Document
false--12-31Q3201810-Q0000780571falseLarge Accelerated FilerITRON INC /WA/falseITRI144000002000007500000075000000387710003940000038771000394000000.00517000000.350.210312016201001000000000000000P12M8000000 0000780571 2018-01-01 2018-09-30 0000780571 2018-10-31 0000780571 2017-01-01 2017-09-30 0000780571 2018-07-01 2018-09-30 0000780571 us-gaap:ProductMember 2017-01-01 2017-09-30 0000780571 2017-07-01 2017-09-30 0000780571 us-gaap:ProductMember 2018-01-01 2018-09-30 0000780571 us-gaap:ServiceMember 2017-01-01 2017-09-30 0000780571 us-gaap:ServiceMember 2018-01-01 2018-09-30 0000780571 us-gaap:ServiceMember 2017-07-01 2017-09-30 0000780571 us-gaap:ServiceMember 2018-07-01 2018-09-30 0000780571 us-gaap:ProductMember 2018-07-01 2018-09-30 0000780571 us-gaap:ProductMember 2017-07-01 2017-09-30 0000780571 2017-12-31 0000780571 2018-09-30 0000780571 2016-12-31 0000780571 2017-09-30 0000780571 us-gaap:AccountingStandardsUpdate201409Member 2017-12-31 0000780571 us-gaap:AccountingStandardsUpdate201616Member 2017-12-31 0000780571 2017-06-30 0000780571 2018-06-30 0000780571 us-gaap:DevelopedTechnologyRightsMember 2017-12-31 0000780571 us-gaap:CustomerRelationshipsMember 2018-09-30 0000780571 us-gaap:InProcessResearchAndDevelopmentMember 2017-12-31 0000780571 us-gaap:DevelopedTechnologyRightsMember 2018-09-30 0000780571 us-gaap:OtherIntangibleAssetsMember 2018-09-30 0000780571 us-gaap:CustomerRelationshipsMember 2017-12-31 0000780571 us-gaap:TrademarksAndTradeNamesMember 2018-09-30 0000780571 us-gaap:InProcessResearchAndDevelopmentMember 2018-09-30 0000780571 us-gaap:TrademarksAndTradeNamesMember 2017-12-31 0000780571 us-gaap:OtherIntangibleAssetsMember 2017-12-31 0000780571 2018-01-05 0000780571 itri:GasOperatingSegmentMember 2018-09-30 0000780571 itri:WaterOperatingSegmentMember 2017-12-31 0000780571 itri:NetworksOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:ElectricityOperatingSegmentMember 2017-12-31 0000780571 itri:ElectricityOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:ElectricityOperatingSegmentMember 2018-09-30 0000780571 itri:WaterOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:NetworksOperatingSegmentMember 2017-12-31 0000780571 itri:WaterOperatingSegmentMember 2018-09-30 0000780571 itri:NetworksOperatingSegmentMember 2018-09-30 0000780571 itri:GasOperatingSegmentMember 2017-12-31 0000780571 itri:GasOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:UsdDenominatedTermLoanMember 2018-09-30 0000780571 us-gaap:LineOfCreditMember 2018-09-30 0000780571 us-gaap:SecuredDebtMember 2018-09-30 0000780571 us-gaap:SeniorNotesMember 2018-09-30 0000780571 us-gaap:SeniorNotesMember 2017-12-31 0000780571 itri:UsdDenominatedTermLoanMember 2017-12-31 0000780571 us-gaap:LineOfCreditMember 2017-12-31 0000780571 us-gaap:SecuredDebtMember 2017-12-31 0000780571 srt:MinimumMember us-gaap:ScenarioForecastMember 2017-12-22 2021-01-14 0000780571 us-gaap:DebtInstrumentRedemptionPeriodTwoMember us-gaap:ScenarioForecastMember 2022-01-15 2023-01-14 0000780571 us-gaap:LondonInterbankOfferedRateLIBORMember 2018-01-01 2018-09-30 0000780571 2018-01-19 0000780571 itri:AlternateBaseRate1Member 2018-01-01 2018-09-30 0000780571 2017-12-22 0000780571 us-gaap:LondonInterbankOfferedRateLIBORMember 2018-09-30 0000780571 srt:MinimumMember 2018-01-01 2018-09-30 0000780571 us-gaap:StandbyLettersOfCreditMember 2018-09-30 0000780571 itri:UsdDenominatedTermLoanMember 2018-01-05 0000780571 srt:MaximumMember us-gaap:ScenarioForecastMember 2017-12-22 2021-01-14 0000780571 itri:AlternateBaseRate3Member 2018-01-01 2018-09-30 0000780571 2015-06-23 0000780571 itri:EURIBORMember 2018-01-01 2018-09-30 0000780571 itri:AlternateBaseRateMember 2018-01-01 2018-09-30 0000780571 srt:MaximumMember 2018-01-01 2018-09-30 0000780571 us-gaap:DebtInstrumentRedemptionPeriodOneMember us-gaap:ScenarioForecastMember 2021-01-15 2022-01-14 0000780571 us-gaap:RevolvingCreditFacilityMember 2018-01-05 0000780571 us-gaap:DebtInstrumentRedemptionPeriodFourMember us-gaap:ScenarioForecastMember 2017-12-22 2021-01-14 0000780571 us-gaap:SecuredDebtMember 2018-01-01 2018-09-30 0000780571 itri:AlternateBaseRate2Member 2018-01-01 2018-09-30 0000780571 us-gaap:DebtInstrumentRedemptionPeriodThreeMember us-gaap:ScenarioForecastMember 2023-01-15 2026-01-15 0000780571 us-gaap:RevolvingCreditFacilityMember 2018-09-30 0000780571 itri:OtherIncomeExpenseMember 2018-01-01 2018-09-30 0000780571 us-gaap:InterestRateCapMember us-gaap:InterestExpenseMember 2017-01-01 2017-09-30 0000780571 itri:OtherIncomeExpenseMember 2017-01-01 2017-09-30 0000780571 us-gaap:InterestRateCapMember us-gaap:InterestExpenseMember 2018-07-01 2018-09-30 0000780571 us-gaap:InterestRateCapMember us-gaap:InterestExpenseMember 2017-07-01 2017-09-30 0000780571 itri:OtherIncomeExpenseMember 2018-07-01 2018-09-30 0000780571 us-gaap:InterestRateCapMember us-gaap:InterestExpenseMember 2018-01-01 2018-09-30 0000780571 itri:OtherIncomeExpenseMember 2017-07-01 2017-09-30 0000780571 itri:CurrencySwap2Member 2017-07-01 2017-09-30 0000780571 us-gaap:InterestRateSwapMember 2017-01-01 2017-09-30 0000780571 us-gaap:InterestRateCapMember 2017-07-01 2017-09-30 0000780571 us-gaap:CurrencySwapMember us-gaap:InterestExpenseMember 2018-07-01 2018-09-30 0000780571 us-gaap:InterestRateSwapMember us-gaap:InterestExpenseMember 2017-01-01 2017-09-30 0000780571 us-gaap:InterestRateSwapMember us-gaap:InterestExpenseMember 2017-07-01 2017-09-30 0000780571 us-gaap:CurrencySwapMember itri:OtherIncomeExpenseMember 2017-07-01 2017-09-30 0000780571 us-gaap:CurrencySwapMember us-gaap:InterestExpenseMember 2017-01-01 2017-09-30 0000780571 itri:CurrencySwap2Member 2018-01-01 2018-09-30 0000780571 itri:CurrencySwap2Member 2018-07-01 2018-09-30 0000780571 us-gaap:InterestRateCapMember 2018-01-01 2018-09-30 0000780571 us-gaap:InterestRateSwapMember 2018-01-01 2018-09-30 0000780571 us-gaap:InterestRateCapMember 2017-01-01 2017-09-30 0000780571 itri:CurrencySwap1Member 2017-07-01 2017-09-30 0000780571 us-gaap:InterestRateSwapMember us-gaap:InterestExpenseMember 2018-01-01 2018-09-30 0000780571 itri:CurrencySwap2Member 2017-01-01 2017-09-30 0000780571 us-gaap:CurrencySwapMember us-gaap:InterestExpenseMember 2018-01-01 2018-09-30 0000780571 us-gaap:InterestRateCapMember 2018-07-01 2018-09-30 0000780571 us-gaap:CurrencySwapMember itri:OtherIncomeExpenseMember 2018-07-01 2018-09-30 0000780571 itri:CurrencySwap1Member 2018-07-01 2018-09-30 0000780571 us-gaap:InterestRateSwapMember 2017-07-01 2017-09-30 0000780571 us-gaap:CurrencySwapMember itri:OtherIncomeExpenseMember 2017-01-01 2017-09-30 0000780571 us-gaap:CurrencySwapMember itri:OtherIncomeExpenseMember 2018-01-01 2018-09-30 0000780571 us-gaap:CurrencySwapMember us-gaap:InterestExpenseMember 2017-07-01 2017-09-30 0000780571 itri:CurrencySwap1Member 2018-01-01 2018-09-30 0000780571 itri:CurrencySwap1Member 2017-01-01 2017-09-30 0000780571 us-gaap:InterestRateSwapMember us-gaap:InterestExpenseMember 2018-07-01 2018-09-30 0000780571 us-gaap:InterestRateSwapMember 2018-07-01 2018-09-30 0000780571 us-gaap:CurrencySwapMember 2018-04-30 0000780571 us-gaap:InterestRateCapMember 2018-09-30 0000780571 itri:AccumulatedOtherComprehensiveIncomeNetUnrealizedGainLossOnNonderivativeInstrumentsMember 2018-09-30 0000780571 us-gaap:InterestRateSwapMember 2018-09-30 0000780571 2018-04-30 0000780571 srt:MinimumMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2018-09-30 0000780571 us-gaap:ForwardContractsMember 2018-09-30 0000780571 itri:NumberOfCounterpartiesMember 2017-12-31 0000780571 itri:NumberOfCounterpartiesMember 2018-09-30 0000780571 srt:MaximumMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2018-09-30 0000780571 us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:SecuredDebtMember 2018-09-30 0000780571 us-gaap:InterestRateCapMember 2015-01-01 2015-12-31 0000780571 itri:AccumulatedNetGainLossfromDerivativeandNonderivativeInstrumentsDesignatedasHedgingInstrumentsMember 2017-12-31 0000780571 itri:AccumulatedNetGainLossfromDerivativeandNonderivativeInstrumentsDesignatedasHedgingInstrumentsMember 2018-09-30 0000780571 itri:AccumulatedNetGainLossfromDerivativeandNonderivativeInstrumentsDesignatedasHedgingInstrumentsMember 2016-12-31 0000780571 itri:AccumulatedNetGainLossfromDerivativeandNonderivativeInstrumentsDesignatedasHedgingInstrumentsMember 2017-09-30 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:CurrencySwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-12-31 0000780571 us-gaap:OtherCurrentLiabilitiesMember us-gaap:NondesignatedMember 2018-09-30 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:NondesignatedMember 2018-09-30 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:CurrencySwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-12-31 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:NondesignatedMember 2018-09-30 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:NondesignatedMember 2017-12-31 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:NondesignatedMember 2018-09-30 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:NondesignatedMember 2017-12-31 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-12-31 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:CurrencySwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:NondesignatedMember 2017-12-31 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:InterestRateCapMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-12-31 0000780571 us-gaap:OtherCurrentAssetsMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-12-31 0000780571 us-gaap:OtherNoncurrentAssetsMember us-gaap:CurrencySwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-12-31 0000780571 us-gaap:OtherCurrentLiabilitiesMember us-gaap:NondesignatedMember 2017-12-31 0000780571 itri:AccumulatedOtherComprehensiveIncomeNetUnrealizedGainLossOnNonderivativeInstrumentsMember 2017-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember 2018-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember 2017-12-31 0000780571 us-gaap:RestrictedStockUnitsRSUMember 2017-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember itri:VestedButNotReleasedMember 2018-01-01 2018-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember itri:ExpectedToVestMember 2018-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember itri:VestedAndReleasedMember 2018-01-01 2018-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember 2017-01-01 2017-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember itri:VestedAndReleasedMember 2017-01-01 2017-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember 2016-12-31 0000780571 itri:SSNIPlanMember 2018-09-30 0000780571 itri:StockIncentivePlanMember 2018-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2018-09-30 0000780571 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-09-30 0000780571 us-gaap:EmployeeStockOptionMember 2018-09-30 0000780571 itri:A2018ProjectsMember 2018-01-01 2018-09-30 0000780571 itri:A2016ProjectsMember 2018-01-01 2018-09-30 0000780571 itri:SIlverSpringNetworksInc.Member 2018-01-05 2018-09-30 0000780571 itri:SIlverSpringNetworksInc.Member 2018-01-01 2018-09-30 0000780571 us-gaap:EmployeeStockMember 2018-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2018-01-01 2018-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2017-12-31 0000780571 us-gaap:PhantomShareUnitsPSUsMember itri:ExpectedToVestMember 2017-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember itri:ExpectedToVestMember 2018-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2016-12-31 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2017-01-01 2017-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2017-09-30 0000780571 us-gaap:EmployeeStockOptionMember 2016-12-31 0000780571 us-gaap:EmployeeStockOptionMember 2017-01-01 2017-09-30 0000780571 us-gaap:EmployeeStockOptionMember 2017-12-31 0000780571 us-gaap:EmployeeStockOptionMember 2017-09-30 0000780571 us-gaap:EmployeeStockOptionMember itri:ExpectedToVestMember 2018-09-30 0000780571 us-gaap:EmployeeStockOptionMember 2016-01-01 2016-12-31 0000780571 us-gaap:EmployeeStockOptionMember 2017-01-01 2017-12-31 0000780571 us-gaap:EmployeeStockOptionMember itri:ExpectedToVestMember 2018-01-01 2018-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2017-07-01 2017-09-30 0000780571 us-gaap:PhantomShareUnitsPSUsMember 2018-07-01 2018-09-30 0000780571 us-gaap:EmployeeStockOptionMember 2017-07-01 2017-09-30 0000780571 us-gaap:EmployeeStockOptionMember 2018-07-01 2018-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember itri:LongTermPerformanceRestrictedStockAwardMember 2017-07-01 2017-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember itri:LongTermPerformanceRestrictedStockAwardMember 2017-01-01 2017-09-30 0000780571 us-gaap:RestrictedStockUnitsRSUMember itri:LongTermPerformanceRestrictedStockAwardMember 2018-01-01 2018-09-30 0000780571 itri:SSNIPlanMember 2018-09-30 0000780571 us-gaap:SuretyBondMember 2018-09-30 0000780571 itri:UnsecuredMulticurrencyRevolvingLinesOfCreditMember 2018-09-30 0000780571 itri:CreditFacilityMember 2017-12-31 0000780571 itri:CreditFacilityMember 2018-09-30 0000780571 itri:UnsecuredMulticurrencyRevolvingLinesOfCreditMember 2017-12-31 0000780571 us-gaap:SuretyBondMember 2017-12-31 0000780571 itri:A2018ProjectsMember us-gaap:CorporateNonSegmentMember 2018-09-30 0000780571 itri:A2018ProjectsMember 2018-09-30 0000780571 us-gaap:OtherRestructuringMember itri:A2018ProjectsMember 2018-09-30 0000780571 us-gaap:EmployeeSeveranceMember itri:A2018ProjectsMember 2018-09-30 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember itri:A2018ProjectsMember 2018-01-01 2018-09-30 0000780571 itri:A2018ProjectsMember us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000780571 itri:A2018ProjectsMember itri:ElectricityOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:A2018ProjectsMember itri:ElectricityOperatingSegmentMember 2018-09-30 0000780571 itri:A2018ProjectsMember itri:WaterOperatingSegmentMember 2018-09-30 0000780571 itri:A2018ProjectsMember itri:WaterOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:A2018ProjectsMember itri:GasOperatingSegmentMember 2018-09-30 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember itri:A2018ProjectsMember 2018-09-30 0000780571 us-gaap:EmployeeSeveranceMember itri:A2018ProjectsMember 2018-01-01 2018-09-30 0000780571 us-gaap:OtherRestructuringMember itri:A2018ProjectsMember 2018-01-01 2018-09-30 0000780571 itri:A2018ProjectsMember itri:GasOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:OtherRestructuringMember 2018-09-30 0000780571 us-gaap:OtherRestructuringMember 2018-01-01 2018-09-30 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember 2017-12-31 0000780571 us-gaap:EmployeeSeveranceMember 2018-09-30 0000780571 us-gaap:EmployeeSeveranceMember 2018-01-01 2018-09-30 0000780571 us-gaap:OtherRestructuringMember 2017-12-31 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember 2018-09-30 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember 2018-01-01 2018-09-30 0000780571 us-gaap:EmployeeSeveranceMember 2017-12-31 0000780571 us-gaap:OtherRestructuringMember itri:A2016ProjectsMember 2018-09-30 0000780571 itri:A2016ProjectsMember itri:ElectricityOperatingSegmentMember 2018-09-30 0000780571 itri:A2016ProjectsMember itri:WaterOperatingSegmentMember 2018-09-30 0000780571 itri:A2016ProjectsMember 2018-09-30 0000780571 itri:A2016ProjectsMember itri:ElectricityOperatingSegmentMember 2017-12-31 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember itri:A2016ProjectsMember 2018-01-01 2018-09-30 0000780571 us-gaap:OtherRestructuringMember itri:A2016ProjectsMember 2017-12-31 0000780571 itri:A2016ProjectsMember itri:WaterOperatingSegmentMember 2017-12-31 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember itri:A2016ProjectsMember 2018-09-30 0000780571 us-gaap:EmployeeSeveranceMember itri:A2016ProjectsMember 2018-09-30 0000780571 itri:A2016ProjectsMember us-gaap:CorporateNonSegmentMember 2017-12-31 0000780571 us-gaap:EmployeeSeveranceMember itri:A2016ProjectsMember 2018-01-01 2018-09-30 0000780571 itri:A2016ProjectsMember itri:ElectricityOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:A2016ProjectsMember 2017-12-31 0000780571 itri:A2016ProjectsMember itri:GasOperatingSegmentMember 2018-09-30 0000780571 itri:A2016ProjectsMember itri:GasOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:AssetImpairmentAndNetGainLossOnSaleOrDisposalMember itri:A2016ProjectsMember 2017-12-31 0000780571 us-gaap:OtherRestructuringMember itri:A2016ProjectsMember 2018-01-01 2018-09-30 0000780571 itri:A2016ProjectsMember itri:WaterOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:A2016ProjectsMember us-gaap:CorporateNonSegmentMember 2018-09-30 0000780571 itri:A2016ProjectsMember itri:GasOperatingSegmentMember 2017-12-31 0000780571 us-gaap:EmployeeSeveranceMember itri:A2016ProjectsMember 2017-12-31 0000780571 itri:A2016ProjectsMember us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ParentMember 2017-12-31 0000780571 itri:AccumulatedOtherComprehensiveIncomeNetUnrealizedGainLossOnNonderivativeInstrumentsMember 2017-01-01 2017-09-30 0000780571 us-gaap:ParentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ParentMember 2018-01-01 2018-09-30 0000780571 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-09-30 0000780571 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2016-12-31 0000780571 itri:AccumulatedOtherComprehensiveIncomeNetUnrealizedGainLossOnNonderivativeInstrumentsMember 2017-12-31 0000780571 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-01-01 2018-09-30 0000780571 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-09-30 0000780571 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-01-01 2018-09-30 0000780571 itri:AccumulatedOtherComprehensiveIncomeNetUnrealizedGainLossOnNonderivativeInstrumentsMember 2018-01-01 2018-09-30 0000780571 us-gaap:AccumulatedTranslationAdjustmentMember 2017-09-30 0000780571 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-09-30 0000780571 us-gaap:AccumulatedTranslationAdjustmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-09-30 0000780571 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-12-31 0000780571 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-31 0000780571 us-gaap:AccumulatedTranslationAdjustmentMember 2018-09-30 0000780571 us-gaap:AccumulatedTranslationAdjustmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-01-01 2017-09-30 0000780571 itri:AccumulatedOtherComprehensiveIncomeNetUnrealizedGainLossOnNonderivativeInstrumentsMember 2016-12-31 0000780571 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-31 0000780571 us-gaap:ParentMember 2017-09-30 0000780571 us-gaap:ParentMember 2016-12-31 0000780571 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2016-12-31 0000780571 us-gaap:AccumulatedTranslationAdjustmentMember 2016-12-31 0000780571 us-gaap:ParentMember 2018-09-30 0000780571 us-gaap:InterestRateCapMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:CarryingReportedAmountFairValueDisclosureMember itri:UsdDenominatedTermLoanMember 2017-12-31 0000780571 us-gaap:CurrencySwapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:InterestRateSwapMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:InterestRateSwapMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:InterestRateSwapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:CurrencySwapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:CurrencySwapMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:LineOfCreditMember 2017-12-31 0000780571 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:InterestRateSwapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:LineOfCreditMember 2017-12-31 0000780571 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:LineOfCreditMember 2018-09-30 0000780571 us-gaap:EstimateOfFairValueFairValueDisclosureMember itri:UsdDenominatedTermLoanMember 2018-09-30 0000780571 us-gaap:InterestRateCapMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:LineOfCreditMember 2018-09-30 0000780571 us-gaap:CurrencySwapMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:InterestRateCapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-09-30 0000780571 us-gaap:InterestRateCapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 0000780571 us-gaap:EstimateOfFairValueFairValueDisclosureMember itri:UsdDenominatedTermLoanMember 2017-12-31 0000780571 us-gaap:CarryingReportedAmountFairValueDisclosureMember itri:UsdDenominatedTermLoanMember 2018-09-30 0000780571 itri:OtherCountriesMember 2017-01-01 2017-09-30 0000780571 itri:UnitedStatesAndCanadaMember 2018-01-01 2018-09-30 0000780571 us-gaap:EMEAMember 2017-07-01 2017-09-30 0000780571 us-gaap:EMEAMember 2018-01-01 2018-09-30 0000780571 itri:OtherCountriesMember 2018-01-01 2018-09-30 0000780571 us-gaap:EMEAMember 2017-01-01 2017-09-30 0000780571 itri:OtherCountriesMember 2018-07-01 2018-09-30 0000780571 itri:OtherCountriesMember 2017-07-01 2017-09-30 0000780571 itri:UnitedStatesAndCanadaMember 2018-07-01 2018-09-30 0000780571 itri:UnitedStatesAndCanadaMember 2017-01-01 2017-09-30 0000780571 itri:UnitedStatesAndCanadaMember 2017-07-01 2017-09-30 0000780571 us-gaap:EMEAMember 2018-07-01 2018-09-30 0000780571 itri:NetworksOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 itri:ElectricityOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 itri:GasOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 itri:ElectricityOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 itri:ElectricityOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:WaterOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:GasOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 itri:GasOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ProductMember itri:ElectricityOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 itri:WaterOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:NetworksOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ServiceMember itri:NetworksOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ProductMember itri:GasOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 itri:NetworksOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ServiceMember itri:GasOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ProductMember itri:WaterOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ServiceMember itri:NetworksOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 itri:NetworksOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:WaterOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:NetworksOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 itri:GasOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ProductMember itri:ElectricityOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ProductMember itri:ElectricityOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ProductMember itri:NetworksOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ServiceMember itri:WaterOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ProductMember itri:NetworksOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ProductMember itri:ElectricityOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 itri:WaterOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:GasOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ProductMember itri:GasOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ProductMember itri:WaterOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 itri:WaterOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ProductMember itri:GasOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ServiceMember itri:ElectricityOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:ElectricityOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ProductMember itri:WaterOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ProductMember itri:NetworksOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ProductMember itri:NetworksOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ServiceMember itri:ElectricityOperatingSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:ProductMember itri:WaterOperatingSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:GasOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:ProductMember itri:GasOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:ElectricityOperatingSegmentMember 2017-01-01 2017-09-30 0000780571 us-gaap:ServiceMember itri:WaterOperatingSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2018-07-01 2018-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2017-07-01 2017-09-30 0000780571 us-gaap:CorporateNonSegmentMember 2017-01-01 2017-09-30 0000780571 2018-07-01 2018-09-30 0000780571 us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-09-30 0000780571 2019-07-01 2018-09-30 0000780571 2018-10-01 2018-09-30 0000780571 itri:SIlverSpringNetworksInc.Member 2018-07-01 2018-09-30 0000780571 itri:CustomerContractsAndRelationshipsMember 2018-01-05 0000780571 us-gaap:TrademarksAndTradeNamesMember 2018-01-01 2018-09-30 0000780571 us-gaap:InProcessResearchAndDevelopmentMember 2018-01-05 0000780571 itri:SIlverSpringNetworksInc.Member 2018-01-05 0000780571 itri:CoreDevelopedTechnologyMember 2018-01-01 2018-09-30 0000780571 itri:CustomerContractsAndRelationshipsMember 2018-01-01 2018-09-30 0000780571 itri:CoreDevelopedTechnologyMember 2018-01-05 0000780571 us-gaap:TrademarksAndTradeNamesMember 2018-01-05 0000780571 itri:SIlverSpringNetworksInc.Member 2017-07-01 2017-09-30 0000780571 itri:SIlverSpringNetworksInc.Member 2017-01-01 2017-09-30 0000780571 2018-01-05 2018-09-30 xbrli:shares iso4217:USD xbrli:shares itri:contracts iso4217:USD xbrli:pure

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
o
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)
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
x
 
Accelerated filer
¨
 
 
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
 
 
 
Emerging growth company
¨
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of October 31, 2018, there were outstanding 39,416,335 shares of the registrant's common stock, no par value, which is the only class of common stock of the registrant.
 


Table of Contents

Itron, Inc.
Table of Contents
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1A: Risk Factors
 
 
 
 
 
 
Item 6: Exhibits
 
 
 
 


Table of Contents

PART I: FINANCIAL INFORMATION
Item 1:    Financial Statements (Unaudited)
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(in thousands, except per share data)
Revenues
 
 
 
 
 
 
 
Product revenues
$
525,716

 
$
433,984

 
$
1,578,740

 
$
1,321,062

Service revenues
70,246

 
52,763

 
210,333

 
146,359

Total revenues
595,962

 
486,747

 
1,789,073

 
1,467,421

Cost of revenues
 
 
 
 
 
 
 
Product cost of revenues
357,194

 
284,762

 
1,106,586

 
865,288

Service cost of revenues
41,671

 
36,230

 
128,958

 
100,464

Total cost of revenues
398,865

 
320,992

 
1,235,544

 
965,752

Gross profit
197,097

 
165,755

 
553,529

 
501,669

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Sales and marketing
47,204

 
40,529

 
144,573

 
126,298

Research and development
47,239

 
42,455

 
162,298

 
126,246

General and administrative
42,352

 
39,598

 
188,260

 
119,883

Amortization of intangible assets
17,960

 
5,625

 
53,699

 
15,144

Restructuring
666

 
(678
)
 
82,908

 
7,417

Total operating expenses
155,421

 
127,529

 
631,738

 
394,988

 
 
 
 
 
 
 
 
Operating income (loss)
41,676

 
38,226

 
(78,209
)
 
106,681

Other income (expense)
 
 
 
 
 
 
 
Interest income
431

 
729

 
1,725

 
1,468

Interest expense
(14,171
)
 
(3,466
)
 
(44,320
)
 
(10,076
)
Other income (expense), net
(2,434
)
 
(1,995
)
 
(2,598
)
 
(7,951
)
Total other income (expense)
(16,174
)
 
(4,732
)
 
(45,193
)
 
(16,559
)
 
 
 
 
 
 
 
 
Income (loss) before income taxes
25,502

 
33,494

 
(123,402
)
 
90,122

Income tax benefit (provision)
(5,715
)
 
(6,640
)
 
1,692

 
(32,247
)
Net income (loss)
19,787

 
26,854

 
(121,710
)
 
57,875

Net income (loss) attributable to noncontrolling interests
(95
)
 
1,278

 
1,417

 
2,357

Net income (loss) attributable to Itron, Inc.
$
19,882

 
$
25,576

 
$
(123,127
)
 
$
55,518

 
 
 
 
 
 
 
 
Earnings (loss) per common share - Basic
$
0.51

 
$
0.66

 
$
(3.14
)
 
$
1.44

Earnings (loss) per common share - Diluted
$
0.50

 
$
0.65

 
$
(3.14
)
 
$
1.41

 
 
 
 
 
 
 
 
Weighted average common shares outstanding - Basic
39,340

 
38,713

 
39,177

 
38,624

Weighted average common shares outstanding - Diluted
39,909

 
39,467

 
39,177

 
39,339

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

1

Table of Contents

ITRON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(in thousands)
Net income (loss)
$
19,787

 
$
26,854

 
$
(121,710
)
 
$
57,875

 
 
 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(678
)
 
14,930

 
(18,538
)
 
50,393

Net unrealized gain (loss) on derivative instruments, designated as cash flow hedges
908

 
126

 
2,563

 
187

Pension benefit obligation adjustment
392

 
410

 
1,207

 
1,004

Total other comprehensive income (loss), net of tax
622

 
15,466

 
(14,768
)
 
51,584

 
 
 
 
 
 
 
 
Total comprehensive income (loss), net of tax
20,409

 
42,320

 
(136,478
)
 
109,459

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to noncontrolling interests, net of tax
(95
)
 
1,278

 
1,417

 
2,357

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Itron, Inc.
$
20,504

 
$
41,042

 
$
(137,895
)
 
$
107,102

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

2

Table of Contents

ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
September 30, 2018
 
December 31, 2017
 
 
 
 
 
(in thousands)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
109,044

 
$
176,274

Accounts receivable, net
449,592

 
398,029

Inventories
208,038

 
193,835

Other current assets
101,511

 
81,604

Total current assets
868,185

 
849,742

 
 
 
 
Property, plant, and equipment, net
220,795

 
200,768

Deferred tax assets, net
56,874

 
49,971

Restricted cash
2,055

 
311,010

Other long-term assets
48,746

 
43,666

Intangible assets, net
278,192

 
95,228

Goodwill
1,121,895

 
555,762

Total assets
$
2,596,742

 
$
2,106,147

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
274,950

 
$
262,166

Other current liabilities
72,385

 
56,736

Wages and benefits payable
101,491

 
90,505

Taxes payable
20,558

 
16,100

Current portion of debt
24,375

 
19,688

Current portion of warranty
29,736

 
21,150

Unearned revenue
92,350

 
41,438

Total current liabilities
615,845

 
507,783

 
 
 
 
Long-term debt
1,005,377

 
593,572

Long-term warranty
13,624

 
13,712

Pension benefit obligation
96,081

 
95,717

Deferred tax liabilities, net
1,462

 
1,525

Other long-term obligations
152,021

 
88,206

Total liabilities
1,884,410

 
1,300,515

 
 
 
 
Commitments and contingencies (Note 11)

 

 
 
 
 
Equity
 
 
 
Preferred stock, no par value, 10 million shares authorized, no shares issued or outstanding

 

Common stock, no par value, 75 million shares authorized, 39,400 and 38,771 shares issued and outstanding
1,326,719

 
1,294,767

Accumulated other comprehensive loss, net
(185,246
)
 
(170,478
)
Accumulated deficit
(449,273
)
 
(337,873
)
Total Itron, Inc. shareholders' equity
692,200

 
786,416

Noncontrolling interests
20,132

 
19,216

Total equity
712,332

 
805,632

Total liabilities and equity
$
2,596,742

 
$
2,106,147

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

3

Table of Contents

ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Nine Months Ended September 30,
 
2018
 
2017
 
 
 
 
 
(in thousands)
Operating activities
 
 
 
Net income (loss)
$
(121,710
)
 
$
57,875

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
92,428

 
46,000

Stock-based compensation
23,069

 
15,254

Amortization of prepaid debt fees
5,825

 
800

Deferred taxes, net
(13,141
)
 
7,615

Restructuring, non-cash
569

 
(720
)
Other adjustments, net
(30
)
 
3,111

Changes in operating assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
7,774

 
2,537

Inventories
(10,072
)
 
(30,843
)
Other current assets
(9,797
)
 
(23,492
)
Other long-term assets
3,817

 
10,460

Accounts payable, other current liabilities, and taxes payable
4,494

 
34,987

Wages and benefits payable
2,166

 
6,218

Unearned revenue
27,869

 
(5,679
)
Warranty
3,167

 
(10,285
)
Other operating, net
50,955

 
663

Net cash provided by operating activities
67,383

 
114,501

 
 
 
 
Investing activities
 
 
 
Acquisitions of property, plant, and equipment
(42,493
)
 
(33,493
)
Business acquisitions, net of cash equivalents acquired
(803,075
)
 
(98,848
)
Other investing, net
(181
)
 
10

Net cash used in investing activities
(845,749
)
 
(132,331
)
 
 
 
 
Financing activities
 
 
 
Proceeds from borrowings
611,938


35,000

Payments on debt
(182,297
)
 
(24,844
)
Issuance of common stock
8,283

 
2,797

Prepaid debt fees
(24,042
)
 

Other financing, net
(5,526
)
 
1,216

Net cash provided by financing activities
408,356

 
14,169

 
 
 
 
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
(6,175
)
 
7,680

(Decrease) increase in cash, cash equivalents, and restricted cash
(376,185
)
 
4,019

Cash, cash equivalents, and restricted cash at beginning of period
487,335

 
133,565

Cash, cash equivalents, and restricted cash at end of period
$
111,150

 
$
137,584

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Income taxes, net
$
6,367

 
$
25,423

Interest
34,539

 
7,629


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

4

Table of Contents

ITRON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2018
(UNAUDITED)
In this Quarterly Report on Form 10-Q, the terms "we," "us," "our," "Itron," and the "Company" refer to Itron, Inc.

Note 1:    Summary of Significant Accounting Policies

Financial Statement Preparation
The condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited and reflect entries necessary for the fair presentation of the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017, the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, and the Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 of Itron, Inc. and its subsidiaries. All entries required for the fair presentation of the financial statements are of a normal recurring nature, except as disclosed. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results expected for the full year or for any other period.

Certain information and notes normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) regarding interim results. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in our 2017 Annual Report on Form 10-K filed with the SEC on
February 28, 2018. There have been no significant changes in financial statement preparation or significant accounting policies since December 31, 2017, with the exception of the adoption of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606).

On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to those contracts that were not completed. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605, Revenue Recognition (ASC 605). The cumulative impact of adoption was a net decrease to accumulated deficit of $10.9 million as of January 1, 2018, with the impact primarily related to multiple element arrangements that contain software and software related elements. As we had not established vendor specific objective evidence of fair value for certain of our software and software related elements, we historically combined them as one unit of account and recognized the combined unit of account using the combined services approach. Under ASC 606, these software and software related elements are generally determined to be distinct performance obligations. As such, we are able to recognize revenue as we satisfy the performance obligations, either at a point in time or over time. For contracts that were modified prior to January 1, 2018, we have reflected the aggregate effect of all modifications prior to the date of initial adoption in order to identify the satisfied and unsatisfied performance obligations, determine the transaction price, and allocate the transaction price to satisfied and unsatisfied performance obligations. The impact to revenues for the three and nine months ended September 30, 2018 was immaterial as a result of applying ASC 606.

Refer to the updated Revenue Recognition accounting policy described below and Note 16 for additional disclosures regarding our revenues from contracts with customers and the adoption of ASC 606.

Reclassifications
Certain reclassifications have been made to prior period consolidated financial statements to conform to classifications used in the current period. These reclassifications had no impact on net income (loss), shareholders' equity or cash flows as previously reported.

Restricted Cash and Cash Equivalents
Cash and cash equivalents that are contractually restricted from operating use are classified as restricted cash and cash equivalents.


5

Table of Contents

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:
 
September 30, 2018
 
December 31, 2017
 
September 30, 2017
 
(in thousands)
Cash and cash equivalents
$
109,044

 
$
176,274

 
$
137,584

Current restricted cash included in other current assets
51

 
51

 

Long-term restricted cash
2,055

 
311,010

 

Total cash, cash equivalents, and restricted cash
$
111,150

 
$
487,335

 
$
137,584



Revenue Recognition
The majority of our revenues consist primarily of hardware sales, but may also include the license of software, software implementation services, cloud services and software as a service ("SaaS"), project management services, installation services, consulting services, post-sale maintenance support, and extended or noncustomary warranties. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. In determining whether the definition of a contract has been met, we will consider whether the arrangement creates enforceable rights and obligations, which involves evaluation of agreement terms that would allow for the customer to terminate the agreement. If the customer is able to terminate the agreement without providing further consideration to us, the agreement would not be considered to meet the definition of a contract.

Many of our revenue arrangements involve multiple performance obligations consisting of hardware, meter reading system software, installation, and/or project management services. Separate contracts entered into with the same customer (or related parties of the customer) at or near the same time are accounted for as a single contract where one or more of the following criteria are met:
The contracts are negotiated as a package with a single commercial objective;
The amount of consideration to be paid in one contract depends on the price or performance of the other contract; or
The goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a single performance obligation.

Once the contract has been defined, we evaluate whether the promises in the contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment, and the decision to separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recognized in a given period. For some of our contracts, the customer contracts with us to provide a significant service of integrating, customizing or modifying goods or services in the contract in which case the goods or services would be combined into a single performance obligation. It is common that we may promise to provide multiple distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. If applicable, for goods or services where we have observable standalone sales, the observable standalone sales are used to determine the standalone selling price. For the majority of our goods and services, we do not have observable standalone sales. As a result, we estimate the standalone selling price using either the adjusted market assessment approach or the expected cost plus a margin approach. Approaches used to estimate the standalone selling price for a given good or service will maximize the use of observable inputs and considers several factors, including our pricing practices, costs to provide a good or service, the type of good or service, and availability of other transactional data, among others.

We determine the estimated standalone selling prices of goods or services used in our allocation of arrangement consideration on an annual basis or more frequently if there is a significant change in our business or if we experience significant variances in our transaction prices.

Many of our contracts with customers include variable consideration, which can include liquidated damage provisions, rebates and volume and early payment discounts. Some of our contracts with customers contain clauses for liquidated damages related to the timing of delivery or milestone accomplishments, which could become material in an event of failure to meet the contractual deadlines. At the inception of the arrangement and on an ongoing basis, we evaluate the probability and magnitude of having to pay liquidated damages. We estimate variable consideration using the expected value method, taking into consideration contract terms, historical customer behavior and historical sales. In the case of liquidated damages, we also take into consideration progress towards meeting contractual milestones, including whether milestones have not been achieved, specified rates, if applicable, stated

6

Table of Contents

in the contract, and history of paying liquidated damages to the customer or similar customers. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

In the normal course of business, we do not accept product returns unless the item is defective as manufactured. We establish provisions for estimated returns and warranties. In addition, we do not typically provide customers with the right to a refund.

Hardware revenues are recognized at a point in time. Transfer of control is typically at the time of shipment, receipt by the customer, or, if applicable, upon receipt of customer acceptance provisions. We will recognize revenue prior to receipt of customer acceptance for hardware in cases where the customer acceptance provision is determined to be a formality. Transfer of control would not occur until receipt of customer acceptance in hardware arrangements where such provisions are subjective or where we do not have history of meeting the acceptance criteria.

Perpetual software licenses are considered to be a right to use intellectual property and are recognized at a point in time. Transfer of control is considered to be at the point at which it is available to the customer to download and use or upon receipt of customer acceptance. In certain contracts, software licenses may be sold with professional services that include implementation services that include a significant service of integrating, customizing or modifying the software. In these instances, the software license is combined into single performance obligation with the implementation services and recognized over time as the implementation services are performed.

Hardware and software licenses (when not combined with professional services) are typically billed when shipped and revenue recognized at a point-in-time. As a result, the timing of revenue recognition and invoicing does not have a significant impact on contract assets and liabilities.

Professional services, which include implementation, project management, installation, and consulting services are recognized over time. We measure progress towards satisfying these performance obligations using input methods, most commonly based on the costs incurred in relation to the total expected costs to provide the service. We expect this method to best depict our performance in transferring control of services promised to the customer or represents a reasonable proxy for measuring progress. The estimate of expected costs to provide services requires judgment. Cost estimates take into consideration past history and the specific scope requested by the customer and are updated quarterly. We may also offer professional services on a stand-ready basis over a specified period of time, in which case revenue would be recognized ratably over the term. Invoicing of these services is commensurate with performance and occurs on a monthly basis. As such, these services do not have a significant impact on contract assets and contract liabilities.

Cloud services and SaaS arrangements where customers have access to certain of our software within a cloud-based IT environment that we manage, host and support are offered to customers on a subscription basis. Revenue for the cloud services and SaaS offerings are generally recognized over time, ratably over the contact term commencing with the date the services are made available to the customer.

Services, including professional services, cloud services and SaaS arrangements, are commonly billed on a monthly basis in arrears and typically result in an unbilled receivable, which is not considered a contract asset as our right to consideration is unconditional.

Certain of our revenue arrangements include an extended or noncustomary warranty provisions that covers all or a portion of a customer's replacement or repair costs beyond the standard or customary warranty period. Whether or not the extended warranty is separately priced in the arrangement, such warranties are considered to be a separate good or service, and a portion of the transaction price is allocated to this extended warranty performance obligation. This revenue is recognized, ratably over the extended warranty coverage period.

Hardware and software post-sale maintenance support fees are recognized over time, ratably over the life of the related service contract. Shipping and handling costs and incidental expenses billed to customers are recognized as revenue, with the associated cost charged to cost of revenues. We recognize sales, use, and value added taxes billed to our customers on a net basis. Support fees are typically billed on an annual basis, resulting in a contract liability.

Payment terms with customers can vary by customer; however, amounts billed are typically payable within 30 to 90 days, depending on the destination country. We do not make a practice of offering financing as part of our contracts with customers.

We incur certain incremental costs to obtain contracts with customers, primarily in the form of sales commissions. Where the amortization period is one year or less, we have elected to apply the practical expedient and recognize the related commissions

7

Table of Contents

expense as incurred. Otherwise, such incremental costs are capitalized and amortized over the contract period. Capitalized incremental costs are not material.

New Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (ASU 2016-02), which requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The new standard also will result in enhanced quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing leases. The standard requires modified retrospective adoption and will be effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases (ASU 2018-10), to clarify, improve, and correct various aspects of ASU 2016-02, and also issued ASU 2018-11, Targeted Improvements to Topic 842, Leases (ASU 2018-11), to simplify transition requirements and, for lessors, provide a practical expedient for the separation of nonlease components from lease components. The effective date and transition requirements in ASU 2018-10 and ASU 2018-11 are the same as the effective date and transition requirements of ASU 2016-02. We currently believe the most significant impact relates to our real estate leases and the increased financial statement disclosures, but are continuing to evaluate the effect that the updated standard will have on our consolidated results of operations, financial position, cash flows, and related financial statement disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (ASU 2016-13), which replaces the incurred loss impairment methodology in current GAAP with a methodology based on expected credit losses. This estimate of expected credit losses uses a broader range of reasonable and supportable information. This change will result in earlier recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019. We are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes, and systems.

In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740) (ASU 2016-16), which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. Under ASU 2016-16, the selling entity is required to recognize a current tax expense or benefit upon transfer of the asset. Similarly, the purchasing entity is required to recognize a deferred tax asset or deferred tax liability, as well as the related deferred tax benefit or expense, upon receipt of the asset. The resulting deferred tax asset or deferred tax liability is measured by computing the difference between the tax basis of the asset in the buyer's jurisdiction and its financial reporting carrying value in the consolidated financial statements and multiplying such difference by the enacted tax rate in the buyer's jurisdiction. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. We adopted this standard effective January 1, 2018 using the modified retrospective transition method, recognizing a $0.9 million one-time decrease to accumulated deficit.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), which provides additional guidance on the presentation of net benefit costs in the income statement. ASU 2017-07 requires an employer disaggregate the service cost component from the other components of net benefit cost and to disclose other components outside of a subtotal of income from operations. It also allows only the service cost component of net benefit costs to be eligible for capitalization. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.

We adopted this standard on January 1, 2018 retrospectively for the presentation of the service cost component of net periodic pension cost in the statement of operations, and prospectively for the capitalization of the service cost component of net periodic pension cost. For applying the retrospective presentation requirements, we elected to utilize amounts previously disclosed in our defined benefit pension plan footnote for the prior comparative periods as the estimation basis for applying the retrospective presentation. This resulted in a reclassification of an immaterial amount of net periodic pension benefit costs from operating income to other income (expense) in all periods presented on the Consolidated Statements of Operations.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. This update expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Additionally, the amendments in ASU 2017-12 provide new guidance about income statement classification and eliminates the requirement to separately measure and report hedge ineffectiveness. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted this standard on April 1, 2018 and

8

Table of Contents

it did not materially impact our consolidated results of operations, financial position, cash flows, or related financial statement disclosures.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13) which amends the disclosure requirements under ASC 820, Fair Value Measurements. ASU 2018-13 is effective for us beginning with our interim financial reports for the first quarter of 2020.

In August 2018, the FASB issued ASU 2018-14, Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14) which amends the disclosure requirements under ASC 715-20, Compensation—Retirement Benefits—Defined Benefit Plans. ASU 2018-14 is effective for our financial reporting in 2020.

Note 2:    Earnings Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (EPS):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except per share data)
Net income (loss) available to common shareholders
$
19,882

 
$
25,576

 
$
(123,127
)
 
$
55,518

 
 
 
 
 
 
 
 
Weighted average common shares outstanding - Basic
39,340

 
38,713

 
39,177

 
38,624

Dilutive effect of stock-based awards
569

 
754

 

 
715

Weighted average common shares outstanding - Diluted
39,909

 
39,467

 
39,177

 
39,339

Earnings (loss) per common share - Basic
$
0.51

 
$
0.66

 
$
(3.14
)
 
$
1.44

Earnings (loss) per common share - Diluted
$
0.50

 
$
0.65

 
$
(3.14
)
 
$
1.41



Stock-based Awards
For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect 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 and the future compensation cost associated with the stock award. Approximately 0.5 million and 1.1 million stock-based awards were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2018, respectively, because they were anti-dilutive. Approximately 0.2 million stock-based awards were excluded from the calculation of diluted EPS for both the three and nine months ended September 30, 2017 because they were anti-dilutive. These stock-based awards could be dilutive in future periods.

Note 3:    Certain Balance Sheet Components

A summary of accounts receivable from contracts with customers is as follows:
Accounts receivable, net
September 30, 2018
 
December 31, 2017
 
(in thousands)
Trade receivables (net of allowance of $3,822 and $3,957)
$
422,567

 
$
369,047

Unbilled receivables
27,025

 
28,982

Total accounts receivable, net
$
449,592

 
$
398,029




9

Table of Contents

Allowance for doubtful accounts activity
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Beginning balance
$
4,552

 
$
3,502

 
$
3,957

 
$
3,320

Provision (recovery) for doubtful accounts, net
(105
)
 
769

 
1,149

 
1,513

Accounts written-off
(624
)
 
(310
)
 
(1,129
)
 
(1,115
)
Effect of change in exchange rates
(1
)
 
30

 
(155
)
 
273

Ending balance
$
3,822

 
$
3,991

 
$
3,822

 
$
3,991



Inventories
September 30, 2018
 
December 31, 2017
 
(in thousands)
Materials
$
128,744

 
$
126,656

Work in process
8,595

 
9,863

Finished goods
70,699

 
57,316

Total inventories
$
208,038

 
$
193,835



Property, plant, and equipment, net
September 30, 2018
 
December 31, 2017
 
(in thousands)
Machinery and equipment
$
318,218

 
$
310,753

Computers and software
112,681

 
104,384

Buildings, furniture, and improvements
149,934

 
135,566

Land
15,463

 
18,433

Construction in progress, including purchased equipment
41,423

 
39,946

Total cost
637,719

 
609,082

Accumulated depreciation
(416,924
)
 
(408,314
)
Property, plant, and equipment, net
$
220,795

 
$
200,768



Depreciation expense
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Depreciation expense
$
12,489

 
$
10,907

 
$
38,729

 
$
30,856




10

Table of Contents

Note 4:    Intangible Assets and Liabilities

The gross carrying amount and accumulated amortization (accretion) of our intangible assets and liabilities, other than goodwill, were as follows:
 
September 30, 2018
 
December 31, 2017
 
Gross
 
Accumulated
(Amortization) Accretion
 
Net
 
Gross
 
Accumulated
(Amortization) Accretion
 
Net
 
(in thousands)
Intangible Assets
 
 
 
 
 
 
 
 
 
 
 
Core-developed technology
$
515,949

 
$
(427,069
)
 
$
88,880

 
$
429,548

 
$
(399,969
)
 
$
29,579

Customer contracts and relationships
385,148

 
(210,735
)
 
174,413

 
258,586

 
(197,582
)
 
61,004

Trademarks and trade names
79,739

 
(69,376
)
 
10,363

 
70,056

 
(66,004
)
 
4,052

Other
12,602

 
(11,166
)
 
1,436

 
11,661

 
(11,068
)
 
593

Total intangible assets subject to amortization
$
993,438

 
$
(718,346
)
 
$
275,092

 
$
769,851

 
$
(674,623
)
 
$
95,228

In-process research and development
3,100

 

 
3,100

 

 

 

Total intangible assets
$
996,538

 
$
(718,346
)
 
$
278,192

 
$
769,851

 
$
(674,623
)
 
$
95,228

 
 
 
 
 
 
 
 
 
 
 
 
Intangible Liabilities
 
 
 
 
 
 
 
 
 
 
 
Customer contracts and relationships
$
(23,900
)
 
$
3,913

 
$
(19,987
)
 
$

 
$

 
$



A summary of intangible assets and liabilities activity is as follows:
 
Nine Months Ended September 30,
 
2018
 
2017
 
(in thousands)
Beginning balance, intangible assets, gross
$
769,851

 
$
669,896

Intangible assets acquired
242,039

 
36,500

Effect of change in exchange rates
(15,352
)
 
57,640

Ending balance, intangible assets, gross
$
996,538

 
$
764,036

 
 
 
 
Beginning balance, intangible liabilities, gross
$

 
$

Intangible liabilities acquired
(23,900
)
 

Effect of change in exchange rates

 

Ending balance, intangible liabilities, gross
$
(23,900
)
 
$



On January 5, 2018, we completed our acquisition of Silver Spring Networks, Inc. (SSNI) by purchasing 100% of the voting stock. Intangible assets acquired in 2018 are primarily based on the preliminary purchase price allocation relating to this acquisition. Acquired intangible assets include in-process research and development (IPR&D), which is not amortized until such time as the associated development projects are completed. Of these projects, $11.3 million were completed during the nine months ended September 30, 2018 and are included in core-developed technology. The remaining IPR&D is expected to be completed in the next year. Acquired intangible liabilities reflect the present value of the projected cash outflows for an existing contract where remaining costs are expected to exceed projected revenues. Refer to Note 17 for additional information regarding this acquisition.


11

Table of Contents

Estimated future annual amortization (accretion) is as follows:
Year Ending December 31,
 
Amortization
 
Accretion
 
Estimated Annual Amortization, net
 
 
(in thousands)
2018 (amount remaining at September 30, 2018)
 
$
19,547

 
$
(1,304
)
 
$
18,243

2019
 
72,681

 
(8,233
)
 
64,448

2020
 
52,727

 
(8,028
)
 
44,699

2021
 
37,314

 
(1,963
)
 
35,351

2022
 
27,160

 
(459
)
 
26,701

Beyond 2022
 
65,663

 

 
65,663

Total intangible assets subject to amortization (accretion)
 
$
275,092

 
$
(19,987
)
 
$
255,105



We have recognized $18.0 million and $5.6 million of net amortization of intangible assets for the three months ended September 30, 2018 and 2017, respectively, and $53.7 million and $15.1 million for the nine months ended September 30, 2018 and 2017, respectively within operating expenses in the Consolidated Statement of Operations. These expenses relate to intangible assets and liabilities acquired as part of a business combination.

Note 5:    Goodwill

The following table reflects goodwill allocated to each reporting unit:
 
Electricity
 
Gas
 
Water
 
Networks
 
Total Company
 
(in thousands)
Goodwill balance at January 1, 2018
 
 
 
 
 
 
 
 
 
Goodwill before impairment
$
500,625

 
$
352,703

 
$
378,901

 
$

 
$
1,232,229

Accumulated impairment losses
(386,384
)
 

 
(290,083
)
 

 
(676,467
)
Goodwill, net
114,241

 
352,703

 
88,818

 

 
555,762

 
 
 
 
 
 
 
 
 
 
Goodwill acquired

 

 

 
570,790

 
570,790

Effect of change in exchange rates
(370
)
 
(3,259
)
 
(785
)
 
(243
)
 
(4,657
)
 
 
 
 
 
 
 
 
 
 
Goodwill balance at September 30, 2018
 
 
 
 
 
 
 
 
 
Goodwill before impairment
496,565

 
349,444

 
374,569

 
570,547

 
1,791,125

Accumulated impairment losses
(382,694
)
 

 
(286,536
)
 

 
(669,230
)
Goodwill, net
$
113,871

 
$
349,444

 
$
88,033

 
$
570,547

 
$
1,121,895



Note 6:    Debt

The components of our borrowings were as follows:
 
September 30, 2018
 
December 31, 2017
 
(in thousands)
Credit facility:
 
 
 
USD denominated term loan
$
641,875

 
$
194,063

Multicurrency revolving line of credit
10,000

 
125,414

Senior notes
400,000

 
300,000

Total debt
1,051,875

 
619,477

Less: current portion of debt
24,375

 
19,688

Less: unamortized prepaid debt fees - term loan
5,208

 
629

Less: unamortized prepaid debt fees - senior notes
16,915

 
5,588

Long-term debt
$
1,005,377


$
593,572



12

Table of Contents


Credit Facility
On January 5, 2018, we entered into a credit agreement providing for committed credit facilities in the amount of $1.2 billion U.S. dollars (the 2018 credit facility) which amended and restated in its entirety our credit agreement dated June 23, 2015 and replaced committed facilities in the amount of $725 million. The 2018 credit facility consists of a $650 million U.S. dollar term loan (the term loan) and a multicurrency revolving line of credit (the revolver) with a principal amount of up to $500 million. The revolver also contains a $300 million standby letter of credit sub-facility and a $50 million swingline sub-facility. Both the term loan and the revolver mature on January 5, 2023 and can be repaid without penalty. Amounts repaid on the term loan may not be reborrowed and amounts borrowed under the revolver may be repaid and reborrowed until the revolver's maturity, at which time all outstanding loans together with all accrued and unpaid interest must be repaid. Amounts not borrowed under the revolver are subject to a commitment fee, which is paid in arrears on the last day of each fiscal quarter, ranging from 0.18% to 0.35% per annum depending on our total leverage ratio as of the most recently ended fiscal quarter.

The 2018 credit facility permits us and certain of our foreign subsidiaries to borrow in U.S. dollars, euros, British pounds, or, with lender approval, other currencies readily convertible into U.S. dollars. All obligations under the 2018 credit facility are guaranteed by Itron, Inc. and material U.S. domestic subsidiaries and are secured by a pledge of substantially all of the assets of Itron, Inc. and material U.S. domestic subsidiaries, including a pledge of their related assets. This includes a pledge of 100% of the capital stock of material U.S. domestic subsidiaries and up to 66% of the voting stock (100% of the non-voting stock) of first-tier foreign subsidiaries. In addition, the obligations of any foreign subsidiary who is a foreign borrower, as defined by the 2018 credit facility, are guaranteed by the foreign subsidiary and by its direct and indirect foreign parents. The 2018 credit facility includes debt covenants, which contain certain financial thresholds and place certain restrictions on the incurrence of debt, investments, and the issuance of dividends. We were in compliance with the debt covenants under the 2018 credit facility at September 30, 2018.

Under the 2018 credit facility, we elect applicable market interest rates for both the term loan and any outstanding revolving loans. We also pay an applicable margin, which is based on our total leverage ratio as defined in the credit agreement. The applicable rates per annum may be based on either: (1) the LIBOR rate or EURIBOR rate (subject to a floor of 0%), plus an applicable margin, or (2) the Alternate Base Rate, plus an applicable margin. The Alternate Base Rate election is equal to the greatest of three rates: (i) the prime rate, (ii) the Federal Reserve effective rate plus 0.50%, or (iii) one-month LIBOR plus 1.00%. At September 30, 2018, the interest rate for both the term loan and revolver was 4.25%, which includes the LIBOR rate plus a margin of 2.00%.

Senior Notes
On December 22, 2017 and January 19, 2018, we issued $300 million and $100 million, respectively, of aggregate principal amount of 5.00% senior notes maturing January 15, 2026 (Notes). The proceeds were used to refinance existing indebtedness related to the acquisition of SSNI, pay related fees and expenses, and for general corporate purposes. Interest on the Notes is payable semi-annually in arrears on January 15 and July 15, commencing on July 15, 2018. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our subsidiaries that guarantee the senior credit facilities.

Prior to maturity we may redeem some or all of the Notes, together with accrued and unpaid interest, if any, plus a "make-whole" premium. On or after January 15, 2021, we may redeem some or all of the Notes at any time at declining redemption prices equal to 102.50% beginning on January 15, 2021, 101.25% beginning on January 15, 2022 and 100.00% beginning on January15, 2023 and thereafter to the applicable redemption date. In addition, before January 15, 2021, and subject to certain conditions, we may redeem up to 35% of the aggregate principal amount of Notes with the net proceeds of certain equity offerings at 105.00% of the principal amount thereof to the date of redemption; provided that (i) at least 65% of the aggregate principal amount of Notes remains outstanding after such redemption and (ii) the redemption occurs within 60 days of the closing of any such equity offering.

Debt Maturities
The amount of required minimum principal payments on our long-term debt in aggregate over the next five years, are as follows:
Year Ending December 31,
 
Minimum Payments
 
 
(in thousands)
2018 (amount remaining at September 30, 2018)
 
$
4,063

2019
 
28,438

2020
 
44,777

2021
 
60,937

2022
 
65,000

2023
 
448,660

Total minimum payments on debt
 
$
651,875




13

Table of Contents

Note 7:    Derivative Financial Instruments

As part of our risk management strategy, we use derivative instruments to hedge certain foreign currency and interest rate exposures. Refer to Note 13 and Note 14 for additional disclosures on our derivative instruments.

The fair values of our derivative instruments are determined using the income approach and significant other observable inputs (also known as "Level 2"). We have used observable market inputs based on the type of derivative and the nature of the underlying instrument. The key inputs include interest rate yield curves (swap rates and futures) and foreign exchange spot and forward rates, all of which are available in an active market. We have utilized the mid-market pricing convention for these inputs. We include, as a discount to the derivative asset, the effect of our counterparty credit risk based on current published credit default swap rates when the net fair value of our derivative instruments is in a net asset position. We consider our own nonperformance risk when the net fair value of our derivative instruments is in a net liability position by discounting our derivative liabilities to reflect the potential credit risk to our counterparty through applying a current market indicative credit spread to all cash flows.

The fair values of our derivative instruments were as follows:
 
 
 
 
Fair Value
Derivative Assets
 
Balance Sheet Location
 
September 30, 2018
 
December 31, 2017
Derivatives designated as hedging instruments under Subtopic 815-20
 
(in thousands)
Interest rate swap contract
 
Other current assets
 
$
2,051

 
$
658

Interest rate cap contracts