form_10k-a.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 1
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the fiscal year ended December 31,
2006
|
OR
¨
|
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 000-22418
ITRON,
INC.
(Exact
name of registrant as specified in its charter)
|
|
Washington
|
91-1011792
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification
Number)
|
2111
N Molter Road, Liberty Lake, Washington 99019
(509)
924-9900
(Address
and telephone number of registrant’s principal executive
offices)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
|
|
Name
of each exchange on which registered
|
Common
stock, no par value
|
|
NASDAQ
Global Select Market
|
Preferred
share purchase rights
|
|
NASDAQ
Global Select Market
|
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. Yes x No ¨
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act. Yes ¨ No x
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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ¨
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. (Check
one):
|
|
|
Large
accelerated filer x
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes ¨ No x
As
of
June 30, 2006 (the last business day of the registrant’s most recently
completed second fiscal quarter), the aggregate market value of the shares
of
common stock held by non-affiliates of the registrant (based on the closing
price for the common stock on the NASDAQ National Market on such date) was
$1,510,628,542.
As
of
January 31, 2007, there were outstanding 25,748,297 shares of the
registrant’s common stock, no par value, which is the only class of common stock
of the registrant.
DOCUMENTS
INCORPORATED BY REFERENCE
The
information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the Annual Meeting of Shareholders of the Company
to be held May 15, 2007.
EXPLANATORY
NOTE
Amendment
No. 1 to our Annual Report on Form 10-K for the fiscal year ended December
31,
2006, which was originally filed with the Securities and Exchange Commission
(SEC) on February 23, 2007, is being filed to restate previously omitted
financial information from Item 8, Financial Statements and Supplementary
Data,
to include financial information pursuant to SEC Regulation S-X Rule 3-10,
Financial Statements of Guarantors and Issuers of Guaranteed Securities
Registered or Being Registered.
In
addition, we have updated Item 8, Financial Statements and Supplementary
Data,
to retrospectively adjust for a change in the composition of our reportable
segments, which occurred in the second quarter of 2007, in connection with
our
acquisition of Actaris Metering Systems SA. We have not updated Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, for the change in our reportable segments as we believe the current
disclosures includes more detailed information than would be required under
our
updated segment presentation.
The
restated and updated information noted above has been reflected in Notes
17 and
18 to the consolidated financial statements. This restatement had no effect
on
the accompanying Consolidated Statements of Operations, Consolidated Balance
Sheets, Consolidated Statements of Shareholders’ Equity or Consolidated
Statements of Cash Flows. Other items and disclosures included in this Form
10-K/A have not been updated for any events subsequent to the previously
filed
Annual Report on Form 10-K.
We
have
also included Item 9A, Controls and Procedures, and Item 15, Exhibits, Financial
Statement Schedule.
ITEM
8: FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
REPORT
OF MANAGEMENT
To
the
Board of Directors and Shareholders of Itron, Inc.
Management
is responsible for the preparation of our consolidated financial statements
and
related information appearing in this Annual Report on Form 10-K/A. Management
believes that the consolidated financial statements fairly reflect the form
and
substance of transactions and that the financial statements reasonably present
our financial position, results of operations and cash flows in conformity
with
accounting principles generally accepted in the United States of America.
Management has included in our financial statements amounts based on estimates
and judgments that it believes are reasonable under the
circumstances.
Management’s
explanation and interpretation of our overall operating results and financial
position, with the basic financial statements presented, should be read in
conjunction with the entire report. The notes to consolidated financial
statements, an integral part of the basic financial statements, provide
additional detailed financial information. Our Board of Directors has an Audit
and Finance Committee composed of independent directors. The Committee meets
regularly with financial management and Deloitte & Touche LLP to review
internal control, auditing and financial reporting matters.
|
|
LeRoy
D. Nosbaum
|
Steven
M. Helmbrecht
|
Chairman
and Chief Executive Officer
|
Sr.
Vice President and Chief Financial
Officer
|
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders of
Itron,
Inc.
Liberty
Lake, Washington
We
have
audited the accompanying consolidated balance sheets of Itron, Inc. and
subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the
related consolidated statements of operations, shareholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2006.
Our audits also included the financial statement schedule listed in the Index
at
Item 15. These financial statements and financial statement schedule are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based
on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Itron, Inc. and subsidiaries at
December 31, 2006 and 2005, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
2006, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, such financial statement schedule,
when
considered in relation to the basic consolidated financial statements taken
as a
whole, presents fairly, in all material respects, the information set forth
therein.
As
discussed in Note 1 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No.
123(R), Share-Based Payment, effective January 1, 2006.
As
discussed in Note 18 to the consolidated financial statements, the accompanying
consolidated financial statements have been restated to include a previously
omitted footnote disclosure.
As
discussed in Note 17 to the consolidated financial statements, the disclosures
in the accompanying consolidated financial statements have been retrospectively
adjusted for a change in the composition of reportable segments.
We
have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2006, based on the
criteria established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 22, 2007 expressed an unqualified opinion on management’s
assessment of the effectiveness of the Company’s internal control over financial
reporting and an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
/s/
DELOITTE & TOUCHE LLP
Seattle,
Washington
February 22,
2007 (September 12, 2007, as to Notes 17 and 18)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in
thousands, except per share data)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
593,990
|
|
|
$ |
503,270
|
|
|
$ |
346,543
|
|
Service
|
|
|
50,052
|
|
|
|
49,420
|
|
|
|
52,651
|
|
Total
revenues
|
|
|
644,042
|
|
|
|
552,690
|
|
|
|
399,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
349,210
|
|
|
|
291,445
|
|
|
|
198,131
|
|
Service
|
|
|
27,390
|
|
|
|
27,624
|
|
|
|
30,394
|
|
Total
cost of revenues
|
|
|
376,600
|
|
|
|
319,069
|
|
|
|
228,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
267,442
|
|
|
|
233,621
|
|
|
|
170,669
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
63,587
|
|
|
|
56,642
|
|
|
|
45,279
|
|
Product
development
|
|
|
58,774
|
|
|
|
47,077
|
|
|
|
44,379
|
|
General
and administrative
|
|
|
52,213
|
|
|
|
44,428
|
|
|
|
35,490
|
|
Amortization
of intangible assets
|
|
|
31,125
|
|
|
|
38,846
|
|
|
|
27,901
|
|
Restructurings
|
|
|
-
|
|
|
|
390
|
|
|
|
7,258
|
|
In-process
research and development
|
|
|
-
|
|
|
|
-
|
|
|
|
6,400
|
|
Total
operating expenses
|
|
|
205,699
|
|
|
|
187,383
|
|
|
|
166,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
61,743
|
|
|
|
46,238
|
|
|
|
3,962
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
9,497
|
|
|
|
302
|
|
|
|
166
|
|
Interest
expense
|
|
|
(17,785 |
) |
|
|
(18,944 |
) |
|
|
(13,145 |
) |
Other
income (expense), net
|
|
|
(1,220 |
) |
|
|
(68 |
) |
|
|
(389 |
) |
Total
other income (expense)
|
|
|
(9,508 |
) |
|
|
(18,710 |
) |
|
|
(13,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
52,235
|
|
|
|
27,528
|
|
|
|
(9,406 |
) |
Income
tax (provision) benefit
|
|
|
(18,476 |
) |
|
|
5,533
|
|
|
|
4,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
33,759
|
|
|
$ |
33,061
|
|
|
$ |
(5,257 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.33
|
|
|
$ |
1.41
|
|
|
$ |
(0.25 |
) |
Diluted
|
|
$ |
1.28
|
|
|
$ |
1.33
|
|
|
$ |
(0.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,414
|
|
|
|
23,394
|
|
|
|
20,922
|
|
Diluted
|
|
|
26,283
|
|
|
|
24,777
|
|
|
|
20,922
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED
BALANCE SHEETS
|
|
At
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
361,405
|
|
|
$ |
33,638
|
|
Short-term
investments, held to maturity
|
|
|
34,583
|
|
|
|
-
|
|
Accounts
receivable, net
|
|
|
109,924
|
|
|
|
104,428
|
|
Inventories
|
|
|
52,496
|
|
|
|
49,456
|
|
Deferred
income taxes, net
|
|
|
20,916
|
|
|
|
23,194
|
|
Other
|
|
|
17,121
|
|
|
|
10,941
|
|
Total
current assets
|
|
|
596,445
|
|
|
|
221,657
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
88,689
|
|
|
|
77,623
|
|
Intangible
assets, net
|
|
|
112,682
|
|
|
|
123,293
|
|
Goodwill
|
|
|
126,266
|
|
|
|
116,032
|
|
Deferred
income taxes, net
|
|
|
47,400
|
|
|
|
48,955
|
|
Other
|
|
|
17,040
|
|
|
|
11,324
|
|
Total
assets
|
|
$ |
988,522
|
|
|
$ |
598,884
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
43,922
|
|
|
$ |
46,215
|
|
Wages
and benefits payable
|
|
|
24,214
|
|
|
|
23,732
|
|
Current
portion of debt
|
|
|
-
|
|
|
|
4,376
|
|
Current
portion of warranty
|
|
|
7,999
|
|
|
|
8,497
|
|
Unearned
revenue
|
|
|
27,449
|
|
|
|
22,758
|
|
Total
current liabilities
|
|
|
103,584
|
|
|
|
105,578
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
469,324
|
|
|
|
160,186
|
|
Project
financing debt
|
|
|
-
|
|
|
|
2,367
|
|
Warranty
|
|
|
10,149
|
|
|
|
6,779
|
|
Contingent
purchase price
|
|
|
5,879
|
|
|
|
-
|
|
Other
obligations
|
|
|
8,604
|
|
|
|
6,440
|
|
Total
liabilities
|
|
|
597,540
|
|
|
|
281,350
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
Preferred
stock, no par value, 10 million shares authorized,
|
|
|
|
|
|
|
|
|
no
shares issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, no par value, 75 million shares authorized,
|
|
|
|
|
|
|
|
|
25,675,237
and 24,869,201 shares issued and outstanding
|
|
|
351,018
|
|
|
|
312,046
|
|
Accumulated
other comprehensive income, net
|
|
|
1,588
|
|
|
|
871
|
|
Retained
earnings
|
|
|
38,376
|
|
|
|
4,617
|
|
Total
shareholders' equity
|
|
|
390,982
|
|
|
|
317,534
|
|
Total
liabilities and shareholders' equity
|
|
$ |
988,522
|
|
|
$ |
598,884
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
|
Shares
|
|
|
Amount
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
Retained
Earnings (Accumulated
Deficit)
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Balances
at January 1, 2004
|
|
|
20,572
|
|
|
$ |
200,567
|
|
|
$ |
(136 |
) |
|
$ |
(23,187 |
) |
|
$ |
177,244
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,257 |
) |
|
|
(5,257 |
) |
Currency
translation adjustment, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provision
of $770
|
|
|
|
|
|
|
|
|
|
|
1,090
|
|
|
|
|
|
|
|
1,090
|
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,167 |
) |
Stock
issues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
|
|
632
|
|
|
|
6,555
|
|
|
|
|
|
|
|
|
|
|
|
6,555
|
|
Employee
stock plans income tax benefits
|
|
|
|
|
|
|
2,594
|
|
|
|
|
|
|
|
|
|
|
|
2,594
|
|
Issuance
of stock-based compensation awards
|
|
|
10
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
193
|
|
Employee
stock purchase plan
|
|
|
116
|
|
|
|
2,011
|
|
|
|
|
|
|
|
|
|
|
|
2,011
|
|
Balances
at December 31, 2004
|
|
|
21,330
|
|
|
$ |
211,920
|
|
|
$ |
954
|
|
|
$ |
(28,444 |
) |
|
$ |
184,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,061
|
|
|
|
33,061
|
|
Currency
translation adjustment, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
benefit
of $248
|
|
|
|
|
|
|
|
|
|
|
(83 |
) |
|
|
|
|
|
|
(83 |
) |
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,978
|
|
Stock
issues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
1,725
|
|
|
|
59,588
|
|
|
|
|
|
|
|
|
|
|
|
59,588
|
|
Options
exercised
|
|
|
1,746
|
|
|
|
23,803
|
|
|
|
|
|
|
|
|
|
|
|
23,803
|
|
Employee
stock plans income tax benefits
|
|
|
|
|
|
|
15,146
|
|
|
|
|
|
|
|
|
|
|
|
15,146
|
|
Issuance
of stock-based compensation awards
|
|
|
6
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
180
|
|
Employee
stock purchase plan
|
|
|
62
|
|
|
|
1,409
|
|
|
|
|
|
|
|
|
|
|
|
1,409
|
|
Balances
at December 31, 2005
|
|
|
24,869
|
|
|
$ |
312,046
|
|
|
$ |
871
|
|
|
$ |
4,617
|
|
|
$ |
317,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,759
|
|
|
|
33,759
|
|
Currency
translation adjustment, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provision
of $494
|
|
|
|
|
|
|
|
|
|
|
717
|
|
|
|
|
|
|
|
717
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,476
|
|
Stock
issues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised
|
|
|
751
|
|
|
|
13,081
|
|
|
|
|
|
|
|
|
|
|
|
13,081
|
|
Employee
stock plans income tax benefits
|
|
|
|
|
|
|
13,547
|
|
|
|
|
|
|
|
|
|
|
|
13,547
|
|
Issuance
of stock-based compensation awards
|
|
|
7
|
|
|
|
292
|
|
|
|
|
|
|
|
|
|
|
|
292
|
|
Employee
stock purchase plan
|
|
|
48
|
|
|
|
2,169
|
|
|
|
|
|
|
|
|
|
|
|
2,169
|
|
Stock-based
compensation expense
|
|
|
|
|
|
|
9,397
|
|
|
|
|
|
|
|
|
|
|
|
9,397
|
|
Reclassification
of liability associated with
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
restricted
stock awards upon adoption of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SFAS
123(R)
|
|
|
|
|
|
|
486
|
|
|
|
|
|
|
|
|
|
|
|
486
|
|
Balances
at December 31, 2006
|
|
|
25,675
|
|
|
$ |
351,018
|
|
|
$ |
1,588
|
|
|
$ |
38,376
|
|
|
$ |
390,982
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in
thousands)
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
33,759
|
|
|
$ |
33,061
|
|
|
$ |
(5,257 |
) |
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
46,234
|
|
|
|
51,572
|
|
|
|
38,785
|
|
Employee
stock plans income tax benefits
|
|
|
13,547
|
|
|
|
15,146
|
|
|
|
2,594
|
|
Excess
tax benefits from stock-based compensation
|
|
|
(9,717 |
) |
|
|
-
|
|
|
|
-
|
|
Stock-based
compensation
|
|
|
9,689
|
|
|
|
739
|
|
|
|
421
|
|
Amortization
of prepaid debt fees
|
|
|
4,526
|
|
|
|
5,031
|
|
|
|
1,832
|
|
Deferred
income taxes, net
|
|
|
1,624
|
|
|
|
(22,017 |
) |
|
|
(6,590 |
) |
Acquired
in-process research and development
|
|
|
-
|
|
|
|
-
|
|
|
|
6,400
|
|
Other,
net
|
|
|
828
|
|
|
|
2,278
|
|
|
|
1,347
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(3,275 |
) |
|
|
(14,183 |
) |
|
|
15,277
|
|
Inventories
|
|
|
(1,599 |
) |
|
|
(3,997 |
) |
|
|
(3,600 |
) |
Accounts
payable and accrued expenses
|
|
|
(8,278 |
) |
|
|
4,432
|
|
|
|
3,232
|
|
Wages
and benefits payable
|
|
|
(1,774 |
) |
|
|
9,282
|
|
|
|
(1,383 |
) |
Unearned
revenue
|
|
|
5,698
|
|
|
|
156
|
|
|
|
10,952
|
|
Warranty
|
|
|
2,872
|
|
|
|
3,831
|
|
|
|
(8,456 |
) |
Other
long-term obligations
|
|
|
(486 |
) |
|
|
(511 |
) |
|
|
(994 |
) |
Other,
net
|
|
|
1,125
|
|
|
|
(5,203 |
) |
|
|
(1,505 |
) |
Net
cash provided by operating activities
|
|
|
94,773
|
|
|
|
79,617
|
|
|
|
53,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of investments, held to maturity
|
|
|
(204,995 |
) |
|
|
-
|
|
|
|
-
|
|
Proceeds
from the maturities of investments, held to maturity
|
|
|
170,434
|
|
|
|
-
|
|
|
|
-
|
|
Acquisitions
of property, plant and equipment
|
|
|
(31,739 |
) |
|
|
(31,973 |
) |
|
|
(12,788 |
) |
Business
acquisitions, net of cash and cash equivalents acquired
|
|
|
(21,121 |
) |
|
|
-
|
|
|
|
(253,050 |
) |
Other,
net
|
|
|
1,922
|
|
|
|
1,402
|
|
|
|
(1,263 |
) |
Net
cash used in investing activities
|
|
|
(85,499 |
) |
|
|
(30,571 |
) |
|
|
(267,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
345,000
|
|
|
|
14,800
|
|
|
|
309,081
|
|
Change
in short-term borrowings, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,000 |
) |
Payments
on debt
|
|
|
(42,703 |
) |
|
|
(126,196 |
) |
|
|
(74,234 |
) |
Issuance
of common stock
|
|
|
15,250
|
|
|
|
84,727
|
|
|
|
8,338
|
|
Excess
tax benefits from stock-based compensation
|
|
|
9,717
|
|
|
|
-
|
|
|
|
-
|
|
Prepaid
debt fees
|
|
|
(8,771 |
) |
|
|
(391 |
) |
|
|
(13,646 |
) |
Other,
net
|
|
|
-
|
|
|
|
28
|
|
|
|
(109 |
) |
Net
cash provided by (used in) financing activities
|
|
|
318,493
|
|
|
|
(27,032 |
) |
|
|
219,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in cash and cash equivalents
|
|
|
327,767
|
|
|
|
22,014
|
|
|
|
5,384
|
|
Cash
and cash equivalents at beginning of year
|
|
|
33,638
|
|
|
|
11,624
|
|
|
|
6,240
|
|
Cash
and cash equivalents at end of year
|
|
$ |
361,405
|
|
|
$ |
33,638
|
|
|
$ |
11,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets purchased but not yet paid
|
|
$ |
6,631
|
|
|
$ |
4,400
|
|
|
$ |
-
|
|
Non-cash
affects of acquisitions (Note 5)
|
|
|
637
|
|
|
|
-
|
|
|
|
-
|
|
Reclassification
of prepaid debt fees
|
|
|
-
|
|
|
|
-
|
|
|
|
485
|
|
Taxes
on contingent purchase price paid for acquisition
|
|
|
-
|
|
|
|
-
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
3,434
|
|
|
$ |
1,281
|
|
|
$ |
530
|
|
Interest
(net of amount capitalized)
|
|
|
5,234
|
|
|
|
14,314
|
|
|
|
23,848
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
these
consolidated financial statements, the terms “we,” “us,” “our,” “Itron” and the
“Company” refer to Itron, Inc.
Note
1: Summary of Significant Accounting
Policies
We
were
incorporated in the state of Washington in 1977. We provide solutions to gas,
electric and water utilities worldwide to assist them in optimizing the delivery
and use of energy and water. Our solutions include electric meters, handheld
computers, mobile and fixed network automated meter reading (AMR), advanced
metering infrastructure (AMI), water leak detection and related software and
services. Additionally, we sell enterprise software to manage, analyze and
forecast utility data.
Basis
of Consolidation
The
consolidated financial statements include the Consolidated Statements of
Operations for the years ended December 31, 2006, 2005 and 2004,
Consolidated Balance Sheets as of December 31, 2006 and 2005 and
Consolidated Statements of Shareholders’ Equity and Cash Flows for the years
ended December 31, 2006, 2005 and 2004, of Itron and our wholly owned
subsidiaries.
We
consolidate all entities in which we have a greater than 50% ownership interest.
We also consolidate entities in which we have a 50% or less investment and
over
which we have control. We use the equity method of accounting for entities
in
which we have a 50% or less investment and exercise significant influence.
Entities in which we have less than a 20% investment and do not exercise
significant influence are accounted for under the cost method. We consider
for
consolidation any variable interest entity of which we are the primary
beneficiary. We are not the primary beneficiary of any variable interest
entities.
On
April
1, 2006, we completed the acquisition of Quantum Consulting, Inc., which is
reported within our Software Solutions segment. On June 1, 2006, we completed
the acquisition of ELO Sistemas e Tecnologia Ltda., located in Brazil, which
is
reported within our Electricity Metering segment. On November 21, 2006, we
completed the acquisition of Flow Metrix, Inc., which is reported in our Meter
Data Collection segment. On July 1, 2004, we completed the acquisition of our
Electricity Metering business, which became our Electricity Metering segment.
The operating results of these acquisitions are included in our consolidated
financial statements commencing on the date of each acquisition (see Note
5).
Cash and Cash Equivalents
We
consider all highly liquid instruments with remaining maturities of three months
or less at the date of acquisition to be cash equivalents. Cash equivalents
are
recorded at cost, which approximates fair value.
Short-term investments
Investment
securities are classified into one of three categories: held to maturity,
trading or available for sale. Debt securities that we have the intent and
ability to hold to maturity are classified as held to maturity and are reported
at amortized cost (including amortization of premium or accretion of discount).
Investment purchases and sales are accounted for on a trade date basis. Market
value at a period end is based upon quoted market prices for each security.
Realized gains and losses are determined using the specific identification
method and are included in earnings. Premiums and discounts are recognized
in
interest income using the effective interest method over the terms of the
securities.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are recorded for invoices issued to customers in accordance with
our
contractual arrangements. Interest and late payment fees are minimal. Unbilled
receivables are recorded when revenues are recognized upon product shipment
or
service delivery and invoicing occurs at a later date. The allowance for
doubtful accounts is based on our historical experience of bad debts. Accounts
receivable are written-off against the allowance when we believe an account,
or
a portion thereof, is no longer collectible.
Inventories
Inventories
are stated at the lower of cost or market using the first-in, first-out method.
Cost includes raw materials and labor, plus applied direct and indirect costs,
including those costs required under Statement of Financial Accounting Standards
151, Inventory Costs—an amendment of ARB 43, Chapter 4 (SFAS 151),
which was effective for inventory costs incurred on or after January 1, 2006.
SFAS 151 did not have a material effect on our financial statements. Service
inventories consist primarily of subassemblies and components necessary to
support post-sale maintenance. A large portion of our low-volume manufacturing
and all of our domestic handheld meter reading unit repair services are provided
by an outside vendor, Servatron. At December 31, 2005, we had a 30% equity
interest in Servatron, which we redeemed in the first quarter of 2006 (see
Note
8). Consigned inventory held by Servatron totaled $2.9 million at December
31,
2006 and 2005.
Property,
Plant and Equipment
Property,
plant and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally thirty years for buildings and three
to
five years for equipment, computers and furniture. Leasehold improvements are
capitalized over the term of the applicable lease, including renewable periods
if reasonably assured, or over the useful lives, whichever is shorter. Project
management costs incurred in connection with installation and equipment used
in
outsourcing contracts are capitalized and depreciated using the straight-line
method over the shorter of the useful life or the term of the contract. Costs
related to internally developed software and software purchased for internal
uses are capitalized in accordance with Statement of Position 98-1,
Accounting for Costs of Computer Software Developed or Obtained for Internal
Use. Repair and maintenance costs are expensed as incurred. We have no
major planned maintenance activities.
Prepaid Debt Fees
Prepaid
debt fees represent the capitalized direct costs incurred related to the
issuance of debt and are recorded in other noncurrent assets. These costs are
amortized to interest expense over the lives of the respective borrowings using
the effective interest method. Debt fees associated with convertible notes
are
amortized through the date of the earliest put or conversion option. When debt
is repaid early, the portion of unamortized prepaid debt fees related to the
early principal repayment is written-off and included in interest expense in
the
Consolidated Statements of Operations.
Acquisitions
In
accordance with SFAS 141, Business Combinations, we record the results
of operations of an acquired business from the date of acquisition. Net assets
of the company acquired and intangible assets that arise from contractual/legal
rights, or are capable of being separated, are recorded at their fair values
at
the date of acquisition. The balance of the purchase price after fair value
allocations represents goodwill. The excess of the fair value of the acquisition
over the cost, resulting from contingent consideration, is recorded as a
liability. Contingent payments subsequently made are then applied against the
liability. Amounts allocated to in-process research and development (IPR&D)
are expensed in the period of acquisition.
Goodwill and Intangible Assets
Goodwill
is tested for impairment as of October 1 of each year, or more frequently,
if a
significant event occurs under the guidance of SFAS 142, Goodwill and Other
Intangible Assets. Our reporting units, as defined by SFAS 142, are the
same as our operating segments as each business unit is comprised of a single
component. Goodwill is assigned to our reporting units based on the expected
benefit from the combined synergies, determined by using the incremental
discounted cash flows associated with each reporting unit. Intangible assets
with a finite life are amortized based on estimated discounted cash flows over
estimated useful lives and tested for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. We use
estimates in determining the value of goodwill and intangible assets, including
estimates of useful lives of intangible assets, discounted future cash flows
and
fair values of the related operations. In testing goodwill for impairment,
we
forecast discounted future cash flows at the reporting unit levelbased on
estimated future revenues and operating costs, which take into consideration
factors such as existing backlog, expected future orders, supplier contracts
and
general market conditions.
We
offer
industry standard warranties on our hardware products and large application
software products. Standard warranty accruals represent the estimated cost
of
projected warranty claims and are based on historical and projected product
performance trends, business volume assumptions, supplier information and other
business and economic projections. Testing of new products in the development
stage helps identify and correct potential warranty issues prior to
manufacturing. Continuing quality control efforts during manufacturing reduce
our exposure to warranty claims. If our quality control efforts fail to detect
a
fault in one of our products, we could experience an increase in warranty
claims. We track warranty claims to identify potential warranty trends. If
an
unusual trend is noted, an additional warranty accrual may be assessed and
recorded when a failure event is probable and the cost can be reasonably
estimated. Management continually evaluates the sufficiency of the warranty
provisions and makes adjustments when necessary. The warranty allowances may
fluctuate due to changes in estimates for material, labor and other costs we
may
incur to replace projected product failures, and we may incur additional
warranty and related expenses in the future with respect to new or established
product. The long-term warranty balance includes estimated warranty claims
beyond one year.
A
summary
of the warranty accrual account activity is as follows:
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Beginning
balance, January 1
|
|
$ |
15,276
|
|
|
$ |
13,574
|
|
Electricity
Metering acquisition adjustments
|
|
|
-
|
|
|
|
(2,128 |
) |
New
product warranties
|
|
|
2,875
|
|
|
|
3,360
|
|
Other
changes/adjustments to warranties
|
|
|
7,229
|
|
|
|
7,569
|
|
Claims
activity
|
|
|
(7,232 |
) |
|
|
(7,099 |
) |
Ending
balance, December 31
|
|
|
18,148
|
|
|
|
15,276
|
|
Less:
current portion of warranty
|
|
|
7,999
|
|
|
|
8,497
|
|
Long-term
warranty
|
|
$ |
10,149
|
|
|
$ |
6,779
|
|
Total
warranty expense, which consists of new product warranties issued and other
changes and adjustments to warranties, totaled approximately $10.1 million,
$10.9 million and $6.7 million for the three years ended December 31, 2006,
2005 and 2004, respectively. Warranty expense is classified within cost of
sales.
Health
Benefits
We
are
self insured for a substantial portion of the cost of employee group health
insurance. We purchase insurance from a third party, which provides individual
and aggregate stop loss protection for these costs. Each reporting period,
we
expense the costs of our health insurance plan including paid claims, the change
in the estimate of incurred but not reported (IBNR) claims, taxes and
administrative fees (collectively the plan costs). Plan costs were approximately
$14.5 million, $14.6 million and $8.4 million for the years ended
December 31, 2006, 2005 and 2004, respectively. The IBNR accrual, which is
included in wages and benefits payable, was $1.9 million and $2.1 million at
December 31, 2006 and 2005, respectively. Fluctuations in the IBNR accrual
are the result of the number of plan participants, claims activity and
deductible limits.
Contingencies
An
estimated loss for a contingency is recorded if it is probable that an asset
has
been impaired or a liability has been incurred and the amount of the loss can
be
reasonably estimated. We evaluate, among other factors, the degree of
probability of an unfavorable outcome and the ability to make a reasonable
estimate of the amount of loss. Changes in these factors could materially affect
our financial position, results of operations and cash flows.
Income Taxes
We
account for income taxes using the asset and liability method. Under this
method, deferred income taxes are recorded for the temporary differences
between
the financial reporting basis and tax basis of our assets and liabilities.
These
deferred taxes are measured using the tax rates expected to be in effect
when
the temporary differences reverse. We establish a valuation allowance for
a
portion of the deferred tax asset when we believe it is more likely than
not
that a portion of the deferred tax asset will not be utilized. Deferred tax
liabilities have been recorded on undistributed earnings of foreign
subsidiaries.
Foreign
Exchange
Our
consolidated financial statements are prepared in U.S. dollars. Assets and
liabilities of foreign subsidiaries are denominated in foreign currencies and
are translated to U.S. dollars at the exchange rates in effect on the balance
sheet date. Revenues, costs of revenues and expenses for these subsidiaries
are
translated using a weighted average rate for the relevant reporting period.
Translation adjustments resulting from this process are included, net of tax,
in
accumulated other comprehensive income (loss) in shareholders’ equity. Gains and
losses that arise from exchange rate fluctuations for balances that are not
denominated in the local currency are included in the Consolidated Statements
of
Operations unless those balances arose from intercompany transactions deemed
to
be long-term in nature. Currency gains and losses for this exception are
included, net of tax, in accumulated other comprehensive income (loss) in
shareholders’ equity.
Revenue
Recognition
Sales
consist of hardware, software license fees, custom software development, field
and project management service and engineering, consulting, implementation,
installation and professional service revenues. Service revenues include
post-sale maintenance support and outsourcing services. Outsourcing services
include installation, operation and maintenance of meter reading systems to
provide meter information to a customer for billing and management purposes.
Outsourcing services can be provided for systems we own, as well as those owned
by our customers.
Revenue
arrangements with multiple deliverables are divided into separate units of
accounting if the delivered item(s) have value to the customer on a standalone
basis, there is objective and reliable evidence of fair value of the undelivered
item(s) and delivery/performance of the undelivered item(s) is probable. The
total arrangement consideration is allocated among the separate units of
accounting based on their relative fair values and the applicable revenue
recognition criteria considered for each unit of accounting. For our standard
contract arrangements that combine deliverables such as hardware, meter reading
system software, installation and project management services, each deliverable
is generally considered a single unit of accounting. The amount allocable to
a
delivered item is limited to the amount that we are entitled to bill and collect
and is not contingent upon the delivery/performance of additional
items.
Revenues
are recognized when (1) persuasive evidence of an arrangement exists, (2)
delivery has occurred or services have been rendered, (3) the sales price is
fixed or determinable and (4) collectibility is reasonably assured. Hardware
revenues are generally recognized at the time of shipment, receipt by customer,
or, if applicable, upon completion of customer acceptance provisions. For
software arrangements with multiple elements, revenue recognition is also
dependent upon the availability of vendor-specific objective evidence (VSOE)
of
fair value for each of the elements. The lack of VSOE, or the existence of
extended payment terms or other inherent risks, may affect the timing of revenue
recognition for software arrangements. If implementation services are essential
to a software arrangement, revenue is recognized using either the percentage
of
completion methodology if project costs can be estimated or the completed
contract methodology if project costs can not be reliably estimated. Hardware
and software post-sale maintenance support fees are recognized ratably over
the
life of the related service contract. Under outsourcing arrangements, revenue
is
recognized as services are provided. Certain consulting services are recognized
as services are performed.
Unearned
revenue is recorded for products or services that have not been provided but
have been invoiced under contractual agreements or paid for by a customer,
or
when products or services have been provided but the criteria for revenue
recognition have not been met. Shipping and handling costs billed to customers
are recorded as revenue, with the associated cost charged to cost of
sales.
Product and Software Development
Costs
Product
and software development costs primarily include payroll and third party
contracting fees. For software we develop to be marketed or sold, financial
accounting standards require the capitalization of development costs after
technological feasibility is established. Due to the relatively short period
of
time between technological feasibility and the completion of product and
software development, and the immaterial nature of these costs, we generally
do
not capitalize product and software development expenses.
Advertising
Advertising
costs are expensed as incurred. Advertising expenses were $1.2 million, $1.5
million and $1.8 million for the years ended December 31, 2006, 2005 and
2004, respectively.
Earnings
Per Share
Basic
earnings per share (EPS) is calculated using net income (loss) divided by the
weighted average common shares outstanding during the period. We compute
dilutive earnings per share by adjusting the weighted average number of common
shares outstanding to consider the effect of potentially dilutive securities,
including stock-based awards and convertible notes. Shares that are contingently
issuable are included in the dilutive EPS calculation as of the beginning of
the
period when all necessary conditions have been satisfied. For periods in which
we report a net loss, diluted net loss per share is the same as basic net loss
per share.
Stock-Based
Compensation
On
January 1, 2006, we adopted SFAS 123(R), Share-Based Payment, which
requires the measurement and recognition of compensation expense for all
stock-based awards made to employees and directors based on estimated fair
values. SFAS 123(R) supersedes Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees. In March 2005, the Securities
Exchange Commission (SEC) issued Staff Accounting Bulletin 107 (SAB 107)
relating to SFAS 123(R). We have applied the provisions of SAB 107 in our
adoption of SFAS 123(R).
We
adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the accounting standard as of January 1, 2006,
the
first day of our fiscal year 2006. Our consolidated financial statements for
the
year ended December 31, 2006, reflect the impact of SFAS 123(R). In accordance
with the modified prospective transition method, our consolidated financial
statements for prior periods have not been restated to reflect the impact of
SFAS 123(R).
We
record
stock-based compensation expense under SFAS 123(R) for awards of stock options,
our Employee Stock Purchase Plan (ESPP) and issuance of restricted and
unrestricted stock. We expense stock-based compensation using the straight-line
method. For the year ended December 31, 2006, stock-based compensation expense
was $9.7 million, before a related income tax benefit of $1.7 million.
There was no stock-based compensation expense capitalized at December 31, 2006.
Stock-based compensation expense of $739,000 for the year ended December 31,
2005 was related to the issuance of unrestricted stock and ESPP that we
recognized under previous accounting standards. There was no stock-based
compensation expense related to employee stock options recognized during the
year ended December 31, 2005.
The
adoption of SFAS 123(R) resulted in incremental stock-based compensation expense
and a corresponding decrease to pre-tax income of $9.0 million for the year
ended December 31, 2006. A substantial portion of our stock-based compensation
can not be expensed for tax purposes. This resulted in a decrease to income
after tax of $7.6 million, or $0.30 per basic and $0.29 per diluted share for
the year. Prior to the adoption of SFAS 123(R), we presented all tax benefits
resulting from the exercise of stock options as operating cash inflows. Under
SFAS 123(R), the benefits of tax deductions in excess of the compensation cost
recognized are classified as financing cash inflows rather than operating cash
inflows, on a prospective basis. Cash provided by operating activities decreased
and cash provided by financing activities increased by $9.7 million,
respectively, related to excess tax benefits from stock awards exercised during
the year ended December 31, 2006.
The
following table shows the effect on net earnings and earnings per share, for
the
year ended December 31, 2005 and 2004, had compensation cost been recognized
based upon the estimated fair value on the grant date of stock options and
ESPP
in accordance with SFAS 123, Accounting for Stock-based Compensation,
as amended by SFAS 148, Accounting for Stock-Based Compensation – Transition
and Disclosure. Disclosures for the year ended December 31, 2006 are not
presented because the amounts are recognized in the consolidated financial
statements.
|
|
Year
Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(in
thousands, except per share data)
|
|
Net
income (loss)
|
|
|
|
|
|
|
As
reported
|
|
$ |
33,061
|
|
|
$ |
(5,257 |
) |
Deduct:
stock-based compensation, net of tax
|
|
|
(5,404 |
) |
|
|
(5,261 |
) |
Pro
forma net income (loss)
|
|
$ |
27,657
|
|
|
$ |
(10,518 |
) |
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
|
|
|
|
|
|
As
reported
|
|
$ |
1.41
|
|
|
$ |
(0.25 |
) |
Pro
forma
|
|
$ |
1.18
|
|
|
$ |
(0.50 |
) |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
|
As
reported
|
|
$ |
1.33
|
|
|
$ |
(0.25 |
) |
Pro
forma
|
|
$ |
1.12
|
|
|
$ |
(0.50 |
) |
The fair value of stock options and ESPP awards issued
during
the years ended December 31, 2006, 2005 and 2004 were estimated at the date
of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions:
|
|
Employee
Stock Options
|
|
ESPP
|
|
|
Year
Ended December 31,
|
|
Year
Ended December 31,
|
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
Dividend
yield
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Expected
volatility
|
|
43.1%
|
|
58.9%
|
|
71.7%
|
|
41.3%
|
|
46.1%
|
|
38.7%
|
Risk-free
interest rate
|
|
4.8%
|
|
3.8%
|
|
4.0%
|
|
4.7%
|
|
3.1%
|
|
1.5%
|
Expected
life (years)
|
|
4.6
|
|
3.4
|
|
4.5
|
|
0.25
|
|
0.25
|
|
0.25
|
For
2006,
expected price volatility is based on a combination of historical volatility
of
our common stock and the implied volatility of our traded options, for the
related vesting period. Prior to the adoption of SFAS 123(R), expected stock
price volatility was estimated using only historical volatility. We believe
this
combined approach is more reflective of current and historical market conditions
and a better indicator of expected volatility. The risk-free interest rate
is
the rate available as of the award date on zero-coupon U.S. government issues
with a remaining term equal to the expected life of the award. The expected
life
is the weighted average expected life for the entire award based on the fixed
period of time between the date the award is granted and the date the award
is
fully exercised. Factors to be considered in estimating the expected life are
historical experience of similar awards, giving consideration to the contractual
terms, vesting schedules and expectations of future employee behavior. We have
not paid dividends in the past and do not plan to pay any dividends in the
foreseeable future.
For
restricted and unrestricted stock awards, the fair value is the market close
price of our common stock on the date of grant.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management
to
make estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Because of various factors affecting future costs and
operations, actual results could differ from estimates.
Reclassifications
Due
to
our adoption of SFAS 123(R) on January 1, 2006, certain amounts in the 2005
and
2004 Consolidated Statement of Cash Flows have been reclassified to conform
with
the 2006 presentation.
New
Accounting Pronouncements
In
July
2006, the Financial Accounting Standards Board (FASB) issued Financial
Interpretation 48, Accounting for Uncertainty in Income Taxes – an
interpretation of FASB 109 (FIN 48), which clarifies the accounting for
uncertainty in income taxes recognized in a company’s financial statements and
is effective for us commencing January 1, 2007. The
cumulative effect of applying FIN 48 shall be reported as an adjustment
to the opening
balance of retained earnings for that fiscal year. Although we are
continuing to evaluate the impact of FIN 48, based on our current analysis,
we
do not expect it to have a material impact on our financial
statements.
In
September 2006, the FASB issued SFAS 157, Fair Value Instruments (SFAS
157), which defines fair value, establishes a framework for measuring fair
value
and expands disclosures about fair value measurements. SFAS 157 is effective
for
fiscal years beginning after November 15, 2007, on a prospective basis. We
are
currently evaluating the impact of the adoption of SFAS 157 on our
financial statements.
In
September 2006, the SEC released SAB 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements (SAB 108), regarding the process of quantifying financial
statement misstatements, such as assessing both the carryover and reversing
effects of prior year misstatements on the current year financial statements.
SAB 108 is effective for years ending after November 15, 2006. The adoption
of
SAB 108 did not have a material impact on our financial
statements.
In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities. This statement permits entities to choose
to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected would be reported in net income. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. We are currently evaluating the impact of
the
adoption of SFAS 159 on our financial statements.
Note
2: Earnings Per Share and Capital
Structure
The
following table sets forth the computation of basic and diluted
EPS:
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in
thousands, except per share data)
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
Net
income (loss) available to common shareholders
|
|
$ |
33,759
|
|
|
$ |
33,061
|
|
|
$ |
(5,257 |
) |
Weighted
average number of shares outstanding
|
|
|
25,414
|
|
|
|
23,394
|
|
|
|
20,922
|
|
Basic
|
|
$ |
1.33
|
|
|
$ |
1.41
|
|
|
$ |
(0.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) available to common shareholders
|
|
$ |
33,759
|
|
|
$ |
33,061
|
|
|
$ |
(5,257 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
25,414
|
|
|
|
23,394
|
|
|
|
20,922
|
|
Dilutive
effect of stock-based awards
|
|
|
869
|
|
|
|
1,383
|
|
|
|
-
|
|
Adjusted
weighted average number of shares outstanding
|
|
|
26,283
|
|
|
|
24,777
|
|
|
|
20,922
|
|
Diluted
|
|
$ |
1.28
|
|
|
$ |
1.33
|
|
|
$ |
(0.25 |
) |
The
dilutive effect of stock-based awards is calculated using the treasury stock
method. Under this method, EPS is computed as if the awards were exercised
at
the beginning of the period (or at time of issuance, if later) and assumes
the
related proceeds were used to repurchase common stock at the average market
price during the period. Related proceeds include the amount the employee must
pay upon exercise, future compensation cost associated with the stock award
and
the amount of excess tax benefits. Weighted average common shares outstanding,
assuming dilution, include the incremental shares that would be issued upon
the
assumed exercise of stock-based awards. At December 31, 2006, 2005 and 2004,
we
had stock-based awards outstanding of approximately 2.2 million,
2.4 million and 3.9 million at weighted average option exercise prices of
$29.78, $21.24 and $15.24, respectively. Approximately 270,000, 15,000 and
2.4
million stock-based awards were excluded from the calculation of diluted EPS
for
the years ended December 31, 2006, 2005 and 2004, respectively, because they
were anti-dilutive. These stock-based awards could be dilutive in future
periods.
In
August
2006, we issued $345 million of convertible notes that if converted in the
future, would have a potentially dilutive effect on our stock (see Note 9).
Under the indenture for the convertible notes, upon conversion we are required
to settle the principal amount of the convertible notes in cash and may elect
to
settle the remaining conversion obligation (stock price in excess of conversion
price) in cash, shares or a combination. The effect on diluted earnings per
share is calculated under the net share settlement method in accordance with
the
FASB’s Emerging Issues Task Force 04-8, The Effect of Contingently
Convertible Instruments on Diluted Earnings per Share. Under the net share
settlement method, we include the amount of shares it would take to satisfy
the
conversion obligation, assuming that all of the convertible notes are
surrendered. The average closing price of our common stock for each of the
periods presented is used as the basis for determining dilution. The average
price of our common stock for the year ended December 31, 2006 did not exceed
the conversion price of $65.16 and therefore, did not have an effect on diluted
earnings per share.
We
have
authorized 10 million shares of preferred stock with no par value. In the event
of a liquidation, dissolution or winding up of the affairs of the corporation,
whether voluntary or involuntary, the holders of any preferred stock at the
time
outstanding will be entitled to be paid a preferential amount per share to
be
determined by the Board of Directors prior to any payment to holders of common
stock. Shares of preferred stock may be converted into common stock based on
terms, conditions, rates and subject to such adjustments set by the Board of
Directors. There was no preferred stock issued or outstanding at December 31,
2006, 2005 and 2004.
Note
3: Short-term Investments, Held to
Maturity
Our
investments are classified as held to maturity, have original maturities of
less
than one year and consist of U.S. government and federal agencies. We have
the
intent and ability to hold these investments to maturity. The securities are
reported at their amortized cost with premiums and discounts recognized in
interest income using the effective interest method over the terms of the
securities. Any impairment to the fair value of the securities is considered
temporary due to the short-term nature of the investments, with recovery of
fair
value expected at maturity.
The
amortized cost and fair value of our investments at December 31, 2006 were
as
follows:
|
|
Amortized
Cost
|
|
Gross
Recognized Gains
|
|
|
Gross
Recognized Losses
|
|
|
Fair
Value
|
|
|
|
(in
thousands)
|
|
U.S.
government and federal agencies
|
|
$ |
34,583
|
|
|
$ |
7
|
|
|
$ |
-
|
|
|
$ |
34,590
|
|
Note
4: Certain Balance Sheet Components
Accounts
receivable, net
|
|
At
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Trade
(net of allowance for doubtful accounts of $589 and $598)
|
|
$ |
100,162
|
|
|
$ |
96,106
|
|
Unbilled
revenue
|
|
|
9,762
|
|
|
|
8,322
|
|
Total
accounts receivable, net
|
|
$ |
109,924
|
|
|
$ |
104,428
|
|
A
summary
of the allowance for doubtful accounts activity is as follows:
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Beginning
balance, January 1
|
|
$ |
598
|
|
|
$ |
1,312
|
|
Electricity
Metering adjustments
|
|
|
-
|
|
|
|
(164 |
) |
Provision
(benefit) for doubtful accounts
|
|
|
52
|
|
|
|
(165 |
) |
Recoveries
|
|
|
-
|
|
|
|
-
|
|
Accounts
charged off
|
|
|
(61 |
) |
|
|
(385 |
) |
Ending
balance, December 31
|
|
$ |
589
|
|
|
$ |
598
|
|
Inventories
A
summary
of the inventory balances is as follows:
|
|
At
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Materials
|
|
$ |
29,650
|
|
|
$ |
25,744
|
|
Work
in process
|
|
|
5,220
|
|
|
|
5,832
|
|
Finished
goods
|
|
|
16,433
|
|
|
|
16,241
|
|
Total
manufacturing inventories
|
|
|
51,303
|
|
|
|
47,817
|
|
Service
inventories
|
|
|
1,193
|
|
|
|
1,639
|
|
Total
inventories
|
|
$ |
52,496
|
|
|
$ |
49,456
|
|
Other
current assets
Assets
held for sale are classified within other current assets and are reported at
the
lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. During the first quarter of 2006, after the purchase of our new
headquarters facility in Liberty Lake, Washington at the end of 2005, our
previous headquarters facility in Spokane Valley was listed for sale. As a
result, the net carrying value of the Spokane Valley facility totaling
approximately $8.8 million was transferred from property, plant and
equipment to other current assets. During 2006,
we
reduced the carrying value of the facility by $680,000 to reflect fair value
less costs to sell, which was recorded in general and administrative expenses.
We expect to sell the building in 2007.
Property, plant and equipment, net
|
|
At
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Machinery
and equipment
|
|
$ |
59,485
|
|
|
$ |
47,709
|
|
Equipment
used in outsourcing
|
|
|
16,086
|
|
|
|
16,086
|
|
Computers
and purchased software
|
|
|
40,368
|
|
|
|
34,736
|
|
Buildings,
furniture and improvements
|
|
|
45,670
|
|
|
|
45,611
|
|
Land
|
|
|
2,482
|
|
|
|
4,217
|
|
Total
cost
|
|
|
164,091
|
|
|
|
148,359
|
|
Accumulated
depreciation
|
|
|
(75,402 |
) |
|
|
(70,736 |
) |
Property,
plant and equipment, net
|
|
$ |
88,689
|
|
|
$ |
77,623
|
|
Depreciation
expense was $15.1 million, $12.8 million and $11.2 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
On
December 30, 2005, we completed the purchase of a building in Liberty Lake,
Washington, which became our corporate headquarters in the third quarter of
2006. For the year ended December 31, 2006, we invested approximately $11.6
million in capital improvements related to our new corporate headquarters,
including capitalized interest costs of $900,000. These capital
improvements were
substantially complete at September 30, 2006.
Note
5: Business Combinations
Quantum
Consulting, Inc.
On
April
1, 2006, we completed the acquisition of Quantum Consulting, Inc. (Quantum),
an
energy consulting firm. The acquisition expands our consulting services related
to energy efficiency, planning design and market research in our Software
Solutions segment. The preliminary purchase price, including a working capital
adjustment of $96,000 and net of cash acquired of $81,000, is summarized as
follows (in thousands):
Cash
consideration, net of cash acquired
|
|
$ |
4,015
|
|
Direct
transaction costs
|
|
|
478
|
|
Total
purchase price
|
|
$ |
4,493
|
|
Of
the
purchase price consideration, $400,000 is retained in an escrow account for
indemnifications made by Quantum. The amount in escrow will be released at
predetermined intervals through April 2008. Additional contingent consideration
of up to $1.0 million will be paid to Quantum shareholders if certain defined
financial targets are achieved in 2006, 2007 and 2008. These additional payments
will increase the purchase price and goodwill at the time the financial targets
are achieved. The 2006 financial target was not achieved; therefore, no
additional consideration was required at December 31, 2006. An additional
payment will also be made to Quantum shareholders, of up to $1.0 million,
if certain key individuals remain employees through March 2009. A substantial
portion of the payment will be recognized as compensation expense over the
retention period.
The
following financial information reflects the allocation of the purchase price
based on estimated fair values of assets and liabilities as of the date of
acquisition. The excess of the purchase price over the fair value of net assets
acquired has been recorded as goodwill.
|
|
April
1, 2006
|
|
|
|
|
|
|
Fair
Value
|
|
|
Useful
Life
|
|
|
|
(in
thousands)
|
|
|
(in
months)
|
|
Fair
value of tangible net assets acquired
|
|
$ |
446
|
|
|
|
|
Identified
intangible assets - amortizable
|
|
|
|
|
|
|
|
Non-compete
agreements
|
|
|
670
|
|
|
|
55
|
|
Contract
backlog
|
|
|
360
|
|
|
|
38
|
|
Goodwill
|
|
|
3,017
|
|
|
|
|
|
Total
net assets acquired
|
|
$ |
4,493
|
|
|
|
|
|
The
values assigned to the identified intangible assets were estimated using the
income approach. Under the income approach, the fair value reflects the present
value of the projected cash flows that are expected to be generated. The
intangible assets will be amortized over the estimated useful lives of the
estimated discounted cash flows assumed in the valuation models. Goodwill and
intangible assets were allocated to our Software Solutions segment in accordance
with SFAS 142. For tax purposes, goodwill is not deductible as we acquired
the
stock of Quantum.
ELO
Sistemas e Tecnologia Ltda.
On
June
1, 2006, we completed the acquisition of ELO Sistemas e Tecnologia Ltda. (ELO)
for an initial cash payment of approximately $1.9 million and a working capital
adjustment of $102,000. Cash consideration also included the settlement of
a
$637,000 payable from ELO to us for inventory purchased by ELO prior to the
acquisition. Additional contingent consideration will be payable if certain
financial targets are achieved over the next five years. The 2006 financial
target was not achieved; therefore, no additional consideration was required
at
December 31, 2006. Operations reside in Campinas, Brazil and include sales,
manufacturing, service and maintenance, consulting and administrative functions
related to meters, AMR technology and related systems in South America. The
preliminary purchase price, which includes direct transaction costs and is
net
of cash acquired of $10,000, is summarized as follows (in
thousands):
Cash
consideration, net of cash acquired
|
|
$ |
2,641
|
|
Direct
transaction costs
|
|
|
1,210
|
|
Total
purchase price
|
|
$ |
3,851
|
|
The
purchase price was allocated to the tangible and intangible assets acquired
and
liabilities assumed based on their estimated fair values as of the date of
acquisition. The estimated fair value of the net assets acquired and liabilities
assumed exceeded the initial cash consideration paid by approximately $5.5
million, resulting in negative goodwill. In a business combination with
contingent consideration, the lesser of the maximum amount of contingent
consideration or the total amount of negative goodwill should be recorded as
a
liability. As the purchase agreement does not limit the maximum contingent
consideration payable, the full amount of the negative goodwill is reflected
as
a long-term liability. If contingent payments are made, we will apply the
payments against the contingent liability. Payments in excess of the contingent
liability balance, if any, will be recorded as goodwill.
The
following financial information reflects a preliminary allocation of the
purchase price based on estimated fair values of assets and liabilities as
of
the date of acquisition. We are continuing to assess certain assets acquired,
including fixed assets, and expect to finalize the adjustments in the first
quarter of 2007.
|
|
June
1, 2006
|
|
|
|
|
|
|
Fair
Value
|
|
|
Useful
Life
|
|
|
|
(in
thousands)
|
|
|
(in
months)
|
|
Fair
value of tangible net assets acquired
|
|
$ |
682
|
|
|
|
|
Identified
intangible assets - amortizable
|
|
|
|
|
|
|
|
Customer
relationships/contracts
|
|
|
6,957
|
|
|
|
175
|
|
Contract
backlog
|
|
|
1,731
|
|
|
|
12
|
|
Contingent
purchase price liability
|
|
|
(5,519 |
) |
|
|
|
|
Total
net assets acquired
|
|
$ |
3,851
|
|
|
|
|
|
The
values assigned to the identified intangible assets were estimated using the
income approach. Under the income approach, the fair value reflects the present
value of the projected cash flows that are expected to be generated. The
intangible assets will be amortized over the estimated useful lives of the
estimated discounted cash flows assumed in the valuation models. Goodwill and
intangible assets were allocated to our Electricity Metering segment in
accordance with SFAS 142. Due to changes in foreign currency exchange rates,
the
contingent purchase price liability can increase or decrease, with a
corresponding change in accumulated other comprehensive income (loss). The
contingent purchase price liability was approximately $5.9 million at December
31, 2006. This acquisition was structured such that we received an increase
in
basis for tax purposes equal to the cash consideration paid. In future years,
intangible assets and goodwill will be recognized (and deductible) for tax
purposes as contingent consideration payments are made.
Flow
Metrix, Inc.
On
November 21, 2006, we completed the acquisition of Flow Metrix, Inc. (Flow
Metrix). Flow Metrix develops and manufactures advanced leak detection systems
for underground pipelines, which will complement our fixed network water
products and allow our customers to improve pipeline integrity management.
The
preliminary purchase price, which includes direct transaction costs, net of
cash
acquired of $2.0 million, is summarized as follows (in thousands):
Cash
consideration, net of cash acquired
|
|
$ |
12,952
|
|
Direct
transaction costs
|
|
|
654
|
|
Total
purchase price
|
|
$ |
13,606
|
|
Of
the
purchase price consideration, $2.8 million was retained in an escrow account
for
working capital adjustments and indemnifications made by Flow Metrix. Additional
consideration of up to $3.0 million may be made if certain technological and
integration milestones are achieved within the first three years. These
additional payments will increase the purchase price and goodwill at the time
the milestones are achieved. The agreement also provides us a one year option
to
purchase additional technology targeted at energy pipeline integrity for an
additional payment of $1.5 million.
The
following information reflects a preliminary allocation of the purchase price
based on estimated fair values of assets and liabilities as of the date of
the
acquisition. We are performing a review of the assets acquired and liabilities
assumed, including intangible assets and the associated lives, and expect to
finalize the majority of the fair value adjustments during the first quarter
of
2007.
|
|
November
21, 2006
|
|
|
|
|
|
|
Fair
Value
|
|
|
Useful
Life
|
|
|
|
(in
thousands)
|
|
|
(in
months)
|
|
Fair
value of net liabilities assumed
|
|
$ |
(3,824 |
) |
|
|
|
Identified
intangible assets - amortizable
|
|
|
|
|
|
|
|
Core-developed
technology
|
|
|
8,600
|
|
|
|
120
|
|
Customer
contracts
|
|
|
740
|
|
|
|
120
|
|
Tradenames
|
|
|
500
|
|
|
|
120
|
|
Other
|
|
|
430
|
|
|
|
12
|
|
Goodwill
|
|
|
7,160
|
|
|
|
|
|
Total
net assets acquired
|
|
$ |
13,606
|
|
|
|
|
|
The
values assigned to the identified intangible assets were estimated using
the
income approach. Under the income approach, the fair value reflects the present
value of the projected cash flows that are expected to be generated. The
intangible assets will be amortized over the estimated useful lives of the
estimated discounted cash flows assumed in the valuation models. Goodwill
and
intangible assets were allocated to our Meter Data Collection segment in
accordance with SFAS 142. For tax purposes, goodwill is not deductible as
we
acquired the stock of Flow Metrix.
Pro
forma
results are not presented for the acquisitions of Quantum, ELO and Flow Metrix
because they were not considered material business combinations in accordance
with SFAS 141.
Electricity
Metering
On
July 1, 2004, we completed the acquisition of our Electricity Meter
business. This acquisition added electricity meter manufacturing and sales
to
our operations, creating our Electricity Metering operating
segment.
The
purchase price was $248.3 million, which included a post closing working
capital
adjustment of $109,000, less cash acquired of approximately $1.4 million.
Direct
transaction costs were $8.0 million. We used proceeds from a new
$240 million senior secured credit facility (credit facility) and a private
placement of $125 million in senior subordinated notes to finance the
acquisition, pay related fees and expenses and repay approximately $50.2
million
of a previous credit facility.
The
excess of the purchase price over the fair value of net assets acquired was
recorded as goodwill. Goodwill and intangible assets were allocated to our
new
Hardware Solutions—Electricity Metering segment in accordance with SFAS
142.
The
following financial information reflects the allocation of the purchase price
based on final fair values of the assets and liabilities.
|
|
Fair
Value
|
|
|
Useful
Life
|
|
|
|
(in
thousands)
|
|
|
(in
months)
|
|
Fair
value of tangible net assets acquired
|
|
$ |
58,747
|
|
|
|
|
In-process
research and development
|
|
|
6,400
|
|
|
|
|
Identified
intangible assets - amortizable
|
|
|
|
|
|
|
|
Core-developed
technology
|
|
|
136,900
|
|
|
54
to 168
|
|
Contract
backlog
|
|
|
1,800
|
|
|
|
6
|
|
Customer
relationships/contracts
|
|
|
3,100
|
|
|
|
18
|
|
Trademarks
and tradenames
|
|
|
25,200
|
|
|
|
90
|
|
Other
|
|
|
53
|
|
|
|
120
|
|
Goodwill
|
|
|
24,093
|
|
|
|
|
|
Net
assets acquired
|
|
$ |
256,293
|
|
|
|
|
|
The
values assigned to the identified intangible assets were estimated using the
income approach. Under the income approach, the fair value reflects the present
value of the projected cash flows that are expected to be generated. The
intangible assets are being amortized over the estimated useful lives of the
estimated discounted cash flows assumed in the valuation models. This
acquisition was treated as an asset purchase for tax purposes; accordingly,
goodwill and IPR&D expense are deductible for tax purposes over 15
years.
The
$6.4
million of IPR&D consisted primarily of next generation technology, valued
at $5.7 million. The IPR&D projects were analyzed according to exclusivity,
substance, economic benefit, incompleteness, measurability and alternative
future use. The primary projects were intended to make key enhancements and
improve functionality of our polyphase meter. We valued IPR&D using the
income approach, which uses the present value of the projected cash flows that
are expected to be generated. The risk adjusted discount rate was 18 percent,
which was based on several factors such as the industry composite of weighted
average cost of capital, weighted average return on assets, internal rate of
return and perceived risk of the projects. We originally estimated the
research and development to be approximately 50% complete, with a cost to
complete the development of approximately $1.2 million over the next twelve
months. At December 31, 2005, after incurring approximately $1.3 million in
costs, we were substantially complete with the in-process technology. Sales
of
this new technology took place in 2006.
Note
6: Identified Intangible Assets
The
gross
carrying amount and accumulated amortization of our intangible assets, other
than goodwill, are as follows:
|
|
At
December 31, 2006
|
|
|
At
December 31, 2005
|
|
|
|
Gross
Assets
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Gross
Assets
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
|
(in
thousands)
|
|
Core-developed
technology
|
|
$ |
162,930
|
|
|
$ |
(77,783 |
) |
|
$ |
85,147
|
|
|
$ |
154,330
|
|
|
$ |
(54,064 |
) |
|
$ |
100,266
|
|
Patents
|
|
|
7,088
|
|
|
|
(5,059 |
) |
|
|
2,029
|
|
|
|
7,088
|
|
|
|
(4,690 |
) |
|
|
2,398
|
|
Capitalized
software
|
|
|
5,065
|
|
|
|
(5,065 |
) |
|
|
-
|
|
|
|
5,065
|
|
|
|
(5,065 |
) |
|
|
-
|
|
Distribution
and production rights
|
|
|
3,935
|
|
|
|
(3,384 |
) |
|
|
551
|
|
|
|
3,935
|
|
|
|
(3,220 |
) |
|
|
715
|
|
Customer
contracts
|
|
|
16,888
|
|
|
|
(7,931 |
) |
|
|
8,957
|
|
|
|
8,750
|
|
|
|
(7,028 |
) |
|
|
1,722
|
|
Trademarks
and tradenames
|
|
|
26,210
|
|
|
|
(12,022 |
) |
|
|
14,188
|
|
|
|
25,710
|
|
|
|
(7,634 |
) |
|
|
18,076
|
|
Other
|
|
|
9,752
|
|
|
|
(7,942 |
) |
|
|
1,810
|
|
|
|
6,450
|
|
|
|
(6,334 |
) |
|
|
116
|
|
Total
identified intangible assets
|
|
$ |
231,868
|
|
|
$ |
(119,186 |
) |
|
$ |
112,682
|
|
|
$ |
211,328
|
|
|
$ |
(88,035 |
) |
|
$ |
123,293
|
|
A
summary
of the identifiable intangible asset account activity is as
follows:
|
|
At
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Beginning
balance
|
|
$ |
211,328
|
|
|
$ |
211,328
|
|
Intangible
assets acquired
|
|
|
19,988
|
|
|
|
-
|
|
Effect
of change in exchange rates
|
|
|
552
|
|
|
|
-
|
|
Ending
balance, total intangible assets, gross
|
|
$ |
231,868
|
|
|
$ |
211,328
|
|
Increases
in identified intangible assets were the result of the Quantum, ELO and Flow
Metrix acquisitions during 2006. The carrying amount of intangible assets can
also increase or decrease, with a corresponding change in accumulated other
comprehensive income (loss), due to changes in foreign currency exchange rates
for those intangible assets owned by our foreign subsidiaries. At December
31,
2006, the intangible assets associated with the ELO acquisition increased
$552,000 as a result of a change in foreign currency rates. Intangible asset
amortization expense was $31.1 million in 2006, $38.8 million in 2005 and
$27.6 million in 2004.
Estimated
future annual amortization expense is as follows:
Years
ending December 31,
|
|
Estimated
Annual Amortization
|
|
|
|
(in
thousands)
|
|
2007
|
|
$ |
28,146
|
|
2008
|
|
|
23,742
|
|
2009
|
|
|
19,991
|
|
2010
|
|
|
14,010
|
|
2011
|
|
|
11,764
|
|
Beyond
2011
|
|
|
15,029
|
|
Total
identified intangible assets, net
|
|
$ |
112,682
|
|
Note
7: Goodwill
We
test
goodwill for impairment as of October 1 of each year. No impairment
adjustment was required in 2006, 2005 or 2004. On April 1, 2006, we completed
the acquisition of Quantum and recorded a preliminary allocation of the purchase
price, resulting in $3.0 million of estimated goodwill. On November 21,
2006, we completed the acquisition of Flow Metrix and recorded a preliminary
allocation of the purchase price, resulting in $7.2 million of estimated
goodwill. On July 1, 2004, we completed the acquisition of our Electricity
Metering business and continued to make adjustments to the purchase price
through June 2005 as the valuation of assets and liabilities were finalized.
Goodwill decreased in 2005 primarily due to a $2.1 million adjustment
related to a warranty accrual associated with the Electricity Metering
acquisition. Goodwill balances can also increase or decrease, with a
corresponding change in accumulated other comprehensive income (loss), due
to
changes in foreign currency exchange rates.
The
following table reflects goodwill allocated to each reporting segment at
December 31, 2006 and 2005.
|
|
Hardware
Solutions
|
|
|
|
|
|
|
|
|
|
Electricity
Metering
|
|
|
Meter
Data Collection
|
|
|
Software
Solutions
|
|
|
Total
Company
|
|
|
|
(in
thousands)
|
|
Goodwill
balance at December 31, 2004
|
|
$ |
26,236
|
|
|
$ |
73,337
|
|
|
$ |
17,898
|
|
|
$ |
117,471
|
|
Goodwill
adjustments
|
|
|
(1,758 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(1,758 |
) |
Effect
of change in exchange rates
|
|
|
77
|
|
|
|
195
|
|
|
|
47
|
|
|
|
319
|
|
Goodwill
balance at December 31, 2005
|
|
|
24,555
|
|
|
|
73,532
|
|
|
|
17,945
|
|
|
|
116,032
|
|
Goodwill
acquired
|
|
|
-
|
|
|
|
7,160
|
|
|
|
3,017
|
|
|
|
10,177
|
|
Effect
of change in exchange rates
|
|
|
54
|
|
|
|
2
|
|
|
|
1
|
|
|
|
57
|
|
Goodwill
balance at December 31, 2006
|
|
$ |
24,609
|
|
|
$ |
80,694
|
|
|
$ |
20,963
|
|
|
$ |
126,266
|
|
Note
8: Investments in Affiliates and Related Party
Transactions
Investments
in Affiliates
During
2006, our 30% equity interest in Servatron was redeemed for $1.0 million and
we
recognized a loss of $242,000. Servatron serves both as a contract manufacturer
for our low volume products and as our handheld service repair depot. Prior
to
our stock redemption, we received a dividend of $193,000, which was recorded
as
a return on investment. Therefore, at December 31, 2006, we had no ownership
in
Servatron. At December 31, 2005, this investment, accounted for under the equity
method of accounting, was $1.4 million. Our equity in earnings, recorded in
other income (expense) was $33,000 and $82,000 for the years ended
December 31, 2006 and 2005. There were no earnings or losses in the year
ended December 31, 2004. Purchases of low volume products and repair
services from Servatron were $17.0 million in 2006, $19.3 million in 2005 and
$12.7 million in 2004, with amounts payable to Servatron of $605,000 and
$1.5 million at December 31, 2006 and 2005, respectively. We continue to
lease to Servatron a portion of our Spokane Valley facility, which is currently
held for sale (see Note 4). Lease revenues were approximately $186,000 in both
2006 and 2005 and approximately $181,000 in 2004. Servatron also remits payment
for consigned inventory purchased from us. Accounts receivable was approximately
$445,000 and $360,000 at December 31, 2006 and 2005,
respectively.
During
2005, we established a limited liability company with an entity in Qatar, a
Middle East country, to open a sales and distribution office in Qatar. We
invested $27,000, acquiring a 49% ownership. Although this ownership is less
than 50%, we maintain decision-making and control; therefore requiring
consolidation of the subsidiary and its operations. At December 31, 2006
and 2005, the balance for the non-controlling interest portion of the investment
was zero because cumulative operating losses exceeded the total invested
capital. Losses are recorded to other income (expense).
During
the first quarter of 2006, our Chief Financial Officer became a board member
of
a financial institution, which is a 3.6% participant in our $55 million
revolver. Fees paid to this financial institution during 2006, associated with
our revolver, were minimal.
We
lease
a facility from former owners of a business we acquired in 2002, one of whom
is
a current employee. The lease agreement was renewed in March 2004 and will
terminate in February 2008. The monthly lease expense is approximately $40,000.
We also lease a facility from a current employee, with monthly lease expense
of
approximately $5,000. This lease was renewed in August 2006 and will terminate
in August 2009.
Note
9: Debt
The
components of our borrowings are as follows:
|
|
At
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Senior
subordinated notes
|
|
$ |
124,324
|
|
|
$ |
124,226
|
|
Convertible
senior subordinated notes
|
|
|
345,000
|
|
|
|
-
|
|
Senior
secured credit facility term loan
|
|
|
-
|
|
|
|
24,676
|
|
Real
estate term note
|
|
|
-
|
|
|
|
14,800
|
|
Project
financing debt
|
|
|
-
|
|
|
|
3,227
|
|
|
|
|
469,324
|
|
|
|
166,929
|
|
Current
portion of debt
|
|
|
-
|
|
|
|
(4,376 |
) |
Total
long-term debt
|
|
$ |
469,324
|
|
|
$ |
162,553
|
|
Senior Subordinated Notes
Our
senior subordinated notes (subordinated notes) consist of $125 million aggregate
principal amount of 7.75% notes, issued in May 2004 and due in 2012. The
subordinated notes were discounted to a price of 99.265 to yield 7.875%, with
a
balance of $124.3 million at December 31, 2006. The subordinated notes are
registered with the SEC and are generally transferable. The discount on the
subordinated notes is accreted and the prepaid debt fees are amortized over
the
life of the notes. Fixed interest payments of $4.8 million are required
every six months, in May and November. The notes are subordinated to our credit
facility and are guaranteed by all of our operating subsidiaries, except for
our
foreign subsidiaries, all of which are wholly owned. As of December 31, 2006,
all guarantor operating subsidiaries were merged into Itron parent. The
subordinated notes contain covenants, which place restrictions on the incurrence
of debt, the payment of dividends, certain investments and mergers. We were
in
compliance with these debt covenants at December 31, 2006 and 2005. Some or
all
of the subordinated notes may be redeemed at our option at any time on or after
May 15, 2008, at their principal amount plus a specified premium. At any time
prior to May 15, 2007, we may, at our option, redeem up to 35% of the
subordinated notes at 107.75%, with the proceeds of certain sales of our common
stock.
Convertible Senior Subordinated Notes
On
August
4, 2006, we issued $345 million of 2.50% convertible senior subordinated notes
(convertible notes) due August 2026. Fixed interest payments of $4.3 million
are
required every six months in February and August. For each six month period
beginning August 2011, contingent interest payments of approximately 0.19%
of
the average trading price of the convertible notes will be made if certain
thresholds and events are met, as outlined in the indenture. The convertible
notes are registered with the SEC and are generally transferable. Our
convertible notes are not considered conventional convertible debt as defined
in
Emerging Issues Task Force (EITF) 05-02, The Meaning of “Conventional
Convertible Debt Instruments” in Issue 00-19, as the number of shares, or
cash, to be received by the holders was not fixed at the inception of the
obligation. We have concluded that the conversion feature of our convertible
notes does not require bifurcation from the host contract in accordance with
SFAS 133, Accounting for Derivative Instruments and Hedging Activities (as
amended), as the conversion feature is indexed to the company’s own stock
and would be classified within stockholders’ equity if it were a freestanding
instrument as provided by EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s own
stock.
The
convertible notes may be converted under the following circumstances, at the
option of the holder, at an initial conversion rate of 15.3478 shares of our
common stock for each $1,000 principal amount of the convertible notes
(conversion price of $65.16 per share), as defined in the
indenture:
o
|
during
any fiscal quarter commencing after September 30, 2006, if the closing
sale price per share of our common stock exceeds 120% of the conversion
price for at least 20 trading days in the 30 consecutive trading
day
period ending on the last trading day of the preceding fiscal
quarter;
|
o
|
between
July 1, 2011 and August 1, 2011, and any time after August 1,
2024;
|
o
|
during
the five business days after any five consecutive trading day period
in
which the trading price of the convertible notes for each day was
less
than 98% of the conversion value of the convertible
notes;
|
o
|
if
the convertible notes are called for
redemption;
|
o
|
if
a fundamental change occurs; or
|
o
|
upon
the occurrence of defined corporate
events.
|
The
convertible notes also contain put options, which may require us, at the
option of the holder, to repurchase all or a portion of the convertible notes
on
August 1, 2011, August 1, 2016 and August 1, 2021 at the principal amount,
plus
accrued and unpaid interest.
Upon
conversion, the principal amount of the convertible notes will be settled in
cash and, at our option, the remaining conversion obligation (stock price in
excess of conversion price) may be settled in cash, shares or a combination.
The
conversion rate for the convertible notes is subject to adjustment upon the
occurrence of certain corporate events, as defined in the indenture, to ensure
that the economic rights of the convertible notes are preserved. We
may redeem some or all of the convertible notes for cash, on or after
August 1, 2011, for a price equal to 100% of the principal amount plus accrued
and unpaid interest.
Net
proceeds of approximately $336.3 million may be used to acquire or invest in
businesses, products or technologies that are complementary to our own. We
may
also use the proceeds for general corporate purposes. The convertible notes
are
unsecured and subordinate to all of our existing and future senior indebtedness.
The convertible notes are currently not guaranteed by any of our operating
subsidiaries. However, the convertible notes will be unconditionally guaranteed,
joint and severally, by any future subsidiaries that guarantee our senior
subordinated notes. The convertible notes contain covenants, which place
restrictions on the incurrence of debt and certain mergers. We were in
compliance with these debt covenants at December 31, 2006. The aggregate
principal amount of the convertible notes is included in long-term debt as
they
can not be converted prior to July 2011, unless certain defined events occur.
At
such time the holders have the ability to convert, we will reclassify the
convertible notes from long-term to current to reflect the holders’ conversion
rights.
Senior Secured Credit Facility
At
December 31, 2005, we had $24.7 million remaining on our original $185 million
seven-year senior secured term loan (term loan), which we repaid during the
first quarter of 2006. The term loan was part of our senior secured credit
facility (credit facility), which originated on July 1, 2004 to finance the
acquisition of our Electricity Metering business. The credit facility also
includes a $55 million five-year senior secured revolving credit line
(revolver). We have the ability to increase the revolver to $75 million at
a
future date. Our letter of credit limit under the credit facility is $55 million
and can be increased to $65 million at a future date. The credit facility
is guaranteed by all of our operating subsidiaries, except for our foreign
subsidiaries, all of which are wholly owned.
At
December 31, 2006, there were no borrowings outstanding under the revolver
and
$23.0 million was utilized by outstanding standby letters of credit resulting
in
$32.0 million available for additional borrowings. Revolver borrowings can
be
made at any time through June 2009, at which time any borrowings outstanding
must be repaid. Our debt covenants require us to maintain certain consolidated
leverage and coverage ratios on a quarterly basis, as well as customary
covenants that place restrictions on the incurrence of debt, the payment of
dividends, certain investments and mergers. We were in compliance with these
debt covenants at December 31, 2006 and 2005.
Interest
rates on the revolver vary depending on our consolidated leverage ratio and
are
based on the London InterBank Offering Rate (LIBOR) plus 1.0% to 2.0%, or Prime
plus zero to 1.5%, payable at various intervals depending on the term of the
borrowing. The annual commitment fee on the unused portion of the revolver
varies from 0.25% to 0.50%. We incur annual letter of credit fees based on
(a) a
fronting fee of 0.125% and (b) a letter of credit fee that varies from 1.0%
to
2.0%.
Real Estate Term Note
On
December 30, 2005, we signed a real estate term note (real estate note) for
$14.8 million, secured by real property, with principal payments of $740,000,
plus interest, payable quarterly, commencing April 1, 2006 and continuing
through January 1, 2011. During the first quarter of 2006, we made an
optional prepayment of $10.0 million on the real estate note. During April
2006,
we completed the repayment of the real estate note.
Project Financing
In
May
1998, in conjunction with project financing for one of our outsourcing
contracts, we issued a note secured by the assets of the project with monthly
interest payments at an annual interest rate of 7.6%, maturing May 31, 2009.
During April 2006, we repaid the balance of the project financing loan,
which included $107,000 in prepayment fees.
Prepaid
Debt Fees & Interest Expense
Prepaid
debt fees for our outstanding borrowings are amortized over the respective
terms
using the effective interest method. Total unamortized prepaid debt fees were
approximately $13.2 million and $8.9 million at December 31, 2006 and 2005,
respectively. For the year ended December 31, 2006, total interest cost was
$18.7 million, of which $900,000 was capitalized as part of our new corporate
headquarters capital improvements. There was no capitalized interest in 2005
or
2004. Accrued interest expense was $4.8 million and $1.3 million at December
31,
2006 and 2005, respectively.
Minimum
Payments on Debt
Our
outstanding debt has no required minimum payments due over the next five years.
Our subordinated notes are due on May 15, 2012. Our convertible notes can be
converted at any time as a result of certain corporate transactions or defined
market conditions, as outlined above, or no earlier than July 1,
2011.
Note
10: Fair Values of Financial
Instruments
The
estimated fair value of financial instruments has been determined by using
available market information and appropriate valuation methodologies. The values
provided are representative of fair values only as of December 31, 2006 and
2005, and do not reflect subsequent changes in the economy, interest and tax
rates and other variables that may affect determination of fair value. The
following methods and assumptions were used in estimating fair
values.
Cash
and cash equivalents: Due to the liquid nature of these
instruments, the carrying value approximates fair value.
Short-term
investments, held to maturity: The fair value is based on quoted
market prices, which approximates the carrying amount because of the short
maturity of these instruments.
Senior
subordinated notes: The 2006 fair value is based on the latest
quoted market price at December 31, 2006. The fair value at December 31, 2005
is
based on an internally generated fair value model, using estimated spreads
above
quoted treasury rates for similar issues as this borrowing had very little
trading activity during 2005.
Convertible
senior subordinated notes: The fair value is based on the latest
quoted market price at December 31, 2006.
Senior
secured credit facility term loan: The carrying value approximates
fair value as the interest rates are periodically adjusted to market rates
by
our lenders.
Real
estate term note: The carrying value approximates fair value as the
interest rates are periodically adjusted to market rates by our
lender.
Project
financing: The fair value is estimated based on an internally
generated fair value model, using estimated spreads above quoted treasury rates
for similar issues.
|
|
At
December 31, 2006
|
|
|
At
December 31, 2005
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
|
(in
thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
361,405
|
|
|
$ |
361,405
|
|
|
$ |
33,638
|
|
|
$ |
33,638
|
|
Short-term
investments, held to maturity
|
|
|
34,583
|
|
|
|
34,590
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
subordinated notes
|
|
|
124,324
|
|
|
|
128,438
|
|
|
|
124,226
|
|
|
|
124,279
|
|
Convertible
senior subordinated notes
|
|
|
345,000
|
|
|
|
366,435
|
|
|
|
-
|
|
|
|
-
|
|
Senior
secured credit facility term loan
|
|
|
-
|
|
|
|
-
|
|
|
|
24,676
|
|
|
|
24,676
|
|
Real
estate term note
|
|
|
-
|
|
|
|
-
|
|
|
|
14,800
|
|
|
|
14,800
|
|
Project
financing
|
|
|
-
|
|
|
|
-
|
|
|
|
3,227
|
|
|
|
3,266
|
|
Note
11: Restructurings
There
was
no restructuring activity in 2006 or 2005. During 2004, we implemented a new
internal organizational structure, which resulted in several actions to reduce
spending and eliminate certain unprofitable activities. As a result, we reduced
our staffing by approximately 260 employees and incurred restructuring expenses
of $7.7 million. The liability for employee severance of $2.3 million was
recorded within wages and benefits payable at December 31, 2004. Additional
costs of $390,000 were recorded in 2005, with all severance costs paid to
employees by December 31, 2005.
Note
12: Income Taxes
A
reconciliation of income taxes at the U.S. federal statutory rate of 35% to
the
consolidated actual tax rate is as follows:
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in
thousands)
|
|
Income
(loss) before income taxes
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$ |
52,068
|
|
|
$ |
25,666
|
|
|
$ |
(10,220 |
) |
Foreign
|
|
|
167
|
|
|
|
1,862
|
|
|
|
814
|
|
Total
income (loss) before income taxes
|
|
$ |
52,235
|
|
|
$ |
27,528
|
|
|
$ |
(9,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
federal income tax provision (benefit)
|
|
$ |
18,282
|
|
|
$ |
9,635
|
|
|
$ |
(3,292 |
) |
Tax
credits
|
|
|
(2,433 |
) |
|
|
(2,114 |
) |
|
|
(971 |
) |
State
income tax provision (benefit), net of federal effect
|
|
|
2,501
|
|
|
|
1,488
|
|
|
|
(477 |
) |
Export
sales provision (benefit)
|
|
|
(209 |
) |
|
|
(220 |
) |
|
|
82
|
|
Meals
and entertainment
|
|
|
344
|
|
|
|
309
|
|
|
|
252
|
|
Realization
of prior years' deferred tax assets
|
|
|
(615 |
) |
|
|
(8,534 |
) |
|
|
-
|
|
Change
in valuation allowance
|
|
|
(202 |
) |
|
|
(5,519 |
) |
|
|
(121 |
) |
Foreign
operations
|
|
|
(837 |
) |
|
|
(501 |
) |
|
|
-
|
|
Stock-based
compensation
|
|
|
1,876
|
|
|
|
-
|
|
|
|
-
|
|
Other,
net
|
|
|
(231 |
) |
|
|
(77 |
) |
|
|
378
|
|
Total
provision (benefit) for income taxes
|
|
$ |
18,476
|
|
|
$ |
(5,533 |
) |
|
$ |
(4,149 |
) |
The
provision (benefit) for income taxes consists of the following:
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in
thousands)
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
2,428
|
|
|
$ |
-
|
|
|
$ |
-
|
|
State
and local
|
|
|
1,319
|
|
|
|
528
|
|
|
|
449
|
|
Foreign
|
|
|
290
|
|
|
|
356
|
|
|
|
73
|
|
Total
current
|
|
|
4,037
|
|
|
|
884
|
|
|
|
522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
15,052
|
|
|
|
(8,063 |
) |
|
|
(3,716 |
) |
State
and local
|
|
|
1,093
|
|
|
|
1,864
|
|
|
|
(785 |
) |
Foreign
|
|
|
(1,504 |
) |
|
|
5,301
|
|
|
|
(49 |
) |
Total
deferred
|
|
|
14,641
|
|
|
|
(898 |
) |
|
|
(4,550 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in valuation allowance
|
|
|
(202 |
) |
|
|
(5,519 |
) |
|
|
(121 |
) |
Total
provision (benefit) for income taxes
|
|
$ |
18,476
|
|
|
$ |
(5,533 |
) |
|
$ |
(4,149 |
) |
Net
deferred income tax assets consist of the following:
|
|
At
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|
Deferred
tax assets
|
|
|
|
|
|
|
Loss
carryforwards
|
|
$ |
25,266
|
|
|
$ |
31,787
|
|
Accrued
expenses
|
|
|
14,896
|
|
|
|
10,539
|
|
Tax
credits
|
|
|
17,429
|
|
|
|
19,257
|
|
Depreciation
and amortization
|
|
|
12,040
|
|
|
|
10,953
|
|
Other,
net
|
|
|
857
|
|
|
|
1,372
|
|
Total
deferred tax assets
|
|
|
70,488
|
|
|
|
73,908
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
|
Tax
effect of accumulated translation
|
|
|
(939 |
) |
|
|
(444 |
) |
Other,
net
|
|
|
(191 |
) |
|
|
(80 |
) |
Total
deferred tax liabilities
|
|
|
(1,130 |
) |
|
|
(524 |
) |
Valuation
allowance
|
|
|
(1,083 |
) |
|
|
(1,285 |
) |
Net
deferred tax assets
|
|
$ |
68,275
|
|
|
$ |
72,099
|
|
At
December 31, 2006, we had unused federal research and development tax
credits of $17.7 million, which expire during the tax years 2007 – 2026 if not
utilized. We have state research and development tax credits of approximately
$1.9 million available to offset future state tax liabilities and alternative
minimum tax credits of $2.5 million available to offset future federal tax
liabilities, both of which are available indefinitely. Federal loss
carryforwards of $60.4 million expire during the tax years 2019 – 2025.
Valuation allowances of $1.1 million, $1.3 million and $6.8 million in 2006,
2005 and 2004, respectively, were provided primarily for foreign loss
carryforwards attributable to various items for which we may not receive future
benefits. The tax benefit associated with equity compensation was $13.5 million,
$15.1 million and $2.6 million in 2006, 2005 and 2004, respectively, and is
included in the Consolidated Statements of Shareholders’ Equity.
Note
13: Shareholder Rights Plan
On
November 4, 2002, the Board of Directors authorized the implementation of a
Shareholder Rights Plan and declared a dividend of one preferred share purchase
right (a Right) for each outstanding share of common stock, without par value.
The Rights will separate from the common stock and become exercisable following
the earlier of (i) the close of business on the tenth business day after a
public announcement that a person or group (including any affiliate or associate
of such person or group) has acquired beneficial ownership of 15% or more of
the
outstanding common shares and (ii) the close of business on such date, if
any, as may be designated by the Board of Directors following the commencement
of, or first public disclosure of an intent to commence, a tender or exchange
offer for outstanding common shares, which could result in the offeror becoming
the beneficial owner of 15% or more of the outstanding common shares (the
earlier of such dates being the distribution date). After the distribution
date,
each Right will entitle the holder to purchase, for $160.00, one one-hundredth
(1/100) of a share of Series R Cumulative Participating Preferred Stock of
the Company (a Preferred Share) with economic terms similar to that of one
common share.
In
the
event a person or group becomes an acquiring person, the Rights will entitle
each holder of a Right to purchase, for the purchase price, that number of
common shares equivalent to the number of common shares, which at the time
of
the transaction would have a market value of twice the purchase price. Any
Rights that are at any time beneficially owned by an acquiring person will
be
null and void and nontransferable and any holder of any such Right will be
unable to exercise or transfer any such Right. If, at any time after any person
or group becomes an acquiring person, we are acquired in a merger or other
business combination with another entity, or if 50% or more of its assets or
assets accounting for 50% or more of its net income or revenues are transferred,
each Right will entitle its holder to purchase, for the purchase price, that
number of shares of common stock of the person or group engaging in the
transaction having a then current market value of twice the purchase price.
At
any time after any person or group becomes an acquiring person, but before
a
person or group becomes the beneficial owner of more than 50% of the common
shares, the Board of Directors may elect to exchange each Right for
consideration per Right consisting of one-half of the number of common shares
that would be issuable at such time on the exercise of one Right and without
payment of the purchase price. At any time prior to any person or group becoming
an acquiring person, the Board of Directors may redeem the Rights in whole,
but
not in part, at a price of $0.01 per Right, subject to adjustment as provided
in
the Rights Agreement. The Rights are not exercisable until the distribution
date
and will expire on December 11, 2012, unless earlier redeemed or exchanged
by us.
The
terms
of the Rights and the Rights Agreement may be amended without the approval
of
any holder of the Rights, at any time prior to the distribution date. Until
a
Right is exercised, the holder thereof, as such, will have no rights as a
shareholder of the Company, including, without limitation, the right to vote
or
receive dividends. In order to preserve the actual or potential economic value
of the Rights, the number of Preferred Shares or other securities issuable
upon
exercise of the Right, the purchase price, the redemption price and the number
of Rights associated with each outstanding common share are all subject to
adjustment by the Board of Directors pursuant to certain customary antidilution
provisions. The Rights distribution should not be taxable for federal income
tax
purposes. Following an event that renders the Rights exercisable or upon
redemption of the Rights, shareholders may recognize taxable
income.
Note
14: Bonus, Profit Sharing and Employee Savings
Plans
We
have
employee bonus and profit sharing plans in which most of our employees
participate, which provide award amounts for the achievement of annual
performance and financial targets. Actual award amounts are determined at the
end of the year if the performance and financial targets are met. As the bonuses
are being earned during the year, we estimate a compensation accrual each
quarter based on the progress towards achieving the goals, the estimated
financial forecast for the year and the probability of achieving results. An
accrual is recorded if management determines it probable that a target will
be
achieved and the amount can be reasonably estimated. Although we monitor our
annual forecast and the progress towards achievement of goals, the actual
results at the end of the year may warrant a bonus award that is significantly
greater or less than the estimates made in earlier quarters. At
December 31, 2006, $9.4 million of bonus and profit sharing expense was
recorded, with payment expected in the first quarter of 2007. For 2005, $9.7
million of bonus and profit sharing expense was recorded, with payment made
in
the first quarter of 2006. During 2004, the performance goals were not met;
however a discretionary payout of approximately $500,000 was recorded as expense
for fiscal 2004 with payment made during the first quarter of 2005.
Employee
Savings Plan
We
have
an employee incentive savings plan in which substantially all employees are
eligible to participate. Employees may contribute, on a tax-deferred basis,
from
1% to 50% of their salary, up to the annual Internal Revenue Service limit.
We
provide a 50% match on the first 6% of the employee salary deferral, subject
to
statutory limitations. The expense for our matching contribution was $3.0
million in 2006, $2.3 million in 2005 and $2.0 million in 2004.
Note
15: Stock-Based Compensation
Stock
Option Plans
At
December 31, 2006, we had three stock-based compensation plans in effect, but
we
are currently only granting options under one, the Amended and Restated 2000
Stock Incentive Plan. Stock options to purchase the Company’s common stock are
granted with an exercise price equal to the fair market value of the stock
on
the date of grant upon approval by our Board of Directors. Options generally
become exercisable in three or four equal installments beginning a year from
the
date of grant and generally expire 10 years from the date of grant.
The
fair
value of each stock option granted is estimated on the date of grant using
the
Black-Scholes option-pricing model. The weighted average fair value of stock
options granted in 2006, 2005 and 2004 was $21.01, $16.57 and $12.42,
respectively. The compensation expense related to stock options recognized
under
SFAS 123(R) for the year ended December 31, 2006 was $8.6 million. Compensation
expense is recognized only for those options expected to vest, with forfeitures
estimated at the date of grant based on our historical experience and future
expectations. Prior to the adoption of SFAS 123(R), the effect of
forfeitures on the pro forma expense amounts was recognized as the forfeitures
occurred.
A
summary
of our stock option activity from January 1, 2004 through December 31, 2006
is
as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise Price per Share
|
|
|
Weighted
Average Remaining Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
|
|
(in
thousands)
|
|
|
|
|
|
(years)
|
|
|
(in
thousands)
|
|
Outstanding,
January 1, 2004
|
|
|
3,887
|
|
|
$ |
13.22
|
|
|
|
|
|
|
|
Granted
|
|
|
875
|
|
|
|
21.02
|
|
|
|
|
|
|
|
Exercised
|
|
|
(632 |
) |
|
|
10.37
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(246 |
) |
|
|
16.43
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2004
|
|
|
3,884
|
|
|
$ |
15.24
|
|
|
|
6.03
|
|
|
$ |
34,003
|
|
Exercisable
and expected to vest, December 31, 2004
|
|
|
3,688
|
|
|
$ |
14.87
|
|
|
|
5.92
|
|
|
$ |
33,835
|
|
Exercisable,
December 31, 2004
|
|
|
2,251
|
|
|
$ |
13.17
|
|
|
|
5.01
|
|
|
$ |
24,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
627
|
|
|
|
36.80
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,746 |
) |
|
|
13.64
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(322 |
) |
|
|
18.64
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2005
|
|
|
2,443
|
|
|
$ |
21.24
|
|
|
|
6.89
|
|
|
$ |
46,189
|
|
Exercisable
and expected to vest, December 31, 2005
|
|
|
2,313
|
|
|
$ |
20.73
|
|
|
|
6.81
|
|
|
$ |
44,922
|
|
Exercisable,
December 31, 2005
|
|
|
1,157
|
|
|
$ |
13.66
|
|
|
|
5.55
|
|
|
$ |
30,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
600
|
|
|
|
49.39
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(751 |
) |
|
|
17.32
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(67 |
) |
|
|
33.55
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2006
|
|
|
2,225
|
|
|
$ |
29.78
|
|
|
|
7.46
|
|
|
$ |
49,469
|
|
Exercisable
and expected to vest, December 31, 2006
|
|
|
2,004
|
|
|
$ |
28.55
|
|
|
|
7.31
|
|
|
$ |
46,986
|
|
Exercisable,
December 31, 2006
|
|
|
1,032
|
|
|
$ |
18.13
|
|
|
|
5.98
|
|
|
$ |
34,797
|
|
The
aggregate intrinsic value in the table above is before applicable income taxes,
based on our closing stock price of $51.84 as of the last business day of the
period ended December 31, 2006, which represents the amounts optionees would
have received if all options had been exercised on that date. As of December
31,
2006, total unrecognized stock-based compensation expense related to nonvested
stock options was $16.9 million, which is expected to be recognized over a
weighted average period of approximately 21 months. During the years ended
December 31, 2006, 2005 and 2004, the total intrinsic value of stock options
exercised was $30.3 million, $45.4 million and $6.3 million, respectively.
The
total fair value of options vested was $32.5 million, $14.2 million and
$15.0 million during the years ended December 31, 2006, 2005 and 2004,
respectively.
We
issue
new shares of common stock upon the exercise of stock options.
As
of
December 31, 2006, there were 473,685 shares of common stock available for
future grants pursuant to stock-based awards, which includes the stock option
plans, the Long-Term Performance Plan and the Directors’ stock awards.
Additional information regarding options outstanding as of December 31, 2006,
is
as follows:
|
|
|
Outstanding
Options
|
|
|
Exercisable
Options
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
Weighted
Average
Exercise
Price
per
Share
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
per
Share
|
|
|
|
|
(in
thousands)
|
|
|
(years)
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
Range
of Exercise Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
4.87 - $14.17
|
|
|
|
339
|
|
|
|
3.81
|
|
|
$ |
7.66
|
|
|
|
339
|
|
|
$
|
7.66
|
|
|
$14.85
- $20.52
|
|
|
|
359
|
|
|
|
6.35
|
|
|
|
18.60
|
|
|
|
330
|
|
|
|
18.55
|
|
|
$20.64
- $30.32
|
|
|
|
470
|
|
|
|
7.51
|
|
|
|
21.71
|
|
|
|
226
|
|
|
|
21.37
|
|
|
$37.40
- $42.62
|
|
|
|
462
|
|
|
|
8.27
|
|
|
|
37.65
|
|
|
|
136
|
|
|
|
37.67
|
|
|
$48.51
- $55.80
|
|
|
|
562
|
|
|
|
9.56
|
|
|
|
48.59
|
|
|
|
1
|
|
|
|
50.29
|
|
|
$56.60
- $70.99
|
|
|
|
33
|
|
|
|
9.34
|
|
|
|
62.80
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
2,225
|
|
|
|
7.46
|
|
|
$ |
29.78
|
|
|
|
1,032
|
|
|
$ |
18.13
|
|
Employee
Stock Purchase Plan
Eligible
employees who have completed three months of service, work more than 20 hours
each week and are employed more than five months in any calendar year are
eligible to participate in our employee stock purchase plan (ESPP). Employees
who own 5% or more of our common stock are not eligible to participate in the
ESPP. Under the terms of the ESPP, eligible employees can choose payroll
deductions each year of up to 10% of their regular cash compensation. Such
deductions are applied toward the discounted purchase price of our common stock.
The purchase price of the common stock is 85% of the fair market value of the
stock at the end of each fiscal quarter. Under the ESPP, we sold 48,442 and
62,498 shares to employees in the years ended December 31, 2006 and 2005,
respectively. The fair value of ESPP awards issued is estimated using the
Black-Scholes option-pricing model. The weighted average fair value of the
ESPP
awards issued in 2006, 2005 and 2004 was $8.63, $6.85 and $4.45, respectively.
The expense related to ESPP recognized under SFAS 123(R) for the year ended
December 31, 2006 was $386,000. We had no unrecognized compensation cost at
December 31, 2006 associated with the awards issued under the ESPP. As of
December 31, 2006, there were 381,846 shares of common stock available for
future issuance under the Employee Stock Purchase Plan.
Long-Term
Performance Plan
We
have a
Long-Term Performance Plan (LTPP) for senior management with restricted stock
awards contingent on the attainment of yearly goals payable in the Company’s
common stock with a three-year cliff vesting period. Restricted stock awards
are
granted in the year following attainment, as approved by our Board of Directors.
The value of an award is based on a percentage of the participant’s base salary
and is dependent on performance objectives for the period. We currently have
two
active plans, one for 2005 and another for 2006.
The
award
for 2005 consisted of 30,542 shares of restricted stock issued on February
15,
2006, at a grant-date fair value of $59.16. For the years ended December 31,
2006 and 2005, approximately $226,000 and $485,000 were recognized as expense
for the 2005 award, respectively. As of December 31, 2006, total unrecognized
stock-based compensation expense related to the 2005 award was $684,000, which
will be recognized through February 15, 2009. For the 2006 yearly goals the
number of shares of restricted stock to be issued will be determined by dividing
the dollar amount of the award by the fair value of our common stock on the
date
the award is approved by our Board of Directors. For the year ended December
31,
2006, $209,000 was recognized as expense related to the 2006 award, with the
remaining $1.3 million to be recognized through February, 2010.
A
summary
of the restricted stock activity for the year ended December 31, 2006 is as
follows:
|
|
Restricted
Shares
|
|
Nonvested,
January 1, 2006
|
|
|
-
|
|
Granted
|
|
|
30,542
|
|
Vested
|
|
|
(1,171 |
) |
Forfeited
|
|
|
(6,938 |
) |
Nonvested,
December 31, 2006
|
|
|
22,433
|
|
Board
of Directors’ Unrestricted Stock Awards
We
issue
unrestricted stock awards to our Board of Directors as part of the Board of
Directors’ compensation. During the year ended December 31, 2006, we issued
5,762 shares of unrestricted stock to our Board of Directors, with a weighted
average grant-date fair value of $50.71. The expense related to these awards
for
the year ended December 31, 2006 was $292,000. All awards were fully vested
and
expensed when granted.
Note
16: Commitments and Contingencies
Commitments
We
have
noncancelable operating leases for computers, office, production and storage
space expiring at various dates through 2011. Rent expense under our operating
leases was $7.0 million in 2006, $7.6 million in 2005 and $8.1 million in 2004.
We receive lease income on a portion of our Spokane Valley facility from another
entity. Future minimum payments and revenues at December 31, 2006, under
noncancelable operating leases with initial or remaining terms in excess of
one
year are as follows:
|
|
Minimum
Payments
|
|
|
Minimum
Revenues
|
|
|
|
(in
thousands)
|
|
2007
|
|
$ |
5,263
|
|
|
$ |
176
|
|
2008
|
|
|
4,121
|
|
|
|
279
|
|
2009
|
|
|
2,769
|
|
|
|
386
|
|
2010
|
|
|
1,731
|
|
|
|
386
|
|
2011
|
|
|
1,382
|
|
|
|
386
|
|
|
|
$ |
15,266
|
|
|
$ |
1,613
|
|
Rent
expense and income, net of any leasehold incentive, is recognized straightline
over the lease term, including renewal periods if reasonably assured. Our most
significant operating leases include our manufacturing facility in Waseca,
Minnesota and office space for our software operations in Raleigh, North
Carolina and Oakland and San Diego, California. Our leases typically contain
renewal options similar to the original terms with lease payments that increase
based on the consumer price index.
Guarantees
and Indemnifications
Under
FASB Interpretation 45, Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others, we
record a liability for certain types of guarantees and indemnifications for
agreements entered into or amended subsequent to December 31, 2002. No
liabilities were required for agreements entered into during the years ended
December 31, 2006 and 2005.
We
maintain bid and performance bonds for certain customers. Bonds in force were
$6.0 million and $3.0 million at December 31, 2006 and 2005, respectively.
Bid bonds guarantee that we will enter into a contract consistent with the
terms
of the bid. Performance bonds provide a guarantee to the customer for future
performance, which usually covers the installation phase of a contract and
may
on occasion cover the operations and maintenance phase of outsourcing
contracts.
We
also
have standby letters of credit to guarantee our performance under certain
contracts. The outstanding amounts of standby letters of credit were $23.0
million and $22.6 million at December 31, 2006 and 2005,
respectively.
We
generally provide an indemnification related to the infringement of any patent,
copyright, trademark or other intellectual property right on software or
equipment within our sales contracts, which indemnifies the customer from and
pays the resulting costs, damages and attorney’s fees awarded against a customer
with respect to such a claim provided that (a) the customer promptly
notifies us in writing of the claim and (b) we have the sole control of the
defense and all related settlement negotiations. The terms of the
indemnification normally do not limit the maximum potential future payments.
We
also provide an indemnification for third party claims resulting from damages
caused by the negligence or willful misconduct of our employees/agents in
connection with the performance of certain contracts. The terms of the
indemnification generally do not limit the maximum potential
payments.
Legal
Matters
We
are
subject to various legal proceedings and claims of which the outcomes are
subject to significant uncertainty. Our policy is to assess the likelihood
of
any adverse judgments or outcomes related to legal matters, as well as ranges
of
probable losses. A determination of the amount of the liability required, if
any, for these contingencies is made after an analysis of each known issue
in
accordance with SFAS 5, Accounting for Contingencies, and related
pronouncements. In accordance with SFAS 5, a liability is recorded when we
determine that a loss is probable and the amount can be reasonably estimated.
Additionally, we disclose contingencies for which a material loss is reasonably
possible, but not probable. At December 31, 2006, there were no material legal
contingencies requiring accrual or disclosure.
Note
17: Segment Information
Subsequent
to the filing of our Annual Report on Form 10-K for the year ended December
31,
2006, which was originally filed with the SEC on February 23, 2007, and
in
connection with the close of the Actaris Metering Systems SA (Actaris)
acquisition on April 18, 2007, we realigned our previously reported operating
segments into two groups, Itron North America and Actaris, to reflect the
way we
are managing our business after the Actaris acquisition. Our Itron North
America
operating segment represents our operations prior to the Actaris acquisition,
which are primarily located in North America. Prior to the Actaris
acquisition, Itron North America previously consisted of three operating
segments, as previously reported: Electricity Metering, Meter Data Collection
and Software Solutions. Our Actaris operating segment represents the operations
of the Actaris acquisition, which are primarily located outside of North
America. As such operating segment was not acquired prior to December 31,
2006,
such segment is not included in the operating segment information below.
The
operating segment information as set forth below, for the years ended December
31, 2006, 2005 and 2004 is based on the new segment reporting structure
as of
June 30, 2007. Historical segment information has been restated from the
segment
information previously provided to conform to the segment reporting structure
after the April 2007 Actaris acquisition in accordance with SFAS 131,
Disclosures about Segments of an Enterprise and Related
Information.
Corporate
operating expenses, interest income, interest expense, other income (expense)
and income tax expense (benefit) are not allocated to the Itron North America
segment, nor included in the measure of segment profit or loss. Assets
and
liabilities are not used in our measurement of segment performance and,
therefore, are not allocated to our segments. Approximately 99% of depreciation
expense was allocated to the Itron North America segment at December 31,
2006,
2005 and 2004, with the remaining portion reported under corporate
unallocated.
We
classify our Itron North America products as either hardware or
software. Hardware revenues were 91% in 2006 and 2005 and 88% in
2004. Software revenues were 9% in 2006 and 2005 and 12% in 2004. We classify
sales in the United States and Canada as domestic revenues. International
revenues were $41.1 million, $39.3 million and $25.9 million for the years
ended December 31, 2006, 2005 and 2004, respectively.
Segment
Products
Segment
|
|
Major
Products
|
Itron
North America
|
|
Electricity
meters with and without automated meter reading (AMR); gas and water
AMR
modules; handheld, mobile and network AMR data collection technologies;
advanced metering infrastructure (AMI) technologies; software,
installation, implementation, maintenance support and other
services.
|
Segment
Information
|
|
Year
Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(in
thousands)
|
|
Revenues
- Itron North America
|
|
$ |
644,042
|
|
|
$ |
552,690
|
|
|
$ |
399,194
|
|
Gross
margin - Itron North America
|
|
|
267,442
|
|
|
|
233,621
|
|
|
|
170,669
|
|
Operating
income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Itron
North America
|
|
|
89,028
|
|
|
|
69,953
|
|
|
|
27,029
|
|
Corporate
unallocated
|
|
|
(27,285 |
) |
|
|
(23,715 |
) |
|
|
(23,067 |
) |
Total
Company
|
|
|
61,743
|
|
|
|
46,238
|
|
|
|
3,962
|
|
Total
other income (expense)
|
|
|
(9,508 |
) |
|
|
(18,710 |
) |
|
|
(13,368 |
) |
Income
(loss) before income taxes
|
|
$ |
52,235
|
|
|
$ |
27,528
|
|
|
$ |
(9,406 |
) |
One
customer accounted for 16% of total Company revenues in 2006. No single customer
represented more than 10% of total Company revenues in 2005 and
2004.
Note
18: Condensed Consolidating Financial
Information
Subsequent
to the filing of our Annual Report on Form 10-K for the year ended December
31,
2006, which was originally filed with the SEC on February 23, 2007, we
determined that the required disclosure under SEC Regulation S-X Rule 3-10,
Financial Statements of Guarantors and Issuers of Guaranteed Securities
Registered or Being Registered, had been omitted. As a result, the
previously omitted information is being presented below.
Our
senior subordinated notes and convertible notes, issued by Itron, Inc.
(the
Issuer) are guaranteed by our U.S. domestic subsidiaries, which are 100%
owned,
and any future domestic subsidiaries. The guarantees are joint and several,
full, complete and unconditional. Our convertible senior subordinated notes
(convertible notes) were not guaranteed by any of our subsidiaries on the
date
of issuance. However, our guarantees under the convertible notes will be
joint
and several, full, complete and unconditional by any future subsidiaries
that
guarantee our senior subordinated notes.
There
are
currently no restrictions on the ability of the subsidiary guarantors to
transfer funds to the parent company.
Effective
January 1, 2006, the legal entity holding the U.S. operations of our
Electricity Metering business (a guarantor subsidiary) was merged into the
parent company. As a result of this merger, the assets, liabilities and
operations of this guarantor subsidiary have beencombined with the parent
company as of and for the year ended December 31, 2006. In addition, as a
result
of our legal entity merger on January 1, 2006, we have restated the parent
and
guarantor subsidiary information for the 2005 and 2004 periods presented
to
reflect the new legal entity structure.
During
the second quarter of 2006, we acquired Quantum and ELO (see Note 5).
Commencing on the date of acquisition, Quantum’s financial results are reflected
within the parent company. The financial results of the wholly-owned entities
that hold the investment in ELO are reflected within the guarantor
subsidiaries, whereas the financial results of ELO are reflected within the
non-guarantor subsidiaries.
Consolidating
Statement of Operations
|
|
Year
Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Combined
Guarantor
Subsidiaries
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
561,583
|
|
|
$ |
-
|
|
|
$ |
52,428
|
|
|
$ |
(20,021 |
) |
|
$ |
593,990
|
|
Service
|
|
|
56,943
|
|
|
|
-
|
|
|
|
9,540
|
|
|
|
(16,431 |
) |
|
|
50,052
|
|
Total
revenues
|
|
|
618,526
|
|
|
|
-
|
|
|
|
61,968
|
|
|
|
(36,452 |
) |
|
|
644,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
338,993
|
|
|
|
-
|
|
|
|
30,252
|
|
|
|
(20,035 |
) |
|
|
349,210
|
|
Service
|
|
|
25,235
|
|
|
|
-
|
|
|
|
17,908
|
|
|
|
(15,753 |
) |
|
|
27,390
|
|
Total
cost of revenues
|
|
|
364,228
|
|
|
|
-
|
|
|
|
48,160
|
|
|
|
(35,788 |
) |
|
|
376,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
254,298
|
|
|
|
-
|
|
|
|
13,808
|
|
|
|
(664 |
) |
|
|
267,442
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
56,937
|
|
|
|
-
|
|
|
|
6,650
|
|
|
|
-
|
|
|
|
63,587
|
|
Product
development
|
|
|
58,208
|
|
|
|
-
|
|
|
|
1,389
|
|
|
|
(823 |
) |
|
|
58,774
|
|
General
and administrative
|
|
|
48,997
|
|
|
|
-
|
|
|
|
3,058
|
|
|
|
158
|
|
|
|
52,213
|
|
Amortization
of intangible assets
|
|
|
29,801
|
|
|
|
-
|
|
|
|
1,324
|
|
|
|
-
|
|
|
|
31,125
|
|
Total
operating expenses
|
|
|
193,943
|
|
|
|
-
|
|
|
|
12,421
|
|
|
|
(665 |
) |
|
|
205,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
60,355
|
|
|
|
-
|
|
|
|
1,387
|
|
|
|
1
|
|
|
|
61,743
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
9,705
|
|
|
|
-
|
|
|
|
175
|
|
|
|
(383 |
) |
|
|
9,497
|
|
Interest
expense
|
|
|
(17,444 |
) |
|
|
-
|
|
|
|
(723 |
) |
|
|
382
|
|
|
|
(17,785 |
) |
Other
income (expense), net
|
|
|
(818 |
) |
|
|
-
|
|
|
|
(402 |
) |
|
|
-
|
|
|
|
(1,220 |
) |
Total
other income (expense)
|
|
|
(8,557 |
) |
|
|
-
|
|
|
|
(950 |
) |
|
|
(1 |
) |
|
|
(9,508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
51,798
|
|
|
|
-
|
|
|
|
437
|
|
|
|
-
|
|
|
|
52,235
|
|
Income
tax (provision) benefit
|
|
|
(19,532 |
) |
|
|
-
|
|
|
|
1,056
|
|
|
|
-
|
|
|
|
(18,476 |
) |
Equity
in earnings (losses) of guarantor and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-guarantor
subsidiaries
|
|
|
1,493
|
|
|
|
(1,451 |
) |
|
|
-
|
|
|
|
(42 |
) |
|
|
-
|
|
Net
income (loss)
|
|
$ |
33,759
|
|
|
$ |
(1,451 |
) |
|
$ |
1,493
|
|
|
$ |
(42 |
) |
|
$ |
33,759
|
|
Consolidating
Statement of Operations
|
|
Year
Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
488,755
|
|
|
$ |
40,365
|
|
|
$ |
(25,850 |
) |
|
$ |
503,270
|
|
Service
|
|
|
45,078
|
|
|
|
8,250
|
|
|
|
(3,908 |
) |
|
|
49,420
|
|
Total
revenues
|
|
|
533,833
|
|
|
|
48,615
|
|
|
|
(29,758 |
) |
|
|
552,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
285,771
|
|
|
|
31,647
|
|
|
|
(25,973 |
) |
|
|
291,445
|
|
Service
|
|
|
24,955
|
|
|
|
6,362
|
|
|
|
(3,693 |
) |
|
|
27,624
|
|
Total
cost of revenues
|
|
|
310,726
|
|
|
|
38,009
|
|
|
|
(29,666 |
) |
|
|
319,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
223,107
|
|
|
|
10,606
|
|
|
|
(92 |
) |
|
|
233,621
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
51,552
|
|
|
|
5,087
|
|
|
|
3
|
|
|
|
56,642
|
|
Product
development
|
|
|
46,922
|
|
|
|
424
|
|
|
|
(269 |
) |
|
|
47,077
|
|
General
and administrative
|
|
|
42,524
|
|
|
|
1,736
|
|
|
|
168
|
|
|
|
44,428
|
|
Amortization
of intangible assets
|
|
|
38,846
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,846
|
|
Restructurings
|
|
|
197
|
|
|
|
193
|
|
|
|
-
|
|
|
|
390
|
|
Total
operating expenses
|
|
|
180,041
|
|
|
|
7,440
|
|
|
|
(98 |
) |
|
|
187,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
43,066
|
|
|
|
3,166
|
|
|
|
6
|
|
|
|
46,238
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
408
|
|
|
|
29
|
|
|
|
(135 |
) |
|
|
302
|
|
Interest
expense
|
|
|
(18,655 |
) |
|
|
(430 |
) |
|
|
141
|
|
|
|
(18,944 |
) |
Other
income (expense), net
|
|
|
2
|
|
|
|
(58 |
) |
|
|
(12 |
) |
|
|
(68 |
) |
Total
other income (expense)
|
|
|
(18,245 |
) |
|
|
(459 |
) |
|
|
(6 |
) |
|
|
(18,710 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
24,821
|
|
|
|
2,707
|
|
|
|
-
|
|
|
|
27,528
|
|
Income
tax benefit (provision)
|
|
|
5,882
|
|
|
|
(349 |
) |
|
|
-
|
|
|
|
5,533
|
|
Equity
in earnings of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-guarantor
subsidiaries
|
|
|
2,358
|
|
|
|
-
|
|
|
|
(2,358 |
) |
|
|
-
|
|
Net
income
|
|
$ |
33,061
|
|
|
$ |
2,358
|
|
|
$ |
(2,358 |
) |
|
$ |
33,061
|
|
Consolidating
Statement of Operations
|
|
Year
Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
338,729
|
|
|
$ |
18,756
|
|
|
$ |
(10,942 |
) |
|
$ |
346,543
|
|
Service
|
|
|
45,983
|
|
|
|
8,392
|
|
|
|
(1,724 |
) |
|
|
52,651
|
|
Total
revenues
|
|
|
384,712
|
|
|
|
27,148
|
|
|
|
(12,666 |
) |
|
|
399,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
193,005
|
|
|
|
16,188
|
|
|
|
(11,062 |
) |
|
|
198,131
|
|
Service
|
|
|
27,538
|
|
|
|
3,441
|
|
|
|
(585 |
) |
|
|
30,394
|
|
Total
cost of revenues
|
|
|
220,543
|
|
|
|
19,629
|
|
|
|
(11,647 |
) |
|
|
228,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
164,169
|
|
|
|
7,519
|
|
|
|
(1,019 |
) |
|
|
170,669
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
41,899
|
|
|
|
3,003
|
|
|
|
377
|
|
|
|
45,279
|
|
Product
development
|
|
|
44,961
|
|
|
|
910
|
|
|
|
(1,492 |
) |
|
|
44,379
|
|
General
and administrative
|
|
|
34,086
|
|
|
|
1,308
|
|
|
|
96
|
|
|
|
35,490
|
|
Amortization
of intangible assets
|
|
|
27,901
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,901
|
|
Restructurings
|
|
|
6,878
|
|
|
|
380
|
|
|
|
-
|
|
|
|
7,258
|
|
In-process
research and development
|
|
|
6,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,400
|
|
Total
operating expenses
|
|
|
162,125
|
|
|
|
5,601
|
|
|
|
(1,019 |
) |
|
|
166,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
2,044
|
|
|
|
1,918
|
|
|
|
-
|
|
|
|
3,962
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
585
|
|
|
|
10
|
|
|
|
(429 |
) |
|
|
166
|
|
Interest
expense
|
|
|
(12,793 |
) |
|
|
(781 |
) |
|
|
429
|
|
|
|
(13,145 |
) |
Other
income (expense), net
|
|
|
(732 |
) |
|
|
343
|
|
|
|
-
|
|
|
|
(389 |
) |
Total
other income (expense)
|
|
|
(12,940 |
) |
|
|
(428 |
) |
|
|
-
|
|
|
|
(13,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
(10,896 |
) |
|
|
1,490
|
|
|
|
-
|
|
|
|
(9,406 |
) |
Income
tax benefit (provision)
|
|
|
4,684
|
|
|
|
(535 |
) |
|
|
-
|
|
|
|
4,149
|
|
Equity
in earnings of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-guarantor
subsidiaries
|
|
|
955
|
|
|
|
-
|
|
|
|
(955 |
) |
|
|
-
|
|
Net
income (loss)
|
|
$ |
(5,257 |
) |
|
$ |
955
|
|
|
$ |
(955 |
) |
|
$ |
(5,257 |
) |
Consolidating
Balance Sheet
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Combined
Guarantor
Subsidiaries
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
353,483
|
|
|
$ |
-
|
|
|
$ |
7,922
|
|
|
$ |
-
|
|
|
$ |
361,405
|
|
Short-term
investments, held to maturity
|
|
|
34,583
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,583
|
|
Accounts
receivable, net
|
|
|
95,041
|
|
|
|
-
|
|
|
|
14,883
|
|
|
|
-
|
|
|
|
109,924
|
|
Intercompany
accounts receivable
|
|
|
6,486
|
|
|
|
-
|
|
|
|
3,263
|
|
|
|
(9,749 |
) |
|
|
-
|
|
Inventories
|
|
|
49,233
|
|
|
|
-
|
|
|
|
3,263
|
|
|
|
-
|
|
|
|
52,496
|
|
Deferred
income taxes, net
|
|
|
19,758
|
|
|
|
-
|
|
|
|
1,158
|
|
|
|
-
|
|
|
|
20,916
|
|
Other
|
|
|
15,394
|
|
|
|
-
|
|
|
|
1,727
|
|
|
|
-
|
|
|
|
17,121
|
|
Intercompany
other
|
|
|
1,698
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
(6,698 |
) |
|
|
-
|
|
Total
current assets
|
|
|
575,676
|
|
|
|
-
|
|
|
|
37,216
|
|
|
|
(16,447 |
) |
|
|
596,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
86,594
|
|
|
|
-
|
|
|
|
2,095
|
|
|
|
-
|
|
|
|
88,689
|
|
Intangible
assets, net
|
|
|
104,731
|
|
|
|
-
|
|
|
|
7,951
|
|
|
|
-
|
|
|
|
112,682
|
|
Goodwill
|
|
|
113,481
|
|
|
|
-
|
|
|
|
12,785
|
|
|
|
-
|
|
|
|
126,266
|
|
Deferred
income taxes, net
|
|
|
44,702
|
|
|
|
-
|
|
|
|
2,698
|
|
|
|
-
|
|
|
|
47,400
|
|
Intercompany
notes receivable
|
|
|
12,257
|
|
|
|
-
|
|
|
|
1,242
|
|
|
|
(13,499 |
) |
|
|
-
|
|
Other
|
|
|
47,041
|
|
|
|
531
|
|
|
|
1,390
|
|
|
|
(31,922 |
) |
|
|
17,040
|
|
Total
assets
|
|
$ |
984,482
|
|
|
$ |
531
|
|
|
$ |
65,377
|
|
|
$ |
(61,868 |
) |
|
$ |
988,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
41,047
|
|
|
$ |
-
|
|
|
$ |
2,875
|
|
|
$ |
-
|
|
|
$ |
43,922
|
|
Intercompany
accounts payable
|
|
|
3,263
|
|
|
|
-
|
|
|
|
6,486
|
|
|
|
(9,749 |
) |
|
|
-
|
|
Wages
and benefits payable
|
|
|
22,673
|
|
|
|
-
|
|
|
|
1,541
|
|
|
|
-
|
|
|
|
24,214
|
|
Current
portion of warranty
|
|
|
7,850
|
|
|
|
-
|
|
|
|
149
|
|
|
|
-
|
|
|
|
7,999
|
|
Short-term
intercompany advances
|
|
|
5,001
|
|
|
|
-
|
|
|
|
1,697
|
|
|
|
(6,698 |
) |
|
|
-
|
|
Unearned
revenue
|
|
|
26,004
|
|
|
|
-
|
|
|
|
1,445
|
|
|
|
|
|
|
|
27,449
|
|
Total
current liabilities
|
|
|
105,838
|
|
|
|
-
|
|
|
|
14,193
|
|
|
|
(16,447 |
) |
|
|
103,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
469,324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
469,324
|
|
Warranty
|
|
|
10,149
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,149
|
|
Intercompany
notes payable
|
|
|
1,241
|
|
|
|
-
|
|
|
|
12,258
|
|
|
|
(13,499 |
) |
|
|
-
|
|
Contingent
purchase price
|
|
|
5,879
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,879
|
|
Other
obligations
|
|
|
1,069
|
|
|
|
-
|
|
|
|
7,535
|
|
|
|
-
|
|
|
|
8,604
|
|
Total
liabilities
|
|
|
593,500
|
|
|
|
-
|
|
|
|
33,986
|
|
|
|
(29,946 |
) |
|
|
597,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
stock
|
|
|
351,018
|
|
|
|
1,982
|
|
|
|
30,113
|
|
|
|
(32,095 |
) |
|
|
351,018
|
|
Accumulated
other comprehensive income (loss), net
|
|
|
1,588
|
|
|
|
-
|
|
|
|
5,767
|
|
|
|
(5,767 |
) |
|
|
1,588
|
|
Retained
earnings (accumulated deficit)
|
|
|
38,376
|
|
|
|
(1,451 |
) |
|
|
(4,489 |
) |
|
|
5,940
|
|
|
|
38,376
|
|
Total
shareholders' equity
|
|
|
390,982
|
|
|
|
531
|
|
|
|
31,391
|
|
|
|
(31,922 |
) |
|
|
390,982
|
|
Total
liabilities and shareholders' equity
|
|
$ |
984,482
|
|
|
$ |
531
|
|
|
$ |
65,377
|
|
|
$ |
(61,868 |
) |
|
$ |
988,522
|
|
Consolidating
Balance Sheet
|
|
At
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
28,064
|
|
|
$ |
5,574
|
|
|
$ |
-
|
|
|
$ |
33,638
|
|
Accounts
receivable, net
|
|
|
96,707
|
|
|
|
7,721
|
|
|
|
-
|
|
|
|
104,428
|
|
Intercompany
accounts receivable
|
|
|
3,460
|
|
|
|
8,977
|
|
|
|
(12,437 |
) |
|
|
-
|
|
Inventories
|
|
|
46,792
|
|
|
|
2,664
|
|
|
|
-
|
|
|
|
49,456
|
|
Deferred
income taxes, net
|
|
|
22,895
|
|
|
|
299
|
|
|
|
-
|
|
|
|
23,194
|
|
Other
|
|
|
8,575
|
|
|
|
2,366
|
|
|
|
-
|
|
|
|
10,941
|
|
Intercompany
other
|
|
|
227
|
|
|
|
3,500
|
|
|
|
(3,727 |
) |
|
|
-
|
|
Total
current assets
|
|
|
206,720
|
|
|
|
31,101
|
|
|
|
(16,164 |
) |
|
|
221,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
74,097
|
|
|
|
3,526
|
|
|
|
-
|
|
|
|
77,623
|
|
Intangible
assets, net
|
|
|
123,233
|
|
|
|
60
|
|
|
|
-
|
|
|
|
123,293
|
|
Goodwill
|
|
|
103,305
|
|
|
|
12,727
|
|
|
|
-
|
|
|
|
116,032
|
|
Deferred
income taxes, net
|
|
|
47,987
|
|
|
|
1,806
|
|
|
|
(838 |
) |
|
|
48,955
|
|
Intercompany
notes receivable
|
|
|
1,966
|
|
|
|
-
|
|
|
|
(1,966 |
) |
|
|
-
|
|
Other
|
|
|
43,189
|
|
|
|
48
|
|
|
|
(31,913 |
) |
|
|
11,324
|
|
Total
assets
|
|
$ |
600,497
|
|
|
$ |
49,268
|
|
|
$ |
(50,881 |
) |
|
$ |
598,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
44,720
|
|
|
$ |
1,495
|
|
|
$ |
-
|
|
|
$ |
46,215
|
|
Intercompany
accounts payable
|
|
|
8,966
|
|
|
|
3,471
|
|
|
|
(12,437 |
) |
|
|
-
|
|
Wages
and benefits payable
|
|
|
22,761
|
|
|
|
971
|
|
|
|
-
|
|
|
|
23,732
|
|
Current
portion of debt
|
|
|
3,516
|
|
|
|
860
|
|
|
|
-
|
|
|
|
4,376
|
|
Current
portion of warranty
|
|
|
7,972
|
|
|
|
525
|
|
|
|
-
|
|
|
|
8,497
|
|
Short-term
intercompany advances
|
|
|
-
|
|
|
|
3,727
|
|
|
|
(3,727 |
) |
|
|
-
|
|
Unearned
revenue
|
|
|
21,801
|
|
|
|
957
|
|
|
|
-
|
|
|
|
22,758
|
|
Total
current liabilities
|
|
|
109,736
|
|
|
|
12,006
|
|
|
|
(16,164 |
) |
|
|
105,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
160,186
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,186
|
|
Project
financing debt
|
|
|
-
|
|
|
|
2,367
|
|
|
|
-
|
|
|
|
2,367
|
|
Intercompany
notes payable
|
|
|
-
|
|
|
|
1,966
|
|
|
|
(1,966 |
) |
|
|
-
|
|
Warranty
|
|
|
6,708
|
|
|
|
71
|
|
|
|
-
|
|
|
|
6,779
|
|
Deferred
income taxes, net
|
|
|
-
|
|
|
|
838
|
|
|
|
(838 |
) |
|
|
-
|
|
Other
obligations
|
|
|
6,333
|
|
|
|
107
|
|
|
|
-
|
|
|
|
6,440
|
|
Total
liabilities
|
|
|
282,963
|
|
|
|
17,355
|
|
|
|
(18,968 |
) |
|
|
281,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
stock
|
|
|
312,046
|
|
|
|
28,132
|
|
|
|
(28,132 |
) |
|
|
312,046
|
|
Accumulated
other comprehensive income (loss), net
|
|
|
871
|
|
|
|
4,962
|
|
|
|
(4,962 |
) |
|
|
871
|
|
Retained
earnings (accumulated deficit)
|
|
|
4,617
|
|
|
|
(1,181 |
) |
|
|
1,181
|
|
|
|
4,617
|
|
Total
shareholders' equity
|
|
|
317,534
|
|
|
|
31,913
|
|
|
|
(31,913 |
) |
|
|
317,534
|
|
Total
liabilities and shareholders' equity
|
|
$ |
600,497
|
|
|
$ |
49,268
|
|
|
$ |
(50,881 |
) |
|
$ |
598,884
|
|
Consolidating
Statement of Cash Flows
|
|
Year
Ended December 31, 2006
|
|
|
|
Parent
|
|
|
Combined
Guarantor Subsidiaries
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Operating
activities
|
|
(in
thousands)
|
|
Net
income (loss)
|
|
$ |
33,759
|
|
|
$ |
(1,451 |
) |
|
$ |
1,493
|
|
|
$ |
(42 |
) |
|
$ |
33,759
|
|
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
44,153
|
|
|
|
-
|
|
|
|
2,081
|
|
|
|
-
|
|
|
|
46,234
|
|
Employee
stock plans income tax benefits
|
|
|
13,547
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,547
|
|
Excess
tax benefits from stock-based compensation
|
|
|
(9,717 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,717 |
) |
Stock-based
compensation
|
|
|
9,689
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,689
|
|
Amortization
of prepaid debt fees
|
|
|
4,526
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,526
|
|
Deferred
income taxes, net
|
|
|
3,764
|
|
|
|
-
|
|
|
|
(2,140 |
) |
|
|
-
|
|
|
|
1,624
|
|
Equity
in (earnings) losses of non-guarantor subsidiaries
|
|
|
(1,493 |
) |
|
|
1,451
|
|
|
|
-
|
|
|
|
42
|
|
|
|
-
|
|
Other,
net
|
|
|
846
|
|
|
|
-
|
|
|
|
(18 |
) |
|
|
-
|
|
|
|
828
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
3,863
|
|
|
|
-
|
|
|
|
(7,138 |
) |
|
|
-
|
|
|
|
(3,275 |
) |
Inventories
|
|
|
(1,948 |
) |
|
|
-
|
|
|
|
349
|
|
|
|
-
|
|
|
|
(1,599 |
) |
Long-term
note receivable, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
(5,212 |
) |
|
|
-
|
|
|
|
(3,066 |
) |
|
|
-
|
|
|
|
(8,278 |
) |
Wages
and benefits payable
|
|
|
(1,966 |
) |
|
|
-
|
|
|
|
192
|
|
|
|
-
|
|
|
|
(1,774 |
) |
Unearned
revenue
|
|
|
5,033
|
|
|
|
-
|
|
|
|
665
|
|
|
|
-
|
|
|
|
5,698
|
|
Warranty
|
|
|
3,319
|
|
|
|
-
|
|
|
|
(447 |
) |
|
|
-
|
|
|
|
2,872
|
|
Other
long-term obligations
|
|
|
(497 |
) |
|
|
-
|
|
|
|
11
|
|
|
|
-
|
|
|
|
(486 |
) |
Intercompany
transactions, net
|
|
|
(8,404 |
) |
|
|
-
|
|
|
|
8,404
|
|
|
|
-
|
|
|
|
-
|
|
Other,
net
|
|
|
560
|
|
|
|
-
|
|
|
|
565
|
|
|
|
-
|
|
|
|
1,125
|
|
Net
cash provided by operating activities
|
|
|
93,822
|
|
|
|
-
|
|
|
|
951
|
|
|
|
-
|
|
|
|
94,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of investments, held to maturity
|
|
|
(204,995 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(204,995 |
) |
Proceeds
from the maturities of investments, held to maturity
|
|
|
170,381
|
|
|
|
-
|
|
|
|
53
|
|
|
|
-
|
|
|
|
170,434
|
|
Acquisitions
of property, plant and equipment
|
|
|
(30,702 |
) |
|
|
-
|
|
|
|
(1,037 |
) |
|
|
-
|
|
|
|
(31,739 |
) |
Business
acquisitions, net of cash and cash equivalents acquired
|
|
|
(19,889 |
) |
|
|
-
|
|
|
|
(1,232 |
) |
|
|
-
|
|
|
|
(21,121 |
) |
Cash
transferred to parent
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,303 |
) |
|
|
3,303
|
|
|
|
-
|
|
Cash
transferred to non-guarantor subsidiaries
|
|
|
(760 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
760
|
|
|
|
-
|
|
Intercompany
notes, net
|
|
|
-
|
|
|
|
-
|
|
|
|
8,133
|
|
|
|
(8,133 |
) |
|
|
-
|
|
Other,
net
|
|
|
672
|
|
|
|
-
|
|
|
|
1,250
|
|
|
|
-
|
|
|
|
1,922
|
|
Net
cash (used in) provided by investing activities
|
|
|
(85,293 |
) |
|
|
-
|
|
|
|
3,864
|
|
|
|
(4,070 |
) |
|
|
(85,499 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
345,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
345,000
|
|
Payments
on debt
|
|
|
(39,476 |
) |
|
|
-
|
|
|
|
(3,227 |
) |
|
|
-
|
|
|
|
(42,703 |
) |
Issuance
of common stock
|
|
|
15,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,250
|
|
Excess
tax benefits from stock-based compensation
|
|
|
9,717
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,717
|
|
Prepaid
debt fees
|
|
|
(8,771 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,771 |
) |
Cash
transferred from parent
|
|
|
-
|
|
|
|
-
|
|
|
|
760
|
|
|
|
(760 |
) |
|
|
-
|
|
Cash
transferred from non-guarantor subsidiaries
|
|
|
3,303
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,303 |
) |
|
|
-
|
|
Intercompany
notes payable
|
|
|
(8,133 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
8,133
|
|
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
|
316,890
|
|
|
|
-
|
|
|
|
(2,467 |
) |
|
|
4,070
|
|
|
|
318,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in cash and cash equivalents
|
|
|
325,419
|
|
|
|
-
|
|
|
|
2,348
|
|
|
|
-
|
|
|
|
327,767
|
|
Cash
and cash equivalents at beginning of period
|
|
|
28,064
|
|
|
|
-
|
|
|
|
5,574
|
|
|
|
-
|
|
|
|
33,638
|
|
Cash
and cash equivalents at end of period
|
|
$ |
353,483
|
|
|
$ |
-
|
|
|
$ |
7,922
|
|
|
$ |
-
|
|
|
$ |
361,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets purchased but not yet paid
|
|
$ |
6,129
|
|
|
$ |
-
|
|
|
$ |
502
|
|
|
$ |
-
|
|
|
$ |
6,631
|
|
Non-cash
affects of acquisitions (Note 5)
|
|
|
-
|
|
|
|
-
|
|
|
|
637
|
|
|
|
-
|
|
|
|
637
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
3,082
|
|
|
$ |
-
|
|
|
$ |
352
|
|
|
$ |
-
|
|
|
$ |
3,434
|
|
Interest
(net of amount capitalized)
|
|
|
4,941
|
|
|
|
-
|
|
|
|
293
|
|
|
|
-
|
|
|
|
5,234
|
|
Consolidating
Statement of Cash Flows
|
|
Year
Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
33,061
|
|
|
$ |
2,358
|
|
|
$ |
(2,358 |
) |
|
$ |
33,061
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
50,771
|
|
|
|
801
|
|
|
|
-
|
|
|
|
51,572
|
|
Employee
stock plans income tax benefits
|
|
|
15,146
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,146
|
|
Stock-based
compensation
|
|
|
739
|
|
|
|
-
|
|
|
|
-
|
|
|
|
739
|
|
Amortization
of prepaid debt fees
|
|
|
5,031
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,031
|
|
Deferred
income taxes, net
|
|
|
(21,865 |
) |
|
|
(152 |
) |
|
|
-
|
|
|
|
(22,017 |
) |
Equity
in earnings of non-guarantor subsidiaries
|
|
|
(2,358 |
) |
|
|
-
|
|
|
|
2,358
|
|
|
|
-
|
|
Other,
net
|
|
|
2,795
|
|
|
|
(517 |
) |
|
|
-
|
|
|
|
2,278
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(15,544 |
) |
|
|
1,361
|
|
|
|
-
|
|
|
|
(14,183 |
) |
Inventories
|
|
|
(5,209 |
) |
|
|
1,212
|
|
|
|
-
|
|
|
|
(3,997 |
) |
Accounts
payable and accrued expenses
|
|
|
5,110
|
|
|
|
(678 |
) |
|
|
-
|
|
|
|
4,432
|
|
Wages
and benefits payable
|
|
|
9,788
|
|
|
|
(506 |
) |
|
|
-
|
|
|
|
9,282
|
|
Unearned
revenue
|
|
|
343
|
|
|
|
(187 |
) |
|
|
-
|
|
|
|
156
|
|
Warranty
|
|
|
4,044
|
|
|
|
(213 |
) |
|
|
-
|
|
|
|
3,831
|
|
Other
long-term obligations
|
|
|
(511 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(511 |
) |
Intercompany
transactions, net
|
|
|
(6,725 |
) |
|
|
6,725
|
|
|
|
-
|
|
|
|
-
|
|
Other,
net
|
|
|
(5,241 |
) |
|
|
38
|
|
|
|
-
|
|
|
|
(5,203 |
) |
Net
cash provided by operating activities
|
|
|
69,375
|
|
|
|
10,242
|
|
|
|
-
|
|
|
|
79,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
of property, plant and equipment
|
|
|
(31,675 |
) |
|
|
(298 |
) |
|
|
-
|
|
|
|
(31,973 |
) |
Cash
transferred to parent
|
|
|
-
|
|
|
|
(2,500 |
) |
|
|
2,500
|
|
|
|
-
|
|
Cash
transferred to non-guarantor subsidiaries
|
|
|
465
|
|
|
|
-
|
|
|
|
(465 |
) |
|
|
-
|
|
Intercompany
notes, net
|
|
|
5,957
|
|
|
|
-
|
|
|
|
(5,957 |
) |
|
|
-
|
|
Other,
net
|
|
|
1,851
|
|
|
|
(1,863 |
) |
|
|
1,414
|
|
|
|
1,402
|
|
Net
cash used in investing activities
|
|
|
(23,402 |
) |
|
|
(4,661 |
) |
|
|
(2,508 |
) |
|
|
(30,571 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
14,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,800
|
|
Payments
on debt
|
|
|
(125,399 |
) |
|
|
(797 |
) |
|
|
-
|
|
|
|
(126,196 |
) |
Issuance
of common stock
|
|
|
84,727
|
|
|
|
1,414
|
|
|
|
(1,414 |
) |
|
|
84,727
|
|
Prepaid
debt fees
|
|
|
(391 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(391 |
) |
Cash
transferred from parent
|
|
|
-
|
|
|
|
(465 |
) |
|
|
465
|
|
|
|
-
|
|
Cash
transferred from non-guarantor subsidiaries
|
|
|
2,500
|
|
|
|
-
|
|
|
|
(2,500 |
) |
|
|
-
|
|
Intercompany
notes, net
|
|
|
-
|
|
|
|
(5,957 |
) |
|
|
5,957
|
|
|
|
-
|
|
Other,
net
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
|
|
28
|
|
Net
cash used in financing activities
|
|
|
(23,763 |
) |
|
|
(5,777 |
) |
|
|
2,508
|
|
|
|
(27,032 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
22,210
|
|
|
|
(196 |
) |
|
|
-
|
|
|
|
22,014
|
|
Cash
and cash equivalents at beginning of period
|
|
|
5,854
|
|
|
|
5,770
|
|
|
|
-
|
|
|
|
11,624
|
|
Cash
and cash equivalents at end of period
|
|
$ |
28,064
|
|
|
$ |
5,574
|
|
|
$ |
-
|
|
|
$ |
33,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets purchased but not yet paid
|
|
$ |
4,400
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
4,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
977
|
|
|
$ |
304
|
|
|
$ |
-
|
|
|
$ |
1,281
|
|
Interest
(net of amount capitalized)
|
|
|
14,036
|
|
|
|
278
|
|
|
|
-
|
|
|
|
14,314
|
|
Consolidating
Statement of Cash Flows
|
|
Year
Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Combined
Non-guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(5,257 |
) |
|
$ |
955
|
|
|
$ |
(955 |
) |
|
$ |
(5,257 |
) |
Adjustments
to reconcile net income (loss) to net cash provided (used) by
operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
37,966
|
|
|
|
819
|
|
|
|
-
|
|
|
|
38,785
|
|
Employee
stock plans income tax benefits
|
|
|
2,594
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,594
|
|
Stock-based
compensation
|
|
|
421
|
|
|
|
-
|
|
|
|
-
|
|
|
|
421
|
|
Amortization
of prepaid debt fees
|
|
|
1,832
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,832
|
|
Deferred
income taxes, net
|
|
|
(6,879 |
) |
|
|
289
|
|
|
|
-
|
|
|
|
(6,590 |
) |
Acquired
in-process research and development
|
|
|
6,400
|
|
|
|
-
|
|
|
|
|
|
|
|
6,400
|
|
Equity
in earnings (losses) of non-guarantor subsidiaries
|
|
|
(955 |
) |
|
|
-
|
|
|
|
955
|
|
|
|
-
|
|
Other,
net
|
|
|
1,283
|
|
|
|
64
|
|
|
|
-
|
|
|
|
1,347
|
|
Changes
in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
15,721
|
|
|
|
(444 |
) |
|
|
-
|
|
|
|
15,277
|
|
Inventories
|
|
|
(5,168 |
) |
|
|
1,568
|
|
|
|
-
|
|
|
|
(3,600 |
) |
Accounts
payable and accrued expenses
|
|
|
3,413
|
|
|
|
(181 |
) |
|
|
-
|
|
|
|
3,232
|
|
Wages
and benefits payable
|
|
|
(1,204 |
) |
|
|
(179 |
) |
|
|
-
|
|
|
|
(1,383 |
) |
Unearned
revenue
|
|
|
10,472
|
|
|
|
480
|
|
|
|
-
|
|
|
|
10,952
|
|
Warranty
|
|
|
(8,956 |
) |
|
|
500
|
|
|
|
-
|
|
|
|
(8,456 |
) |
Other
long-term obligations
|
|
|
(994 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(994 |
) |
Intercompany
transactions, net
|
|
|
12,459
|
|
|
|
(12,459 |
) |
|
|
-
|
|
|
|
-
|
|
Other,
net
|
|
|
(997 |
) |
|
|
(508 |
) |
|
|
-
|
|
|
|
(1,505 |
) |
Net
cash provided by (used in) operating activities
|
|
|
62,151
|
|
|
|
(9,096 |
) |
|
|
-
|
|
|
|
53,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition/transfer
of property, plant and equipment
|
|
|
(12,420 |
) |
|
|
(368 |
) |
|
|
-
|
|
|
|
(12,788 |
) |
Business
acquisitions, net of cash and cash equivalents acquired
|
|
|
(254,444 |
) |
|
|
1,394
|
|
|
|
-
|
|
|
|
(253,050 |
) |
Cash
transfer to non-guarantor subsidiaries/intercompany notes
|
|
|
(14,704 |
) |
|
|
-
|
|
|
|
14,704
|
|
|
|
-
|
|
Cash
transfer to parent
|
|
|
-
|
|
|
|
(1,000 |
) |
|
|
1,000
|
|
|
|
-
|
|
Other,
net
|
|
|
(2,057 |
) |
|
|
794
|
|
|
|
-
|
|
|
|
(1,263 |
) |
Net
cash (used in) provided by investing activities
|
|
|
(283,625 |
) |
|
|
820
|
|
|
|
15,704
|
|
|
|
(267,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
|
|
309,081
|
|
|
|
-
|
|
|
|
-
|
|
|
|
309,081
|
|
Change
in short-term borrowings, net
|
|
|
(10,000 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(10,000 |
) |
Payments
on debt
|
|
|
(72,424 |
) |
|
|
(1,810 |
) |
|
|
-
|
|
|
|
(74,234 |
) |
Issuance
of common stock
|
|
|
8,338
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,338
|
|
Prepaid
debt fees
|
|
|
(13,646 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(13,646 |
) |
Cash
received from guarantor and non-guarantor subsidiaries
|
|
|
1,000
|
|
|
|
-
|
|
|
|
(1,000 |
) |
|
|
-
|
|
Intercompany
notes, net
|
|
|
-
|
|
|
|
14,704
|
|
|
|
(14,704 |
) |
|
|
-
|
|
Other,
net
|
|
|
(109 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
(109 |
) |
Net
cash provided by financing activities
|
|
|
222,240
|
|
|
|
12,894
|
|
|
|
(15,704 |
) |
|
|
219,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in cash and cash equivalents
|
|
|
766
|
|
|
|
4,618
|
|
|
|
-
|
|
|
|
5,384
|
|
Cash
and cash equivalents at beginning of period
|
|
|
5,088
|
|
|
|
1,152
|
|
|
|
-
|
|
|
|
6,240
|
|
Cash
and cash equivalents at end of period
|
|
$ |
5,854
|
|
|
$ |
5,770
|
|
|
$ |
-
|
|
|
$ |
11,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of prepaid debt fees
|
|
$ |
485
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
485
|
|
Taxes
on contingent purchase price paid for acquisition
|
|
|
113
|
|
|
|
-
|
|
|
|
-
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
514
|
|
|
$ |
16
|
|
|
$ |
-
|
|
|
$ |
530
|
|
Interest
(net of amount capitalized)
|
|
|
23,509
|
|
|
|
339
|
|
|
|
-
|
|
|
|
23,848
|
|
Note
19: Quarterly Results (Unaudited)
Quarterly
results are as follows:
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year
|
|
|
|
|
(in
thousands, except per share and stock price data)
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$ |
155,553
|
|
|
$ |
163,810
|
|
|
$ |
164,706
|
|
|
$ |
159,973
|
|
|
$ |
644,042
|
|
|
Gross
profit
|
|
$ |
66,774
|
|
|
$ |
69,032
|
|
|
$ |
67,425
|
|
|
$ |
64,211
|
|
|
$ |
267,442
|
|
|
Net
income
|
|
$ |
7,069
|
|
|
$ |
10,204
|
|
|
$ |
9,215
|
|
|
$ |
7,271
|
|
|
$ |
33,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.28
|
|
|
$ |
0.40
|
|
|
$ |
0.36
|
|
|
$ |
0.28
|
|
|
$ |
1.33
|
|
|
Diluted
earnings per share
|
|
$ |
0.27
|
|
|
$ |
0.39
|
|
|
$ |
0.35
|
|
|
$ |
0.28
|
|
|
$ |
1.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$ |
62.75
|
|
|
$ |
73.72
|
|
|
$ |
60.46
|
|
|
$ |
57.50
|
|
|
$ |
73.72
|
|
|
Low
|
|
$ |
39.44
|
|
|
$ |
52.58
|
|
|
$ |
44.76
|
|
|
$ |
46.87
|
|
|
$ |
39.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$ |
116,470
|
|
|
$ |
135,123
|
|
|
$ |
141,145
|
|
|
$ |
159,952
|
|
|
$ |
552,690
|
|
|
Gross
profit
|
|
$ |
50,998
|
|
|
$ |
56,739
|
|
|
$ |
61,030
|
|
|
$ |
64,854
|
|
|
$ |
233,621
|
|
|
Net
income
|
|
$ |
817
|
|
|
$ |
9,313
|
|
|
$ |
6,002
|
|
|
$ |
16,929
|
|
|
$ |
33,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.04
|
|
|
$ |
0.41
|
|
|
$ |
0.25
|
|
|
$ |
0.68
|
|
|
$ |
1.41
|
|
|
Diluted
earnings per share
|
|
$ |
0.04
|
|
|
$ |
0.38
|
|
|
$ |
0.23
|
|
|
$ |
0.65
|
|
|
$ |
1.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$ |
30.83
|
|
|
$ |
48.29
|
|
|
$ |
53.90
|
|
|
$ |
49.00
|
|
|
$ |
53.90
|
|
|
Low
|
|
$ |
21.50
|
|
|
$ |
29.21
|
|
|
$ |
43.58
|
|
|
$ |
37.98
|
|
|
$ |
21.50
|
|
ITEM
9A: CONTROLS AND PROCEDURES
(i)
|
Evaluation
of disclosure controls and
procedures.
|
|
An
evaluation was performed under the supervision and with the participation
of our Company’s management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation
of the Company’s disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange
Act of 1934 as amended. Based on that evaluation, the Company’s
management, including the Chief Executive Officer and Chief Financial
Officer, concluded that the Company’s disclosure controls and procedures
were effective as of December 31,
2006.
|
(ii)
|
Internal
Control Over Financial
Reporting.
|
(a)
|
Management’s
Annual Report on Internal Control Over Financial
Reporting. Our management is responsible for
establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f).
Under
the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted
an
evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control— Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our evaluation under the framework
in
Internal Control—Integrated Framework, our management concluded
that our internal control over financial reporting was effective
as of
December 31, 2006.
|
|
We
completed the acquisition of ELO Sistemas e Tecnologia Ltda. on June
1,
2006. This business represents a separate legal entity with total
assets
of $20.1 million as of December 31, 2006 and revenues of $10.6 million
for
the seven months then ended. It is also a separate control environment.
The evaluation of disclosure controls and procedures referred to
in (i)
above included ELO Sistemas e Tecnologia Ltda. However, we have excluded
this acquisition from management’s report on internal control over
financial reporting, as permitted by SEC guidance, for the year ended
December 31, 2006.
|
|
Our
management’s assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2006 has been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report that is included in this
Annual
Report on Form 10-K/A.
|
(b)
|
Changes
in internal control over financial
reporting. The Company’s disclosure controls,
including the Company’s internal controls, are designed to provide a
reasonable level of assurance that the stated objectives are met.
We
concluded, as stated in (a) above, that the Company’s internal
control over financial reporting was effective in providing this
reasonable level of assurance as of December 31, 2006. The Company’s
management, including the Chief Executive Officer and Chief Financial
Officer, does not expect that the Company’s disclosure controls or
internal controls will prevent all errors and all fraud. A control
system,
no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system
are met.
Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues
and
instances of fraud, if any, within the Company have been prevented
or
detected. These inherent limitations include the fact that judgments
in
decision-making can be faulty. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. Because of the
inherent
limitations in a control system, misstatements due to error or fraud
may
occur and not be prevented or
detected.
|
There
have been no changes in internal control over financial reporting during the
quarter requiring disclosure that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial
reporting.
(c)
|
Report
of Independent Registered Public Accounting
Firm.
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders of
Itron,
Inc.
Liberty
Lake, Washington
We
have
audited management’s assessment, included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting, that
Itron, Inc. and subsidiaries (the “Company”) maintained effective
internal control over financial reporting as of December 31, 2006, based on
criteria established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. As
described in Management’s Annual Report on Internal Control Over Financial
Reporting, management excluded from its assessment the internal control over
financial reporting at ELO Sistemas e Tecnologia Ltda. which was acquired
on June 1, 2006 and whose financial statements constitute .2% and 2.0% of
net and total assets, respectively, 1.6% of revenues, and (4.3)% of net income
of the consolidated financial statement amounts as of and for the year ended
December 31, 2006. Accordingly, our audit did not include the internal
control over financial reporting at ELO Sistemas e Tecnologia Ltda. The
Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion
on
management’s assessment and an opinion on the effectiveness of the Company’s
internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.
A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by
the
company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures
of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use,
or
disposition of the company’s assets that could have a material effect on the
financial statements.
Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented
or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In
our
opinion, management’s assessment that the Company maintained effective internal
control over financial reporting as of December 31, 2006, is fairly stated,
in all material respects, based on the criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the criteria established in
Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We
have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements and
financial statement schedule as of and for the year ended December 31, 2006,
of
the Company and our report dated February 22, 2007 (September 12, 2007, as
to
Notes 17 and 18) expressed an unqualified opinion on those financial statements
and financial statement schedule and included explanatory paragraphs relating
to
the adoption of Statement of Financial Accounting Standards No. 123(R),
Share-Based Payment, the restatement discussed in Note 18, and
retrospective adjustment for a change in the composition of reportable segments
discussed in Note 17.
/s/
DELOITTE & TOUCHE LLP
Seattle,
Washington
February 22,
2007
PART
IV
ITEM 15: EXHIBITS,
FINANCIAL STATEMENT SCHEDULE
(a)
(1) Financial Statement:
The
financial statements required by this item are submitted in Item 8 of this
Annual Report on Form 10-K/A.
(a)
(2) Financial Statement Schedule:
Schedule
II: Valuation and Qualifying Accounts
(3)
Exhibits:
Exhibit
|
|
|
Number
|
|
Description
of Exhibits
|
|
|
|
2.1
|
|
Agreement
and Plan of Reorganization between Itron, Inc. and LineSoft Corporation
dated February 14, 2002. (filed as Exhibit 2.1 to Itron, Inc.’s Report on
Form 8-K dated March 1, 2002—File No. 0-22418)
|
|
|
|
2.2
|
|
Agreement
and Plan of Merger By and Among Regional Economic Research, Inc.,
RER
Combination, Inc. and Itron, Inc. dated September 9, 2002. (filed
as
Exhibit 2.2 to Itron, Inc.’s Annual Report on Form 10-K dated March 27,
2003—File No. 0-22418)
|
|
|
|
2.3
|
|
Combination
Agreement By and Among eMobile Data Corporation, Marc Jones, eMD
Combination, Inc. and Itron, Inc. dated August 30, 2002. (filed
as Exhibit
2.3 to Itron, Inc.’s Annual Report on Form 10-K dated March 27, 2003—File
No. 0-22418)
|
|
|
|
2.4
|
|
Agreement
and Plan of Merger By and Among Silicon Energy Corp., Shadow Combination,
Inc. and Itron, Inc. dated January 18, 2003 as amended on February
27,
2003 and February 28, 2003. (filed as Exhibit 2.1 to Itron, Inc.’s Report
on Form 8-K dated March 19, 2003—File No. 0-22418)
|
|
|
|
2.5
|
|
Corrected
Schedule 1.1 of First Amendment dated February 27, 2003 of the
Agreement
and Plan of Merger, by and among Itron, Inc., Shadow Combination,
Inc. and
Silicon Energy Corp. (filed as Exhibit 2.1.1 to Itron, Inc.’s Report on
Form 8-K/A dated March 26, 2003—File No. 0-22418)
|
|
|
|
2.6
|
|
Amended
& Restated Purchase Agreement dated July 1, 2004, by and among Itron,
Inc., Itron Canada, Inc., Itron France and Schlumberger Electricity,
Inc.,
Schlumberger Technology Corporation, Schlumberger Canada Limited,
BVI
Holdings Limited, Axalto S.A., Schlumberger B.V. (filed as Exhibit
2.1 to
Itron, Inc.’s Report on Form 8-K dated July 15, 2004—File No.
0-22418)
|
|
|
|
3.1
|
|
Amended
and Restated Articles of Incorporation of Itron, Inc. (filed as
Exhibit
3.1 to Itron, Inc.’s Annual Report on Form 10-K dated March 27, 2003—File
No. 0-22418)
|
|
|
|
3.2
|
|
Amended
and Restated Bylaws of Itron, Inc. (filed as Exhibit 3.2 to Itron,
Inc.’s
Quarterly Report on Form 10-Q dated August 12, 2002—File No.
0-22418)
|
|
|
|
3.3
|
|
Bylaws
of Itron Engineering Services, Inc. (filed as Exhibit 3.8 to Itron,
Inc.’s
Report on Form S-4 dated September 3, 2004—File No.
333-118782)
|
|
|
|
3.4
|
|
Bylaws
of Itron International, Inc. (filed as Exhibit 3.11 to Itron, Inc.’s
Report on Form S-4 dated September 3, 2004—File No.
333-118782)
|
|
|
|
3.5
|
|
Certificate
of Incorporation of Itron International, Inc. (filed as Exhibit
3.12 to
Itron, Inc.’s Report on Form S-4 dated September 3, 2004—File No.
333-118782)
|
|
|
|
4.1
|
|
Rights
Agreement between Itron, Inc. and Mellon Investor Services LLC,
as Rights
Agent, dated as of December 11, 2002. (filed as Exhibit 4.1 to
Itron,
Inc.’s Registration of Securities on Form 8-A, filed on December 12,
2002—File No. 0-22418)
|
Exhibit
|
|
|
Number
|
|
Description
of Exhibits
|
|
|
|
4.2
|
|
Credit
Agreement among Itron, Inc., several lenders from time to time
parties
hereto, Bear Stearns Corporate Lending, Inc. and Wells Fargo
Bank,
National Association dated December 17, 2003. (filed as Exhibit
10.17 to
Itron, Inc.’s Annual Report on Form 10-K dated March 12, 2004—File
No. 0-22418)
|
|
|
|
4.3
|
|
Credit
Agreement, dated December 17, 2003, by and among Itron, Inc.
and Bear
Stearns Corporate Lending Inc. as Syndication Agent and Wells
Fargo Bank,
National Association, as Administrative Agent. (filed as Exhibit
4.1 to
Itron, Inc.’s Report on Form 8-K dated July 15, 2004—File
No. 0-22418)
|
|
|
|
4.4
|
|
First
Amendment to the Credit Agreement, dated March 15, 2004, by and
among
Itron, Inc. and Bear Stearns Corporate Lending Inc. as Syndication
Agent
and Wells Fargo Bank, National Association, as Administrative
Agent.
(filed as Exhibit 4.2 to Itron, Inc.’s Report on Form 8-K dated July 15,
2004—File No. 0-22418)
|
|
|
|
4.5
|
|
Second
Amendment to the Credit Agreement, dated May 14, 2004, by and
among Itron,
Inc. and Bear Stearns Corporate Lending Inc. as Syndication Agent
and
Wells Fargo Bank, National Association, as Administrative Agent.
(filed as
Exhibit 4.3 to Itron, Inc.’s Report on Form 8-K dated July 15, 2004—File
No. 0-22418)
|
|
|
|
4.6
|
|
Third
Amendment to the Credit Agreement, dated June 30, 2004, by and
among
Itron, Inc. and Bear Stearns Corporate Lending Inc. as Syndication
Agent
and Wells Fargo Bank, National Association, as Administrative
Agent.
(filed as Exhibit 4.4 to Itron, Inc.’s Report on Form 8-K dated July 15,
2004—File No. 0-22418)
|
|
|
|
4.7
|
|
Form
of Itron, Inc.’s 7.75% Exchange Note due 2012. (filed as Exhibit 4.6 to
Itron, Inc.’s Report on Form S-4 dated September 3, 2004—File No.
333-118782)
|
|
|
|
4.8
|
|
Indenture
relating to Itron, Inc.’s 7.75% senior subordinated notes due 2012, dated
as of May 10, 2004. (filed as Exhibit 4.7 to Itron, Inc.’s Report on Form
S-4 dated September 3, 2004—File No. 333-118782)
|
|
|
|
4.9
|
|
Registration
Rights Agreement among Itron, Inc. domestic subsidiaries listed
on
Schedule I thereto and Bear, Stearns & Co. Inc. dated May 10, 2004.
(filed as Exhibit 4.8 to Itron, Inc.’s Report on Form S-4/A dated
September 9, 2004—File No. 333-118782)
|
|
|
|
4.10
|
|
Fourth
Amendment to the Credit Agreement dated April 19, 2005, by and
among
Itron, Inc. and Bear Stearns Corporate Lending Inc. as Syndication
Agent
and Wells Fargo Bank, National Association, as Administrative
Agent.
(filed as Exhibit 10.23 to Itron, Inc.’s Report on Form 8-K dated April
20, 2005—File No. 0-22418)
|
|
|
|
4.11
|
|
Fifth
Amendment to the Credit Agreement dated April 19, 2005, by and
among
Itron, Inc. and Bear Stearns Corporate Lending Inc. as Syndication
Agent
and Wells Fargo Bank, National Association, as Administrative
Agent.
(filed as Exhibit 10.24 to Itron, Inc.’s Report on Form 8-K dated April
20, 2005—File No. 0-22418)
|
|
|
|
4.12
|
|
Sixth
Amendment to the Credit Agreement dated December 19, 2005, by and
among Itron, Inc. and Bear Stearns Corporate Lending Inc. as
Syndication
Agent and Wells Fargo Bank, National Association, as Administrative
Agent.
(filed as Exhibit 4.11 to Itron, Inc.’s Report on Form 8-K dated
December 21, 2005—File No. 0-22418)
|
|
|
|
4.13
|
|
Seventh
Amendment to the Credit Agreement dated May 18, 2006, and entered by
and among Itron, Inc., several lenders from time to time parties
thereto,
Bear Stearns Corporate Lending Inc. and Wells Fargo Bank, National
Association and is made with reference to the Credit Agreement
dated
December 17, 2003. (filed as Exhibit 4.14 to Itron, Inc.’s Report on Form
8-K dated May 18, 2006—File No. 0-22418)
|
|
|
|
4.14
|
|
Eighth
Amendment to the Credit Agreement dated July 31, 2006, and entered
into by and among Itron, Inc., several lenders from time to time
parties
thereto, Bear Stearns Corporate Lending Inc. and Wells Fargo
Bank,
National Association and is made with reference to the Credit
Agreement
dated December 17, 2003. (filed as Exhibit 4.15 to Itron, Inc.’s Report on
Form 8-K dated July 31, 2006—File No. 0-22418)
|
|
|
|
4.15
|
|
Indenture
relating to Itron, Inc.’s 2.50% convertible senior subordinated notes due
2026, dated as of August 4, 2006. (filed as Exhibit 4.16 to Itron,
Inc.’s
Quarterly Report on Form 10-Q dated November 6, 2006—File
No. 0-22418)
|
Exhibit
|
|
|
Number
|
|
Description
of Exhibits
|
|
|
|
10.1
|
|
Form
of Change in Control Agreement between Itron, Inc. and certain
of its
executive officers.* (filed as Exhibit 10.2 to Itron Inc.’s Report on Form
8-K dated February 15, 2006—File No. 0-22418)
|
|
|
|
10.2
|
|
Schedule
of certain executive officers who are parties to Change in Control
Agreements* (see Exhibit 10.1 hereto) with Itron, Inc. (filed
as Exhibit 10.2 to Itron Inc.’s Report on Form 10-K dated February 23,
2007—File No. 0-22418)
|
|
|
|
10.3
|
|
Amended
and Restated 2000 Stock Incentive Plan. (filed as Appendix A to
Itron,
Inc.’s Proxy Statement for the Annual Meeting of Shareholders to be
held
on May 9, 2006—File No. 0-22418)
|
|
|
|
10.4
|
|
Amended
and Restated Equity Grant Program for Nonemployee Directors under
the
Itron, Inc. 2000 Amended and Restated Stock Incentive Plan. (filed
as
Exhibit 10.4 to Itron, Inc.’s Quarterly Report on Form 10-Q dated November
6, 2006—File No. 0-22418)
|
|
|
|
10.5
|
|
Executive
Deferred Compensation Plan.* (filed as Exhibit 10.12 to Itron,
Inc.’s
Registration Statement on Form S-1 (Registration #33-49832), as
amended,
filed on July 22, 1992)
|
|
|
|
10.6
|
|
Executive
Deferred Compensation Plan, Amendment No. Two, dated December 4,
2006*
(filed as Exhibit 10.6 to Itron, Inc.’s Current Report on Form 8-K dated
December 7, 2006—File No. 0-22418)
|
|
|
|
10.7
|
|
Form
of Indemnification Agreements between Itron, Inc. and certain directors
and officers. (filed as Exhibit 10.9 to Itron, Inc.’s Annual Report on
Form 10-K dated March 26, 2000—File No. 0-22418)
|
|
|
|
10.8
|
|
Schedule
of directors and executive officers who are parties to Indemnification
Agreements (see Exhibit 10.7 hereto) with Itron, Inc. (filed as
Exhibit 10.8 to Itron Inc.’s Report on Form 10-K dated February 23,
2007—File No. 0-22418)
|
|
|
|
10.9
|
|
Asset
Purchase Agreement between Itron, Inc. and DataCom Information
Systems,
LLC (e.g. an affiliate of Duquesne Light Company) dated March 30,
2000.
(filed as Exhibit 10.19 to Itron, Inc.’s Quarterly Report on Form 10-Q
dated May 12, 2000—File No. 0-22418)
|
|
|
|
10.10
|
|
Amended
and Restated Warranty and Maintenance Agreement between Itron,
Inc. and
Duquesne Light Company dated May 1, 2003. (filed as Exhibit 10.13
to
Itron, Inc.’s Quarterly Report on Form 10-Q dated May 9, 2003—File No.
0-22418)
|
|
|
|
10.11
|
|
2002
Employee Stock Purchase Plan. (filed as Appendix B to Itron, Inc.’s Proxy
Statement for the Annual Meeting of Shareholders to be held on
May 3,
2005—File No. 0-22418)
|
|
|
|
10.12
|
|
Amended
Long-Term Performance Plan dated February 15, 2006 between Itron,
Inc. and
certain of its executive officers. * (filed as Exhibit 10.20 to
Itron,
Inc.’s Report on Form 8-K dated February 15, 2006—File No.
0-22418)
|
|
|
|
10.13
|
|
1989
Restated Stock Option Plan. (filed as Appendix A to Itron, Inc.’s Proxy
Statement for the Annual Meeting of Shareholders to be held on
April 29,
1997—File No. 0-22418)
|
|
|
|
10.14
|
|
Stock
Option Plan for Nonemployee Directors. (filed as Exhibit 10.11
to Itron,
Inc.’s Registration Statement on Form S-1 dated July 22,
1992)
|
|
|
|
10.15
|
|
Notice
of Restricted Stock Award.* (filed as Exhibit 10.23 to Itron, Inc.’s
Report on Form 8-K dated February 15, 2006)
|
|
|
|
12.1
|
|
Statement
re Computation of Ratios. (filed as Exhibit 12.1 to Itron
Inc.’s Report on Form 10-K dated February 23, 2007—File
No. 0-22418)
|
|
|
|
21.1
|
|
Subsidiaries
of Itron, Inc. (filed as Exhibit 21.1 to Itron
Inc.’s Report on Form 10-K dated February 23, 2007—File
No. 0-22418)
|
|
|
|
23.1
|
|
Consent
of Independent Registered Public Accounting Firm—Deloitte & Touche
LLP.
|
|
|
|
31.1
|
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
31.2
|
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
32.1
|
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
*
|
|
Management
contract or compensatory plan or
arrangement.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15 (d) 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, in the City of Liberty
Lake, State of Washington, on the 13th day of
September, 2007.
|
|
ITRON,
INC.
|
|
|
By:
|
/S/ STEVEN
M. HELMBRECHT
|
|
Steven
M. Helmbrecht
Sr.
Vice President and Chief Financial
Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on the 13th day of
September, 2007.
Signature
|
|
Title
|
|
|
|
/S/ LEROY
D.
NOSBAUM
|
|
|
LeRoy
D. Nosbaum
|
|
Chairman
of the Board and Chief Executive Officer (Principal Executive
Officer)
|
|
|
|
/S/ STEVEN
M.
HELMBRECHT
|
|
|
Steven
M. Helmbrecht
|
|
Sr.
Vice President and Chief Financial Officer (Principal Financial
and
Accounting Officer)
|
|
|
|
/S/ MICHAEL
B.
BRACY
|
|
|
Michael
B. Bracy
|
|
Director
|
|
|
|
/S/ TED
C.
DEMERRITT
|
|
|
Ted
C. DeMerritt
|
|
Director
|
|
|
|
/S/ KIRBY
A. DYESS
|
|
|
Kirby
A. Dyess
|
|
Director
|
|
|
|
/S/ JON
E.
ELIASSEN
|
|
|
Jon
E. Eliassen
|
|
Director
|
|
|
|
/S/ CHARLES
H. GAYLORD,
JR.
|
|
|
Charles
H. Gaylord, Jr.
|
|
Director
|
|
|
|
/S/ THOMAS
S.
GLANVILLE
|
|
|
Thomas
S. Glanville
|
|
Director
|
|
|
|
/S/
SHARON L.
NELSON
|
|
|
Sharon
L. Nelson
|
|
Director
|
|
|
|
/S/
GARY
E. PRUITT
|
|
|
Gary
E. Pruitt
|
|
Director
|
|
|
|
/S/ GRAHAM
M.
WILSON
|
|
|
Graham
M. Wilson
|
|
Director
|
Schedule
II: VALUATION AND QUALIFYING
ACCOUNTS
|
|
|
|
|
|
Electricity
Metering
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
acquisition
|
|
|
charged to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning
|
|
|
opening
balance /
|
|
|
costs
and
|
|
|
|
|
|
Balance at end of period
|
|
Description
|
|
of
period
|
|
|
adjustments
|
|
|
expenses
|
|
|
Deductions
|
|
|
Current
|
|
|
Noncurrent
|
|
|
|
|
(in
thousands)
|
|
Year
ended December 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short
and long-term warranty
|
|
$ |
17,475
|
|
|
$ |
4,554
|
|
|
$ |
6,738
|
|
|
$ |
15,193
|
|
|
$ |
7,243
|
|
|
$ |
6,331
|
|
|
Allowance
for doubtful accounts
|
|
|
695
|
|
|
|
861
|
|
|
|
193
|
|
|
|
437
|
|
|
|
1,312
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short
and long-term warranty
|
|
$ |
13,574
|
|
|
$ |
(2,128 |
) |
(1) |
$ |
10,929
|
|
|
$ |
7,099
|
|
|
$ |
8,497
|
|
|
$ |
6,779
|
|
|
Allowance
for doubtful accounts
|
|
|
1,312
|
|
|
|
(164 |
) |
|
|
(165 |
) |
|
|
(385 |
) |
|
|
598
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short
and long-term warranty
|
|
$ |
15,276
|
|
|
$ |
-
|
|
|
$ |
10,104
|
|
|
$ |
7,232
|
|
|
$ |
7,999
|
|
|
$ |
10,149
|
|
|
Allowance
for doubtful accounts
|
|
|
598
|
|
|
|
-
|
|
|
|
52
|
|
|
|
(61 |
) |
|
|
589
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On
July 1, 2004, we completed the acquisition of our Electricity Metering
business and continued to make adjustments to the purchase
price
|
|
|
through June 2005
as the valuation of assets and liabilities were
finalized. |
|