UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 18, 2005
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Date of Report (Date of Earliest Event Reported)
ITRON, INC.
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(Exact Name of Registrant as Specified in its Charter)
Washington 000-22418 91-1011792
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
2818 N. Sullivan Road, Spokane, WA 99216
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(Address of Principal Executive Offices, Zip Code)
(509) 924-9900
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(Registrant's Telephone Number, Including Area Code)
None
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(Former Name or Former Address, if Changed Since Last Report)
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
In February 2003, a Long Term Performance Plan (LTPP) for senior management and
key executive officers was established with awards contingent on the attainment
of multi-year performance goals designed to drive the long-term financial
success and growth of the Company. Actual participation is approved by the
Compensation Committee. The performance goals for the one-year and two-year
cycles that began January 1, 2003 were not met and therefore, no payouts were
earned for 2003 and 2004.
On February 16, 2005, the LTPP was revised to provide for yearly goals, instead
of a three-year cycle. Payouts were also revised from 50% cash and 50% shares of
the Company's Common Stock to 100% shares of the Company's Common Stock with a
three-year cliff vesting period. The value of an award is based on a percentage
of the participant's base salary and is dependent on performance objectives for
the period. The number of shares to be issued will be determined by dividing the
dollar amount of the award by the fair value of Itron Common Stock on the date
the payout is approved by the Compensation Committee. For 2005, performance
measures have been established based on achievement of specified levels of free
cash flow and earnings.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
The following exhibits are filed as part of this report:
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Exhibit Number Description
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10.20 Amended Long-Term Performance Plan dated February 16, 2005
between Itron, Inc. and certain of its executive officers.
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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/A
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, 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.
ITRON, INC.
Dated: February 18, 2005 By: /s/ STEVEN M. HELMBRECHT
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Steven M. Helmbrecht
Sr. Vice President and
Chief Financial Officer
EXHIBIT INDEX
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Exhibit Number Description
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10.20 Amended Long-Term Performance Plan dated February 16, 2005
between Itron, Inc. and certain of its executive officers.
Exhibit 10.20
ITRON
KNOWLEDGE TO SHAPE YOUR FUTURE
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LONG-TERM PERFORMANCE PLAN
SPECIFICATIONS & GUIDELINES
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ITRON, INC.
AMENDED BY THE
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON
FEBRUARY 16, 2005
This document constitutes part of a prospectus for securities that have been
registered under the Securities Exchange Act of 1933, as amended, and
supplements a Plan Summary dated May 28, 2004 for the Itron, Inc. Amended and
Restated 2000 Stock Incentive Plan.
Purpose
Long-term incentives serve to align, motivate and reward executives for their
contributions to the long-term financial success and growth of the Company. The
objectives for the Long-Term Performance Plan (or LTPP) are to:
o Provide a greater long-term orientation and competitiveness to total
compensation for Itron executives, by establishing a performance-based
component, paid out in Itron restricted stock, in addition to or as a
replacement for the existing stock option plan;
o Align individual executive rewards with shareholder value over a long-term
period, based on the achievement of predetermined annual objectives whose
achievement will be rewarded with Itron restricted stock to be vested after
a three-year waiting period; and
o Enable Itron to meet competitive total compensation needs in attracting and
retaining critical executive talent.
Overview
The Long-Term Performance Plan is a performance unit plan, with awards that are
contingent on the attainment of annual performance goals. The length of each
performance period will be one year, unless the Compensation Committee of the
Board of Directors provides otherwise. At the beginning of the performance
period, goals are established which are designed to measure the degree of
business success over the timeframe. The Compensation Committee reviews and
approves goals that are recommended by management. At the end of the period,
performance against the goals is assessed and payouts are determined.
Business results for Itron will be measured over the performance period. Payout
will be in restricted Itron shares with a vesting period of three years, which
will both serve as an executive retention tool and tie executive performance to
shareholder value.
Eligibility
Eligibility for the plan will include senior management and key executives who
impact organization-wide results. Actual participation will be based on
recommendation by the Chief Executive Officer and approval by the Compensation
Committee. Current plan participants are recapped in the attached appendix.
Other executives may be eligible for future awards, upon recommendation of the
Chief Executive Officer and approval by the Compensation Committee.
Participation in the Long-Term Performance Plan for a given period will not be
construed to confer a right to participate in the plan in any subsequent period,
or the right to continue in the Company's employment.
Award Opportunities
Award opportunities will be established for each executive at the beginning of
the performance period. Awards will be calculated as a percentage of base salary
that is in existence on the last day of the performance period and expressed as
a dollar amount. Award opportunities will increase or decrease as performances
goes beyond or falls short of the performance objectives for that performance
period.
In addition, threshold and maximum award levels will be established as a percent
of the LTPP Target.
Annually, Itron establishes a Target Annual Plan (TAP) for the coming year.
Goals, financial and otherwise, as established in the TAP do not necessarily
reflect the same goals that will be used for the LTPP.
Performance Measurement
At the beginning of each performance period, the Chief Executive Officer will
recommend and communicate the specific range of performance objectives for the
Company to the Compensation Committee. The goals and the key performance factors
will be reviewed and approved by the Compensation Committee.
Performance Measures
Performance objectives will be set on the basis of corporate plans for the
following performance period, condition of the utility industry and
competitive performance in the market place. In the process of determining
appropriate LTPP goals, consideration will be given to proposed
acquisitions, financing and other major issues that could have material
impact on the financial performance of the Company. Typical performance
measures may include but are not limited to: Revenue Growth, Earnings
Growth, Cash Flow, Return on Capital Employed, Net Operating Profit after
Tax, Normalized Earnings per Share or a combination of measures.
Performance Weighting
Corporate performance will determine 100% of the award for all plan
participants. Performance for other organization levels, i.e. business
unit, product group, etc., may be included in future performance periods.
Performance/Payout Relationship
A range of performance levels -- including threshold, LTPP Target, and
maximum -- and associated payouts will be established at the beginning of
the performance period. As well, in any performance period performance
hurdles could be established. At the end of each performance period,
Itron's actual performance against the goals established for that
performance period will be assessed and the resulting payouts determined.
Performance and payout opportunity will be expressed as a percentage of the
LTPP Target Award. For example, achieving 100% of the performance goals
would result in participants receiving 100% of the LTPP Target Award.
Payouts will be linearly interpolated for performance achievement between
the indicated levels. The Compensation Committee may use discretion to set
threshold levels and determine final award payouts.
Pro forma Results
In calculating performance attainment, pro forma results will generally be
used. Pro forma results, as defined, will be GAAP numbers adjusted for
IPR&D, amortization of intangibles, restructuring charges and other
extraordinary events subject to approval by the Compensation Committee of
the Board. Adjustments to GAAP for the purpose of pro forma results will be
discussed with the Compensation Committee at the time of the event and
confirmed by the Compensation Committee at its next scheduled meeting.
Payouts
Payouts will be announced as soon after the end of the performance period as
practical, and be in the form of restricted stock with a three-year cliff
vesting period. The number of shares of restricted stock to be paid out to
participants will be determined by dividing the dollar amount of the award
payout by the fair market value of Itron common stock on the date the
Compensation Committee approves the payout.
The dollar amount of the award payout will be a percentage of the eligible
employee's base pay as shown below in one of three tiers. Base pay will be the
employee's annual salary as of the last day of the performance period. The tier
structure can be changed at the recommendation of the Chief Executive Officer
and the approval of the Compensation Committee of the Board of Directors.
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% OF BASE
TIER POSITION SALARY
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Tier I Chairman & Chief Executive Officer 75%
President & Chief Operating Officer 75%
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Tier II Sr. Vice President and Chief Financial Officer 50%
Sr. Vice President and General Counsel 50%
Sr. Vice President Hardware 50%
Sr. Vice President Software 50%
Vice President Competitive Resources 50%
Vice President Investor Relations 50%
Vice President International 50%
Vice President Marketing 50%
Vice President Business Operations 50%
Vice President Itron Electric Metering 50%
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Tier III For future consideration 25%
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Deferral Option
In order to provide executives flexibility to meet individual financial needs
and Itron's executive stock ownership guidelines, participants will have the
option to defer all or a portion of the award on a nonqualified basis in
accordance with the applicable plan and procedures.
New Participants
An employee hired into an eligible position during a performance period may
begin participation in the subsequent performance period or, at the
recommendation of the Chief Executive Officer and approval by the Compensation
Committee, in the ongoing performance period. New participants permitted to join
an ongoing performance period will be eligible to receive a prorate payout based
on the number of full months worked during the performance period. New
participants in the plan will be nominated by the Chief Executive Officer and
approved by the Compensation Committee.
Changes in Employment
Participants who terminate employment during a performance period for any reason
other than termination for Cause (as defined in the Company's Amended and
Restated 2000 Stock Incentive Plan), including voluntary termination, discharge
by the Company, death, disability, or retirement will receive a modified payout
determined by multiplying 1/3 of the total payout amount the participant would
have received had the participant remained employed through the end of the
performance period by the quotient obtained by dividing (a) the number of full
months worked during the performance period by (b) the 12 months in the
performance period. For participants who terminate employment for any reason
other than termination for Cause, including voluntary termination, discharge by
the Company, death, disability, or retirement during the vesting period for
restricted stock issued in connection with a prior performance period, the
restricted stock will vest on a prorate basis depending on the number of
completed years in the vesting period (1/3, 2/3, or 100%). Employees who are
dismissed for Cause will forfeit their award payment(s).
Change-of-Control
All outstanding awards will be accelerated and paid out at maximum levels
immediately prior to a change-of-control of the Company and payout will be in
the form of fully vested shares of Itron common stock. In addition, any
outstanding unvested restricted stock issued in connection with a prior
performance period will accelerate in full immediately prior to a
change-of-control of the Company. "Change-of-control" will be consistent with
the language in the Company's standard change of control agreements in effect at
the time.
Tax Consequences
Participants will not be deemed to receive income at the time an award is
granted. Likewise, participants will not be deemed to receive income at the time
an award is paid in shares of restricted stock. However, participants will
generally recognize taxable ordinary income when the restricted stock ceases to
be subject to restrictions in an amount equal to the excess of the fair market
value of the shares at such time over the amount, if any, paid for the shares.
Within 30 days after a participant receives the restricted stock, the
participant may elect (83(b) Election) under Section 83(b) of the Internal
Revenue Code of 1986 (Code) to recognize taxable ordinary income in an amount
equal to the excess of the fair market value of the restricted stock at the time
of receipt over the amount, if any, paid for the shares. If a participant makes
an 83(b) Election, when the restrictions on the restricted stock lapse, the
participant will not have to recognize any additional income at that time.
However, if a participant has to forfeit the restricted stock to Itron (e.g.,
upon termination prior to expiration of the restriction period), the participant
may not deduct the income recognized at the time of receipt of the restricted
stock, and the participant will have a capital loss equal to the amount, if any,
paid for the shares.
The Company will be entitled to a deduction at the same time and in the same
amount as a participant recognizes ordinary income, subject to certain
limitations on deductions for compensation under Section 162(m) of the Code.
This is only a brief summary of the U.S. federal income tax laws and regulations
that apply to an award under the plan. Participants should not rely on this
summary for a complete statement of such laws and regulations. The tax laws and
regulations are complex and are subject to legislative changes. In addition,
circumstances peculiar to certain individuals may change the usual income tax
results. FOR THESE REASONS, PARTICIPANTS SHOULD CONSULT A TAX ADVISOR TO
DETERMINE THE INCOME TAX CONSEQUENCES OF AN AWARD UNDER THE PLAN.
Governance
Senior management and the Compensation Committee will be responsible for the
administration and governance of the plan. The decisions of the Committee shall
be conclusive and binding on all participants.
Amendment, Modification, or Termination of the Plan
Itron, by action of its Board of Directors and/or Compensation Committee,
reserves the right to amend, modify, or terminate the plan at any time.
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