##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---

FORM 10-Q



---



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

For the quarterly period ended September 30, 2006



| ̈ | 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



---



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



---



|                                                               |  |                                      |  |                                                                |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------ |  | -------------------------------------------------------------- |  | ------------------------------------
|Bermuda                                                        |  | 98-0413362                           |  | Delaware                                                       |  | 51-0338883                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.) |  | (State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

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)



---

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  x    No ̈

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer x

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

As of October 30, 2006,
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.



---



---

##### Table of Contents

Part IFinancial Information



|                          |  |                                                                                                                           |  |     
|------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | ----
|                          |  |                                                                                                                           |  | Page
|Item 1.                   |  | Financial Statements                                                                                                      |  |     
|                          |  |                                                                                                                          
|                          |  | Consolidated Balance Sheets as of September 30, 2006 (unaudited) and March 31, 2006                                       |  | 3   
|                          |  |                                                                                                                          
|                          |  | Consolidated Statements of Operations for the fiscal quarter and six months ended September 30, 2006 and 2005 (unaudited) |  | 4   
|                          |  |                                                                                                                          
|                          |  | Consolidated Statements of Cash Flows for the six months ended September 30, 2006 and 2005 (unaudited)                    |  | 5   
|                          |  |                                                                                                                          
|                          |  | Notes to Unaudited Consolidated Financial Statements                                                                      |  | 6   
|                          |  |                                                                                                                          
|Item 2.                   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                     |  | 25  
|                          |  |                                                                                                                          
|Item 3.                   |  | Quantitative and Qualitative Disclosures About Market Risk                                                                |  | 32  
|                          |  |                                                                                                                          
|Item 4.                   |  | Controls and Procedures                                                                                                   |  | 33  
|                         
|Part IIOther Information
|                          |  |                                                                                                                          
|Item 1.                   |  | Legal Proceedings                                                                                                         |  | 34  
|                          |  |                                                                                                                          
|Item 1A.                  |  | Risk Factors                                                                                                              |  | 34  
|                          |  |                                                                                                                          
|Item 2.                   |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                               |  | 34  
|                          |  |                                                                                                                          
|Item 3.                   |  | Defaults Upon Senior Securities                                                                                           |  | 34  
|                          |  |                                                                                                                          
|Item 4.                   |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 34  
|                          |  |                                                                                                                          
|Item 5.                   |  | Other Information                                                                                                         |  | 34  
|                          |  |                                                                                                                          
|Item 6.                   |  | Exhibits                                                                                                                  |  | 34  



2



---

##### 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 30,2006 |       |   | March 31,2006 |  
|                                                                                                                      |  | (unaudited)       |       |   |               |  
|ASSETS                                                                                                                |  |                   |       |   |               |   |       |  
|CURRENT ASSETS:                                                                                                       |  |                   |       |   |               |   |       |  
|Cash and cash equivalents                                                                                             |  | $                 | 24.1  |   |               | $ | 52.6  |  
|Accounts receivable:                                                                                                  |  |                   |       |   |               |   |       |  
|Trade, net of allowance for doubtful accounts of $1.6 and $1.4 at September 30, 2006 and March 31, 2006,
respectively |  |                   | 81.8  |   |               |   | 88.5  |  
|Other                                                                                                                 |  |                   | 1.9   |   |               |   | 1.8   |  
|Inventories, net                                                                                                      |  |                   | 69.8  |   |               |   | 56.2  |  
|Prepayments and other current assets                                                                                  |  |                   | 9.6   |   |               |   | 9.9   |  
|Deferred income taxes                                                                                                 |  |                   | 5.2   |   |               |   | 5.2   |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total current assets                                                                                                  |  |                   | 192.4 |   |               |   | 214.2 |  
|                                                                                                                      |  |                  
|Property, plant and equipment, net                                                                                    |  |                   | 133.5 |   |               |   | 136.8 |  
|Intangible assets, net                                                                                                |  |                   | 230.7 |   |               |   | 215.9 |  
|Goodwill                                                                                                              |  |                   | 366.8 |   |               |   | 330.5 |  
|Deferred income taxes                                                                                                 |  |                   | 12.5  |   |               |   | 12.5  |  
|Other long-term assets                                                                                                |  |                   | 24.2  |   |               |   | 25.2  |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total assets                                                                                                          |  | $                 | 960.1 |   |               | $ | 935.1 |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|                                                                                                                      |  |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  |  |                   |       |   |               |   |       |  
|CURRENT LIABILITIES:                                                                                                  |  |                   |       |   |               |   |       |  
|Accounts payable                                                                                                      |  | $                 | 51.1  |   |               | $ | 60.5  |  
|Current portion of long-term debt                                                                                     |  |                   | 1.6   |   |               |   | 0.6   |  
|Short-term borrowings                                                                                                 |  |                   | 4.8   |   |               |   | 4.0   |  
|Income taxes payable                                                                                                  |  |                   | 0.9   |   |               |   | 2.7   |  
|Restructuring accruals                                                                                                |  |                   | 3.2   |   |               |   | 3.0   |  
|Accruals and other current liabilities                                                                                |  |                   | 56.3  |   |               |   | 57.6  |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total current liabilities                                                                                             |  |                   | 117.9 |   |               |   | 128.4 |  
|                                                                                                                      |  |                  
|Long-term debt, less current portion                                                                                  |  |                   | 480.0 |   |               |   | 481.0 |  
|Pensions                                                                                                              |  |                   | 47.2  |   |               |   | 44.8  |  
|Deferred income taxes                                                                                                 |  |                   | 77.5  |   |               |   | 77.3  |  
|Other long-term liabilities                                                                                           |  |                   | 10.1  |   |               |   | 9.8   |  
|Minority interest                                                                                                     |  |                   | 7.7   |   |               |   | 7.4   |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total liabilities                                                                                                     |  |                   | 740.4 |   |               |   | 748.7 |  
|                                                                                                                      |  |                  
|Commitments and Contingencies (Note 12)                                                                               |  |                   |       |   |               |   |       |  
|STOCKHOLDERS EQUITY:                                                                                                 |  |                   |       |   |               |   |       |  
|Common stock, par value $1.00 per share, 12,000 shares authorized, issued and outstanding                             |  |                   |      |   |               |   |      |  
|Paid-in capital                                                                                                       |  |                   | 243.2 |   |               |   | 200.0 |  
|Accumulated deficit                                                                                                   |  |                   | (19.9 | ) |               |   | (10.1 | )
|Accumulated other comprehensive loss                                                                                  |  |                   | (3.6  | ) |               |   | (3.5  | )
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total stockholders equity                                                                                            |  |                   | 219.7 |   |               |   | 186.4 |  
|                                                                                                                      |  |                   |       |   |               |   |       |  
|Total liabilities and stockholders equity                                                                            |  | $                 | 960.1 |   |               | $ | 935.1 |  
|                                                                                                                      |  |                   |       |   |               |   |       |  

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



3



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions)

(unaudited)



|                                               |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|---------------------------------------------- |  | ------------------------------------ | ----- | - | ------------------------------------ | - | ----- | -------------------------------- |  | - | -------------------------------- | - |  | - | ----- | -
|                                               |  | Fiscal QuarterEndedSeptember 30,2006 |       |   | Fiscal QuarterEndedSeptember 30,2005 |   |       | Six MonthsEndedSeptember 30,2006 |  |   | Six MonthsEndedSeptember 30,2005 |  
|NET SALES                                      |  | $                                    | 153.2 |   |                                      | $ | 142.1 |                                  |  | $ | 299.8                            |   |  | $ | 288.9 |  
|COST OF SALES                                  |  |                                      | 109.3 |   |                                      |   | 99.8  |                                  |  |   | 215.3                            |   |  |   | 202.3 |  
|                                               |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|GROSS PROFIT                                   |  |                                      | 43.9  |   |                                      |   | 42.3  |                                  |  |   | 84.5                             |   |  |   | 86.6  |  
|OPERATING EXPENSES:                            |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|Selling, general and administrative expenses   |  |                                      | 27.9  |   |                                      |   | 27.6  |                                  |  |   | 56.7                             |   |  |   | 54.6  |  
|Restructuring costs                            |  |                                      | 1.1   |   |                                      |   | 0.8   |                                  |  |   | 3.0                              |   |  |   | 2.2   |  
|Amortization of intangible assets              |  |                                      | 6.0   |   |                                      |   | 5.6   |                                  |  |   | 11.6                             |   |  |   | 11.3  |  
|Other operating expense, net                   |  |                                      | 0.7   |   |                                      |   | 0.8   |                                  |  |   | 1.4                              |   |  |   | 1.6   |  
|                                               |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|OPERATING INCOME                               |  |                                      | 8.2   |   |                                      |   | 7.5   |                                  |  |   | 11.8                             |   |  |   | 16.9  |  
|NON-OPERATING (EXPENSE) INCOME:                |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|Interest expense, net                          |  |                                      | (10.5 | ) |                                      |   | (9.9  | )                                |  |   | (20.8                            | ) |  |   | (19.0 | )
|Other income (expense), net                    |  |                                      | 0.2   |   |                                      |   | (0.2  | )                                |  |   | 2.3                              |   |  |   | (2.2  | )
|                                               |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|LOSS BEFORE INCOME TAXES AND MINORITY INTEREST |  |                                      | (2.1  | ) |                                      |   | (2.6  | )                                |  |   | (6.7                             | ) |  |   | (4.3  | )
|PROVISION FOR INCOME TAXES                     |  |                                      | 0.9   |   |                                      |   | 2.0   |                                  |  |   | 2.8                              |   |  |   | 4.4   |  
|                                               |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|LOSS BEFORE MINORITY INTEREST                  |  |                                      | (3.0  | ) |                                      |   | (4.6  | )                                |  |   | (9.5                             | ) |  |   | (8.7  | )
|MINORITY INTEREST                              |  |                                      | (0.2  | ) |                                      |   | (0.3  | )                                |  |   | (0.3                             | ) |  |   | (0.4  | )
|                                               |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  
|NET LOSS                                       |  | $                                    | (3.2  | ) |                                      | $ | (4.9  | )                                |  | $ | (9.8                             | ) |  | $ | (9.1  | )
|                                               |  |                                      |       |   |                                      |   |       |                                  |  |   |                                  |   |  |   |       |  

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



4



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)



|                                                                                          |  |                                  |       |   |                                  |   |       |  
|----------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | - | -------------------------------- | - | ----- | -
|                                                                                          |  | Six MonthsEndedSeptember 30,2006 |       |   | Six MonthsEndedSeptember 30,2005 |  
|OPERATING ACTIVITIES:                                                                     |  |                                  |       |   |                                  |   |       |  
|Net loss                                                                                  |  | $                                | (9.8  | ) |                                  | $ | (9.1  | )
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |                                  |       |   |                                  |   |       |  
|Depreciation                                                                              |  |                                  | 11.9  |   |                                  |   | 9.2   |  
|Amortization of intangible assets                                                         |  |                                  | 11.6  |   |                                  |   | 11.3  |  
|Amortization of deferred financing costs                                                  |  |                                  | 1.2   |   |                                  |   | 0.9   |  
|Net (gain) loss on sale of assets                                                         |  |                                  | (1.7  | ) |                                  |   | 0.1   |  
|Net (gain) loss on foreign currency transactions                                          |  |                                  | (0.8  | ) |                                  |   | 2.1   |  
|Minority interest                                                                         |  |                                  | 0.3   |   |                                  |   | 0.4   |  
|Changes in operating assets and liabilities, net of effects of acquisitions:              |  |                                  |       |   |                                  |   |       |  
|Accounts receivable                                                                       |  |                                  | 8.2   |   |                                  |   | 10.4  |  
|Inventories                                                                               |  |                                  | (12.8 | ) |                                  |   | (5.2  | )
|Accounts payable, accruals and other current liabilities                                  |  |                                  | (11.8 | ) |                                  |   | (5.9  | )
|Other current assets                                                                      |  |                                  | 0.6   |   |                                  |   | (0.3  | )
|Other long-term assets                                                                    |  |                                  | (0.4  | ) |                                  |   | (3.0  | )
|Income taxes                                                                              |  |                                  | (1.7  | ) |                                  |   | 3.0   |  
|Pensions                                                                                  |  |                                  | 0.3   |   |                                  |   | 0.7   |  
|                                                                                          |  |                                  |       |   |                                  |   |       |  
|Net cash (used in) provided by operating activities                                       |  |                                  | (4.9  | ) |                                  |   | 14.6  |  
|                                                                                          |  |                                 
|INVESTING ACTIVITIES:                                                                     |  |                                  |       |   |                                  |   |       |  
|Expenditures for property, plant and equipment                                            |  |                                  | (6.1  | ) |                                  |   | (12.5 | )
|Purchases of intangible assets                                                            |  |                                  | (0.3  | ) |                                  |   | (1.4  | )
|Rongtai acquisition                                                                       |  |                                  | (0.6  | ) |                                  |   | (10.2 | )
|DuPenn acquisition                                                                        |  |                                  | (0.4  | ) |                                  |   |      |  
|AMDS acquisition                                                                          |  |                                  | (49.6 | ) |                                  |   |      |  
|Proceeds from sale of assets                                                              |  |                                  | 1.8   |   |                                  |   | 0.1   |  
|Other                                                                                     |  |                                  |      |   |                                  |   | 0.4   |  
|                                                                                          |  |                                  |       |   |                                  |   |       |  
|Net cash used in investing activities                                                     |  |                                  | (55.2 | ) |                                  |   | (23.6 | )
|                                                                                          |  |                                 
|FINANCING ACTIVITIES:                                                                     |  |                                  |       |   |                                  |   |       |  
|Principal payments on debt                                                                |  |                                  |      |   |                                  |   | (8.7  | )
|Increase in borrowings                                                                    |  |                                  | 0.7   |   |                                  |   |      |  
|Equity contributions for AMDS acquisition                                                 |  |                                  | 30.4  |   |                                  |   |      |  
|Proceeds from joint venture partner                                                       |  |                                  |      |   |                                  |   | 6.0   |  
|                                                                                          |  |                                  |       |   |                                  |   |       |  
|Net cash provided by (used in) financing activities                                       |  |                                  | 31.1  |   |                                  |   | (2.7  | )
|Effect of exchange rate changes on cash                                                   |  |                                  | 0.5   |   |                                  |   | (0.1  | )
|                                                                                          |  |                                  |       |   |                                  |   |       |  
|DECREASE IN CASH AND CASH EQUIVALENTS                                                     |  |                                  | (28.5 | ) |                                  |   | (11.8 | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                            |  | $                                | 52.6  |   |                                  | $ | 54.9  |  
|                                                                                          |  |                                  |       |   |                                  |   |       |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                |  | $                                | 24.1  |   |                                  | $ | 43.1  |  
|                                                                                          |  |                                  |       |   |                                  |   |       |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW:                                                    |  |                                  |       |   |                                  |   |       |  
|Cash paid during the period for:                                                          |  |                                  |       |   |                                  |   |       |  
|Interest                                                                                  |  | $                                | 19.8  |   |                                  | $ | 18.4  |  
|                                                                                          |  |                                  |       |   |                                  |   |       |  
|Income taxes, net of refunds                                                              |  | $                                | 4.5   |   |                                  | $ | 1.8   |  
|                                                                                          |  |                                  |       |   |                                  |   |       |  

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the six months ended September 30, 2006, in conjunction with the AMDS acquisition, Sensus Metering Systems (Bermuda 1) Ltd. issued 15,000
vested preference shares to AMDS with an estimated fair value of $12.8 million (Note 2).

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



5



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Description of Business

Sensus Metering Systems (Bermuda 2) Ltd. (Bermuda 2), a wholly owned subsidiary of Sensus Metering Systems (Bermuda 1) Ltd.
(Bermuda 1), 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, gas, heat and electric meters including comprehensive metering communications system solutions that include both automatic meter reading (AMR) and advanced metering infrastructure (AMI) systems. 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 Company was formed on December 17, 2003 through 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 8 5/8% senior subordinated notes due 2013 (the Notes) and equity contributions from Bermuda 1.

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, 2006 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, 2006 and 2005. 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.

Recent Accounting Pronouncements

In
June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109(FIN 48).FIN
48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return (including a decision whether or
not to file a return in a particular jurisdiction). Under FIN 48, the financial statements will reflect expected future tax consequences of such positions presuming the taxing authorities full knowledge of the position and all relevant facts,
but without considering time values. FIN 48 revises disclosure



6



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



requirements and introduces a prescriptive, annual, tabular roll forward of the unrecognized tax benefits. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The Company is currently assessing the impact of adopting FIN 48 on its results of operations and overall financial position.

In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements(FAS 157), to provide enhanced guidance when using fair value to measure assets and liabilities. FAS 157
defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. FAS 157 applies whenever other pronouncements require or permit assets or liabilities to be measured at fair value
and, while not requiring new fair value measurements, may change current practices. The Company is currently evaluating the impact FAS 157 will have on its consolidated financial statements. FAS 157 is effective for the Company beginning in fiscal
year 2009.

In September 2006, the FASB issued FASB Statement No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)(FAS 158). FAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an
asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The Company will adopt FAS 158 related to the funded status in the fiscal
year ended after June 15, 2007. FAS 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position. In the fiscal year ended after December 15, 2008, the Company will
adopt this change related to the measurement date. FAS 158 allows employers to choose one of two transition methods to adopt the measurement date requirement, and both methods would result in immediate adjustments to the statement of financial
position. The Company is in the process of evaluating which method to use. The Company does not anticipate that the adoption of FAS 158 will have a material impact on its financial statements.

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. Acquisitions

AMDS.On
July 6, 2006, the Company acquired substantially all of the assets and assumed certain liabilities of Advanced Metering Data Systems, L.L.C. (AMDS) for $62.4 million consisting of $49.6 million in cash and 15,000 vested preference
shares issued by Bermuda 1 with an estimated fair value of $12.8 million. The Company financed the transaction with equity contributions totaling $30.4 million in cash from Bermuda 1, cash on hand and utilization of the Companys revolving
credit facility. The vested preference shares are redeemable for $15.0 million at the option of the holder once certain future performance targets are achieved. On the earlier of an initial public offering, change of control or the fifth anniversary
of the closing date, any vested shares that have not been redeemed for liquidation value or converted into common shares of Bermuda 1 will then become redeemable or convertible regardless of whether the performance measures are met. The estimated
fair value of the vested preference shares was determined based on a discounted cash flow analysis of the redemption value based on managements estimate of when the specified performance measures will be achieved. This purchase is expected to
provide the Company with core capability to deliver comprehensive AMI technology with robust two-way offerings to the electricity market and powerful one-way solutions for the water and gas markets, which complements the Companys existing AMR
technologies.



7



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table summarizes the preliminary purchase price allocation as of September 30,
2006:



|                                  |  |   |      |  
|--------------------------------- |  | - | ---- | -
|Goodwill                          |  | $ | 36.3 |  
|Intangible assets                 |  |   | 27.3 |  
|Net liabilities assumed           |  |   | (1.2 | )
|                                  |  |   |      |  
|Fair value of net assets acquired |  | $ | 62.4 |  
|                                  |  |   |      |  

The preliminary allocation of the purchase price, including transaction costs of $2.9 million,
resulted in the recognition of approximately $36.3 million of goodwill attributable to the anticipated future earnings and related cash flows. The transaction costs include a fee of $1.5 million paid to The Jordan Company, L.P., a related party, for
advisory and consulting services related to the acquisition. The Company preliminarily allocated $27.3 million of the purchase price to intangible assets, $26.0 million of which relates to developed technology and $1.3 million for licenses.

The Company is also required to make additional future cash payments to AMDS based on a specified percentage of certain financial
performance measures of the acquired business through March 2011. In addition, Bermuda 1 issued 15,000 unvested preference shares to AMDS, which are subject to vesting based on the performance of the acquired business over a five-year period
following closing. The redemption value of the unvested preference shares is $15.0 million if the specified performance thresholds are achieved over the relevant period. Any additional future cash consideration and the fair value of the unvested
preference shares represent additional purchase price and will increase the amount of recorded goodwill when the contingencies are resolved.

The transaction is accounted for in accordance with FASB Statement No. 141 (FAS 141), Business Combinations, and the results of operations of AMDS are included in the Companys consolidated financial statements
from the date of acquisition. Unaudited pro forma financial information related to the acquisition has not been presented because the acquisition was not significant to the Companys consolidated results of operations, and thus SEC Regulation
S-X does not require pro forma disclosures.

Bermuda 1 is legally obligated to satisfy any future redemption requirements of the vested and
unvested preference shares. Accordingly, the estimated fair value of the vested preference shares has been reflected within stockholders equity in the accompanying consolidated balance sheet at September 30, 2006 since it represents a
capital contribution from Bermuda 1. The Company is not obligated to fulfill any future redemption requirements on behalf of Bermuda 1.

Rongtai. On July 27, 2005, 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 this 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 purchase price for the net assets acquired of Rongtai was $11.5 million, consisting of $10.2 million, $0.7
million and $0.6 million of cash consideration paid in July 2005, November 2005 and September 2006, respectively. In addition, the Company paid approximately $0.8 million of acquisition costs related to this acquisition during fiscal 2006.

The Company has finalized the purchase price allocation attributable to the Rongtai acquisition. The fair value of the tangible assets
acquired and liabilities assumed in the acquisition was $12.3 million.



8



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The acquisition of Rongtai has been accounted for in accordance with FAS 141. 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 the date of acquisition.

3. Goodwill and Identifiable Intangible Assets

Intangible assets consist of tradenames, patents, non-competition agreements, developed technology and customer and distributor relationships. Goodwill at September 30, 2006 represents the excess of the purchase price paid by the
Company for Invensys Metering Systems, NexusData, Inc. (Nexus) and AMDS over the fair value of the respective net assets acquired. The purchase price allocation for these acquisitions resulted in $366.8 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 and European water metering markets, the North American clamps and couplings and precision die
casting markets and the expected synergies resulting from the technology in connection with the Nexus and AMDS acquisitions.

Intangible
assets are summarized as follows (in millions):



|                                               |  |                    |       |                         |                |       |      |  |                         |       |  |   |       |  
|---------------------------------------------- |  | ------------------ | ----- | ----------------------- | -------------- | ----- | ---- |  | ----------------------- | ----- |  | - | ----- | -
|                                               |  | September 30, 2006 |       |                         | March 31, 2006 |      
|                                               |  | Cost               |       | AccumulatedAmortization |                |       | Cost |  | AccumulatedAmortization |      
|Intangible assets not subject to amortization: |  |                    |       |                         |                |       |      |  |                         |       |  |   |       |  
|Goodwill                                       |  | $                  | 366.8 |                         | $              |      |      |  | $                       | 330.5 |  | $ |      |  
|Tradenames (indefinite lived)                  |  |                    | 27.3  |                         |                |      |      |  |                         | 27.3  |  |   |      |  
|                                               |  |                    |       |                         |                |       |      |  |                         |       |  |   |       |  
|                                               |  |                    | 394.1 |                         |                |      |      |  |                         | 357.8 |  |   |      |  
|                                               |  |                    |       |                        
|Intangible assets subject to amortization:     |  |                    |       |                         |                |       |      |  |                         |       |  |   |       |  
|Distributor and marketing relationships        |  |                    | 192.1 |                         |                | (30.9 | )    |  |                         | 193.0 |  |   | (26.4 | )
|Developed technology                           |  |                    | 26.0  |                         |                | (0.5  | )    |  |                         |      |  |   |      |  
|Non-competition agreements                     |  |                    | 30.5  |                         |                | (21.1 | )    |  |                         | 30.5  |  |   | (17.3 | )
|Patents                                        |  |                    | 15.4  |                         |                | (8.1  | )    |  |                         | 15.1  |  |   | (6.3  | )
|                                               |  |                    |       |                         |                |       |      |  |                         |       |  |   |       |  
|                                               |  |                    | 264.0 |                         |                | (60.6 | )    |  |                         | 238.6 |  |   | (50.0 | )
|                                               |  |                    |       |                         |                |       |      |  |                         |       |  |   |       |  
|Total intangible assets                        |  | $                  | 658.1 |                         | $              | (60.6 | )    |  | $                       | 596.4 |  | $ | (50.0 | )
|                                               |  |                    |       |                         |                |       |      |  |                         |       |  |   |       |  

4. 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 consist of the following (in millions):



|                                      |  |                   |      |   |               |   |      |  
|------------------------------------- |  | ----------------- | ---- | - | ------------- | - | ---- | -
|                                      |  | September 30,2006 |      |   | March 31,2006 |  
|Raw materials, parts and supplies     |  | $                 | 40.1 |   |               | $ | 31.7 |  
|Work in process                       |  |                   | 14.0 |   |               |   | 13.4 |  
|Finished goods                        |  |                   | 18.0 |   |               |   | 13.3 |  
|                                      |  |                   |      |   |               |   |      |  
|Allowance for shrink and obsolescence |  |                   | (2.3 | ) |               |   | (2.2 | )
|                                      |  |                   |      |   |               |   |      |  
|Inventories, net                      |  | $                 | 69.8 |   |               | $ | 56.2 |  
|                                      |  |                   |      |   |               |   |      |  



9



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



5. Financial Instruments

The Company utilizes derivative instruments, specifically forward contracts and interest rate swap agreements, to manage our exposure to market risks such as foreign currency exchange and interest rate risks. The
Company records derivative instruments as assets or liabilities on the consolidated balance sheet, measured at fair value.

As of
September 30, 2006, the Company had various foreign currency forward contracts outstanding to purchase approximately 5.6 million net U.S. dollars by selling approximately GBP 0.1 million and SKK 241.8 million, net and buying EUR
2.0 million, with expiration dates ranging from October 27, 2006 through December 15, 2006. These contracts are arranged to manage the exposure to foreign currency risks related to certain intercompany receivable and payable balances
denominated in those currencies. 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 (expense) in our consolidated statements of operations. The
Company does not utilize hedge accounting treatment for its forward contracts. The Company recorded an unrealized loss of $0.3 million on the forward contracts for the fiscal quarter ended September 30, 2006. For the six months then ended, the
Company recorded a net loss of $0.5 million on the forward contracts, which includes a $0.3 million realized loss upon settlement of certain contracts. For the fiscal quarter and sixth months ended September 30, 2005, the Company recorded a
$0.1 million net loss and a $0.1 million net gain, respectively, which includes a $0.2 million realized loss in each of those periods.

The
Company utilizes interest rate swap agreements to mitigate our exposure to fluctuations in interest rates on variable-rate debt by converting variable-rate debt to fixed-rate debt. On December 9, 2005 and March 24, 2006 (the trade
dates), the Company entered into interest rate swap agreements, each with a notional amount of $50.0 million, in which it receives periodic variable interest payments at the three-month LIBOR and makes periodic payments at a fixed rate of
4.927% and 5.121%, respectively. The first swap agreement was effective on January 20, 2006 and terminates on September 30, 2010, and the second swap agreement was effective on August 22, 2006 and terminates on June 30, 2010.
These interest rate swaps have been designated as cash flow hedges, and changes in the Companys cash flows attributable to the risk being hedged are expected to be completely offset by the hedging derivatives. To the extent the swaps provide
an effective hedge, changes in the fair value of the interest rate swaps are reflected in other comprehensive income (loss), net of tax. Any ineffectiveness related to the interest rate swaps will be recorded through earnings. Other comprehensive
loss of $1.2 million (net of tax of $0.7 million) and $0.4 million (net of tax of $0.3 million) recorded for the quarter and six months ended September 30, 2006, respectively, reflects the decrease in fair value of the interest rate swaps due
to changes in interest rates since the trade dates.

6. Restructuring Costs

The following table reflects activity associated with costs related to the Companys restructuring initiatives that are charged to operations (in
millions):



|                                                                     |  |                                      |     |                                      |   |                                  |  |                                  |     |  |   |    
|-------------------------------------------------------------------- |  | ------------------------------------ | --- | ------------------------------------ | - | -------------------------------- |  | -------------------------------- | --- |  | - | ---
|                                                                     |  | Fiscal QuarterEndedSeptember 30,2006 |     | Fiscal QuarterEndedSeptember 30,2005 |   | Six MonthsEndedSeptember 30,2006 |  | Six MonthsEndedSeptember 30,2005
|Severance and other costs related to headcount reduction initiatives |  | $                                    | 1.1 |                                      | $ | 0.8                              |  | $                                | 3.0 |  | $ | 2.2
|                                                                     |  |                                      |     |                                      |   |                                  |  |                                  |     |  |   |    

For the fiscal quarter and six months ended September 30, 2006, the Company incurred $1.1
million and $3.0 million of restructuring costs, respectively, related to ongoing activities to rationalize its water meter



10



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



product lines in Europe and to relocate selected North American pipe joining manufacturing lines. These and other planned activities affect both direct and
indirect personnel and will result in a net headcount reduction of approximately 44 employees primarily in the Companys German water meter production facilities through the end of fiscal 2007.

Charges for restructuring costs comprise the following (in millions):



|                                          |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    
|----------------------------------------- |  | ------------------------------------- | --- | ------------------------------------- | - | --------------------------------- |  | --------------------------------- | --- |  | - | ---
|                                          |  | Fiscal QuarterEnded September 30,2006 |     | Fiscal QuarterEnded September 30,2005 |   | Six MonthsEnded September 30,2006 |  | Six MonthsEnded September 30,2005
|Employee severance and exit costs accrued |  | $                                     | 1.0 |                                       | $ | 0.5                               |  | $                                 | 2.7 |  | $ | 1.4
|Expensed as incurred                      |  |                                       | 0.1 |                                       |   | 0.3                               |  |                                   | 0.3 |  |   | 0.8
|                                          |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    
|Total                                     |  | $                                     | 1.1 |                                       | $ | 0.8                               |  | $                                 | 3.0 |  | $ | 2.2
|                                          |  |                                       |     |                                       |   |                                   |  |                                   |     |  |   |    

Restructuring accruals are summarized as follows (in millions):



|                                            |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  
|------------------------------------------- |  | ------------------------------------ | ---- | - | ------------------------------------ | - | ---- | -------------------------------- |  | - | -------------------------------- | - |  | - | ---- | -
|                                            |  | Fiscal QuarterEndedSeptember 30,2006 |      |   | Fiscal QuarterEndedSeptember 30,2005 |   |      | Six MonthsEndedSeptember 30,2006 |  |   | Six MonthsEndedSeptember 30,2005 |  
|Balance at beginning of period              |  | $                                    | 6.5  |   |                                      | $ | 5.9  |                                  |  | $ | 5.7                              |   |  | $ | 7.0  |  
|Cash payments                               |  |                                      | (1.3 | ) |                                      |   | (1.0 | )                                |  |   | (2.6                             | ) |  |   | (2.5 | )
|Accrue for new committed/announced programs |  |                                      | 0.8  |   |                                      |   | 0.5  |                                  |  |   | 2.7                              |   |  |   | 1.4  |  
|Foreign currency translation adjustment     |  |                                      | 0.1  |   |                                      |   |     |                                  |  |   | 0.3                              |   |  |   | (0.5 | )
|                                            |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  
|Balance at end of period                    |  | $                                    | 6.1  |   |                                      | $ | 5.4  |                                  |  | $ | 6.1                              |   |  | $ | 5.4  |  
|                                            |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  
|Current portion                             |  | $                                    | 3.2  |   |                                      | $ | 2.6  |                                  |  | $ | 3.2                              |   |  | $ | 2.6  |  
|Non-current portion                         |  |                                      | 2.9  |   |                                      |   | 2.8  |                                  |  |   | 2.9                              |   |  |   | 2.8  |  
|                                            |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  
|Total                                       |  | $                                    | 6.1  |   |                                      | $ | 5.4  |                                  |  | $ | 6.1                              |   |  | $ | 5.4  |  
|                                            |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  

Restructuring accruals are reflected within current liabilities and other long-term liabilities on
the Companys consolidated balance sheets. At September 30, 2006, $1.1 million of restricted cash, classified as other long-term assets, was set aside beginning in fiscal 2006 to fund the Companys early retirement contracts for
certain of its German employees.

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
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 balance sheets.



11



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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



|                                        |  |                                   |      |   |                                  |   |      |  
|--------------------------------------- |  | --------------------------------- | ---- | - | -------------------------------- | - | ---- | -
|                                        |  | Six Months EndedSeptember 30,2006 |      |   | Six MonthsEndedSeptember 30,2005 |  
|Balance at beginning of year            |  | $                                 | 7.8  |   |                                  | $ | 7.8  |  
|Warranties issued                       |  |                                   | 2.1  |   |                                  |   | 1.9  |  
|Settlements made                        |  |                                   | (2.4 | ) |                                  |   | (1.9 | )
|Foreign currency translation adjustment |  |                                   | 0.1  |   |                                  |   |     |  
|                                        |  |                                   |      |   |                                  |   |      |  
|Balance at end of period                |  | $                                 | 7.6  |   |                                  | $ | 7.8  |  
|                                        |  |                                   |      |   |                                  |   |      |  
|Current portion                         |  | $                                 | 4.2  |   |                                  | $ | 4.1  |  
|Non-current portion                     |  |                                   | 3.4  |   |                                  |   | 3.7  |  
|                                        |  |                                   |      |   |                                  |   |      |  
|Total                                   |  | $                                 | 7.6  |   |                                  | $ | 7.8  |  
|                                        |  |                                   |      |   |                                  |   |      |  

8. 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.

Net periodic benefit cost for the
German retirement benefit plan consists of the following (in millions):



|                                   |  |                                      |     |                                      |   |                                  |  |                                  |     |  |   |    
|---------------------------------- |  | ------------------------------------ | --- | ------------------------------------ | - | -------------------------------- |  | -------------------------------- | --- |  | - | ---
|                                   |  | Fiscal QuarterEndedSeptember 30,2006 |     | Fiscal QuarterEndedSeptember 30,2005 |   | Six MonthsEndedSeptember 30,2006 |  | Six MonthsEndedSeptember 30,2005
|Service cost                       |  | $                                    | 0.3 |                                      | $ | 0.1                              |  | $                                | 0.5 |  | $ | 0.3
|Interest cost                      |  |                                      | 0.5 |                                      |   | 0.5                              |  |                                  | 1.0 |  |   | 1.0
|Amortization of prior service cost |  |                                      |    |                                      |   |                                 |  |                                  | 0.1 |  |   |   
|Recognized net actuarial loss      |  |                                      |    |                                      |   |                                 |  |                                  | 0.1 |  |   |   
|                                   |  |                                      |     |                                      |   |                                  |  |                                  |     |  |   |    
|Net periodic benefit cost          |  | $                                    | 0.8 |                                      | $ | 0.6                              |  | $                                | 1.7 |  | $ | 1.3
|                                   |  |                                      |     |                                      |   |                                  |  |                                  |     |  |   |    

Net periodic benefit cost for the U.S. retirement benefit plan consists primarily of service cost
and was $0.2 million and $0.4 million for the fiscal quarters ended September 30, 2006 and 2005, respectively, and $0.5 million and $0.6 million for the six months ended September 30, 2006 and 2005, respectively. The Company expects to
continue to make contributions sufficient to fund benefits paid under its U.S. retirement benefit plan. The Company contributed approximately $1.0 million in the first half of fiscal 2007 to its U.S. plan and expects to contribute approximately $0.5
million during the remainder of the current fiscal year.

9. Business Segment Information

Reporting Segments. The Company has two principal product groups: metering systems products and support products. Metering systems products include
metering, AMR, and/or AMI, communications systems and four principal metering product categories: water, gas, heat and electricity. 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.



12



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Metering and Related Communication Systems revenues consist solely of third-party sales, and All
Other revenues consist of third-party and inter-segment sales.

Inter-segment sales generally approximate 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
intangible assets and 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 AMR and AMI systems used by utilities. AMR systems include handheld and mobile radio-frequency reading systems and fixed
network AMI systems. All metering reading system solutions include installation services and ongoing systems 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.



13



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table provides changes in trends or components of revenue, operating income (loss) and
pre-tax profit (loss) before minority interest for each segment (in millions):



|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|------------------------------------------------------- |  | -------------------- | ----- | - | ----------------- | - | ----- | ----------------- |  | - | ----------------- | - |  | - | ----- | -
|                                                        |  | Fiscal Quarter Ended |       |   | Six Months Ended  |  
|                                                        |  | September 30,2006    |       |   | September 30,2005 |   |       | September 30,2006 |  |   | September 30,2005 |  
|Segment revenues                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Metering and related communication systems              |  | $                    | 121.1 |   |                   | $ | 114.4 |                   |  | $ | 237.3             |   |  | $ | 236.2 |  
|All other                                               |  |                      | 36.1  |   |                   |   | 30.8  |                   |  |   | 70.9              |   |  |   | 59.9  |  
|Eliminations of inter-segment sales                     |  |                      | (4.0  | ) |                   |   | (3.1  | )                 |  |   | (8.4              | ) |  |   | (7.2  | )
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Total                                                   |  | $                    | 153.2 |   |                   | $ | 142.1 |                   |  | $ | 299.8             |   |  | $ | 288.9 |  
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Operating income (loss)                                 |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Metering and related communication systems              |  | $                    | 7.2   |   |                   | $ | 8.2   |                   |  | $ | 11.3              |   |  | $ | 17.6  |  
|All other                                               |  |                      | 1.0   |   |                   |   | (0.7  | )                 |  |   | 0.5               |   |  |   | (0.7  | )
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Total                                                   |  | $                    | 8.2   |   |                   | $ | 7.5   |                   |  | $ | 11.8              |   |  | $ | 16.9  |  
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Profit (loss) before income taxes and minority interest |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Metering and related communication systems              |  | $                    | 6.8   |   |                   | $ | 7.9   |                   |  | $ | 12.5              |   |  | $ | 15.0  |  
|All other                                               |  |                      | (8.9  | ) |                   |   | (10.5 | )                 |  |   | (19.2             | ) |  |   | (19.3 | )
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  
|Total                                                   |  | $                    | (2.1  | ) |                   | $ | (2.6  | )                 |  | $ | (6.7              | ) |  | $ | (4.3  | )
|                                                        |  |                      |       |   |                   |   |       |                   |  |   |                   |   |  |   |       |  

Geographic Information.Net sales to third parties and long-lived assets, which include
property, plant and equipment (net), intangible assets (net) and goodwill, by geographic region are as follows (in millions):



|                            |  |                                   |       |                                   |   |                   |  |               |       |  |   |      
|--------------------------- |  | --------------------------------- | ----- | --------------------------------- | - | ----------------- |  | ------------- | ----- |  | - | -----
|                            |  | Net Sales                         |       | Long-Lived Assets                
|                            |  | Six MonthsEnded September 30,2006 |       | Six MonthsEnded September 30,2005 |   | September 30,2006 |  | March 31,2006
|North America               |  | $                                 | 198.9 |                                   | $ | 201.2             |  | $             | 600.6 |  | $ | 552.3
|Europe, Middle East, Africa |  |                                   | 87.2  |                                   |   | 79.6              |  |               | 106.9 |  |   | 107.1
|South America               |  |                                   | 6.4   |                                   |   | 5.0               |  |               | 1.3   |  |   | 1.4  
|Asia                        |  |                                   | 7.3   |                                   |   | 3.1               |  |               | 22.2  |  |   | 22.4 
|                            |  |                                   |       |                                   |   |                   |  |               |       |  |   |      
|Total                       |  | $                                 | 299.8 |                                   | $ | 288.9             |  | $             | 731.0 |  | $ | 683.2
|                            |  |                                   |       |                                   |   |                   |  |               |       |  |   |      

Net sales 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



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10. Comprehensive Loss

Comprehensive loss consists of the following (in millions):



|                                                   |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  
|-------------------------------------------------- |  | ------------------------------------ | ---- | - | ------------------------------------ | - | ---- | -------------------------------- |  | - | -------------------------------- | - |  | - | ---- | -
|                                                   |  | Fiscal QuarterEndedSeptember 30,2006 |      |   | Fiscal QuarterEndedSeptember 30,2005 |   |      | Six MonthsEndedSeptember 30,2006 |  |   | Six MonthsEndedSeptember 30,2005 |  
|Net loss                                           |  | $                                    | (3.2 | ) |                                      | $ | (4.9 | )                                |  | $ | (9.8                             | ) |  | $ | (9.1 | )
|Other comprehensive income (loss):                 |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  
|Foreign currency translation adjustment            |  |                                      | 0.4  |   |                                      |   | 1.3  |                                  |  |   | 0.3                              |   |  |   | 1.9  |  
|Unrealized loss on interest rate swaps, net of tax |  |                                      | (1.2 | ) |                                      |   |     |                                  |  |   | (0.4                             | ) |  |   |     |  
|                                                   |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  
|Comprehensive loss                                 |  | $                                    | (4.0 | ) |                                      | $ | (3.6 | )                                |  | $ | (9.9                             | ) |  | $ | (7.2 | )
|                                                   |  |                                      |      |   |                                      |   |      |                                  |  |   |                                  |   |  |   |      |  

11. Income Taxes

The Companys 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.

12. Commitments and
Contingencies

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, administrative proceedings and claims 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 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.

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, 2006, the Company had $5.1 million of letters of credit outstanding with varying expiration dates.

13. Stock Compensation

On April 1, 2006, the Company adopted FASB Statement No. 123(R), Share-Based Payment, which requires that the
compensation cost related to share-based payment transactions be recognized in the financial statements based on estimated fair values. Bermuda 1 maintains a Restricted Share Plan (the Plan) that



15



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



provides for the award of restricted common shares to officers, directors and consultants of the Company. The restricted shares issued pursuant to the 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 Plan are subject to restrictions on transfer rights, repurchase rights and other limitations as set forth in the management subscription and shareholders agreement. As of
September 30, 2006, there were 2,000,000 restricted shares of Bermuda 1 authorized and 1,037,000 shares issued and outstanding. The outstanding restricted shares were purchased for $0.01 of cash consideration. No compensation expense related to
the Plan was recognized for the fiscal quarter or six months ended September 30, 2006 or any previously reported periods as the Company concluded that the fair value of such shares was not material to the consolidated statement of operations.

14. Guarantor Subsidiaries

The
following tables present the condensed consolidating balance sheets at September 30, 2006 (unaudited) and March 31, 2006 and unaudited statements of operations and cash flows for the fiscal quarters and six months ended September 30,
2006 and 2005, as applicable, for: (a) Bermuda 2 (referred to as Parent), (b) Sensus Metering Systems Inc. (SMS Inc.), the issuer of the Notes (referred to as Issuer), (c) on a combined basis, the subsidiaries of Bermuda 2
that are guaranteeing the Notes (referred to as Guarantor Subsidiaries) and (d) on a combined basis, the subsidiaries of Bermuda 2 that are not guaranteeing the Notes (referred to as Non-Guarantor Subsidiaries). Separate financial statements
for the Issuer and the Guarantor Subsidiaries are not presented because SMS Inc. and the Guarantor Subsidiaries are 100% owned by Bermuda 2, the guarantees are full and unconditional and joint and several, and the Company believes separate financial
statements and other disclosures are not material to investors.

The Company merged its subsidiaries, SMS Inc., Sensus Metering Systems
North America Inc. (SMS NA) and Sensus Metering Headquarters Corporation (SMS HQ), on October 1, 2005 for the purpose of simplifying the Companys corporate structure. The results of operations for SMS NA and SMS
HQ, which were previously reported with the Guarantor Subsidiaries, are currently reported with the results of operations of the Issuer. The condensed consolidating balance sheets of the Company at September 30, 2006 (unaudited) and
March 31, 2006 and the unaudited statements of operations and cash flows for the fiscal quarter and six months ended September 30, 2006 reflect this merger.



16



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Balance Sheets (unaudited)

September 30, 2006



|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|--------------------------------------------- |  | ------------- | ----- | - | ------ | - | ------- | --------------------- |  | - | ------------------------- | - |  | ------------ | ----- | - | ------------ | - | -------- | - |  | - | -----
|                                              |  | Parent        |       |   | Issuer |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |       |   | Consolidated
|                                              |  | (in millions)
|Assets                                        |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Current assets:                               |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Cash and cash equivalents                     |  | $             |      |   |        | $ | 2.2     |                       |  | $ | (0.1                      | ) |  | $            | 22.0  |   |              | $ |         |   |  | $ | 24.1 
|Accounts receivable:                          |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Trade, net of allowance for doubtful accounts |  |               |      |   |        |   | 32.0    |                       |  |   | 9.8                       |   |  |              | 40.0  |   |              |   |         |   |  |   | 81.8 
|From affiliates                               |  |               | (2.1  | ) |        |   | 23.4    |                       |  |   | 2.0                       |   |  |              | (23.3 | ) |              |   |         |   |  |   |     
|Other                                         |  |               |      |   |        |   |        |                       |  |   | 1.6                       |   |  |              | 0.3   |   |              |   |         |   |  |   | 1.9  
|Inventories, net                              |  |               |      |   |        |   | 27.7    |                       |  |   | 14.6                      |   |  |              | 27.5  |   |              |   |         |   |  |   | 69.8 
|Prepayments and other current assets          |  |               |      |   |        |   | 3.6     |                       |  |   | 0.3                       |   |  |              | 5.7   |   |              |   |         |   |  |   | 9.6  
|Deferred income taxes                         |  |               |      |   |        |   | 4.7     |                       |  |   | (0.1                      | ) |  |              | 0.6   |   |              |   |         |   |  |   | 5.2  
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total current assets                          |  |               | (2.1  | ) |        |   | 93.6    |                       |  |   | 28.1                      |   |  |              | 72.8  |   |              |   |         |   |  |   | 192.4
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Notes receivable from affiliates              |  |               |      |   |        |   | 433.2   |                       |  |   |                          |   |  |              | 29.1  |   |              |   | (462.3   | ) |  |   |     
|Property, plant and equipment, net            |  |               |      |   |        |   | 37.6    |                       |  |   | 32.4                      |   |  |              | 63.5  |   |              |   |         |   |  |   | 133.5
|Intangible assets, net                        |  |               |      |   |        |   | 150.7   |                       |  |   | 15.0                      |   |  |              | 65.0  |   |              |   |         |   |  |   | 230.7
|Goodwill                                      |  |               |      |   |        |   | 247.8   |                       |  |   | 54.7                      |   |  |              | 64.3  |   |              |   |         |   |  |   | 366.8
|Investment in subsidiaries                    |  |               | 683.9 |   |        |   | 121.1   |                       |  |   |                          |   |  |              |      |   |              |   | (805.0   | ) |  |   |     
|Deferred income taxes                         |  |               |      |   |        |   | 1.9     |                       |  |   | 9.0                       |   |  |              | 1.6   |   |              |   |         |   |  |   | 12.5 
|Other long-term assets                        |  |               | 0.2   |   |        |   | 19.7    |                       |  |   | 0.9                       |   |  |              | 3.4   |   |              |   |         |   |  |   | 24.2 
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total assets                                  |  | $             | 682.0 |   |        | $ | 1,105.6 |                       |  | $ | 140.1                     |   |  | $            | 299.7 |   |              | $ | (1,267.3 | ) |  | $ | 960.1
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Liabilities and stockholders equity          |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Current liabilities:                          |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Accounts payable                              |  | $             |      |   |        | $ | 21.8    |                       |  | $ | 7.3                       |   |  | $            | 22.0  |   |              | $ |         |   |  | $ | 51.1 
|Current portion of long-term debt             |  |               |      |   |        |   | 1.4     |                       |  |   |                          |   |  |              | 0.2   |   |              |   |         |   |  |   | 1.6  
|Short-term borrowings                         |  |               |      |   |        |   | 0.7     |                       |  |   |                          |   |  |              | 4.1   |   |              |   |         |   |  |   | 4.8  
|Income taxes payable                          |  |               |      |   |        |   | 5.6     |                       |  |   | (5.7                      | ) |  |              | 1.0   |   |              |   |         |   |  |   | 0.9  
|Restructuring accruals                        |  |               |      |   |        |   |        |                       |  |   |                          |   |  |              | 3.2   |   |              |   |         |   |  |   | 3.2  
|Accruals and other current liabilities        |  |               |      |   |        |   | 23.9    |                       |  |   | 4.1                       |   |  |              | 28.3  |   |              |   |         |   |  |   | 56.3 
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total current liabilities                     |  |               |      |   |        |   | 53.4    |                       |  |   | 5.7                       |   |  |              | 58.8  |   |              |   |         |   |  |   | 117.9
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Notes payable to affiliates                   |  |               | 462.3 |   |        |   | (82.6   | )                     |  |   | 16.7                      |   |  |              | 65.9  |   |              |   | (462.3   | ) |  |   |     
|Long-term debt, less current portion          |  |               |      |   |        |   | 455.6   |                       |  |   |                          |   |  |              | 24.4  |   |              |   |         |   |  |   | 480.0
|Pensions                                      |  |               |      |   |        |   | 1.4     |                       |  |   | (0.5                      | ) |  |              | 46.3  |   |              |   |         |   |  |   | 47.2 
|Deferred income taxes                         |  |               |      |   |        |   | 51.5    |                       |  |   | 4.0                       |   |  |              | 22.0  |   |              |   |         |   |  |   | 77.5 
|Other long-term liabilities                   |  |               |      |   |        |   | 3.4     |                       |  |   | 2.0                       |   |  |              | 4.7   |   |              |   |         |   |  |   | 10.1 
|Minority interest                             |  |               |      |   |        |   |        |                       |  |   |                          |   |  |              | 7.7   |   |              |   |         |   |  |   | 7.7  
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities                             |  |               | 462.3 |   |        |   | 482.7   |                       |  |   | 27.9                      |   |  |              | 229.8 |   |              |   | (462.3   | ) |  |   | 740.4
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Stockholders equity                          |  |               | 219.7 |   |        |   | 622.9   |                       |  |   | 112.2                     |   |  |              | 69.9  |   |              |   | (805.0   | ) |  |   | 219.7
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities and stockholders equity    |  | $             | 682.0 |   |        | $ | 1,105.6 |                       |  | $ | 140.1                     |   |  | $            | 299.7 |   |              | $ | (1,267.3 | ) |  | $ | 960.1
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      



17



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Balance Sheets

March 31, 2006



|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|--------------------------------------------- |  | ------------- | ----- | - | ------ | - | ------- | --------------------- |  | - | ------------------------- | - |  | ------------ | ----- | - | ------------ | - | -------- | - |  | - | -----
|                                              |  | Parent        |       |   | Issuer |   |         | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |       |   | Consolidated
|                                              |  | (in millions)
|Assets                                        |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Current assets:                               |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Cash and cash equivalents                     |  | $             |      |   |        | $ | 26.7    |                       |  | $ | 0.7                       |   |  | $            | 25.2  |   |              | $ |         |   |  | $ | 52.6 
|Accounts receivable:                          |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Trade, net of allowance for doubtful accounts |  |               |      |   |        |   | 39.7    |                       |  |   | 9.4                       |   |  |              | 39.4  |   |              |   |         |   |  |   | 88.5 
|From affiliates                               |  |               | (2.0  | ) |        |   | 28.7    |                       |  |   | 2.5                       |   |  |              | (29.2 | ) |              |   |         |   |  |   |     
|Other                                         |  |               |      |   |        |   | 0.1     |                       |  |   | 1.4                       |   |  |              | 0.3   |   |              |   |         |   |  |   | 1.8  
|Inventories, net                              |  |               |      |   |        |   | 21.7    |                       |  |   | 9.6                       |   |  |              | 24.9  |   |              |   |         |   |  |   | 56.2 
|Prepayments and other current assets          |  |               |      |   |        |   | 4.5     |                       |  |   | 0.5                       |   |  |              | 4.9   |   |              |   |         |   |  |   | 9.9  
|Deferred income taxes                         |  |               |      |   |        |   | 4.7     |                       |  |   | (0.1                      | ) |  |              | 0.6   |   |              |   |         |   |  |   | 5.2  
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total current assets                          |  |               | (2.0  | ) |        |   | 126.1   |                       |  |   | 24.0                      |   |  |              | 66.1  |   |              |   |         |   |  |   | 214.2
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Notes receivable from affiliates              |  |               |      |   |        |   | 433.2   |                       |  |   |                          |   |  |              | 29.1  |   |              |   | (462.3   | ) |  |   |     
|Property, plant and equipment, net            |  |               |      |   |        |   | 39.5    |                       |  |   | 34.2                      |   |  |              | 63.1  |   |              |   |         |   |  |   | 136.8
|Intangible assets, net                        |  |               |      |   |        |   | 159.6   |                       |  |   | 16.6                      |   |  |              | 39.7  |   |              |   |         |   |  |   | 215.9
|Goodwill                                      |  |               |      |   |        |   | 244.9   |                       |  |   | 54.7                      |   |  |              | 30.9  |   |              |   |         |   |  |   | 330.5
|Investment in subsidiaries                    |  |               | 650.5 |   |        |   | 108.3   |                       |  |   |                          |   |  |              |      |   |              |   | (758.8   | ) |  |   |     
|Deferred income taxes                         |  |               |      |   |        |   | 1.9     |                       |  |   | 9.0                       |   |  |              | 1.6   |   |              |   |         |   |  |   | 12.5 
|Other long-term assets                        |  |               | 0.2   |   |        |   | 21.3    |                       |  |   | 1.3                       |   |  |              | 2.4   |   |              |   |         |   |  |   | 25.2 
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total assets                                  |  | $             | 648.7 |   |        | $ | 1,134.8 |                       |  | $ | 139.8                     |   |  | $            | 232.9 |   |              | $ | (1,221.1 | ) |  | $ | 935.1
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Liabilities and stockholders equity          |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Current liabilities:                          |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Accounts payable                              |  | $             |      |   |        | $ | 27.4    |                       |  | $ | 11.5                      |   |  | $            | 21.6  |   |              | $ |         |   |  | $ | 60.5 
|Current portion of long-term debt             |  |               |      |   |        |   | 0.5     |                       |  |   |                          |   |  |              | 0.1   |   |              |   |         |   |  |   | 0.6  
|Short-term borrowings                         |  |               |      |   |        |   |        |                       |  |   |                          |   |  |              | 4.0   |   |              |   |         |   |  |   | 4.0  
|Income taxes payable                          |  |               |      |   |        |   | 4.3     |                       |  |   | (2.8                      | ) |  |              | 1.2   |   |              |   |         |   |  |   | 2.7  
|Restructuring accruals                        |  |               |      |   |        |   | 0.1     |                       |  |   |                          |   |  |              | 2.9   |   |              |   |         |   |  |   | 3.0  
|Accruals and other current liabilities        |  |               |      |   |        |   | 27.6    |                       |  |   | 4.4                       |   |  |              | 25.6  |   |              |   |         |   |  |   | 57.6 
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total current liabilities                     |  |               |      |   |        |   | 59.9    |                       |  |   | 13.1                      |   |  |              | 55.4  |   |              |   |         |   |  |   | 128.4
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Notes payable to affiliates                   |  |               | 462.3 |   |        |   | (23.2   | )                     |  |   | 20.8                      |   |  |              | 2.4   |   |              |   | (462.3   | ) |  |   |     
|Long-term debt, less current portion          |  |               |      |   |        |   | 456.5   |                       |  |   |                          |   |  |              | 24.5  |   |              |   |         |   |  |   | 481.0
|Pensions                                      |  |               |      |   |        |   | 1.2     |                       |  |   |                          |   |  |              | 43.6  |   |              |   |         |   |  |   | 44.8 
|Deferred income taxes                         |  |               |      |   |        |   | 51.3    |                       |  |   | 4.1                       |   |  |              | 21.9  |   |              |   |         |   |  |   | 77.3 
|Other long-term liabilities                   |  |               |      |   |        |   | 3.4     |                       |  |   | 2.0                       |   |  |              | 4.4   |   |              |   |         |   |  |   | 9.8  
|Minority interest                             |  |               |      |   |        |   |        |                       |  |   |                          |   |  |              | 7.4   |   |              |   |         |   |  |   | 7.4  
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities                             |  |               | 462.3 |   |        |   | 549.1   |                       |  |   | 40.0                      |   |  |              | 159.6 |   |              |   | (462.3   | ) |  |   | 748.7
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Stockholders equity                          |  |               | 186.4 |   |        |   | 585.7   |                       |  |   | 99.8                      |   |  |              | 73.3  |   |              |   | (758.8   | ) |  |   | 186.4
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      
|Total liabilities and stockholders equity    |  | $             | 648.7 |   |        | $ | 1,134.8 |                       |  | $ | 139.8                     |   |  | $            | 232.9 |   |              | $ | (1,221.1 | ) |  | $ | 935.1
|                                              |  |               |       |   |        |   |         |                       |  |   |                           |   |  |              |       |   |              |   |          |   |  |   |      



18



---

##### 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, 2006



|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ---- | --------------------- |  | - | ------------------------- | - |  | ------------ | ---- | - | ------------ | - | ---- | - |  | - | ----- | -
|                                                        |  | Parent        |      |   | Issuer |   |      | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |      |   | Consolidated |  
|                                                        |  | (in millions) |     
|Net sales                                               |  | $             |     |   |        | $ | 71.8 |                       |  | $ | 32.4                      |   |  | $            | 58.4 |   |              | $ | (9.4 | ) |  | $ | 153.2 |  
|Cost of sales                                           |  |               |     |   |        |   | 50.2 |                       |  |   | 25.2                      |   |  |              | 43.3 |   |              |   | (9.4 | ) |  |   | 109.3 |  
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Gross profit                                            |  |               |     |   |        |   | 21.6 |                       |  |   | 7.2                       |   |  |              | 15.1 |   |              |   |     |   |  |   | 43.9  |  
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Selling, general and administrative expenses            |  |               |     |   |        |   | 14.6 |                       |  |   | 0.4                       |   |  |              | 12.9 |   |              |   |     |   |  |   | 27.9  |  
|Restructuring costs                                     |  |               |     |   |        |   |     |                       |  |   |                          |   |  |              | 1.1  |   |              |   |     |   |  |   | 1.1   |  
|Amortization of intangible assets                       |  |               |     |   |        |   | 3.9  |                       |  |   | 0.8                       |   |  |              | 1.3  |   |              |   |     |   |  |   | 6.0   |  
|Other operating expense, net                            |  |               |     |   |        |   | 0.7  |                       |  |   |                          |   |  |              |     |   |              |   |     |   |  |   | 0.7   |  
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Operating income (expense)                              |  |               |     |   |        |   | 2.4  |                       |  |   | 6.0                       |   |  |              | (0.2 | ) |              |   |     |   |  |   | 8.2   |  
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Non-operating (expense) income:                         |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Interest expense, net                                   |  |               | (0.1 | ) |        |   | (9.2 | )                     |  |   | (0.2                      | ) |  |              | (1.0 | ) |              |   |     |   |  |   | (10.5 | )
|Equity in (loss) earnings of subsidiaries               |  |               | (3.1 | ) |        |   | 7.8  |                       |  |   |                          |   |  |              |     |   |              |   | (4.7 | ) |  |   |      |  
|Other income, net                                       |  |               |     |   |        |   | 0.2  |                       |  |   |                          |   |  |              |     |   |              |   |     |   |  |   | 0.2   |  
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income before income taxes and minority interest |  |               | (3.2 | ) |        |   | 1.2  |                       |  |   | 5.8                       |   |  |              | (1.2 | ) |              |   | (4.7 | ) |  |   | (2.1  | )
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Provision (benefit) for income taxes                    |  |               |     |   |        |   | 2.1  |                       |  |   | (1.6                      | ) |  |              | 0.4  |   |              |   |     |   |  |   | 0.9   |  
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|(Loss) income before minority interest                  |  |               | (3.2 | ) |        |   | (0.9 | )                     |  |   | 7.4                       |   |  |              | (1.6 | ) |              |   | (4.7 | ) |  |   | (3.0  | )
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Minority interest                                       |  |               |     |   |        |   |     |                       |  |   |                          |   |  |              | (0.2 | ) |              |   |     |   |  |   | (0.2  | )
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  
|Net (loss) income                                       |  | $             | (3.2 | ) |        | $ | (0.9 | )                     |  | $ | 7.4                       |   |  | $            | (1.8 | ) |              | $ | (4.7 | ) |  | $ | (3.2  | )
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  



19



---

##### Table of Contents

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Statements of Operations (unaudited)

Six Months Ended September 30, 2006



|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ----- | --------------------- |  | - | ------------------------- | - |  | ------------ | ----- | - | ------------ | - | ----- | - |  | - | ----- | -
|                                                        |  | Parent        |      |   | Issuer |   |       | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |       |   | Consolidated |  
|                                                        |  | (in millions) |     
|Net sales                                               |  | $             |     |   |        | $ | 141.7 |                       |  | $ | 64.6                      |   |  | $            | 112.2 |   |              | $ | (18.7 | ) |  | $ | 299.8 |  
|Cost of sales                                           |  |               |     |   |        |   | 99.1  |                       |  |   | 51.3                      |   |  |              | 83.6  |   |              |   | (18.7 | ) |  |   | 215.3 |  
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Gross profit                                            |  |               |     |   |        |   | 42.6  |                       |  |   | 13.3                      |   |  |              | 28.6  |   |              |   |      |   |  |   | 84.5  |  
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Selling, general and administrative expenses            |  |               |     |   |        |   | 29.7  |                       |  |   | 1.0                       |   |  |              | 26.0  |   |              |   |      |   |  |   | 56.7  |  
|Restructuring costs                                     |  |               |     |   |        |   |      |                       |  |   |                          |   |  |              | 3.0   |   |              |   |      |   |  |   | 3.0   |  
|Amortization of intangible assets                       |  |               |     |   |        |   | 7.9   |                       |  |   | 1.6                       |   |  |              | 2.1   |   |              |   |      |   |  |   | 11.6  |  
|Other operating expense, net                            |  |               |     |   |        |   | 1.4   |                       |  |   |                          |   |  |              |      |   |              |   |      |   |  |   | 1.4   |  
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Operating income (loss)                                 |  |               |     |   |        |   | 3.6   |                       |  |   | 10.7                      |   |  |              | (2.5  | ) |              |   |      |   |  |   | 11.8  |  
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Non-operating (expense) income:                         |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Interest expense, net                                   |  |               | (0.1 | ) |        |   | (18.1 | )                     |  |   | (0.5                      | ) |  |              | (2.1  | ) |              |   |      |   |  |   | (20.8 | )
|Equity in (loss) earnings of subsidiaries               |  |               | (9.7 | ) |        |   | 12.9  |                       |  |   |                          |   |  |              |      |   |              |   | (3.2  | ) |  |   |      |  
|Other income, net                                       |  |               |     |   |        |   | 0.3   |                       |  |   |                          |   |  |              | 2.0   |   |              |   |      |   |  |   | 2.3   |  
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|(Loss) income before income taxes and minority interest |  |               | (9.8 | ) |        |   | (1.3  | )                     |  |   | 10.2                      |   |  |              | (2.6  | ) |              |   | (3.2  | ) |  |   | (6.7  | )
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Provision (benefit) for income taxes                    |  |               |     |   |        |   | 4.3   |                       |  |   | (2.2                      | ) |  |              | 0.7   |   |              |   |      |   |  |   | 2.8   |  
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|(Loss) income before minority interest                  |  |               | (9.8 | ) |        |   | (5.6  | )                     |  |   | 12.4                      |   |  |              | (3.3  | ) |              |   | (3.2  | ) |  |   | (9.5  | )
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Minority interest                                       |  |               |     |   |        |   |      |                       |  |   |                          |   |  |              | (0.3  | ) |              |   |      |   |  |   | (0.3  | )
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  
|Net (loss) income                                       |  | $             | (9.8 | ) |        | $ | (5.6  | )                     |  | $ | 12.4                      |   |  | $            | (3.6  | ) |              | $ | (3.2  | ) |  | $ | (9.8  | )
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |       |   |              |   |       |   |  |   |       |  



20



---

##### 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 |   |      | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | 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  | )
|                                                        |  |               |      |   |        |   |      |                       |  |   |                           |   |  |              |      |   |              |   |      |   |  |   |       |  



21



---

##### Table of Contents

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 |   |       | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | 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  | )
|                                                        |  |               |      |   |        |   |       |                       |  |   |                           |   |  |              |      |   |              |   |       |   |  |   |       |  



22



---

##### Table of Contents

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, 2006



|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|-------------------------------------------------------------- |  | ------------- | ---- | - | ------ | - | ----- | ---------------------- |  | - | -------------------------- | - |  | ------------ | ---- | - | ------------ | - | ---- | - |  | - | ----- | -
|                                                               |  | Parent        |      |   | Issuer |   |       | Guarantor Subsidiaries |  |   | Non-Guarantor Subsidiaries |   |  | Eliminations |      |   | Consolidated |  
|                                                               |  | (in millions) |     
|Operating activities                                           |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Net (loss) income                                              |  | $             | (9.8 | ) |        | $ | (5.6  | )                      |  | $ | 12.4                       |   |  | $            | (3.6 | ) |              | $ | (3.2 | ) |  | $ | (9.8  | )
|Non-cash adjustments                                           |  |               |     |   |        |   | 15.3  |                        |  |   | 0.2                        |   |  |              | 7.0  |   |              |   |     |   |  |   | 22.5  |  
|Undistributed equity in loss (earnings) of subsidiaries        |  |               | 9.7  |   |        |   | (12.9 | )                      |  |   |                           |   |  |              |     |   |              |   | 3.2  |   |  |   |      |  
|Changes in operating assets and liabilities                    |  |               | 0.1  |   |        |   | 0.2   |                        |  |   | (12.5                      | ) |  |              | (5.4 | ) |              |   |     |   |  |   | (17.6 | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Net cash (used in) provided by operating activities            |  |               |     |   |        |   | (3.0  | )                      |  |   | 0.1                        |   |  |              | (2.0 | ) |              |   |     |   |  |   | (4.9  | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Investing activities                                           |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Expenditures for property, plant and equipment and intangibles |  |               |     |   |        |   | (2.6  | )                      |  |   | (0.9                       | ) |  |              | (2.9 | ) |              |   |     |   |  |   | (6.4  | )
|Acquisitions, net                                              |  |               |     |   |        |   | (50.0 | )                      |  |   |                           |   |  |              | (0.6 | ) |              |   |     |   |  |   | (50.6 | )
|Other investments                                              |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | 1.8  |   |              |   |     |   |  |   | 1.8   |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Net cash used in investing activities                          |  |               |     |   |        |   | (52.6 | )                      |  |   | (0.9                       | ) |  |              | (1.7 | ) |              |   |     |   |  |   | (55.2 | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Financing activities                                           |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Increase in borrowings                                         |  |               |     |   |        |   | 0.7   |                        |  |   |                           |   |  |              |     |   |              |   |     |   |  |   | 0.7   |  
|Equity contributions for AMDS acquisition                      |  |               |     |   |        |   | 30.4  |                        |  |   |                           |   |  |              |     |   |              |   |     |   |  |   | 30.4  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Net cash provided by financing activities                      |  |               |     |   |        |   | 31.1  |                        |  |   |                           |   |  |              |     |   |              |   |     |   |  |   | 31.1  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Effect of exchange rate changes on cash                        |  |               |     |   |        |   |      |                        |  |   |                           |   |  |              | 0.5  |   |              |   |     |   |  |   | 0.5   |  
|Decrease in cash and cash equivalents                          |  | $             |     |   |        | $ | (24.5 | )                      |  | $ | (0.8                       | ) |  | $            | (3.2 | ) |              | $ |     |   |  | $ | (28.5 | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Cash and cash equivalents at beginning of year                 |  | $             |     |   |        | $ | 26.7  |                        |  | $ | 0.7                        |   |  | $            | 25.2 |   |              | $ |     |   |  | $ | 52.6  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  
|Cash and cash equivalents at end of period                     |  | $             |     |   |        | $ | 2.2   |                        |  | $ | (0.1                       | ) |  | $            | 22.0 |   |              | $ |     |   |  | $ | 24.1  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |      |   |              |   |      |   |  |   |       |  



23



---

##### Table of Contents

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  | )
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Net 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   |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  
|Net 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  |  
|                                                               |  |               |      |   |        |   |       |                        |  |   |                            |   |  |              |       |   |              |   |       |   |  |   |       |  



24



---

##### 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, 2006 and the related notes thereto included in this report
and the audited consolidated financial statements for the year ended March 31, 2006 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 we and our predecessors 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 automatic meter reading (AMR) devices to North American water utilities. We have enhanced our meter reading systems portfolio in North America with a radio frequency fixed network advanced
metering infrastructure (AMI) solution for our electric, gas and water utility customers. 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.

History

The Company was formed on December 17, 2003 through the acquisition of the metering systems and certain other businesses of Invensys plc. We and our
predecessors have been supplying metering and related products for over a century.



25



---

##### Table of Contents

Recent Acquisition

AMDS.On July 6, 2006, the Company acquired substantially all of the assets and assumed certain liabilities of Advanced Metering Data Systems,
L.L.C. (AMDS) for $62.4 million consisting of $49.6 million in cash and 15,000 vested preference shares issued by Sensus Metering Systems (Bermuda 1) Ltd. (Bermuda 1) with an estimated fair value of $12.8 million. The Company
financed the transaction with equity contributions totaling $30.4 million in cash from Bermuda 1, cash on hand and utilization of the Companys revolving credit facility. The vested preference shares are redeemable for $15.0 million at the
option of the holder once certain future performance targets are achieved. On the earlier of an initial public offering, change of control or the fifth anniversary of the closing date, any vested shares that have not been redeemed for liquidation
value or converted into common shares of Bermuda 1 will then become redeemable or convertible regardless of whether the performance measures are met. This purchase is expected to provide the Company with core capability to deliver comprehensive AMI
technology with robust two-way offerings to the electricity market and powerful one-way solutions for the water and gas markets, which complements the Companys existing AMR technologies.

The Company is also required to make additional future cash payments to AMDS based on a specified percentage of certain financial performance measures of
the acquired business through March 2011. In addition, Bermuda 1 issued 15,000 unvested preference shares to AMDS, which are subject to vesting based on the performance of the acquired business over a five-year period following closing. The
redemption value of the unvested preference shares is $15.0 million if the specified performance thresholds are achieved over the relevant period. Any additional future cash consideration and the fair value of the unvested preference shares
represent additional purchase price and will increase the amount of recorded goodwill when the contingencies are resolved.

Bermuda 1 is
legally obligated to satisfy any future redemption requirements of the vested and unvested preference shares. Accordingly, the estimated fair value of the vested preference shares has been reflected within stockholders equity in the
accompanying consolidated balance sheet at September 30, 2006 since it represents a capital contribution from Bermuda 1. The Company is not obligated to fulfill any future redemption requirements on behalf of Bermuda 1.

Recent Event

On
October 9, 2006, the Company successfully completed labor agreement negotiations and has a new three-year labor contract with the United Automobile Workers at Sensus Precision Die Casting, Inc., one of our subsidiaries.

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 30,2006    |       | July 1,2006 |   | March 31,2006 |  | December 31,2005 |       | September 30,2005 |   | July 2,2005
|Orders (in millions)          |  | $                    | 162.0 |             | $ | 150.6         |  | $                | 170.5 |                   | $ | 151.7       |  | $ | 153.9 |  | $ | 150.5
|Total net sales (in millions) |  | $                    | 153.2 |             | $ | 146.6         |  | $                | 178.1 |                   | $ | 146.9       |  | $ | 142.1 |  | $ | 146.8
|Employees                     |  |                      | 3,831 |             |   | 3,835         |  |                  | 3,859 |                   |   | 3,880       |  |   | 3,914 |  |   | 3,372

Backlog

The Companys total backlog at September 30, 2006 and 2005 was $61.9 million and $61.2 million, respectively. The Companys total backlog consists of unshipped orders relating to undelivered contractual
commitments and purchase orders.



26



---

##### Table of Contents

Results of Operations

The following table provides summary results of operations of the Company for the periods presented:



|                                               |  |                                      |       |   |   |     |    |                                      |   |       |   |  |     |                                  |  |   |       |   |  |                                  |    |  |   |       |   |  |     |   
|---------------------------------------------- |  | ------------------------------------ | ----- | - | - | --- | -- | ------------------------------------ | - | ----- | - |  | --- | -------------------------------- |  | - | ----- | - |  | -------------------------------- | -- |  | - | ----- | - |  | --- | --
|(in millions)                                  |  | Fiscal QuarterEndedSeptember 30,2006 |       |   | % |     |    | Fiscal QuarterEndedSeptember 30,2005 |   |       | % |  |     | Six MonthsEndedSeptember 30,2006 |  |   | %     |   |  | Six MonthsEndedSeptember 30,2005 |    |  | % |      
|Net sales                                      |  | $                                    | 153.2 |   |   | 100 | %  |                                      | $ | 142.1 |   |  | 100 | %                                |  | $ | 299.8 |   |  | 100                              | %  |  | $ | 288.9 |   |  | 100 | % 
|Gross profit                                   |  |                                      | 43.9  |   |   | 29  | %  |                                      |   | 42.3  |   |  | 30  | %                                |  |   | 84.5  |   |  | 28                               | %  |  |   | 86.6  |   |  | 30  | % 
|Selling, general and administrative expenses   |  |                                      | 27.9  |   |   | 18  | %  |                                      |   | 27.6  |   |  | 19  | %                                |  |   | 56.7  |   |  | 19                               | %  |  |   | 54.6  |   |  | 19  | % 
|Restructuring costs                            |  |                                      | 1.1   |   |   | 1   | %  |                                      |   | 0.8   |   |  | 1   | %                                |  |   | 3.0   |   |  | 1                                | %  |  |   | 2.2   |   |  | 1   | % 
|Amortization of intangible assets              |  |                                      | 6.0   |   |   | 4   | %  |                                      |   | 5.6   |   |  | 4   | %                                |  |   | 11.6  |   |  | 4                                | %  |  |   | 11.3  |   |  | 4   | % 
|Other operating expense, net                   |  |                                      | 0.7   |   |   |    |    |                                      |   | 0.8   |   |  | 1   | %                                |  |   | 1.4   |   |  |                                 |    |  |   | 1.6   |   |  |    |   
|                                               |  |                                      |       |   |   |     |    |                                      |   |       |   |  |     |                                  |  |   |       |   |  |                                  |    |  |   |       |   |  |     |   
|Operating income                               |  |                                      | 8.2   |   |   | 6   | %  |                                      |   | 7.5   |   |  | 5   | %                                |  |   | 11.8  |   |  | 4                                | %  |  |   | 16.9  |   |  | 6   | % 
|Interest expense, net                          |  |                                      | (10.5 | ) |   | (7  | )% |                                      |   | (9.9  | ) |  | (7  | )%                               |  |   | (20.8 | ) |  | (7                               | )% |  |   | (19.0 | ) |  | (6  | )%
|Other non-operating income (expense), net      |  |                                      | 0.2   |   |   |    |    |                                      |   | (0.2  | ) |  |    |                                  |  |   | 2.3   |   |  | 1                                | %  |  |   | (2.2  | ) |  | (1  | )%
|                                               |  |                                      |       |   |   |     |    |                                      |   |       |   |  |     |                                  |  |   |       |   |  |                                  |    |  |   |       |   |  |     |   
|Loss before income taxes and minority interest |  |                                      | (2.1  | ) |   | (1  | )% |                                      |   | (2.6  | ) |  | (2  | )%                               |  |   | (6.7  | ) |  | (2                               | )% |  |   | (4.3  | ) |  | (1  | )%
|Provision for income taxes                     |  |                                      | 0.9   |   |   | 1   | %  |                                      |   | 2.0   |   |  | 1   | %                                |  |   | 2.8   |   |  | 1                                | %  |  |   | 4.4   |   |  | 2   | % 
|                                               |  |                                      |       |   |   |     |    |                                      |   |       |   |  |     |                                  |  |   |       |   |  |                                  |    |  |   |       |   |  |     |   
|Loss before minority interest                  |  |                                      | (3.0  | ) |   | (2  | )% |                                      |   | (4.6  | ) |  | (3  | )%                               |  |   | (9.5  | ) |  | (3                               | )% |  |   | (8.7  | ) |  | (3  | )%
|Minority interest                              |  |                                      | (0.2  | ) |   |    |    |                                      |   | (0.3  | ) |  |    |                                  |  |   | (0.3  | ) |  |                                 |    |  |   | (0.4  | ) |  |    |   
|                                               |  |                                      |       |   |   |     |    |                                      |   |       |   |  |     |                                  |  |   |       |   |  |                                  |    |  |   |       |   |  |     |   
|Net loss                                       |  | $                                    | (3.2  | ) |   | (2  | )% |                                      | $ | (4.9  | ) |  | (3  | )%                               |  | $ | (9.8  | ) |  | (3                               | )% |  | $ | (9.1  | ) |  | (3  | )%
|                                               |  |                                      |       |   |   |     |    |                                      |   |       |   |  |     |                                  |  |   |       |   |  |                                  |    |  |   |       |   |  |     |   

Fiscal Quarter and Six Months Ended September 30, 2006 Compared with Fiscal Quarter and Six Months
Ended September 30, 2005

Net Sales.Net sales increased $11.1 million (including a $2.3 million favorable foreign
currency impact), or 8%, from $142.1 million in the fiscal quarter ended September 30, 2005 to $153.2 million in the fiscal quarter ended September 30, 2006. For the six months ended September 30, 2006, net sales increased $10.9
million (including a $2.8 million favorable foreign currency impact), or 4%, to $299.8 million from $288.9 million in the six months ended September 30, 2005. Notwithstanding the increase, we have experienced sales cycle interruptions during
the fiscal quarter and six months ended September 30, 2006 related to customer consolidation, despite continued growth in the underlying markets and in AMR and AMI applications.

North American sales of water meters decreased $1.5 million, or 3%, from $56.7 million in the fiscal quarter ended September 30, 2005 to $55.2
million in the fiscal quarter ended September 30, 2006. For the six months ended September 30, 2006, North American sales of water meters decreased $7.7 million, or 7%, to $108.8 million from $116.5 million for the fiscal quarter ended
September 30, 2006. This decrease is primarily the result of fewer working days in the first half of the fiscal year, the migration to new products and customer consolidation.

Gas meter sales were relatively unchanged for the fiscal quarter ended September 30, 2006 as compared to the prior year fiscal quarter, and
decreased $1.5 million for the six months ended September 30, 2006, or 5%, compared to the prior year six-month fiscal period principally due to the timing of export sales and lower



27



---

##### Table of Contents

residential gas meter sales. Electric meter sales increased $0.7 million and $0.8 million for the fiscal quarter and six months ended September 30,
2006, respectively, as compared to the fiscal quarter and six months ended September 30, 2005, due to continued growth in sales of our iCon® electric meter products and expansion of our product line into multiphase and broader AMI applications.

The Europe/Middle East/Africa water meter market experienced an increase in sales of $6.3 million and $7.7 million for the fiscal quarter and six months
ended September 30, 2006, respectively, net of foreign currency impact, as compared to the fiscal quarter and six months ended September 30, 2005. This increase is principally the result of growth in Eastern Europe and Africa, entry into
new markets, increased bulk meter sales and initial market acceptance of new AMR product offerings in Germany. South American sales increased $1.0 million and $1.3 million, net of foreign currency impact, for the fiscal quarter and six months ended
September 30, 2006, respectively, as compared to the fiscal quarter and six months ended September 30, 2005, due to increased domestic water meter system sales in Brazil and Chile.

Third-party sales from our precision die casting products increased $4.0 million, or 38% and $8.2 million or 38%, in the fiscal quarter and six months
ended September 30, 2006, respectively, principally due to expansion into China and pass down of aluminum price increases to our customers. Excluding the pass down of aluminum price increases, sales increased 27% in the six months ended
September 30, 2006 as compared to the six months ended September 30, 2005. Pipe joining and repair products sales increased $0.5 million and $1.6 million for the fiscal quarter and six months ended September 30, 2006, respectively, as
compared to the fiscal quarter and six months ended September 30, 2005, as a result of increased sales volumes, new product introductions and price increases.

Our top ten customers accounted for approximately 33% of net sales in the six months ended September 30, 2006. Sales to distributors affiliated with The Home Depot, Inc. constituted approximately 13% of net sales
in the six months ended September 30, 2006. No other individual customer accounted for more than 5% of 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 increased demand for AMR systems, AMI applications, new product offerings, expansion into new markets, resolution of customer consolidation
issues and favorable general economic trends.

Gross Profit. Gross profit increased $1.6 million (including a $0.6 million favorable
foreign currency impact), or 4%, from $42.3 million in the fiscal quarter ended September 30, 2005 to $43.9 million in the fiscal quarter ended September 30, 2006. The increase in gross profit for the current fiscal quarter is due to
higher sales volumes and lower factory overhead costs, partially offset by increased material costs and higher depreciation expense as compared to the prior year fiscal quarter. For the six months ended September 30, 2006, gross profit
decreased $2.1 million (including a $0.8 million favorable foreign exchange impact) to $84.5 million from $86.6 million for the six months ended September 30, 2005. The decrease in gross profit for the current six-month period is the result of
improved sales volumes being more than offset by increased worldwide material prices and higher depreciation expense relating to increased investment in manufacturing infrastructure and new business ventures. In connection with the purchase method
of accounting, the Company recorded an inventory write-up to estimated fair value of $0.7 million related to inventory acquired in the AMDS acquisition in the current fiscal quarter and six months ended September 30, 2006.

Selling, General and Administrative Expenses. Selling, general and administrative (SG&A) expenses for the fiscal quarter ended
September 30, 2006 increased $0.3 million (including a $0.4 million unfavorable foreign currency impact), or 1%, to $27.9 million from $27.6 million in the fiscal quarter ended September 30, 2005. Worldwide inflation, partially offset by
the benefits of restructuring in Europe, primarily accounts for the increase in the current fiscal quarter. For the six months ended September 30, 2006, SG&A expenses increased $2.1 million (including a $0.6 million unfavorable foreign
currency impact) to $56.7 million from $54.6 million for the six months ended September 30, 2005. SG&A expenses increased due to our expansion into China, the AMDS acquisition and higher medical insurance charges.



28



---

##### Table of Contents

Restructuring Costs. Restructuring costs increased $0.3 million and $0.8 million for the fiscal
quarter and six months ended September 30, 2006, respectively. These increases are attributed to the European manufacturing restructuring initiatives and actions to rationalize our pipe joining operations.

Amortization of Intangible Assets. Amortization of intangible assets increased from $5.6 million for the fiscal quarter ended September 30,
2005 to $6.0 million for the fiscal quarter ended September 30, 2006. For the six months ended September 30, 2006, amortization of intangible assets increased to $11.6 million from $11.3 million for the six months ended September 30,
2005. This increase is due to the acquired intangible assets of AMDS. Amortization expense relates to the intangible assets recorded at the time of the acquisition of Invensys Metering Systems for non-competition agreements, customer relationships
and patents and the intangible assets recorded as a result of the AMDS acquisition for developed technology.

Other Operating Expense,
Net. Other operating expense, net of $0.7 million, which represents a management fee paid to The Jordan Company, L.P., for the fiscal quarter ended September 30, 2006 decreased $0.1 million compared to $0.8 million for the fiscal quarter
ended September 30, 2005. For the six months ended September 30, 2006, other operating expense, net decreased $0.2 to $1.4 million from $1.6 million for the six months ended September 30, 2005. Other operating expense, net for the six
months ended September 30, 2006 consists of a management fee of $1.3 million paid to The Jordan Company, L.P. and other fees and expenses of $0.1 million.

Interest Expense, Net. Interest expense, net increased $0.6 million and $1.8 million for the fiscal quarter and six months ended September 30, 2006, respectively, due to higher interest rates on our
variable-rate debt for the current quarter and six months ended compared to the prior year fiscal quarter and six months ended. The higher interest rates on our variable-rate debt were partially offset by the impact of the Companys interest
rate swap agreements discussed below.

Other Non-Operating Income (Expense), Net. Other non-operating income, net of $0.2 million
for the fiscal quarter ended September 30, 2006 is due to a gain on the sale of assets. Other non-operating income, net of $2.3 million for the six months ended September 30, 2006 is primarily related to the gain on the sale of our idle
manufacturing facility in France of $1.7 million and net transactional foreign currency gains.

Provision for Income Taxes. Income
tax expense was $0.9 million and $2.8 million for the fiscal quarter and six months ended September 30, 2006, respectively, compared to $2.0 million and $4.4 million for the fiscal quarter and six months ended September 30, 2005,
respectively. The Companys effective tax rates were the result of income taxes being incurred on the taxable income of our 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
decreased $0.1 million for the fiscal quarter and six months ended September 30, 2006 as compared to the fiscal quarter and six months ended September 30, 2005 and is essentially attributable to our Algerian joint venture.

Net Loss. Net loss of $3.2 million for the fiscal quarter ended September 30, 2006 improved $1.7 million compared to a net loss of $4.9
million for the fiscal quarter ended September 30, 2005, primarily as a result of increased gross margins. For the six months ended September 30, 2006, net loss increased $0.7 million to $9.8 million from $9.1 million for the six months
ended September 30, 2005, as a result of lower gross margins, higher SG&A expenses and increased interest expense, partially offset by other non-operating income.

Non-GAAP Measures

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



29



---

##### Table of Contents

operations, such as depreciation, amortization and interest expense, are significantly impacted by the acquisition of Invensys Metering Systems. 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.

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, 2006 and 2005 (in millions):



|                              |  |                                      |      |   |                                     |   |      |                                  |  |   |                                  |   |  |   |      |  
|----------------------------- |  | ------------------------------------ | ---- | - | ----------------------------------- | - | ---- | -------------------------------- |  | - | -------------------------------- | - |  | - | ---- | -
|                              |  | Fiscal QuarterEndedSeptember 30,2006 |      |   | Fiscal QuarterEndedSeptember30,2005 |   |      | Six MonthsEndedSeptember 30,2006 |  |   | Six MonthsEndedSeptember 30,2005 |  
|Net loss                      |  | $                                    | (3.2 | ) |                                     | $ | (4.9 | )                                |  | $ | (9.8                             | ) |  | $ | (9.1 | )
|Depreciation and amortization |  |                                      | 12.3 |   |                                     |   | 10.3 |                                  |  |   | 23.5                             |   |  |   | 20.5 |  
|Interest expense, net         |  |                                      | 10.5 |   |                                     |   | 9.9  |                                  |  |   | 20.8                             |   |  |   | 19.0 |  
|Income tax provision          |  |                                      | 0.9  |   |                                     |   | 2.0  |                                  |  |   | 2.8                              |   |  |   | 4.4  |  
|Minority interest             |  |                                      | 0.2  |   |                                     |   | 0.3  |                                  |  |   | 0.3                              |   |  |   | 0.4  |  
|                              |  |                                      |      |   |                                     |   |      |                                  |  |   |                                  |   |  |   |      |  
|EBITDA                        |  | $                                    | 20.7 |   |                                     | $ | 17.6 |                                  |  | $ | 37.6                             |   |  | $ | 35.2 |  
|                              |  |                                      |      |   |                                     |   |      |                                  |  |   |                                  |   |  |   |      |  

EBITDA. EBITDA increased $3.1 million from $17.6 million in the fiscal quarter ended
September 30, 2005 to $20.7 million in the fiscal quarter ended September 30, 2006, primarily as a result of increased gross margins (excluding depreciation expense). EBITDA increased $2.4 million from $35.2 million in the six months ended
September 30, 2005 to $37.6 million in the six months ended September 30, 2006, primarily due to other non-operating income.

Liquidity and
Capital Resources

During the six months ended September 30, 2006, we funded our operating, investing and capital requirements
through cash on hand, borrowings under our senior credit facilities and equity contributions related to the AMDS acquisition. 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 used in operating activities for the six months ended
September 30, 2006 was $(4.9) million, and net cash flow provided in operating activities for the six months ended September 30, 2005 was $14.6 million, respectively. The $19.5 million increase in net cash used in operating activities for
the current six months was the result of lower operating income, increased inventory related to higher material prices and a reduction of accounts payable.

Cash expenditures for restructuring for the six months ended September 30, 2006 and 2005 were $2.9 and $3.3 million, respectively, and are reflected within cash used in operations. As of September 30, 2006,
we had $6.1 million of restructuring accruals reflected on our consolidated balance sheet. Additional restructuring expenses of approximately $2.2 million are expected to be incurred in fiscal 2007 for current and new restructuring programs to
rationalize our water meter product lines in Europe.

Working capital as a percentage of net sales decreased to 12% at September 30,
2006 as compared with 14% at September 30, 2005 primarily due to higher accounts payable and accruals.

Cash used for investing
activities of $55.2 million for the six months ended September 30, 2006 represents payments for capital expenditures, intangibles, business acquisitions and other investments, offset by proceeds from the disposition of property, plant and
equipment and business units. Capital expenditures were $6.1 million and $12.5 million for the six months ended September 30, 2006 and 2005, respectively. Capital expenditure requirements are comprised of equipment, molds and tooling for
replacement and expenditures for cost



30



---

##### Table of Contents

reduction, maintenance, safety and expansion. For the full fiscal year 2007, we expect to make capital expenditures of approximately $20.8 million
reflecting our continuing emphasis on a growth-oriented capital expenditures program. Business acquisition expenditures of $50.6 million for the six months ended September 30, 2006 were attributable to $0.6 million as a final payment for the
Rongtai acquisition completed in September 2006, $0.4 million for progress payments for the net assets of DuPenn Inc., which was consummated in fiscal 2006, and $49.6 million attributable to the AMDS acquisition in July 2006. Proceeds from sale of
assets of $1.8 million is primarily from the sale of our idle manufacturing facility in France.

Cash provided by financing activities
represents an increase in indebtedness under the Companys U.S. revolving credit facility of $0.7 million and equity contributions of $30.4 million in cash from Bermuda 1 related to the AMDS acquisition.

As a result of the acquisition of Invensys Metering Systems, we incurred substantial third-party indebtedness. Our senior credit facilities provide for
senior secured financing of $276.2 million, consisting of (a) two term loan facilities in an aggregate amount of $206.2 million, including a $182.0 million U.S. term loan facility and a $24.2 million European term loan facility, and
(b) two revolving credit facilities in an aggregate amount of $70.0 million, under which $40.0 million is available in the form of U.S. dollar-denominated loans and $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 2% margin, or the greater of the Prime Rate and the Federal Funds Effective Rate (Alternate Base Rate) plus a 1% 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.

We also have $275.0 million of senior subordinated notes outstanding, which mature on December 15, 2013 and bear interest at the rate
of 8 5/8% 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 indicated below (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 thereof, 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: (a) incur
additional indebtedness (including by way of guarantee), subject to certain



31



---

##### Table of Contents

exceptions, unless we meet a consolidated coverage ratio of 2.0 to 1.0 or certain other conditions apply; (b) pay dividends or distributions, or make
certain types of investments or other restricted payments, unless we meet certain specified conditions; (c) 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; (d) dispose of certain assets and capital stock of our subsidiary guarantors; (e) enter into certain transactions with affiliates; (f) engage in new lines of business; and
(g) consummate certain mergers and consolidations.

As of September 30, 2006, we had $486.4 million of total indebtedness
outstanding, consisting of $275.0 million under the senior secured facility, $182.0 million under the U.S. term loan facility, $24.2 million under the European term loan facility, $4.8 million in short-term borrowings (comprising $4.1 million
assumed in the Rongtai acquisition and $0.7 million under the U. S. revolving credit facility) and a $0.4 million variable-rate, long-term loan from the Rongtai joint venture partner. Interest expense, net, including amortization of deferred
financing costs, was $10.5 million and $20.8 million for the fiscal quarter and six months ended September 30, 2006, respectively. There are no principal payments due on the term loan facilities until March 2007. In addition to the $0.7 million
short-term borrowings outstanding under the revolving credit facility at September 30, 2006, an additional $5.1 million of the facility was utilized in connection with outstanding letters of credit. We were in compliance with all credit
facility covenants at September 30, 2006.

We believe that cash on hand and expected cash flows 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; however, we offer no assurances. 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.

In conjunction with the AMDS acquisition, the Company is legally obligated to satisfy any additional future cash payments to AMDS based on a specified
percentage of certain financial performance measures of the acquired business through March 2011. We believe that expected cash flows from operations will provide sufficient funds to fulfill this obligation.

Off-Balance Sheet Arrangements

We have no
off-balance sheet arrangements that would have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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 changes in foreign currency rates and
fluctuating interest 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, 2006, assets of foreign subsidiaries constituted approximately 34% of total assets. Foreign currency exchange rate exposure is most significant with respect
to our European and South American operations. For the fiscal quarter and six months ended September 30, 2006, net sales were positively impacted by the valuation of foreign currencies, primarily the euro, versus the U.S. dollar by
approximately $2.3 million and $2.8 million, respectively. In periods of a strengthening U.S. dollar, however, our results of operations could experience a negative currency translation impact.



32



---

##### Table of Contents

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 remeasurement impact of currency rate changes on intercompany
receivables and payables. 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 $0.1 million, which we believe would offset the impact of currency gains and losses
related to certain receivables and payables. We expect to continue to utilize 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. The Companys total indebtedness as of September 30, 2006 was $486.4 million, of which
$206.6 million (including the $0.4 million long-term loan from the Rongtai joint venture partner) bears interest at variable rates. As of September 30, 2006, substantially all of our variable-rate borrowings were under the senior credit
facilities and were at the adjusted LIBOR plus 2.0%. At September 30, 2006, the weighted average interest rate on our variable-rate term debt was approximately 7.3% (consisting of approximately 5.3% LIBOR plus 2.0%). Holding all other variables
constant, a change in the interest rate of 1% on our variable-rate debt would impact annual interest costs by $1.1 million, after giving effect to the interest rate swaps discussed below.

On December 9, 2005 and March 24, 2006, the Company entered into interest rate swap agreements, each with a notional amount of $50.0 million,
to hedge exposure to variable interest rates. The purpose of the swaps, designated as a cash flow hedge, is to effectively hedge the Companys interest payments on a portion of its variable-rate debt. Under the terms of the swap agreements,
which are effective January 20, 2006 and August 22, 2006 and terminate on September 30, 2010 and June 30, 2010, respectively, the Company receives periodic variable interest payments at the three-month LIBOR and makes periodic
payments at a fixed rate of 4.927% and 5.121%, respectively. Changes in the Companys cash flows attributable to the risk being hedged are expected to be completely offset by the hedging derivatives, and therefore changes in the fair value of
the swaps are reflected in other comprehensive income (loss), net of tax. Any ineffectiveness of the swaps is required to be recognized in earnings. Other comprehensive loss of $1.2 million (net of tax of $0.7 million) and $0.4 million (net of tax
of $0.3 million), recorded for the quarter and six months ended September 30, 2006, respectively, reflects the decrease in fair value of the interest rate swaps due to changes in interest rates since the trade dates. We expect to continue to
utilize interest rate swap agreements to manage interest rate risk in the future.

Item 4. Controls and Procedures

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 15d-15
under the Securities Exchange Act of 1934 (Exchange Act) promulgated thereunder, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as
of the end of the period covered by this report (the Evaluation Date). Based on such evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, 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 and to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure. We did not effect any change in our internal controls over financial reporting during the period covered by this report that has materially
affected, or is reasonable likely to materially affect, our internal control over financial reporting.



33



---

##### Table of Contents

PART IIOTHER INFORMATION

ITEM 1. Legal Proceedings

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 in our Annual Report on Form 10-K for the fiscal year ended March 31, 2006, 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 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in
Item 1A in our Annual Report on Form 10-K for the fiscal year ended March 31, 2006, which was filed with the SEC on June 15, 2006.

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, 2006.

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.



34



---

##### Table of Contents

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: October 30, 2006 |  | By:                                      |  | /s/ DANIEL W. HARNESS
|                       |  |                                          |  |                       |  | Daniel W. Harness                    
|                       |  |                                          |  |                       |  | Chief Executive Officer and President
|                       |  |                                         
|Date: October 30, 2006 |  | By:                                      |  | /s/ PETER MAINZ      
|                       |  |                                          |  |                       |  | Peter Mainz                          
|                       |  |                                          |  |                       |  | Chief Financial Officer              
|                       |  |                                          |  |                       |  | (Principal Financial Officer)        
|                       |  |                                         
|Date: October 30, 2006 |  | By:                                      |  | /s/ THOMAS DORAZIO  
|                       |  |                                          |  |                       |  | Thomas DOrazio                      
|                       |  |                                          |  |                       |  | Vice President, Finance              
|                       |  |                                          |  |                       |  | (Principal Accounting Officer)       
|                       | 
|                       |  | SENSUS METERING SYSTEMS INC.            
|                       |  |                                         
|Date: October 30, 2006 |  | By:                                      |  | /s/ DANIEL W. HARNESS
|                       |  |                                          |  |                       |  | Daniel W. Harness                    
|                       |  |                                          |  |                       |  | Chief Executive Officer and President
|                       |  |                                         
|Date: October 30, 2006 |  | By:                                      |  | /s/ PETER MAINZ      
|                       |  |                                          |  |                       |  | Peter Mainz                          
|                       |  |                                          |  |                       |  | Chief Financial Officer              
|                       |  |                                          |  |                       |  | (Principal Financial Officer)        
|                       |  |                                         
|Date: October 30, 2006 |  | By:                                      |  | /s/ THOMAS DORAZIO  
|                       |  |                                          |  |                       |  | Thomas DOrazio                      
|                       |  |                                          |  |                       |  | Vice President, Finance              
|                       |  |                                          |  |                       |  | (Principal Accounting Officer)       



35



---

##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                         
|----------- |  | --------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                             
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 15d-14(a).                                    
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 15d-14(a).                                    
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.