UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
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February
25, 2007
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Date
of Report (Date of Earliest Event
Reported)
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ITRON,
INC.
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(Exact
Name of Registrant as Specified in its
Charter)
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Washington
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000-22418
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91-1011792
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||
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File No.)
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(IRS
Employer
Identification
No.)
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2111
N. Molter Road, Liberty Lake, WA 99019
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(Address
of Principal Executive Offices, Zip
Code)
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(509)
924-9900
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(Registrant’s
Telephone Number, Including Area
Code)
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(Former
Name or Former Address, if Changed Since Last
Report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
]
Written communications pursuant to Rule 425 under Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01 Entry
into a Material Definitive Agreement.
On
February 25, 2007, Itron, Inc. (Itron) signed a stock purchase agreement
to
acquire Luxembourg-based Actaris
Metering Systems (Actaris) for €800 million, plus the retirement of
approximately €445 million in debt. At an exchange rate of 1.30 to the U.S.
dollar, this totals approximately $1.6 billion.
The
acquisition of Actaris, which is expected to close in the second quarter
of
2007, will be funded by approximately $1.1 billion of fully-committed senior
secured debt facilities, the net proceeds of a private placement of $235
million
of common stock and cash on hand.
The
acquisition is not subject to U.S. regulatory review. However, it will be
subject to review by several regulatory bodies in countries outside the United
States, including Ukraine, Germany, Brazil, Spain and Portugal, which require
filings regardless of competitive product overlap.
Item
8.01 Other
Events.
Itron
agreed to sell 4,086,958 shares of common stock at $57.50 per share in a
private
placement. Settlement is expected March 1, 2007, subject to customary closing
conditions. Itron is furnishing the following information, which was used
in
connection with the private placement:
|
o
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A
copy of the press release dated February 25, 2007 announcing
the
acquisition of Actaris; and
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o
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Other
Actaris acquisition announcement information.
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Item
9.01 Financial
Statements and Exhibits.
| (d) |
Exhibits.
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The
following exhibit is filed as part of this report:
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Exhibit
Number
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Description
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99.1
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Press
Release for Actaris Acquisition dated February 25,
2007.
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99.2
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Other
Actaris Acquisition Announcement Information
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99.3
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Press
Release announcing Private Placement of Equity dated February
25,
2007
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The
information presented in this Current Report on Form 8-K contains
forward-looking statements and certain assumptions upon which such
forward-looking statements are in part based. Numerous important factors,
including those factors identified in Itron, Inc.’s Annual Report on Form 10-K
and other of the Company’s filings with the Securities and Exchange Commission,
and the fact that the assumptions set forth in this Current Report on Form
8-K
could prove incorrect including the
expectation that the private placement and the acquisition will be completed
as
scheduled, could
cause actual results to differ materially from those contained in such
forward-looking statements.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned, hereunto
duly authorized.
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ITRON,
INC.
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Dated:
February 25, 2007
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By:
/s/
Steven M. Helmbrecht
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Steven
M. Helmbrecht
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Sr.
Vice President and Chief Financial
Officer
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EXHIBIT
INDEX
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Exhibit
Number
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Description
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99.1
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Press
Release for Actaris Acquisition dated February 25,
2007.
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99.2
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Other
Actaris Acquisition Announcement Information
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99.3
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Press
Release announcing Private Placement of Equity dated February 25,
2007
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Exhibit
99.1
 |
Electric
/ Gas / Water
Information
collection, analysis and applications
2111
North Molter Road
Liberty
Lake, WA 99019
509.924.9900
Tel
509.891.3355
Fax
www.itron.com
|
FOR
IMMEDIATE RELEASE
ITRON
TO ACQUIRE ACTARIS METERING SYSTEMS FOR APPROXIMATELY $1.6
BILLION
|
·
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Acquisition
of Luxembourg-based Actaris will create a worldwide market leader
with
more than 8,000 utility customers, expand Itron’s product offerings and
increase access to global markets for electricity, gas and water
meters
and automated meter reading (AMR)
technology;
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·
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Combined
company revenues and EBITDA in 2006 would have exceeded $1.6
billion and
$274 million on a pro forma basis,
respectively;
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·
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Acquisition
expected to be 20 to 30 cents accretive to non-GAAP earnings
per share in
2007;
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·
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Acquisition
is fully financed and committed to by cash on hand, credit facilities
provided by UBS and a $235 million private placement of equity,
completed
February 25, 2007.
|
SPOKANE,
WA. — February 25, 2007 — Itron, Inc. (NASDAQ:ITRI) announced today that it has
signed an agreement to acquire all of the stock and convertible bonds of
Actaris
Metering Systems (Actaris). The purchase price is €800 million plus the
retirement of approximately €445 million of debt, which, at an exchange rate of
1.30, totals approximately $1.6 billion. The acquisition is expected to close
in
the second quarter of 2007.
Actaris
is
a global leader in electricity, gas and water metering, primarily outside
of
North America. Itron is the AMR leader and foremost electricity meter supplier
in North America. The combined company will be one of the largest metering
companies in the world. This acquisition will allow Actaris to offer Itron’s
industry leading AMR and advanced metering infrastructure (AMI) technologies,
software and systems expertise to customers outside of North America, and
expand
Actaris gas and water meter opportunities in North America.
For
the
twelve months ended December 31, 2006, Actaris generated revenue of
approximately $1 billion and adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) of approximately $159
million.
“This
acquisition, which will more than double Itron’s annual revenues, brings
together two industry leaders and reunites two former Schlumberger divisions,”
said LeRoy Nosbaum, chairman and CEO. “We have been looking for an investment
that would allow Itron to bring its superior AMR technology and systems
expertise to customers outside of North America. Our acquisition of Actaris
is
the perfect choice to combine their quality meters and established distribution
channels with our expertise, which will ultimately bring more value to customers
around the globe. No other meter or AMR provider offers a similar breadth
and
depth of solutions to their customers in the utility industry. This deal
combines two companies that share a heritage, vision and passion for this
industry and our combined customers.”
The
acquisition of Actaris will be funded by approximately $1.1 billion of
fully-committed senior secured debt facilities, the net proceeds of the private
placement of approximately $235 million of common stock, which was completed
February 25, 2007, and cash on hand.
Based
on
management’s expectation for closing in the second quarter, Itron expects that
in 2007 the acquisition will add approximately $720 - $730 million in revenue,
$0.20 - $0.30 in non-GAAP EPS and $110 - $115 million Adjusted EBITDA. These
estimates are subject to financing terms and dependent on the closing date
of
the transaction and
do not
take into effect any intangible amortization expenses, in-process research
and
development expenses, charges related to inventory revaluation required under
purchase accounting or other acquisition expenses.
“This
acquisition brings together two very talented management teams, including
many
individuals who have worked together in previous careers with Schlumberger,”
said Nosbaum. “These are both well-run companies that produce the highest
quality products in very efficient and productive factories around the world.
Bringing these companies together unites research and development, manufacturing
and business synergies that no other provider can match.
“There
can
be no doubt that this acquisition represents a historical turning point in
the
life of our company and a significant commitment on the part of our investors,”
commented Nosbaum. “But as I look at the strength of our businesses and cash
flow, the talent of our combined management team and employee base, the
synergies in our technology offerings, and the expanding opportunities in
the
global marketplace, I have no doubt that this is the right move - both
strategically and financially - and the right time to take Itron to an entirely
new level and drive strong future growth in our business on a global scale.”
CONDITIONS
The
acquisition is not subject to U.S. regulatory review. However, it will be
subject to review by several regulatory bodies in countries outside the U.S.,
including, Ukraine, Germany, Brazil, Spain and Portugal, which require filings
regardless of competitive product overlap.
Itron
has
received a senior secured underwritten agreement from UBS to finance the
transaction. Additionally, UBS acted as exclusive financial advisor to the
Company and sole placement agent for the private placement of common stock.
Gibson, Dunn & Crutcher LLP and Perkins Coie LLP acted as legal advisors to
Itron. Mayer, Brown, Rowe & Maw LLP acted as legal advisor to
Actaris.
About
Itron:
Itron
is a
leading technology provider and critical source of knowledge to the global
energy and water industries. Nearly 3,000 utilities worldwide rely on Itron’s
award-winning technology to provide the knowledge they require to optimize
the
delivery and use of energy and water. Itron creates value for its clients
by
providing industry-leading solutions for electricity metering; meter data
collection; energy information management; demand response; load forecasting,
analysis and consulting services; distribution system design and optimization;
web-based workforce automation; and enterprise and residential energy
management. To know more, start here: www.itron.com.
About
Actaris:
Actaris
is
a world leader in the design and manufacture of meters and associated systems
for the electricity, gas, water and heat markets, providing innovative products
and systems that integrate the latest technologies to meet the evolving needs
of
public or private energy and water suppliers, utility services and industrial
companies worldwide. Actaris is active in more than 30 countries, employs
approximately 6,000 people in 60 locations and has 29 manufacturing sites
worldwide. The company has a cumulative installed base of some 300 million
electricity, gas and water meters throughout the world. To know more, start
here: www.actaris.com.
Forward
Looking Statements:
This
release contains forward-looking statements concerning our expectations about
our operations, financial performance, sales, earnings and cash flows. These
statements reflect our current plans and expectations and are based on
information currently available. They rely on a number of assumptions and
estimates, which could be inaccurate, and which are subject to risks and
uncertainties that could cause our actual results to vary materially from
those
anticipated. Risks and uncertainties include the rate and timing of customer
demand for our products, rescheduling of current customer orders, changes
in
estimated liabilities for product warranties, changes in laws and regulations,
our dependence on new product development and intellectual property, future
acquisitions, changes in foreign exchange rates, changes in estimates for
stock
based compensation and other factors which are more fully described in our
Annual Report on Form 10-K for the year ended December 31, 2006 and other
reports on file with the Securities and Exchange Commission. Itron undertakes
no
obligation to update publicly or revise any forward-looking statements,
including our business outlook.
Non-GAAP
Financial Information:
To
supplement our consolidated financial statements presented in accordance
with
GAAP, we use certain non-GAAP financial measures, including non-GAAP diluted
EPS
and Adjusted EBITDA. We provide these non-GAAP financial measures because
we
believe they provide greater transparency and represent supplemental information
used by management in its financial and operational decision making.
Specifically, these non-GAAP financial measures are provided to enhance
investors’ overall understanding of our current financial performance and our
future anticipated performance by excluding infrequent costs associated with
acquisitions, restructurings and non-cash stock based compensation. We exclude
these expenses in our non-GAAP financial measures as we believe that they
are a
measure of our core business that is not subject to the variations of expenses
associated with these infrequently occurring or non-cash items. Non-GAAP
performance measures should be considered in addition to, and not as a
substitute for, results prepared in accordance with GAAP. Finally, our non-GAAP
financial measures may be different from those reported by other
companies.
Pro
Forma Information:
The
2006
historical information for Itron and Actaris and the pro forma information
for
the combined company is preliminary and has not been audited. Actaris financial
results have not been prepared in accordance with US GAAP and
adjustments have been made to the Actaris historical results to reflect US
GAAP,
however, not all adjustments have been made. These adjustments, which are
reflected in this press release, have not been audited and are
preliminary and subject to change. Audited historical financial statements
for
Actaris and complete pro forma financial information for the combined company
will not be available until up to 75 days after the transaction
closes. Audited financial statements for Itron are available in our 2006
Form
10-K filed February 23, 2007.
Acquisition
Conference Call:
Itron
will
host a conference call to discuss details of the acquisition contained in
this
release at 5 a.m. (PST) on February 26, 2007. The call will be webcast in
a
listen only mode and can be accessed online at www.itron.com, “Investors
- Events.”
The
live webcast will begin at 5 a.m. (PST). The webcast replay will begin
approximately 2 hours after the conclusion of the live call and will be
available for two weeks. A telephone replay of the call will also be available
approximately one hour after the conclusion of the live call, for 48 hours,
and
is accessible by dialing (888)
203-1112 (Domestic)
or
(719)
457-0820 (International),
entering
passcode # 2042318.
For
additional information on the transaction see “Actaris
Acquisition Presentation”
at
www.itron.com.
Itron,
Inc. contact:
Deloris
Duquette
Vice-president,
Investor Relations and Corporate Communications
(509)
891-3523
Deloris.duquette@itron.com
ITRON,
INC.
PRO
FORMA REVENUE AND RECONCILIATION OF ADJUSTED EBITDA
TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURE
For
the twelve months ended December 31, 2006
|
(Unaudited,
in thousands)
|
Actaris
EUR
|
Actaris
USD
|
Itron
|
Pro
Forma
|
|||||||||
|
Revenue
|
€
780,737
|
$
|
1,014,958
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$
|
644,042
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$
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1,659,000
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||||||
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Adjusted
EBITDA:
GAAP
net income
|
€
39,629
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$
|
51,518
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$
|
33,759
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$
|
85,277
|
||||||
|
Interest
income
|
(303
|
)
|
(394
|
)
|
(9,497
|
)
|
(9,891
|
)
|
|||||
|
Interest
expense
|
36,129
|
46,968
|
17,785
|
64,753
|
|||||||||
|
Income
tax provision (benefit)
|
17,187
|
22,343
|
18,476
|
40,819
|
|||||||||
|
Depreciation
and amortization
|
26,323
|
34,220
|
46,234
|
80,454
|
|||||||||
|
Non-cash
stock based compensation expense
|
-
|
-
|
8,646
|
8,646
|
|||||||||
|
Restructuring
costs
|
3,125
|
4,062
|
-
|
4,062
|
|||||||||
|
Adjusted
EBITDA
|
€ |
122,091
|
$
|
158,718
|
$
|
115,403
|
$
|
274,121
|
|||||
Actaris
financial results are unaudited and are not prepared in accordance with US
GAAP.
US dollars calculated at a rate of 1.30 US dollars per Euro.
Exhibit
99.2
LeRoy
Nosbaum Chairman and CEO Steve Helmbrecht Sr. VP and CFO Deloris Duquette
VP,
Investor Relations Acquisition Announcement February 25, 2007 Itron
Actaris
Safe
Harbor Certain matters being discussed today that are not statements of
historical fact constitute forward-looking statements relating to current
or
future financial performance, management's plans and objectives for future
operations, product plans and performance, management's assessment of market
factors, and statements regarding the strategy and plans of the Company.
Such
forward looking statements are made pursuant to the safe harbor provisions
of
the Private Securities Litigation Reform Act of 1995. These statements are
not
guarantees of Itron's future performance. Listeners are cautioned that all
forward-looking statements are subject to a number of risks and uncertainties
that could cause the Company's actual results in the future to differ materially
from these forward-looking statements. These risks and uncertainties are
detailed in the Company's filings with the Securities and Exchange Commission,
including its 10-K filed on February 23, 2007, copies of which may be accessed
through the SEC's website at http://www.sec.gov. Current data and other
statistical information used throughout this presentation are based on
independent industry publications, government publications, and reports by
market research firms or other published independent sources. Some data are
also
based on our good faith estimates, which are derived from our review of internal
surveys, as well the independent sources listed above. We believe that these
sources are reliable. The 2006 historical and Pro forma information for Itron,
Actaris and the Actaris acquisition is preliminary and has not been audited.
Actaris financial results have not been prepared in accordance with US GAAP
and
there have been adjustments made to Actaris results to reflect US GAAP, however,
not all adjustments have been made. These adjustments, which are described
in
more detail in the appendix to this presentation, have not been audited and
are
necessarily preliminary and subject to change. Audited historical financial
statements for Actaris and pro forma financial results for the transaction
will
not be available until up to 75 days after the transaction closes. Audited
financial statements for Itron will not be available until it files its Form
10-K.
Transaction
Summary LeRoy Nosbaum Chairman and CEO
Actaris
Itron Worldwide Utility Solutions Provider 2006 Revenue1: $1,015 million
2006
EBITDA1: $159 million > Leading global supplier of utility meters and
metering systems > Reunites two former Schlumberger divisions and provides
Itron with immediate scale and presence in the global meter market >
Complementary product portfolios and geographic customer bases > Utilities
around the world are moving toward AMR/AMI due to: - Environmental concerns
/
Regulatory concerns / Grid Limitations > Creates and end-to-end solutions
provider for electric, gas and water utilities - Fosters a New Global
Opportunity 2006 Revenue: $644 million 2006 EBITDA: $115 million > Leading
supplier of electric meters and AMR systems in the US and Canada (1) Assumes
constant USD / EUR rate of 1.30x
Acquisition
Opportunity
Key
Transaction Terms Purchase Price Purchase Price Purchase Price > $1.6 billion
enterprise value Timing Timing Timing > Anticipated to close in Q2 2007
Closing Conditions Closing Conditions Closing Conditions >
Regulatory/government approvals > No HSR approval necessary Management
Retention Management Retention Management Retention Financing Financing
Financing > Available cash balances > New equity private placement >
Debt financing arranged by UBS denominated in US, Euro and GBP > Both
principals to remain as a consultants > Three business unit heads and all
other management will remain
Transaction
Sources and Uses (1) (1) Assumes constant USD/EUR rate of 1.30x (2) Includes
preliminary transaction fees and expenses (in millions) Consideration (2)
Sources Purchase Price 1,040 $ Equity Issuance 225 $ Refinance Actaris Debt
574
$ Cash on Hand 325 $ Fees 43 $ Committed Term Loan From UBS 1,107 $ Total
Uses
1,657 $ Total Sources 1,657 $ Credit Statistics Total Debt 1,576 $ Total
Debt/EBITDA 5.8x EBITDA/Interest Expense 2.8x (EBITDA-CapEx)/Interest Expense
2.2x
$0
$50 $100 $150 $200 $250 $300 $350 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2005 2004
($’s
in Millions) Debt Management - SEM Acquisition Electric Metering Acquisition
Equity Offering Fixed Rate Debt Variable Rate Debt
Itron
Actaris 2006 Combined Company Highlights(1) + = Proforma Expected Addition
of
$0.20 - $0.30 to 2007 Non-GAAP Fully Diluted EPS(4) (1) Assumes constant
USD/EUR
rate of 1.30x (2) Pro forma does not equal sum due to rounding (3) Excludes
amortization of intangibles and stock-based compensation (4) Excludes
stock-based compensation (5) Excludes amortization of intangibles and
acquisition related charges and is dependent on financing considerations
(in
millions) Revenue 644 $ 1,015 $ 1,659 $ Gross Profit 267 $ 302 $ 569 $ Gross
Margin 41.5% 29.8% 34.3% Non-GAAP Operating Income (2) 102 $ 135 $ 237 $
Non-GAAP Operating Margin 15.8% 13.3% 14.3% Adjusted EBITDA (3) 115 $ 159
$ 274
$ Adjusted EBITDA Margin 17.9% 15.7% 16.5%
Overview
of Actaris
Overview
of Actaris • Actaris is a leading supplier of utility meters and metering
systems • Actaris traces its origin in metering to the 1850’s • Large,
diversified base of more than 5,000 customers globally with an installed
base of
over 300 million meters • Leading market share for each of its 3 business lines
• Cost advantages due to volume, standardized platforms, and low cost
manufacturing • Active in more than 30 countries • 6,000 people in over 60
locations • 2006 revenue of $1 billion and EBITDA of $159 million Source:
Company information and ABS Energy Research
Electricity
Manufacturing Gas Manufacturing Water Manufacturing Heat Manufacturing Other
Operations Research & Engineering Key Locations Felixstowe Hameln Barcelona
Massy Greenwood Owenton Buenos Aires Chongqing Gödöllö Kiev Argenteuil Karlsruhe
Stretford Reims Chasseneuil Naples Oldenburg Adelaide Kuala Lumpur Jakarta
Dordrecht Porto Asti Haguenau Mâcon Santiago Americana Campinas Al-Khobar
Atlantis 300 860 330 3,310 1,180 # of Employees 300 860 330 3,310 1,180 Actaris
Worldwide Footprint
Actaris
Market Presence Products/Services >Residential, commercial, industrial,
transmission and distribution metering products and services to utility clients
Position > #2 globally Growth > AMR breakthrough > Prepayment market
> Electronic technology Electricity Electricity Electricity >Gas products
and systems combining modern metering, regulation and safety devices, automatic
and remote meter reading, prepayment, energy management, load monitoring
and
operating controls > #2 globally > Prepayment market > Asian
opportunity > AMR penetration Gas Gas Gas >Water meters and products
covering energy measurement in districtheating, district cooling and allocation
applications > #4 globally > Regional legislation > US market >
Shorter product lifecycles Water & Heat Water
Actaris
Strategy—Products and Systems Adapt to a Changing Market Adapt to a Adapt to a
Changing Changing Market Market > Lead the change to static technology for
electricity > Development of systems and services for changing markets due to
rising energy costs, conservation, desire to reduce peak demand Leading Edge
Technology Leading Edge Leading Edge Technology Technology > Continuing
leadership in developing new technologies > Differentiate products through
superior quality and functionality > New high-end products in C&I High
Quality High High Quality Quality > Focus on high quality, long life products
> TQM programs Global Platforms Global Global Platforms Platforms Low Cost
Low Low Cost Cost > Further rationalize product portfolio > Kaizen
efficiency initiative > Product platforms encompassing worldwide standards
> Maintain full range of products and services > Open architecture systems
A
Compelling Transaction
Compelling
Strategic Rationale Geographic Expansion with Established Sales and Distribution
Geographic Expansion with Established Sales and Distribution Geographic
Expansion with Established Sales and Distribution Complementary Product
Portfolios Allow Synergies in Future Complementary Product Portfolios Allow
Synergies in Future Complementary Product Portfolios Allow Synergies in Future
Scale and Platform for Innovation Scale and Platform for Innovation Scale
and
Platform for Innovation Financially and Operationally Strong, Established
Company Financially and Operationally Strong, Established Company Financially
and Operationally Strong, Established Company Common Heritage - Common
Vision
The
Global Opportunity Global AMR Market (millions of meters) 34% 66% 6% 94%
Source:
The Scott Report: AMR Deployments in North America, Q3 06 Edition; ABS Energy
Research 2006 & Management Estimates 300 Million Electric, Gas & Water
Meters 2.46 Billion Electric, Gas & Water Meters For meters, automation and
advanced functionality 2,500 North America Worldwide Automated Unautomated
0 500
1,000 1,500 2,000 2,500
Continued
Global Leadership Global Meter Market Shares Global Meter Market Shares AMR—US
and Canada Electric Gas Water Elster 4% Hunt 5% ESCO 8% Cellnet 13% Itron
55%
Others 15% Source: Scott Report on AMR Deployments, ABS Energy Research,
A.T.
Kearney, Management Estimates 18 55% #1 #1 #2 #2 #4 #4 16% 20% 11% #1 Electric
Gas Water Others 51% Landis & Gyr 14% Dresser 8% Emerson 4% Ester 21% Others
47% Neptune 12% Elster 9% Hydrometer 4% Others 37% Badger 12% Sensus 15%
Continued Global Leadership Global Meter Market Shares Global Meter Market
Shares AMR—US and Canada Electric Gas Water Elster 4% Hunt 5% ESCO 8% Cellnet
13% Itron 55% Others 15% Source: Scott Report on AMR Deployments, ABS Energy
Research, A.T. Kearney, Management Estimates 18 55% #1 #1 #2 #2 #4 #4 16%
20%
11% A leading position in meters globally - Expanding potential
markets
Diverse
Revenue Base Itron Combined Itron and Actaris U.S. 38% Euro-Zone 31% U.K.
15%
Other 16% U.S. and Canada 94% Other 6% 2006 Revenue: $1.6 billion 2006 Revenue:
$1.6 billion 2006 Revenue: $644 million 2006 Revenue: $644 million The
acquisition provides Itron with immediate global scale and more diverse revenue
stream
The
Global Metering Market Opportunity Source: ABS Energy Research 107 25 71
125 32
101 0 50 100 150 200 250 300 2006 2011 Electric Gas Water Annual Meter Shipments
by Type (millions) 258 203 • Potential growth is greatly enhanced with AMR/AMI •
Scale and platform to lead market 2006-11 CAGR 7.3% 4.4% 3.0% Synergies/Benefits
Growth
Drivers for Meters and Advanced Functionality Advanced Metering Infrastructure
New and Replacement Meters ⑀⍽ Limited innovation ⑀⍽ New housing starts ⑀⍽
Replacement cycles ⑀⍽ Electromechanical upgrade to solid state ⑀⍽ Steady
predictable growth Automated Meter Reading ⑀⍽ Driven by improving operations and
cost reductions ⑀⍽ Higher price point ⑀⍽ Additional products and services ⑀⍽
Drives AMR meter and module growth ⑀⍽ Prepaid meters ⑀⍽ Environmental concerns
and conservation reaction ⑀⍽ Legislation/regulation ⑀⍽ Avoided costs of building
generation or transmission ⑀⍽ Efficiency gains ⑀⍽ Ability to shave peak load
Smart Utilities Concerned for the Future Smart Utilities Smart Utilities
Concerned for Concerned for
Complementary
Product Portfolios and Geographic Fit Electricity meters Electricity meters
Gas
meters Gas meters Water meters Water meters Common Heritage - Common Vision
Metering businesses were formerly all part of Schlumberger Metering Electricity
meters Electricity meters Electricity meters AMR technology AMR technology
AMR
technology Electronic Technology Electronic Technology Electronic Technology
Software and Systems
Prominent
Global Customer Base Itron Actaris Dominion Energy Duke Energy Progress Energy
AEP AQUA Piedmon Natural Gas Con Edison Pacific Gas and Electric Company
Constellation Energy Southern Company Xcel Energy DTE Energy Southwest Gas
TEPCO
cp GDI National Grid Iberdrola Veolia Water EDP Electricdade de Portugal
CIS
Cordes & Grafe E.ON EDF Electrabel
Transforming
Itron(1) Enhanced Competitive Positioning Enhanced Competitive Positioning
Enhanced Competitive Positioning Source: Public filings, Company materials
(1)
Assumes constant USD/EUR rate of 1.30x (2) Figure for CY2004 (3) Figure
represents Industrial Technology segment only #1 #1 #1 #1 #1 AMR #1 Electricity
Metering #4 Water Metering #2 Gas Metering 599 430 415 217 644 645 1,015
1,659
1,784 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Ruhrgas Industries
(2) Combined Landis & Gyr Sensus Roper Industries (3) ESCO Technologies
Badger Meter Actaris Itron
Ensuring
a Successful Transaction ⑀⍽ Itron and Actaris have a common heritage >
Metering businesses were former divisions of Schlumberger > Itron acquired
the Schlumberger electricity metering division in 2004 > Cultural and
operational fit ⑀⍽ Experienced management teams with significant transaction
experience > Many of the combined management team has spent a good portion of
their careers already working together ⑀⍽ Geographical and product fit/synergies
> Potential to sell water and gas meters into the US > Potential to sell
AMR/AMI products and software solutions globally > Ability to capture global
synergies • At this moment, the industry worldwide is poised for AMR/AMI
expansion
The
Time is Right in a Changing Marketplace > Deregulation > Privatisations
& mergers > New technology > New competition > Energy market
trading > Globalization Change & Turmoil 1994-2005 > Focus on
conservation/environment > Increased demand of AMR/AMI > Complex products
> Consolidation of utilities/suppliers > Increased quality requirements
> Expansion in emerging markets Time of Opportunities 2006 NOW >
Electromechanical > Established competition > Monopoly clients > Demand
growth > National-based markets Stability & Growth THE PAST
Appendix/Reconciliations
Overview
of Itron
Itron
Customers > More than 2,200 handheld meter reading customers in over 60
countries • Hardware and meter data collection software > Electricity meter
customers in U.S. and Canada • Nearly every IOU, Muni and Co-Op > More than
1,500 AMR customers • > 55 million endpoints shipped (electric, gas and
water) • AMR endpoints shipped to >70% of IOUs • Fixed networks at more than
20 customers > C&I meter data collection software at > 90% of the
largest electric utilities in U.S. Well Known Customers Key Highlights Dominion
Energy Duke Energy Progress Energy AEP Piedmont Natural Gas AQUA National
Grid
Con Edison Pacific Gas and Electric Company Constellation Energy Southern
Company Xcel Energy DTE Energy cp Southwest Gas TEPCO
Products
and Solutions at a Glance Software & Services 9% Meter Data Collection 40%
Electricity Metering 51% HARDWARE SOLUTIONS HARDWARE SOLUTIONS SOFTWARE
SOLUTIONS SOFTWARE SOLUTIONS ⑀⍽ Meter Data Collection > Handheld computer
based meter data collection systems since 1977 > Automatic Meter Reading
(AMR) systems since 1986 > $260 million revenue ⑀⍽ Electricity Metering >
Electricity metering since July 1, 2004 > Solid state metering with embedded
AMR since 1998 > $325 million revenue > Industry-leading software &
services for energy and water information management > $59 million revenue
The leading provider of technology for creating, collecting, analyzing and
applying critical data about electricity, gas and water usage
Oconee
Facility (Electric Meters) ⑀⍽ 106,000 sq.ft. in Waseca, MN > 4.5 million AMR
units produced in 2006 6+ million unit capacity ⑀⍽ 317,000 sq.ft. in Oconee, SC
> 6.5 million meters produced in 2006 7+ million unit capacity ⑀⍽ Both
Facilities: > Highly automated, flexible and scalable > History of cost
reductions > Less than 10% labor content Waseca Facility (AMR) Design and
Manufacturing Operations Low Cost, High Volume
Software
Solutions Approximate Revenue Breakdown in 2006: Licenses = 29%, Services
= 32%,
Maintenance = 39% >Complex Billing >Residential Energy Mgmt. >C&I
Energy Mgt. >Distribution Asset Optimization >Revenue Assurance &
Tamper Analytics >Distribution Asset Design & Optimization
>Engineering Calculations & Standards Compliance >Designer
Productivity >Central Market Forecasting >Retail Forecasting >Wholesale
Forecasting Knowledge Applications Knowledge Applications >Handheld Data
Collection >Mobile Data Collection >Fixed Network Data Collection
>Endpoint Installation >Workforce Mgmt. Meter Data Management Meter Data
Management Data Collection & Workforce Management Data Collection &
Workforce Management Software Licenses, Related Consulting and Implementation
Services >Mass Market Meter Data Mgmt. >C&I Meter Data Mgt.
>C&I Collection
Itron’s
Customer Solutions VALUE Data Creation Data Collection Data Management Rev.
Assurance Customer Care Demand Response Dist. Asset Analysis Load Research
Outage & Restore Forecasting (CIS-Billing) Data Utilization Central
Repository Validation, Editing and Estimation Calculations Settlement Analytics
Meter Asset Mgmt Handhelds Drive-by Dial-up Satellite Pager Fixed Network
Electric Meters
4.7
4.2 4.6 3.0 3.1 2.5 0 1 2 3 4 5 6 7 8 9 2000 2001 2002 2003 2004 2005 Solid
State Electromechanical Itron Meters U.S. & Canada Annual Shipments (mm) Key
Highlights As a pure-play solid-state meter provider, Itron is set to benefit
from the shift from electromechanical technology to electronic technology
>
Itron is the leading provider of electricity meters in the U.S. with an
estimated 35 - 40% share of installed base > Itron’s electronic solid state
meters represent over 85% of the installed base of electronic residential
electricity meters in the U.S. > Electronics meter market driven by: •
Establishment of advanced metering systems • Growth and natural replacement
cycle of electromechanical technology (100 year old, mechanics based technology)
5.4 6.2 6.7 7.9 7.2 8.4 Electricity Metering Market ’00-’05 CAGR: 9% Source:
Management estimates based on normal growth and replacement and historical
AMR
projects
7.5
5.5 6.3 4.7 3.4 2.7 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2000 2001 2002
2003
2004 2005 Electric Gas Water Itron E, G, W Shipments Source: The Scott Report:
AMR Deployments in North America, 10th Edition U.S. and Canada Annual Shipments
(mm) Key Highlights 6.2 8.1 9.7 11.7 10.8 13.6’00-’05 CAGR: 17% > Itron has
the leading share of the installed base in all segments: 3 Electric 53% market
share 3 Gas 80% market share 3 Water 30% market share 3 Total 55% market
share
> AMR data points: • Itron’s next closest co 13% market share • More than 80%
of all AMR units shipped use RF communication • Over 70% of AMR units shipped
are read with Mobile AMR technology AMR Market The AMR Industry is poised
for
growth given the low current penetration levels
Itron
is the AMR Market Leader 53% 19% 16% 9% 3% 0% 10% 20% 30% 40% 50% 60% Itron
Cellnet ESCO Hunt All Others 80% 12% 6% 2% 0% 10% 20% 30% 40% 50% 60% 70%
80%
Itron CellNet AMCO/Elster All Others Electric Gas Water 30% 17% 16% 11% 4%
4% 4%
14% 0% 5% 10% 15% 20% 25% 30% Itron Neptune Sensus Amco/Elster Badger Hexagram
Datamatic All Others ents in North America, 10th Edition
Experienced
Management Team LeRoy Nosbaum Chairman and CEO LeRoy Nosbaum has more than
30
years of leadership and management experience in the utility industry. Mr.
Nosbaum joined Itron in 1996 and has been a director and chief executive
officer
of Itron since March 2000. Before joining Itron, Mr. Nosbaum was with Metricom
Inc., a supplier of wireless data communications networking technology. Prior
to
his tenure with Metricom, he held management positions with Schlumberger,
Ltd.
for 20 Malcolm Unsworth Sr. Vice President, Hardware Solutions Malcolm Unsworth
spent 25 years with Schlumberger, including 11 associated with the electricity
meter business. He was President of the Schlumberger Metering business prior
to
the acquisition of SEM. He also served as VP and General Manager of
Schlumberger’s North America Operations in charge of water, electricity, gas
products and the Cellnet business. Philip Mezey Sr. Vice President, Software
Solutions Philip Mezey was named Vice President, Software Solutions in January
2004. Mr. Mezey joined Itron in March 2003 upon Itron’s acquisition of Silicon
Energy. Mr. Mezey joined Silicon Energy in 2000 as Vice President, Software
Development. Prior to joining Silicon Energy, Mr. Mezey was a founding member
of
Indus, a leading provider of integrated asset and customer management software.
Steven M. Helmbrecht Sr. Vice President and CFO Steve Helmbrecht was named
Sr.
Vice President and Chief Financial Officer in January 2005. Mr. Helmbrecht
joined Itron in 2002 with the acquisition of LineSoft Corporation. Prior
to
joining LineSoft, Mr. Helmbrecht spent seven years with SS&C Technologies,
Inc., a software company focused on portfolio management and accounting systems
for institutional investors.
Financial
Details and Reconciliation
Itron
Non-GAAP Reconciliation (US$mm) 2003 2004 2005 2006(1) Itron US GAAP Net
Income
10.5 (5.3) 33.1 33.8 Income Tax Provision 7.4 (4.1) (5.5) 18.5 Interest Income
(0.2) (0.2) (0.3) (9.5) Interest Expense 2.6 13.1 18.9 17.8 Other Income
1.3 0.4
0.1 1.2 Itron US GAAP Operating Income 21.7 4.0 46.2 61.7 Amortization 9.6
27.9
38.8 31.1 Stock Based Compensation - - - 8.6 Litigation Accrual 0.5 - - -
In-process R&D 0.9 6.4 - - Restructurings 2.2 7.3 0.4 - Itron Non-GAAP
Operating Income 34.9 45.5 85.5 101.5 Depreciation 9.4 10.9 12.7 15.1 Other
Income (1.3) (0.4) (0.1) (1.2) Itron Adjusted EBITDA 43.0 56.0 98.1 115.4
(1)
Unaudited
2006
Pro Forma Reconciliation Actaris EUR Actaris USD Itron Pro Forma Revenue
€
780,737 1,014,958 $ 644,042 $ 1,659,000 $ Adjusted EBITDA: GAAP net income
€
39,629 51,518 $ 33,759 $ 85,277$ Interest income (303) (394) (9,497) (9,891)
Interest expense 36,129 46,968 17,785 64,753 Income tax provision (benefit)
17,187 22,343 18,476 40,819 Depreciation and amortization 26,323 34,220 46,234
80,454 Non-cash stock based compensation expense --8,646 8,646 Restructuring
costs 3,125 4,062 -4,062 Adjusted EBITDA 122,091 € 158,718 $ 115,403 $ 274,121 $
(1) Assumes constant USD/EUR rate of 1.30x (2) Results unaudited and in
thousands (3) Actaris results not prepared in accordance with US GAAP and
not
all adjustments to US GAAP have been made
Strong
Pro Forma Financial Performance (1) 1,138 1,245 1,442 1,659 0 200 400 600
800
1,000 1,200 1,400 1,600 1,800 2003 2004 2005 2006 ($mm) Revenue Gross Profit
Source: Itron and Actaris Company Reports (1) Assumes constant USD/EUR rate
of
1.30x 570499 424391 34.3 34.0 34.6 34.4 0 200 400 600 2003 2004 2005 2006
($mm)
30 35 40 (%) EBITDA CAGR13% CAGR 13% 274 223 179 158 13.8 14.4 15.8 16.5
0 50
100 150 200 250 300 2003 2004 2005 2006 ($m m ) 10 15 20 (% ) CAGR20%
Trended
Pro Forma Revenue 2003 2004 2005 2006 Itron 317$ $ 399 $ 553 $ 644 Actaris
821
846 889 1,015 Combined 1,138$ $ 1,245 $ 1,442 $ 1,659 Gross Profit Itron
144$ $
171 $ 234 $ 267 Actaris 247 253 265 303 Combined 391$ $ 424 $ 499 $ 570 %
34%
34% 35% 34% Adjusted EBITDA Itron 43$ $ 56 $ 98 $ 115 Actaris 115 123 125
159
Combined 158$ $ 179 $ 223 $ 274 % 14% 14% 15% 17% (1) Assumes constant USD/EUR
rate of 1.30x (2) Results unaudited and in millions (3) Actaris results not
prepared in accordance with US GAA P and not all a djustmen ts to US GAA
P have
been made
ƒ
Actaris accounting methods differ from US GAAP in the following ways:
>
Accounting (2004): Actaris has applied a 100% fair value application
rather than
a 97% fair value according to US GAAP standards. If US GAAP had been
used, the
goodwill and paid-in-capital would decrease by approximately €7.6mm > Date of
Acquisition (2004 & 2005): The sales and purchase agreement to acquire
Actaris was signed on June 12, 2003 with a record dated of July 24, 2003.
However, management has accounted for the transaction as of January 1,
2003 >
Fair Value of Machinery & Equipment (2004): Actaris has deemed that the
historical cost of Machinery and Equipment approximates its fair value.
US GAAP
requires that fair value be the market value of such Machinery and Equipment
at
time of the acquisition > Contingent Liabilities (2004 & 2005): Actaris
accounted for contingencies relating to acquired assets as accruals.
Under US
GAAP these contingencies would not have been recognized. The corresponding
reserves have resulted in an increase in goodwill > Convertible bonds (2005):
Convertible bonds exclusively held by the shareholders are presented
as a
component of Shareholders' equity. US GAAP would present these as
liabilities
Exhibit
99.3
| |
Electric
/ Gas / Water
Information
collection, analysis and applications
2111
North Molter Road
Liberty
Lake, WA 99019
509.924.9900
Tel
509.891.3355
Fax
www.itron.com
|
FOR
IMMEDIATE RELEASE
ITRON
ANNOUNCES $235 MILLION PRIVATE PLACEMENT OF EQUITY
SPOKANE,
WA. —February 25, 2007 — Itron, Inc. (NASDAQ:ITRI) announced today that it has
agreed to sell 4,086,958 shares of its common stock to ten institutional
investors in a private placement at a price of $57.50 per share, based
on a 5%
discount from the five-day average share closing price during the week
of
February 12, 2007 of $60.52. The transaction is expected to generate
gross
proceeds to Itron of $235 million before fees and other offering expenses.
Net
proceeds will be used to partially fund the acquisition of Actaris
Metering
Systems. The sale is expected to be completed on March 1, 2007, subject
to
customary closing conditions.
The
shares
being sold have not been registered under the Securities Act of 1933
or any
state securities laws and, until so registered, may not be offered
or sold in
the United States or any state absent an applicable exemption from
registration
requirements. This announcement does not constitute an offer to sell,
nor is it
a solicitation of an offer to buy, these securities. Pursuant to the
terms of
the securities purchase agreement with the private placement investors,
the
Company has agreed to register re-sales of the shares not more than
75 days from
the date of closing of the Actaris acquisition.
This
press
release contains forward-looking statements regarding the expectation
of the
closing of the private placement. These forward-looking statements
are based on
Itron's current expectations and are subject to the risk that the closing
conditions to the financing are not met which, if this occurs, may
cause the
closing not to occur.
Itron,
Inc. contact:
Deloris
Duquette
Vice-president,
Investor Relations and Corporate Communications
(509)
891-3523
Deloris.duquette@itron.com