |               |     |   |        |   | (9.8 | )                      |  |   | 0.7                        |   |  |              | (0.8 | ) |              |   |     |   |  |   | (9.9  | )
|Equity in (loss) earnings of subsidiaries               |  |               | (4.9 | ) |        |   | 11.6 |                        |  |   | 0.8                        |   |  |              |     |   |              |   | (7.5 | ) |  |   |      |  
|Other (expense) income, net                             |  |               |     |   |        |   |     |                        |  |   | (0.3                       | ) |  |              | 0.1  |   |              |   |     |   |  |   | (0.2  | )
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income before income taxes and minority interest |  |               | (4.9 | ) |        |   | (0.2 | )                      |  |   | 13.0                       |   |  |              | (3.0 | ) |              |   | (7.5 | ) |  |   | (2.6  | )
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Provision for income taxes                              |  |               |     |   |        |   | 0.2  |                        |  |   | 1.4                        |   |  |              | 0.4  |   |              |   |     |   |  |   | 2.0   |  
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income before minority interest                  |  |               | (4.9 | ) |        |   | (0.4 | )                      |  |   | 11.6                       |   |  |              | (3.4 | ) |              |   | (7.5 | ) |  |   | (4.6  | )
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Minority interest                                       |  |               |     |   |        |   |     |                        |  |   |                           |   |  |              | (0.3 | ) |              |   |     |   |  |   | (0.3  | )
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Net (loss) income                                       |  | $             | (4.9 | ) |        | $ | (0.4 | )                      |  | $ | 11.6                       |   |  | $            | (3.7 | ) |              | $ | (7.5 | ) |  | $ | (4.9  | )
|                                                        |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  



15



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Statements of Operations (unaudited)

Six Months Ended September 30, 2005



|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ----- | ---------------------- |  | - | -------------------------- | - |  | ------------ | ---- | - | ------------ | - | ----- | - |  | - | ----- | -
|                                                        |  | Parent        |      |   | Issuer |   |       | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Eliminations |      |   | Consolidated |  
|                                                        |  | (in millions) |     
|Net sales                                               |  | $             |     |   |        | $ |      |                        |  | $ | 201.3                      |   |  | $            | 91.1 |   |              | $ | (3.5  | ) |  | $ | 288.9 |  
|Cost of sales                                           |  |               |     |   |        |   |      |                        |  |   | 139.5                      |   |  |              | 66.3 |   |              |   | (3.5  | ) |  |   | 202.3 |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Gross profit                                            |  |               |     |   |        |   |      |                        |  |   | 61.8                       |   |  |              | 24.8 |   |              |   |      |   |  |   | 86.6  |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Selling, general and administrative expenses            |  |               |     |   |        |   | 0.1   |                        |  |   | 28.8                       |   |  |              | 25.7 |   |              |   |      |   |  |   | 54.6  |  
|Restructuring costs                                     |  |               |     |   |        |   |      |                        |  |   | 0.4                        |   |  |              | 1.8  |   |              |   |      |   |  |   | 2.2   |  
|Amortization of intangible assets                       |  |               |     |   |        |   | 3.8   |                        |  |   | 6.0                        |   |  |              | 1.5  |   |              |   |      |   |  |   | 11.3  |  
|Other operating expense, net                            |  |               |     |   |        |   |      |                        |  |   | 1.6                        |   |  |              |     |   |              |   |      |   |  |   | 1.6   |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Operating (loss) income                                 |  |               |     |   |        |   | (3.9  | )                      |  |   | 25.0                       |   |  |              | (4.2 | ) |              |   |      |   |  |   | 16.9  |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Non-operating (expense) income:                         |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Interest (expense) income, net                          |  |               |     |   |        |   | (18.7 | )                      |  |   | 1.2                        |   |  |              | (1.5 | ) |              |   |      |   |  |   | (19.0 | )
|Equity in (loss) earnings of subsidiaries               |  |               | (9.1 | ) |        |   | 24.2  |                        |  |   | 1.1                        |   |  |              |     |   |              |   | (16.2 | ) |  |   |      |  
|Other expense, net                                      |  |               |     |   |        |   |      |                        |  |   | (0.2                       | ) |  |              | (2.0 | ) |              |   |      |   |  |   | (2.2  | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|(Loss) income before income taxes and minority interest |  |               | (9.1 | ) |        |   | 1.6   |                        |  |   | 27.1                       |   |  |              | (7.7 | ) |              |   | (16.2 | ) |  |   | (4.3  | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Provision for income taxes                              |  |               |     |   |        |   | 0.5   |                        |  |   | 3.2                        |   |  |              | 0.7  |   |              |   |      |   |  |   | 4.4   |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|(Loss) income before minority interest                  |  |               | (9.1 | ) |        |   | 1.1   |                        |  |   | 23.9                       |   |  |              | (8.4 | ) |              |   | (16.2 | ) |  |   | (8.7  | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Minority interest                                       |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | (0.4 | ) |              |   |      |   |  |   | (0.4  | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  
|Net (loss) income                                       |  | $             | (9.1 | ) |        | $ | 1.1   |                        |  | $ | 23.9                       |   |  | $            | (8.8 | ) |              | $ | (16.2 | ) |  | $ | (9.1  | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |       |   |  |   |       |  



16



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Statements of Operations (unaudited)

Fiscal Quarter Ended September 30, 2004



|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|---------------------------------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ---- | ---------------------- |  | - | -------------------------- | - |  | ------------ | ---- | - | ------------ | - | ---- | - |  | - | ----- | -
|                                                                                   |  | Parent        |      |   | Issuer |   |      | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Eliminations |      |   | Consolidated |  
|                                                                                   |  | (in millions) |     
|Net sales                                                                          |  | $             |     |   |        | $ |     |                        |  | $ | 101.9                      |   |  | $            | 42.7 |   |              | $ | (1.4 | ) |  | $ | 143.2 |  
|Cost of sales                                                                      |  |               |     |   |        |   |     |                        |  |   | 69.1                       |   |  |              | 32.5 |   |              |   | (1.4 | ) |  |   | 100.2 |  
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Gross profit                                                                       |  |               |     |   |        |   |     |                        |  |   | 32.8                       |   |  |              | 10.2 |   |              |   |     |   |  |   | 43.0  |  
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Selling, general and administrative expenses                                       |  |               |     |   |        |   | 0.2  |                        |  |   | 13.3                       |   |  |              | 11.8 |   |              |   |     |   |  |   | 25.3  |  
|Restructuring costs                                                                |  |               |     |   |        |   | (0.1 | )                      |  |   |                           |   |  |              | 2.6  |   |              |   |     |   |  |   | 2.5   |  
|Amortization of intangible assets                                                  |  |               |     |   |        |   | 1.9  |                        |  |   | 2.7                        |   |  |              | 0.9  |   |              |   |     |   |  |   | 5.5   |  
|Other operating expense, net                                                       |  |               |     |   |        |   | 0.2  |                        |  |   | 0.6                        |   |  |              | 0.4  |   |              |   |     |   |  |   | 1.2   |  
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Operating (loss) income from continuing operations                                 |  |               |     |   |        |   | (2.2 | )                      |  |   | 16.2                       |   |  |              | (5.5 | ) |              |   |     |   |  |   | 8.5   |  
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Non-operating (expense) income:                                                    |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Interest (expense) income, net                                                     |  |               |     |   |        |   | (8.9 | )                      |  |   | 0.2                        |   |  |              | (0.4 | ) |              |   |     |   |  |   | (9.1  | )
|Equity in (loss) earnings of subsidiaries                                          |  |               | (2.2 | ) |        |   | 6.5  |                        |  |   | (3.6                       | ) |  |              |     |   |              |   | (0.7 | ) |  |   |      |  
|Other income (expense), net                                                        |  |               |     |   |        |   |     |                        |  |   | 0.1                        |   |  |              | (0.1 | ) |              |   |     |   |  |   |      |  
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income from continuing operations before income taxes and minority interest |  |               | (2.2 | ) |        |   | (4.6 | )                      |  |   | 12.9                       |   |  |              | (6.0 | ) |              |   | (0.7 | ) |  |   | (0.6  | )
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Benefit) provision for income taxes                                               |  |               |     |   |        |   | (4.5 | )                      |  |   | 6.4                        |   |  |              | (0.1 | ) |              |   |     |   |  |   | 1.8   |  
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income from continuing operations before minority interest                  |  |               | (2.2 | ) |        |   | (0.1 | )                      |  |   | 6.5                        |   |  |              | (5.9 | ) |              |   | (0.7 | ) |  |   | (2.4  | )
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Minority interest                                                                  |  |               |     |   |        |   |     |                        |  |   |                           |   |  |              | 0.2  |   |              |   |     |   |  |   | 0.2   |  
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income from continuing operations                                           |  |               | (2.2 | ) |        |   | (0.1 | )                      |  |   | 6.5                        |   |  |              | (5.7 | ) |              |   | (0.7 | ) |  |   | (2.2  | )
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income from discontinued operations                                         |  |               | (0.5 | ) |        |   | (0.1 | )                      |  |   | (0.1                       | ) |  |              | (0.4 | ) |              |   | 0.6  |   |  |   | (0.5  | )
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Net (loss) income                                                                  |  | $             | (2.7 | ) |        | $ | (0.2 | )                      |  | $ | 6.4                        |   |  | $            | (6.1 | ) |              | $ | (0.1 | ) |  | $ | (2.7  | )
|                                                                                   |  |               |      |   |        |   |      |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  



17



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Statements of Operations (unaudited)

Six Months Ended September 30, 2004



|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|---------------------------------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ----- | ---------------------- |  | - | -------------------------- | - |  | ------------ | ----- | - | ------------ | - | ----- | - |  | - | ----- | -
|                                                                                   |  | Parent        |      |   | Issuer |   |       | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Eliminations |       |   | Consolidated |  
|                                                                                   |  | (in millions) |     
|Net sales                                                                          |  | $             |     |   |        | $ |      |                        |  | $ | 200.1                      |   |  | $            | 85.3  |   |              | $ | (2.8  | ) |  | $ | 282.6 |  
|Cost of sales                                                                      |  |               |     |   |        |   |      |                        |  |   | 136.3                      |   |  |              | 64.8  |   |              |   | (2.8  | ) |  |   | 198.3 |  
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Gross profit                                                                       |  |               |     |   |        |   |      |                        |  |   | 63.8                       |   |  |              | 20.5  |   |              |   |      |   |  |   | 84.3  |  
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Selling, general and administrative expenses                                       |  |               |     |   |        |   | 0.2   |                        |  |   | 25.6                       |   |  |              | 23.6  |   |              |   |      |   |  |   | 49.4  |  
|Restructuring costs                                                                |  |               |     |   |        |   | 0.3   |                        |  |   |                           |   |  |              | 4.2   |   |              |   |      |   |  |   | 4.5   |  
|Amortization of intangible assets                                                  |  |               |     |   |        |   | 3.8   |                        |  |   | 5.3                        |   |  |              | 1.4   |   |              |   |      |   |  |   | 10.5  |  
|Other operating expense, net                                                       |  |               |     |   |        |   | 0.2   |                        |  |   | 1.1                        |   |  |              | 0.4   |   |              |   |      |   |  |   | 1.7   |  
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Operating (loss) income from continuing operations                                 |  |               |     |   |        |   | (4.5  | )                      |  |   | 31.8                       |   |  |              | (9.1  | ) |              |   |      |   |  |   | 18.2  |  
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Non-operating (expense) income:                                                    |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Interest (expense) income, net                                                     |  |               |     |   |        |   | (17.9 | )                      |  |   | 0.2                        |   |  |              | (0.8  | ) |              |   |      |   |  |   | (18.5 | )
|Equity in (loss) earnings of subsidiaries                                          |  |               | (2.8 | ) |        |   | 16.8  |                        |  |   | (3.7                       | ) |  |              |      |   |              |   | (10.3 | ) |  |   |      |  
|Other income (expense), net                                                        |  |               |     |   |        |   |      |                        |  |   | 0.1                        |   |  |              | (0.1  | ) |              |   |      |   |  |   |      |  
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|(Loss) income from continuing operations before income taxes and minority interest |  |               | (2.8 | ) |        |   | (5.6  | )                      |  |   | 28.4                       |   |  |              | (10.0 | ) |              |   | (10.3 | ) |  |   | (0.3  | )
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|(Benefit) provision for income taxes                                               |  |               |     |   |        |   | (9.1  | )                      |  |   | 11.6                       |   |  |              | 0.1   |   |              |   |      |   |  |   | 2.6   |  
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|(Loss) income from continuing operations before minority interest                  |  |               | (2.8 | ) |        |   | 3.5   |                        |  |   | 16.8                       |   |  |              | (10.1 | ) |              |   | (10.3 | ) |  |   | (2.9  | )
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Minority interest                                                                  |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | 0.1   |   |              |   |      |   |  |   | 0.1   |  
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|(Loss) income from continuing operations                                           |  |               | (2.8 | ) |        |   | 3.5   |                        |  |   | 16.8                       |   |  |              | (10.0 | ) |              |   | (10.3 | ) |  |   | (2.8  | )
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|(Loss) income from discontinued operations                                         |  |               | (0.6 | ) |        |   | (0.1  | )                      |  |   | (0.1                       | ) |  |              | (0.5  | ) |              |   | 0.7   |   |  |   | (0.6  | )
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Net (loss) income                                                                  |  | $             | (3.4 | ) |        | $ | 3.4   |                        |  | $ | 16.7                       |   |  | $            | (10.5 | ) |              | $ | (9.6  | ) |  | $ | (3.4  | )
|                                                                                   |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  



18



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Statements of Cash Flows (unaudited)

Six Months Ended September 30, 2005



|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|-------------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ----- | ---------------------- |  | - | -------------------------- | - |  | ------------ | ----- | - | ------------ | - | ----- | - |  | - | ----- | -
|                                                               |  | Parent        |      |   | Issuer |   |       | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Eliminations |       |   | Consolidated |  
|                                                               |  | (in millions) |     
|Operating activities                                           |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Net (loss) income                                              |  | $             | (9.1 | ) |        | $ | 1.1   |                        |  | $ | 23.9                       |   |  | $            | (8.8  | ) |              | $ | (16.2 | ) |  | $ | (9.1  | )
|Non-cash adjustments                                           |  |               |     |   |        |   | 4.6   |                        |  |   | 11.8                       |   |  |              | 7.6   |   |              |   |      |   |  |   | 24.0  |  
|Undistributed equity in loss (earnings) of subsidiaries        |  |               | 9.1  |   |        |   | (24.2 | )                      |  |   | (1.1                       | ) |  |              |      |   |              |   | 16.2  |   |  |   |      |  
|Changes in operating assets and liabilities                    |  |               |     |   |        |   | 27.0  |                        |  |   | (36.7                      | ) |  |              | 9.4   |   |              |   |      |   |  |   | (0.3  | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Cash provided by (used in) operating activities                |  |               |     |   |        |   | 8.5   |                        |  |   | (2.1                       | ) |  |              | 8.2   |   |              |   |      |   |  |   | 14.6  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Investing activities                                           |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Expenditures for property, plant and equipment and intangibles |  |               |     |   |        |   |      |                        |  |   | (10.5                      | ) |  |              | (3.4  | ) |              |   |      |   |  |   | (13.9 | )
|Acquisitions, net                                              |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | (10.2 | ) |              |   |      |   |  |   | (10.2 | )
|Other investments                                              |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | 0.5   |   |              |   |      |   |  |   | 0.5   |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Cash used in investing activities                              |  |               |     |   |        |   |      |                        |  |   | (10.5                      | ) |  |              | (13.1 | ) |              |   |      |   |  |   | (23.6 | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Financing activities                                           |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Principal payments on debt                                     |  |               |      |   |        |   | (8.5  | )                      |  |   |                            |   |  |              | (0.2  | ) |              |   |       |   |  |   | (8.7  | )
|Proceeds from joint venture partner                            |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | 6.0   |   |              |   |      |   |  |   | 6.0   |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Net cash (used in) provided by financing activities            |  |               |     |   |        |   | (8.5  | )                      |  |   |                           |   |  |              | 5.8   |   |              |   |      |   |  |   | (2.7  | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Effect of exchange rate changes on cash                        |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | (0.1  | ) |              |   |      |   |  |   | (0.1  | )
|(Decrease) increase in cash and cash equivalents               |  | $             |     |   |        | $ |      |                        |  | $ | (12.6                      | ) |  | $            | 0.8   |   |              | $ |      |   |  | $ | (11.8 | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Cash and cash equivalents at beginning of year                 |  | $             |     |   |        | $ |      |                        |  | $ | 39.1                       |   |  | $            | 15.8  |   |              | $ |      |   |  | $ | 54.9  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Cash and cash equivalents at end of period                     |  | $             |     |   |        | $ |      |                        |  | $ | 26.5                       |   |  | $            | 16.6  |   |              | $ |      |   |  | $ | 43.1  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  



19



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Statements of Cash Flows (unaudited)

Six Months Ended September 30, 2004



|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ----- | ---------------------- |  | - | -------------------------- | - |  | ------------ | ----- | - | ------------ | - | ---- | - |  | - | ---- | -
|                                                        |  | Parent        |      |   | Issuer |   |       | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Eliminations |       |   | Consolidated |  
|                                                        |  | (in millions) |     
|Operating activities                                    |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Net (loss) income                                       |  | $             | (3.4 | ) |        | $ | 3.4   |                        |  | $ | 16.7                       |   |  | $            | (10.5 | ) |              | $ | (9.6 | ) |  | $ | (3.4 | )
|Non-cash adjustments                                    |  |               |     |   |        |   | 5.1   |                        |  |   | 10.0                       |   |  |              | 4.4   |   |              |   |     |   |  |   | 19.5 |  
|Undistributed equity in loss (earnings) of subsidiaries |  |               | 3.4  |   |        |   | (16.7 | )                      |  |   | 3.7                        |   |  |              |      |   |              |   | 9.6  |   |  |   |     |  
|Changes in operating assets and liabilities             |  |               |     |   |        |   | 14.8  |                        |  |   | (22.5                      | ) |  |              | 4.0   |   |              |   |     |   |  |   | (3.7 | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Cash provided by (used in) operating activities         |  |               |     |   |        |   | 6.6   |                        |  |   | 7.9                        |   |  |              | (2.1  | ) |              |   |     |   |  |   | 12.4 |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Investing activities                                    |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Expenditures for property, plant and equipment          |  |               |     |   |        |   |      |                        |  |   | (6.4                       | ) |  |              | (2.2  | ) |              |   |     |   |  |   | (8.6 | )
|Acquisitions, net                                       |  |               |     |   |        |   | 5.0   |                        |  |   |                           |   |  |              | (5.0  | ) |              |   |     |   |  |   |     |  
|Proceeds from sale of assets                            |  |               |     |   |        |   |      |                        |  |   | 0.3                        |   |  |              | 1.7   |   |              |   |     |   |  |   | 2.0  |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Cash provided by (used in) investing activities         |  |               |     |   |        |   | 5.0   |                        |  |   | (6.1                       | ) |  |              | (5.5  | ) |              |   |     |   |  |   | (6.6 | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Financing activities                                    |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Activity with affiliates                                |  |               |     |   |        |   | (8.9  | )                      |  |   | 3.5                        |   |  |              | 5.4   |   |              |   |     |   |  |   |     |  
|Decrease in short-term borrowings                       |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | (2.4  | ) |              |   |     |   |  |   | (2.4 | )
|Principal payments on debt                              |  |               |     |   |        |   | (2.9  | )                      |  |   |                           |   |  |              |      |   |              |   |     |   |  |   | (2.9 | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Net cash (used in) provided by financing activities     |  |               |     |   |        |   | (11.8 | )                      |  |   | 3.5                        |   |  |              | 3.0   |   |              |   |     |   |  |   | (5.3 | )
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Effect of exchange rate changes on cash                 |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | 0.1   |   |              |   |     |   |  |   | 0.1  |  
|(Decrease) increase in cash and cash equivalents        |  | $             |     |   |        | $ | (0.2  | )                      |  |   | 5.3                        |   |  |              | (4.5  | ) |              | $ |     |   |  | $ | 0.6  |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Cash and cash equivalents at beginning of year          |  | $             |     |   |        | $ | 12.7  |                        |  | $ | 18.1                       |   |  | $            | 17.7  |   |              | $ |     |   |  | $ | 48.5 |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  
|Cash and cash equivalents at end of period              |  | $             |     |   |        | $ | 12.5  |                        |  | $ | 23.4                       |   |  | $            | 13.2  |   |              | $ |     |   |  | $ | 49.1 |  
|                                                        |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |      |   |  |   |      |  



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



13. Segment Information



Reporting Segments



The Company has two principal product groups: metering systems products and support products. Metering systems products include advanced metering and
related automatic meter reading, or AMR, communications systems and consists of four principal metering product categories: water, gas, heat and electric. Support products include pipe joining and repair products and die-casting products. The two
product groups, plus corporate operations, are organized into two reporting segments: Metering and Related Communication Systems and All Other. The segment information is based on the Companys current segment reporting structure and historical
information has been conformed to the current structure.



Inter-segment sales are generally made at cost. Cost of sales is based on standard cost, which includes materials, direct labor, warranty expense, overhead allocation, as well as variances from standard costs. Operating expenses directly
associated with the reporting group may include sales, marketing, product development and administrative expenses and amortization of intangible assets.



Corporate operating expenses, interest expense, amortization of deferred financing costs and management fees are not allocated to the product lines, and
are incorporated in the All Other operating segment.



Reporting Segment Products



|                                           |  |                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Reporting Segment                          |  | Major Products                                                                                                                                                                                                                                                                                                                                                                     
|Metering and Related Communication Systems |  | Commercial and residential water, gas, electric and heat meters and systems used by utilities. AMR metering systems, handheld computers and related installation and implementation
support.                                                                                                                                                                                       
|                                           | 
|All Other                                  |  | Pipe joining, tapping and repair products that consist principally of pipe couplings, tapping sleeves and saddles, and repair clamps that are used by utilities in pipe joining and pipe repair
applications. Die casting products that consist of high quality thin-wall, low porosity aluminum die-castings, generally targeting the automotive industry and gas utility markets.



The following tables
provide significant changes in trends or components of revenue and operating income (loss) for each segment (in millions):



|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|------------------------------------------------------- |  | -------------------- | ----- | - | ----------------- | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                        |  | Fiscal Quarter Ended |       |   | Six Months Ended  |  
|                                                        |  | September 30,2005    |       |   | September 30,2004 |   |       | September 30,2005 |  |   | September 30,2004 |  
|Segment revenues                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Metering and related communication systems              |  | $                    | 116.3 |   |                   | $ | 119.3 |                   |  | $ | 239.8             |   |  | $ | 235.1 |  
|All other                                               |  |                      | 29.1  |   |                   |   | 29.9  |                   |  |   | 58.2              |   |  |   | 58.5  |  
|Eliminations                                            |  |                      | (3.3  | ) |                   |   | (6.0  | )                 |  |   | (9.1              | ) |  |   | (11.0 | )
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Total                                                   |  | $                    | 142.1 |   |                   | $ | 143.2 |                   |  | $ | 288.9             |   |  | $ | 282.6 |  
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Operating income (loss)                                 |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Metering and related communication systems              |  | $                    | 8.3   |   |                   | $ | 7.8   |                   |  | $ | 17.8              |   |  | $ | 16.6  |  
|All other                                               |  |                      | (0.8  | ) |                   |   | 0.7   |                   |  |   | (0.9              | ) |  |   | 1.6   |  
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Total                                                   |  | $                    | 7.5   |   |                   | $ | 8.5   |                   |  | $ | 16.9              |   |  | $ | 18.2  |  
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Profit (loss) before income taxes and minority interest |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Metering and related communication systems              |  | $                    | 8.0   |   |                   | $ | 7.4   |                   |  | $ | 15.0              |   |  | $ | 15.7  |  
|All other                                               |  |                      | (10.6 | ) |                   |   | (8.0  | )                 |  |   | (19.3             | ) |  |   | (16.0 | )
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Total                                                   |  | $                    | (2.6  | ) |                   | $ | (0.6  | )                 |  | $ | (4.3              | ) |  | $ | (0.3  | )
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  



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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.



NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Geographic Segments



Net sales to third parties and long-lived assets by geographic region are as follows (in millions):



|                            |  |                                  |       |                                  |   |                   |  |               |       |  |   |      
|--------------------------- |  | -------------------------------- | ----- | -------------------------------- | - | ----------------- |  | ------------- | ----- |  | - | -----
|                            |  | Net Sales to Third Parties       |       | Long-Lived Assets               
|                            |  | Six MonthsEndedSeptember 30,2005 |       | Six MonthsEndedSeptember 30,2004 |   | September 30,2005 |  | March 31,2005
|North America               |  | $                                | 201.2 |                                  | $ | 199.3             |  | $             | 560.1 |  | $ | 566.3
|Europe, Middle East, Africa |  |                                  | 79.6  |                                  |   | 77.7              |  |               | 107.6 |  |   | 112.4
|South America               |  |                                  | 5.0   |                                  |   | 3.0               |  |               | 1.5   |  |   | 1.3  
|Asia                        |  |                                  | 3.1   |                                  |   | 2.6               |  |               | 20.9  |  |   | 7.7  
|                            |  |                                  |       |                                  |   |                   |  |               |       |  |   |      
|Total                       |  | $                                | 288.9 |                                  | $ | 282.6             |  | $             | 690.1 |  | $ | 687.7
|                            |  |                                  |       |                                  |   |                   |  |               |       |  |   |      



Net sales to third
parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for long-lived assets are based on the location of the entity that holds such assets.



14. Commitments and Contingent Liabilities



The 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.



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 because
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.



The Company entered into contracts that contain guarantees that could require
performance or payment under certain conditions. The Company has entered into various agreements that require letters of credit for financial assurance purposes. These letters of credit are available to fund the payment of such obligations. At
September 30, 2005, we had $4.8 million of letters of credit outstanding with varying expiration dates.



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##### Table of Contents

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



This 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 us 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 include our dependence on new product development and intellectual property, and our dependence on independent
distributors and third-party contract manufacturers, automotive vehicle production levels and schedules, 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 we operate, and other factors beyond our control.



We operate 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. References herein to a fiscal quarter refer to the three-month period ended as of that date. The following managements discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements for the fiscal quarter and six months ended September 30, 2005 and the related notes thereto included in this report and the audited consolidated financial statements for the year ended March 31, 2005 and
related notes thereto included in our Annual Report on Form 10-K filed with the SEC.



Unless the context otherwise indicates or requires, the use in this Quarterly Report on Form 10-Q of the terms we, us or our refers to Sensus Metering Systems (Bermuda 2) Ltd.
and its consolidated subsidiaries. Unless we indicate otherwise, we have rounded dollar amounts to the nearest hundred thousand dollars.



General



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 and have a substantial share of the sales of automated meter reading (AMR) devices to North American water utilities. Additionally, we believe that we are a leading global developer and
manufacturer of gas and heat metering systems and are an emerging participant in the North American electric metering market with iCon, our solid-state electric meter. We are recognized throughout the metering industry for developing and
manufacturing metering products with long-term accuracy and unique product features, as well as for providing comprehensive customer service for all of our products. In addition to our metering business, we believe we are the leading North American
producer of pipe joining and repair products for water and natural gas utilities and a premier supplier of precision-manufactured, thin-wall, low-porosity aluminum die-castings.



During the fiscal quarter and six months ended September 30, 2005, we:



| |  |  | increased sales for the six-month period by 2% over the same period in the prior year;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | maintained gross margin percentages at historic levels;
| | - |  | -------------------------------------------------------



| |  |  | continued restructuring activities to align manufacturing operations with market conditions;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | acquired assets to expand our die-casting business into Asia/Pacific markets; and
| | - |  | ---------------------------------------------------------------------------------



| |  |  | accelerated payments on our long-term debt to reduce future interest expense.
| | - |  | -----------------------------------------------------------------------------



23



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##### Table of Contents

History and the Acquisition



The Company was formed on December 17, 2003 through the acquisition of the metering systems and certain other businesses of
Invensys plc (the Acquisition). We and our 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. We are a
recently formed company with limited operating history as a stand-alone company, which may lead to risks or unanticipated expenses similar to those of a start-up company.



Recent Restructuring and Cost Savings Initiatives



In fiscal 2005, we implemented a number of initiatives to reduce our overall
cost base and improve operating margins. We expect to incur additional restructuring costs of approximately $3.3 million in fiscal 2006 to conclude the ongoing initiatives, generating savings in direct labor costs, manufacturing overhead costs and
general and administrative costs resulting in estimated annual savings of $2.7 million. For the fiscal quarter and six months ended September 30, 2005, we incurred $0.8 million and $2.2 million, respectively, of restructuring costs, primarily
related to employee severance and exit activities.



Other Information About
Our Business



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



|                              |  |                      |       |             |   |               |  |                |       |                   |   |             |  |   |       |  |   |      
|----------------------------- |  | -------------------- | ----- | ----------- | - | ------------- |  | -------------- | ----- | ----------------- | - | ----------- |  | - | ----- |  | - | -----
|                              |  | Fiscal Quarter Ended
|                              |  | September 30,2005    |       | July 2,2005 |   | March 31,2005 |  | January 1,2005 |       | September 30,2004 |   | July 3,2004
|Orders (in millions)          |  | $                    | 153.9 |             | $ | 150.5         |  | $              | 168.6 |                   | $ | 138.7       |  | $ | 138.8 |  | $ | 143.2
|Total net sales (in millions) |  | $                    | 142.1 |             | $ | 146.8         |  | $              | 162.9 |                   | $ | 124.3       |  | $ | 143.2 |  | $ | 139.4
|Employees                     |  |                      | 3,914 |             |   | 3,372         |  |                | 3,350 |                   |   | 3,269       |  |   | 3,366 |  |   | 3,424



Results of Operations



The following table provides results of operations of the
Company:



|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   
|---------------------------------------------------------------------------------- |  | ------------------------------------- | ----- | - | - | --- | -- | ------------------------------------- | - | ----- | - |  | --- | --------------------------------- |  | - | ----- | - |  | --------------------------------- | -- |  | - | ----- | - |  | --- | --
|($ in millions)                                                                    |  | Fiscal QuarterEnded September 30,2005 |       |   | % |     |    | Fiscal QuarterEnded September 30,2004 |   |       | % |  |     | Six MonthsEnded September 30,2005 |  |   | %     |   |  | Six MonthsEnded September 30,2004 |    |  | % |      
|Net sales                                                                          |  | $                                     | 142.1 |   |   | 100 | %  |                                       | $ | 143.2 |   |  | 100 | %                                 |  | $ | 288.9 |   |  | 100                               | %  |  | $ | 282.6 |   |  | 100 | % 
|Gross profit                                                                       |  |                                       | 42.3  |   |   | 30  | %  |                                       |   | 43.0  |   |  | 30  | %                                 |  |   | 86.6  |   |  | 30                                | %  |  |   | 84.3  |   |  | 30  | % 
|Selling, general and administrative expenses                                       |  |                                       | 27.6  |   |   | 19  | %  |                                       |   | 25.3  |   |  | 18  | %                                 |  |   | 54.6  |   |  | 19                                | %  |  |   | 49.4  |   |  | 17  | % 
|Restructuring costs                                                                |  |                                       | 0.8   |   |   | 1   | %  |                                       |   | 2.5   |   |  | 1   | %                                 |  |   | 2.2   |   |  | 1                                 | %  |  |   | 4.5   |   |  | 2   | % 
|Amortization of intangible assets                                                  |  |                                       | 5.6   |   |   | 4   | %  |                                       |   | 5.5   |   |  | 4   | %                                 |  |   | 11.3  |   |  | 4                                 | %  |  |   | 10.5  |   |  | 4   | % 
|Other operating expense, net                                                       |  |                                       | 0.8   |   |   | 1   | %  |                                       |   | 1.2   |   |  | 1   | %                                 |  |   | 1.6   |   |  |                                  |    |  |   | 1.7   |   |  |    |   
|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   
|Operating income from continuing operations                                        |  |                                       | 7.5   |   |   | 5   | %  |                                       |   | 8.5   |   |  | 6   | %                                 |  |   | 16.9  |   |  | 6                                 | %  |  |   | 18.2  |   |  | 7   | % 
|Interest expense, net                                                              |  |                                       | (9.9  | ) |   | (7  | )% |                                       |   | (9.1  | ) |  | (6  | )%                                |  |   | (19.0 | ) |  | (6                                | )% |  |   | (18.5 | ) |  | (7  | )%
|Other non-operating expense, net                                                   |  |                                       | (0.2  | ) |   |    |    |                                       |   |      |   |  |    |                                   |  |   | (2.2  | ) |  | (1                                | )% |  |   |      |   |  |    |   
|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   
|(Loss) income from continuing operations before income taxes and minority interest |  |                                       | (2.6  | ) |   | (2  | )% |                                       |   | (0.6  | ) |  |    |                                   |  |   | (4.3  | ) |  | (1                                | )% |  |   | (0.3  | ) |  |    |   
|Provision for income taxes                                                         |  |                                       | 2.0   |   |   | 1   | %  |                                       |   | 1.8   |   |  | 1   | %                                 |  |   | 4.4   |   |  | 2                                 | %  |  |   | 2.6   |   |  | 1   | % 
|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   
|Loss from continuing operations before minority interest                           |  |                                       | (4.6  | ) |   | (3  | )% |                                       |   | (2.4  | ) |  | (1  | )%                                |  |   | (8.7  | ) |  | (3                                | )% |  |   | (2.9  | ) |  | (1  | )%
|Minority interest                                                                  |  |                                       | (0.3  | ) |   |    |    |                                       |   | 0.2   |   |  |    |                                   |  |   | (0.4  | ) |  |                                  |    |  |   | 0.1   |   |  |    |   
|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   
|Loss from continuing operations                                                    |  |                                       | (4.9  | ) |   | (3  | )% |                                       |   | (2.2  | ) |  | (1  | )%                                |  |   | (9.1  | ) |  | (3                                | )% |  |   | (2.8  | ) |  | (1  | )%
|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   
|Loss from discontinued operations                                                  |  |                                       |      |   |   |    |    |                                       |   | (0.5  | ) |  |    |                                   |  |   |      |   |  |                                  |    |  |   | (0.6  | ) |  |    |   
|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   
|Net loss                                                                           |  | $                                     | (4.9  | ) |   | (3  | )% |                                       | $ | (2.7  | ) |  | (1  | )%                                |  | $ | (9.1  | ) |  | (3                                | )% |  | $ | (3.4  | ) |  | (1  | )%
|                                                                                   |  |                                       |       |   |   |     |    |                                       |   |       |   |  |     |                                   |  |   |       |   |  |                                   |    |  |   |       |   |  |     |   



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Fiscal Quarter and Six Months Ended September 30, 2005 Compared with Fiscal Quarter and Six Months Ended September
30, 2004



Net Sales. Sales decreased $1.1
million, or 1%, from $143.2 million in the fiscal quarter ended September 30, 2004 to $142.1 million in the fiscal quarter ended September 30, 2005. For the six months ended September 30, 2005, net sales increased $6.3 million, or 2%, to $288.9
million from $282.6 million in the six months ended September 30, 2004. Favorable currency translation, due primarily to the appreciation of the euro against the U.S. dollar, accounted for a sales increase of $0.5 million and $2.6 million for the
fiscal quarter and six months ended September 30, 2005, respectively. We continue to experience strong demand for metering systems, due to continued growth of AMR applications and strong product sales for water and gas meters. North American sales
of water meters for the fiscal quarter ended September 30, 2005 decreased by $0.4 million, or 1%, compared to the fiscal quarter ended September 30, 2004, primarily as a result of decreased AMR sales due to timing of new product introductions into
the market. However, North American sales of water meters for the six months ended September 30, 2005 increased $2.7 million, or 2.4%, compared to the six months ended September 30, 2004, due to continued buoyancy for AMR applications and products.
Gas meter sales in North America decreased $2.4 million, or 15%, as compared to the prior year fiscal quarter, and by $1.0 million, or 4%, compared to the prior year six-month fiscal period. This decrease can be attributed to increased sales in the
fiscal quarter ended September 30, 2004 due to working down of prior year backlog resulting from a work stoppage at the Companys precision die casting operation in the third fiscal quarter of 2004. Electric meter sales decreased marginally
from the prior year fiscal quarter and prior year six-month fiscal period, respectively.



The Europe/Middle East/Africa water meter market experienced decreased sales of $0.7 million, or 2%, for the fiscal quarter ended September 30, 2005, net of foreign currency impact, as compared to the fiscal quarter
ended September 30, 2004. This decrease is a result of volume declines in Germany, partially offset by favorable market mix in Eastern Europe and Africa. The Europe/Middle East/Africa water meter market sales for the six months ended September 30,
2005, net of foreign currency impact, remained flat as compared to the six-month period ended September 30, 2004, due to new ventures and growth in Eastern Europe and Africa offsetting volume declines in Germany. South American sales increased, net
of foreign currency impact, $0.5 million, or 30%, for the fiscal quarter ended September 30, 2005 as compared to the prior fiscal quarter and $1.2 million, or 40%, for the six months ended September 30, 2005 as compared to the prior year six-month
fiscal period due to increased water meter sales volumes in Brazil. Third-party sales from our precision die casting products remained relatively consistent compared to the fiscal quarter ended September 30, 2004, and increased $0.4 million as
compared to the fiscal six months ended September 30, 2004 due to expansion into China. Pipe joining and repair products sales increased by $2.5 million, or 17%, for the fiscal quarter ended September 30, 2005 as compared to the prior year fiscal
quarter, and by $2.7 million, or 9%, for the six months ended September 30, 2005 as compared to the prior year six-month fiscal period.



Our top ten customers accounted for approximately 34% of total net sales in the six months ended September 30, 2005. Sales to distributors affiliated with
National Waterworks, Inc., our largest customer, constituted approximately 13% of total net sales, and 12% of metering sales in the six months ended September 30, 2005. In August 2005, National Waterworks, Inc. was acquired by and became a wholly
owned subsidiary of The Home Depot, Inc. No other individual customer accounted for more than 5% of total net sales.



We expect that net sales will be strong for the remainder of the fiscal year, with increases over the prior fiscal year due to demand for AMR systems,
expansion into new markets and favorable general economic trends.



Gross Profit. Gross profit decreased by $0.7 million (including a $0.2 million favorable foreign currency impact), or 2%, from $43.0 million for the fiscal quarter ended September 30, 2004 to $42.3 million for the fiscal quarter
ended September 30, 2005, and was consistent as a percentage of sales at 30%. Gross profit increased by $2.3 million (including a $0.7 million favorable foreign currency impact), or 3%, from $84.3 million for the six months ended September 30, 2004
to $86.6 million for the six months ended September 30, 2005, and was also unchanged as a percentage of sales at 30%. The decrease in gross profit for the current fiscal quarter can be attributed to the decrease in sales volumes as compared to the
prior year fiscal quarter. The increase in gross



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profit in the current six-month period as compared to the prior year six-month period was primarily the result of favorable revenues and favorable market
mix, attributable to higher water meter sales versus lower margin gas and electric sales, and cost reductions resulting from restructuring activities, more than offsetting increased worldwide material prices.



Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the fiscal quarter ended September 30, 2005 increased by $2.3 million, or 9%, to $27.6 million, from $25.3 million for the fiscal quarter ended September 30, 2004. Selling, general and administrative expenses for the six
months ended September 30, 2005 increased by $5.2 million, or 10%, to $54.6 million, from $49.4 million for the six months ended September 30, 2004. Expenses, as a percentage of net sales, increased to 19% from 18% for the fiscal quarter ended
September 30, 2005 compared to the fiscal quarter ended September 30, 2004, and increased to 19% from 17% for the six months ended September 30, 2005 compared to the six months ended September 30, 2004. The increase was due partially to foreign
currency translation that resulted in an increase in foreign-based administrative costs, as expressed in U.S. dollars, of $0.4 million and $1.0 million for the fiscal quarter and six months ended September 30, 2005, respectively. The remaining
increase in selling, general and administrative expenses for the fiscal quarter and six months ended September 30, 2005 was due to increased investments in research and development; a $0.7 million receivable write-down related to the recent
bankruptcy filing of Delphi Corporation (Delphi), a significant customer of the Company; building the finance and accounting function infrastructure and expansion into new markets in China, Italy and Algeria.



Restructuring Costs. Restructuring costs decreased by $1.7 million for
the fiscal quarter ended September 30, 2005 to $0.8 million from $2.5 million for the fiscal quarter ended September 30, 2004 and by $2.3 million for the six months ended September 30, 2005 to $2.2 million from $4.5 million for the six months ended
September 30, 2004. The decrease was the result of the European restructuring activities to achieve our targeted operational footprint nearing completion. Actions to rationalize the pipe joining and gas manufacturing operations are also a component
of current year activities.



Amortization of Intangible
Assets. Amortization of intangible assets increased by $0.1 million from $5.5 million for the fiscal quarter ended September 30, 2004 to $5.6 million for the fiscal quarter ended September 30, 2005 and by $0.8 million from $10.5 million for the
six months ended September 30, 2004 to $11.3 million for the six months ended September 30, 2005. The increase is due to the purchase of intangibles through acquisitions and purchases of technology rights. Amortization expense relates to the
intangible assets recorded at the time of the Acquisition for non-competition agreements, customer relationships and patents.



Other Operating Expense, Net. Other operating expense, net of $0.8 million for the fiscal quarter ended September 30, 2005 decreased by $0.4
million compared to $1.2 million for the fiscal quarter ended September 30, 2004 and decreased by $0.1 million to $1.6 million for the six months ended September 30, 2005 compared to $1.7 million for the six months ended September 30, 2004. The
decrease in other operating expense, net is related primarily to expenses of $0.5 million associated with the Acquisition incurred in the fiscal quarter ended September 30, 2004. For the fiscal quarter ended September 30, 2005, other operating
expense, net consists of the quarterly management fee of $0.5 million paid to The Jordan Company, L.P. and other non-recurring fees and expenses of $0.3 million. For the six months ended September 30, 2005, other operating expense, net relates to
management fees of $1.0 million paid to The Jordan Company, L.P., and $0.6 million of regulatory and other non-recurring fees and expenses.



Interest Expense, Net. Interest expense, net was $9.9 million for the fiscal quarter ended September 30, 2005 compared with $9.1 million for the
fiscal quarter ended September 30, 2004 and $19.0 million for the six months ended September 30, 2005 compared with $18.5 million for the six months ended September 30, 2004. The increase in interest expense, net is the result of rising interest
rates on our variable-rate debt in the current fiscal period.



Other Non-Operating Expense, Net. Other non-operating expense, net of $0.2 million and $2.2 million for the fiscal quarter and six months ended September 30, 2005, respectively, is related primarily to net foreign currency exchange
losses due to remeasurement on intercompany loans in Europe.



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Provision for Income Taxes. Income tax expense for the fiscal quarter ended September 30, 2005
increased by $0.2 million, or 11%, compared with the fiscal quarter ended September 30, 2004 from $1.8 million to $2.0 million and by $1.8 million, or 69%, for the six months ended September 30, 2005 compared with the six months ended September
30, 2004 from $2.6 million to $4.4 million. The current fiscal period effective tax rates were the result of income taxes being incurred on the taxable income of the Companys global 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.



Minority Interest. Minority interest for the fiscal quarter and six months ended September 30, 2005 decreased $0.5 million as compared to the prior
year periods and is related to our partners share of earnings in our Algeria, China and India joint ventures.



Net Loss. Net loss of $4.9 million for the fiscal quarter ended September 30, 2005 increased by $2.2 million as compared to a net loss of $2.7
million for the fiscal quarter ended September 30, 2004. Net loss of $9.1 million for the six months ended September 30, 2005 increased by $5.7 million as compared to a net loss of $3.4 million for the six months ended September 30, 2004. The
following factors contributing to the increase in net loss for the fiscal quarter and six months ended September 30, 2005, as compared to the respective prior year periods, were partially offset by decreased restructuring expenses:



| |  |  | a $0.7 million receivable write-down in the current fiscal quarter related to Delphis bankruptcy filing;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | increased research and development investment;
| | - |  | ----------------------------------------------



| |  |  | greater amortization of intangible assets;
| | - |  | ------------------------------------------



| |  |  | foreign currency exchange losses on remeasurement of intercompany loans; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | increased interest expense resulting from increased interest rates on our variable-rate debt.
| | - |  | ---------------------------------------------------------------------------------------------



EBITDA. EBITDA decreased by $0.1 million from $17.7 million in the fiscal quarter ended September 30, 2004 to $17.6
million in the fiscal quarter ended September 30, 2005 and decreased by $1.6 million from $36.8 million in the six months ended September 30, 2004 to $35.2 million in the six months ended September 30, 2005. The decrease in EBITDA during the fiscal
quarter and six months ended September 30, 2005 as compared to the fiscal quarter and six months ended September 30, 2004 is generally attributable to the following factors, which were partially offset by decreased restructuring expenses:



| |  |  | a $0.7 million receivable write-down in the current fiscal quarter related to Delphis bankruptcy filing;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | increased research and development investment; and
| | - |  | --------------------------------------------------



| |  |  | foreign currency exchange losses on remeasurement of intercompany loans.
| | - |  | ------------------------------------------------------------------------



The discussion of EBITDA is being provided because management considers EBITDA to be an important measure of financial performance. Management believes
that EBITDA provides useful information for our investors for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing performance because items within our
consolidated statements of operations, 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.



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The following table sets forth a quantitative reconciliation of the differences between EBITDA and net
loss calculated in accordance with GAAP for the fiscal quarters and six months ended September 30, 2005 and September 30, 2004 (in millions):



|                                           |  |                                        |      |   |                                        |   |      |                                    |  |   |                                    |   |  |   |      |  
|------------------------------------------ |  | -------------------------------------- | ---- | - | -------------------------------------- | - | ---- | ---------------------------------- |  | - | ---------------------------------- | - |  | - | ---- | -
|                                           |  | Fiscal Quarter EndedSeptember 30, 2005 |      |   | Fiscal Quarter EndedSeptember 30, 2004 |   |      | Six Months EndedSeptember 30, 2005 |  |   | Six Months EndedSeptember 30, 2004 |  
|Net loss                                   |  | $                                      | (4.9 | ) |                                        | $ | (2.7 | )                                  |  | $ | (9.1                               | ) |  | $ | (3.4 | )
|Depreciation and amortization              |  |                                        | 10.3 |   |                                        |   | 9.7  |                                    |  |   | 20.5                               |   |  |   | 19.2 |  
|Interest expense, net                      |  |                                        | 9.9  |   |                                        |   | 9.1  |                                    |  |   | 19.0                               |   |  |   | 18.5 |  
|Income tax provision                       |  |                                        | 2.0  |   |                                        |   | 1.8  |                                    |  |   | 4.4                                |   |  |   | 2.6  |  
|Minority interest                          |  |                                        | 0.3  |   |                                        |   | (0.2 | )                                  |  |   | 0.4                                |   |  |   | (0.1 | )
|                                           |  |                                        |      |   |                                        |   |      |                                    |  |   |                                    |   |  |   |      |  
|EBITDA                                     |  | $                                      | 17.6 |   |                                        | $ | 17.7 |                                    |  | $ | 35.2                               |   |  | $ | 36.8 |  
|                                           |  |                                        |      |   |                                        |   |      |                                    |  |   |                                    |   |  |   |      |  
|Loss from discontinued operations          |  |                                        |     |   |                                        |   | 0.5  |                                    |  |   |                                   |   |  |   | 0.6  |  
|                                           |  |                                        |      |   |                                        |   |      |                                    |  |   |                                    |   |  |   |      |  
|EBITDA (excluding discontinued operations) |  | $                                      | 17.6 |   |                                        | $ | 18.2 |                                    |  | $ | 35.2                               |   |  | $ | 37.4 |  
|                                           |  |                                        |      |   |                                        |   |      |                                    |  |   |                                    |   |  |   |      |  



Liquidity and Capital Resources



During the fiscal quarter and six months ended September
30, 2005, we funded our operating, investing and capital requirements through cash on hand. We generally fund operating and capital requirements from a combination of cash on hand, cash flows from operating activities and borrowings under our senior
credit facilities.



Net cash flow provided by operating
activities for the six months ended September 30, 2005 and September 30, 2004 was $14.6 million and $12.4 million, respectively. The $2.2 million increase in net cash provided by operating activities for the six months ended September 30, 2005 as
compared to the six months ended September 30, 2004 was primarily the result of collection of accounts receivable partially offset by increased inventory purchases and a reduction of accounts payable.



Working capital as a percentage of net sales decreased to 14% for the six
months ended September 30, 2005 as compared with 15% for the six months ended September 30, 2004. The decrease was primarily due to lower receivables and the timing of tax payments.



Cash used for investing activities represents payments for capital expenditures, business acquisitions and other
investments, offset by proceeds from the disposition of property, plant and equipment and business units. Capital expenditures were $12.5 million and $8.6 million for the six months ended September 30, 2005 and September 30, 2004, respectively.
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 2006, we expect to make capital expenditures of
approximately $26.4 million reflecting our continuing emphasis on a growth-oriented capital expenditures program. Business acquisition expenditures of $10.2 million were attributable to the acquired assets and assumed liabilities of the Rongtai
acquisition in the fiscal quarter ended September 30, 2005.



Cash expenditures for restructuring for the six months ended September 30, 2005 and September 30, 2004 totaled $3.3 million and $4.7 million, respectively. As of September 30, 2005, we had $5.4 million of restructuring accruals reflected on
our consolidated balance sheet. Additional restructuring expenses of approximately $3.3 million are expected to be incurred in fiscal year 2006 for current and new restructuring programs.



Cash used in financing activities represents payments for indebtedness to third parties. As a result of the Acquisition, we
incurred substantial third-party indebtedness. Our senior credit facilities provide for senior



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secured financing of $286.8 million, consisting of (a) two term loan facilities in an aggregate amount of $216.8 million, including a $187.5 million U.S.
term loan facility and a $29.3 million European term loan facility, and (b) two revolving credit facilities in an aggregate amount of $70.0 million, under one of which $40.0 million is available 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 U.K. sterling-denominated loans. The term loan facilities mature on December 17, 2010. Borrowing costs under the term loan
facility are based on variable rates tied to the London Interbank Offered Rate (LIBOR) plus a specified margin, or the greater of the Prime Rate and the Federal Funds Effective Rate (Alternative Base Rate) plus a margin. 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. The $6.0 million provided by financing activities for the fiscal quarter and six months ended September 30, 2005 represents the contribution from our PDC Rongtai joint venture partner.



We also have outstanding $275.0 million of senior subordinated
notes, which mature on December 15, 2013 and bear interest at the rate of 85/8% per annum. Interest on the
senior subordinated notes is payable semi-annually in June and December of each year. The senior subordinated notes are our unsecured senior subordinated obligations and rank equally in right of payment to all of our senior subordinated debt,
subordinated in right of payment to all of our senior debt, including our indebtedness under our senior credit facilities, and senior in right of payment to all of our subordinated debt. The senior subordinated notes are guaranteed on a senior
subordinated, unsecured basis by certain of our subsidiaries.



At any time prior to December 15, 2008, we may redeem all, but not less than all, of the senior subordinated notes at our option at a redemption price equal to 100% of the principal amount of the senior subordinated notes, plus a redemption
premium and accrued and unpaid interest. On or after December 15, 2008, we may redeem the senior subordinated notes at the redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest, if redeemed during the
twelve-month period beginning on December 15 of each of the years indicated below:



|                    |  |                  |  
|------------------- |  | ---------------- | -
|Period              |  | Redemption Price |  
|2008                |  | 104.313          | %
|2009                |  | 102.875          | %
|2010                |  | 101.438          | %
|2011 and thereafter |  | 100.000          | %



Also, prior to
December 15, 2006, we may redeem up to 35% of the aggregate principal amount of the senior subordinated notes at a redemption price of 108.625% of the principal amount of the senior subordinated notes, plus accrued and unpaid interest, from the
proceeds of one or more equity offerings. The senior subordinated notes are also redeemable at the option of the holders of such notes at a repurchase price of 101% of the principal amount thereof, plus accrued and unpaid interest, in the event of
certain change of control events related to us.



The indenture
governing the senior subordinated notes contains certain covenants that limit, among other things, our ability to: (i) incur additional indebtedness (including by way of guarantee), subject to certain exceptions, unless we meet a consolidated
coverage ratio of 2.0 to 1.0 or certain other conditions apply; (ii) pay dividends or distributions, or make certain types of investments or other restricted payments, unless we meet certain specified conditions; (iii) create any encumbrance or
restriction on our subsidiary guarantors ability to pay dividends or distributions, repay loans, make loans or advances or transfer any property or assets to us; (iv) dispose of certain assets and capital stock of our subsidiary guarantors;
(v) enter into certain transactions with affiliates; (vi) engage in any new lines of business in which we were not engaged at the time the senior subordinated notes were issued; or (vii) engage in certain mergers and consolidations.



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As of September 30, 2005, we had $495.8 million of total indebtedness outstanding, consisting of $275.0
million under the senior secured facility, $187.5 million under the U.S. term loan facility, $29.3 million under the European term loan facility and $4.0 million in short-term debt assumed in the Rongtai acquisition in the fiscal quarter ended
September 30, 2005. Interest expense, net, including amortization of deferred financing costs, was $19.0 million for the six months ended September 30, 2005. There are no principal payments due on the term loan facilities until September 2006. There
were no borrowings outstanding under the revolving credit facility at September 30, 2005; however, $4.8 million of the facility was utilized in connection with outstanding letters of credit. We are in compliance with all credit facility covenants at
September 30, 2005.



We 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 the foreseeable future.



Our ability to make scheduled payments of principal of, or to pay interest on, or to refinance, our indebtedness or to fund planned capital expenditures
will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those
projected in forward-looking statements. We are exposed to various market risk factors such as fluctuating interest rates and changes in foreign currency rates.



Currency translation. The results of operations of 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 (loss). As of September 30, 2005, assets of foreign subsidiaries constituted approximately 25% of total assets. Foreign currency exchange rate exposure is most significant with respect to the euro. For the fiscal quarter and six
months ended September 30, 2005, net sales were positively impacted by the appreciation of foreign currencies, primarily the euro, versus the U.S. dollar by approximately $0.5 million and $2.6 million, respectively. In periods of a strengthening
U.S. dollar, however, our results of operations may experience a negative translation impact.



Currency transaction exposure. Currency transaction exposure arises when a business or company has transactions denominated in foreign currencies. We have entered into forward contracts that are denominated in
foreign currencies, principally euros and Slovakian korunas, to offset the impact of currency rates on intercompany receivables and payables and third-party receivables. These contracts are used to offset exchange losses and gains on underlying
exposures. Changes in the fair value of these forward contracts are recorded immediately in earnings. We do not enter into derivative instrument transactions for trading or speculative purposes. The purpose of our foreign currency management policy
is to minimize the effect of exchange rate fluctuations on certain foreign denominated anticipated cash flows. Holding all other variables constant, a change in the contracted forward rates of 1% on our forward contracts denominated in the present
foreign currencies would result in a gain or loss of $0.4 million, which we believe would offset the impact of currency gains and losses related to certain receivables and payables. We will continue to use foreign currency forward contracts to
manage foreign currency exchange risks in the future.



Interest rate risk. We have a significant amount of debt, with a large portion being at variable rates. Total debt as of September 30, 2005 was $495.8 million, of which $216.8 million bears interest at variable rates. As of September
30, 2005, the weighted average interest rate on our variable-rate term debt was 6.4%, all of which was outstanding under the senior credit facilities. Variable-rate borrowings under the senior credit facilities are, at our



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option, at the adjusted LIBOR plus 2.5% or the alternative base rate plus 1.5%. Holding all other variables constant, a change in the interest rate of 1% on
variable-rate debt would impact annual interest costs by $2.2 million. At present, we have not sought to hedge exposure to variable interest rates.



Item 4. Controls and Procedures



Pursuant to Section 302 of the Sarbanes-Oxley 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 our disclosure controls and procedures were 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.



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PART IIOTHER INFORMATION



ITEM 1. Legal Proceedings



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, Felix Industries and Smith-Blair,
Inc.) 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. An earlier stay resulting from the bankruptcy of a co-defendant has
been lifted, and the lawsuit is presently in the discovery phase. Pursuant to the terms of the Acquisition, we are entitled to full indemnification for this lawsuit from an affiliate of Invensys plc.



The Company, along 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 compensatory and punitive damages. Because the
cases are in initial stages, it is uncertain whether any plaintiffs have dealt with any of the subsidiarys products, were 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. Although we are entitled to indemnification for legal and indemnity costs for asbestos claims related to these products from certain subsidiaries of Invensys plc, under the stock purchase agreement
pursuant to which we acquired 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.



In addition, we are, from time to time, party to legal proceedings arising
out of the operations 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
operations. 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.



ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds



(a) None.



(b) None.



(c) None.



ITEM 3. Defaults Upon Senior Securities



(a) None.



(b) None.



ITEM 4. Submission of Matters to a Vote of Security Holders



No matters were submitted to a vote of our shareholders during the fiscal quarter ended September 30, 2005.



ITEM 5. Other Information



(a)
None.



(b) None.



ITEM 6. Exhibits



A list of
exhibits filed herewith is contained on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|                       |  |                                          |  |                                                                       
|---------------------- |  | ---------------------------------------- |  | ----------------------------------------------------------------------
|                       |  | SENSUS METERING SYSTEMS (BERMUDA 2) LTD.
|                       |  |                                         
|Date: November 1, 2005 |  | By:                                      |  | /S/    DANIEL W.
HARNESS                                              
|                       |  |                                          |  | Daniel W. Harness Chief Executive Officer and President               
|                       |  |                                         
|Date: November 1, 2005 |  | By:                                      |  | /S/    PETER
MAINZ                                                    
|                       |  |                                          |  | Peter Mainz Chief Financial Officer (Principal Financial Officer)     
|                       |  |                                         
|Date: November 1, 2005 |  | By:                                      |  | /S/    THOMAS
DORAZIO                                                
|                       |  |                                          |  | Thomas DOrazio Vice President, Finance (Principal Accounting Officer)
|                       | 
|                       |  | SENSUS METERING SYSTEMS INC.            
|                       |  |                                         
|Date: November 1, 2005 |  | By:                                      |  | /S/    DANIEL W.
HARNESS                                              
|                       |  |                                          |  | Daniel W. Harness Chief Executive Officer and President               
|                       |  |                                         
|Date: November 1, 2005 |  | By:                                      |  | /S/    PETER
MAINZ                                                    
|                       |  |                                          |  | Peter Mainz Chief Financial Officer (Principal Financial Officer)     
|                       |  |                                         
|Date: November 1, 2005 |  | By:                                      |  | /S/    THOMAS
DORAZIO                                                
|                       |  |                                          |  | Thomas DOrazio Vice President, Finance (Principal Accounting Officer)



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EXHIBIT INDEX



|            |  |                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                          
|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.



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