s As filed with the Securities and Exchange Commission on December 5, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ITRON, INC.
Washington 91-1011792
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2818 N. Sullivan Road
P.O. Box 15288
Spokane, Washington 99216-1897
(509) 924-9900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
David G. Remington
Chief Financial Officer
Itron, Inc.
2818 N. Sullivan Road
P.O. Box 15288
Spokane, Washington 99216-1897
(509) 924-9900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
Linda A. Schoemaker
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
(206) 583-8888
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Approximate date of commencement of proposed sale to the public: From time to
time as soon as practicable after this Registration Statement becomes
effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.__
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box._X_
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
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CALCULATION OF REGISTRATION FEE
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Title of Each Class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities to Be Registered Registered Offering Price per Aggregate Offering Registration Fee
Unit(1) Price(1)
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Common Stock, no par value(2).................. 50,000 $ 18.25 $ 912,500 $ 270.00
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(1) Computed in accordance with Rule 457(c), based on the average of the high
and low sale prices of the Common Stock on November 28, 1997.
(2) Includes associated Common Stock Purchase Rights.
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The Registrant hereby undertakes to amend this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED DECEMBER 5, 1997
ITRON, INC.
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50,000 Shares of Common Stock
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This Prospectus relates to 50,000 shares of Common Stock, no par value
(the "Shares"), of Itron, Inc. ("Itron" or the "Company"). The Shares may be
offered from time to time for the account of the holder named herein (the
"Selling Securityholder") in transactions (which may include block transactions)
on any exchange or market on which such securities are listed or quoted, as
applicable, in negotiated transactions, through a combination of such methods of
sale, or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices. The Selling Securityholder may effect such transactions
by selling the Shares directly or to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholder and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they may sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). See "Selling Securityholder" and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholder. The Selling Securityholder has agreed to
pay all expenses incident to the offer and sale of the Shares offered hereby
including all selling commissions, if any.
The Common Stock is traded on the Nasdaq National Market ("Nasdaq")
under the symbol "ITRI." On December 4, 1997, the last reported sale price of
the Common Stock on Nasdaq was $21.50 per share.
The Shares offered hereby involve a high
degree of risk. See "Risk Factors"
beginning on page 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is December __, 1997.
AVAILABLE INFORMATION
Itron, a Washington corporation, is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such materials can be obtained upon
written request from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a web site (http://www.sec.gov) that contains certain
reports, proxy statements and other information regarding Itron.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement. The Registration Statement and any
amendments thereto, including exhibits filed as a part thereof, also are
available for inspection and copying as set forth above. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. Copies of any such documents, other than
exhibits to such documents that are not specifically incorporated by reference
therein, are available without charge to any person, including any beneficial
owner, to whom this Prospectus is delivered, upon written or oral request to the
Secretary, Itron, Inc., 2818 N. Sullivan Road, P.O. Box 15288, Spokane,
Washington 99216-1897, telephone number (509) 924-9900.
FORWARD-LOOKING STATEMENTS
When included in this Prospectus or in documents incorporated herein by
reference, the words "expects," "intends," "anticipates," "plans," "projects"
and "estimates," and analogous or similar expressions, are intended to identify
forward-looking statements. Such statements are inherently subject to a variety
of risks and uncertainties that could cause actual results to differ materially
from those reflected in such forward-looking statements. Such risks and
uncertainties include, among others, changes in the utility regulatory
environment, delays or difficulties in introducing new products, increased
competition and various other matters, many of which are beyond the Company's
control. These forward-looking statements speak only as of the date of this
Prospectus. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based, other than as expressly required by the Securities Act and
the rules promulgated thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997; and September 30, 1997;
3. The Company's Current Reports on Form 8-K dated March 18, 1997, May 2,
1997, May 29, 1997 September 3, 1997, September 11, 1997; and
4. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission
on September 18, 1993.
All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
such documents.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement so
superseded shall not be deemed to constitute part of this Prospectus.
RISK FACTORS
The securities offered hereby involve a high degree of risk.
Prospective purchasers should consider carefully the following factors, in
addition to the other information contained or incorporated by reference in this
Prospectus.
Dependence on Utility Industry; Uncertainty Resulting From Mergers and
Acquisitions and Regulatory Reform. The Company derives substantially all of its
revenues from sales of its products and services to the utility industry. The
Company has experienced variability of operating results on both an annual and a
quarterly basis due primarily to utility purchasing patterns and delays of
purchasing decisions as a result of mergers and acquisitions in the utility
industry and changes or potential changes to the federal and state regulatory
frameworks within which the electric utility industry operates.
The utility industry, both domestic and foreign, is generally
characterized by long budgeting, purchasing and regulatory process cycles that
can take up to several years to complete. The Company's utility customers
typically issue requests for quotes and proposals, establish committees to
evaluate the purchase, review different technical options with vendors, analyze
performance and cost/benefit justifications and perform a regulatory review, in
addition to applying the normal budget approval process within a utility.
Purchases of the Company's products are, to a substantial extent, deferrable in
the event that utilities reduce capital expenditures as a result of mergers and
acquisitions, pending or unfavorable regulatory decisions, poor revenues due to
weather conditions, rising interest rates or general economic downturns, among
other factors.
The domestic electric utility industry is currently the focus of
regulatory reform initiatives in virtually every state, which initiatives have
resulted in significant uncertainty for industry participants and raised
concerns regarding assets that would not be considered for recovery through
ratepayer charges. Consequently, many utilities are delaying purchasing
decisions that involve significant capital commitments. While the Company
expects some states will act on these regulatory reform initiatives in the near
term, there can be no assurance that the current regulatory uncertainty will be
resolved in the near future or that the advent of new regulatory frameworks will
not have a material adverse effect on the Company's business, financial
condition and results of operations. Moreover, in part as a result of the
competitive pressures in the utility industry arising from the regulatory reform
process, many utility companies are pursuing merger and acquisition strategies.
The Company has experienced considerable delays in purchase decisions by
utilities that have become parties to merger or acquisition transactions.
Typically, such purchase decisions are put on hold indefinitely when merger
negotiations begin. The pattern of merger and acquisition activity among
utilities may continue for the foreseeable future. If such merger and
acquisition activity continues at its current rate or intensifies, the Company's
revenues may continue to be materially adversely affected.
Certain state regulatory agencies are considering the "unbundling" of
metering and certain other services from the basic transport aspects of
electricity distribution. Unbundling includes the identification of the separate
costs of metering and other services and may extend to allowing competition for
metering and other services. For example, in California, for Direct Access
customers the decision has been made to open up metering, billing and other
"revenue cycle" services to competition. The California Public Utilities
Commission may issue standards for metering and meter data communications prior
to January 1, 1998. Customers for the Company's products and services could
change from utilities alone to utilities and their competitive suppliers of
metering services, which change could have a significant impact on the manner in
which the Company markets and sells its products and services. The Company might
also have to modify its products and services (or develop new products and
services) to meet the new standards established for metering or meter data
communications.
Recent Operating Losses. The Company experienced operating losses in
the last two quarters of 1996 and the first quarter of 1997. While the Company
recorded an operating profit in the second quarter of 1997, there can be no
assurance that the Company will thereafter achieve or maintain consistent
profitability on a quarterly or annual basis. The Company has experienced
variability of quarterly results and believes its quarterly results will
continue to fluctuate as a result of factors such as size and timing of
significant customer orders, delays in customer purchasing decisions, timing and
levels of operating expenses, shifts in product or sales channel mix, and
increased competition. Beginning in 1996, the Company increased its rate of
spending on its fixed network ("Fixed Network") automatic meter reading ("AMR")
operations, which has left it subject to net operating losses caused by
fluctuations in revenues. Recently, the Company's operating margins have been
adversely affected by excess manufacturing capacity. The Company expects
competition in the AMR market to increase as current competitors and new market
entrants introduce competitive products. Operating margins also may be affected
by other factors.
Customer Concentration. The Company's revenues in any particular year
tend to be concentrated with a limited number of customers, the identities of
which change from year to year. In 1996, the Company had ten multi-year AMR
contracts (excluding outsourcing contracts), which accounted for 44% of AMR
revenues, or 33% of total Company revenues. One of these contracts was with
Public Service Company of Colorado, and accounted for 22% of the Company's
revenues in 1996. These contracts are subject to cancellation or rescheduling by
customers. Cancellation or postponement of one or more of these contracts would
have a material adverse effect on the Company. For example, beginning in the
third quarter of 1996, the Company's revenues were adversely affected by an
indefinite delay by a large customer in taking delivery of the Company's
products pursuant to a multi-year contract.
Volatility of Share Price. The price of the Company's Common Stock has
traded in the range of $14.50 to $60.00 per share since January 1, 1996. The
price of the Common Stock could continue to fluctuate significantly as a result
of factors such as the Company's quarterly operating results, announcements by
the Company or its competitors, changes in general conditions in the economy,
the introduction of new products or technology, changes in earnings estimates by
analysts or changes in the financial markets or the utility industry. In
addition, in future quarters the Company's results of operations may be below
the expectations of equity research analysts and investors, in which event the
price of the Common Stock would likely be materially adversely affected.
Further, in recent years the stock market has experienced significant price and
volume fluctuations. These broad market fluctuations may materially adversely
affect the market price of the Common Stock.
Dependence on New Product Development. The Company has made and expects
to continue to make a substantial investment in technology development. The
Company's future success will depend in part on its ability to continue to
design and manufacture new competitive products and to enhance its existing
products and achieve large-scale implementation for its Fixed Network AMR
products. This product development will require continued substantial investment
in order to maintain the Company's market position. There can be no assurance
that unforeseen problems will not occur with respect to the development,
performance or market acceptance of the Company's technologies or products.
Development schedules for high-technology products are subject to uncertainty,
and there can be no assurance that the Company will meet its product development
schedules. During 1996, and in previous years, the Company experienced
significant delays and cost overruns in the development of new products, and
there can be no assurance that delays or cost overruns will not be experienced
in the future. Delays in new product development, including software, can result
from a number of causes, including changes in product definition during the
development stage, changes in customer requirements, initial failures of
products or unexpected behavior of products under certain conditions, failure of
third-party supplied components to meet specifications or lack of availability
of such components, unplanned interruptions caused by problems with existing
products that can result in reassignment of product development resources, and
other factors. Delays in the availability of new products or the inability to
develop successfully products that meet customer needs could result in the loss
of revenue or increased service and warranty costs, any of which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Dependence on the Installation, Operations and Maintenance of AMR
Systems Pursuant to Outsourcing Contracts. A portion of the Company's business
consists of outsourcing, wherein the Company installs, operates and maintains
AMR systems that it continues to own in order to provide meter reading and other
related services to utilities and their customers. The Company's long-term
outsourcing contracts are subject to cancellation or termination in certain
circumstances in the event of a material and continuing failure on the Company's
part to meet contractual performance standards on a consistent basis over agreed
time periods. The Company currently has two outsourcing contracts. The largest
of the contracts (the "Duquesne Contract"), which is with Duquesne Light Company
("Duquesne"), involves Fixed Network AMR; the other utilizes a vehicle-based
("Mobile") AMR solution.
Fixed Networks under both contracts are at this time only partially
installed. Installations are scheduled to be completed on both contracts in
1998. There can be no assurance that the Company will complete current
installation requirements under the Duquesne Contract, the uncompleted Mobile
AMR contract and any future outsourcing contracts.
The Company has experienced delays in performing its obligations under
the Duquesne Contract. These delays relate primarily to the development of
certain advanced meter reading functions and the software needed to complete
these functions. While the Company is currently providing daily consumption
meter data and tamper alarm capabilities for approximately 105,000 meters in
Duquesne's service territory using its Fixed Network products, and has
demonstrated additional advanced metering functions required under the Duquesne
Contract, these additional functions are in a late development stage. While the
Company believes that the next version of its Fixed Network AMR software will
provide remaining advanced functions on a basis acceptable to Duquesne, and that
it will complete the development of requisite capabilities to complete the
installation of the AMR system specified in the Duquesne Contract in all
material respects, there can be no assurance that it will be able to do so.
The Company recently negotiated and signed an amendment to the Duquesne
Contract pertaining to milestones and other matters. The amended contract
revised completion dates for a number of critical contract milestones. As in the
original contract, the amended contract provides for certain one-time monetary
penalties for failure to meet certain specified milestones, including three
milestones that must be met in the next eight months. The total amount of these
penalties, should the Company fail to meet every one of the specified
milestones, is approximately $25 million. The Company is currently in compliance
with its agreement with Duquesne and believes it will fully satisfy all future
milestones. Given the large investment already made by the Company in meter
modules and network equipment now installed at Duquesne, the amount of revenues
expected under the contract over its 15-year term, which is approximately $160
million and the milestone penalties, the Company's financial condition would be
materially adversely affected if Duquesne were to terminate the Duquesne
Contract for the Company's failure to perform.
Increasing Competition. The Company faces competitive pressures from a
variety of companies in each of the markets it serves. In the radio-based fixed
network AMR market, companies such as CellNet Data Systems, Inc. ("CellNet")
currently offer alternative solutions to the utility industry and compete
aggressively with the Company. The emerging market for fixed network AMR systems
for the utility industry, together with the potential market for other
applications once such fixed network systems are in place, have led
communications, electronics and utility companies to begin developing various
systems, some of which currently compete, and others of which may in the future
compete, with the Company's Fixed Network AMR system. These competitors can be
expected to offer a variety of technologies and communications approaches, as
well as meter reading, installation and other services to utilities and other
industry participants.
The Company believes that several large suppliers of equipment,
services or technology to the utility industry have developed or are currently
developing competitive products for the AMR market. For example, Schlumberger
Ltd. offers a competitive electric meter module for its newly manufactured
meters. In addition, other large meter manufacturers could expand their current
product and services offerings so as to compete directly with the Company. To
stimulate demand, and due to increasing competition in the AMR market, the
Company has from time to time lowered prices on its AMR products and may
continue to do so in the future. The Company also anticipates increasing
competition with respect to the features and functions of such products. In the
handheld systems market, Itron has encountered competition from a number of
companies, resulting in margin pressures in the maturing domestic handheld
systems business.
Many of the Company's present and potential future competitors have
substantially greater financial, marketing, technical and manufacturing
resources, name recognition and experience than the Company. The Company's
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements or to devote greater resources to the
development, promotion and sale of their products and services than the Company.
In addition, current and potential competitors may make strategic acquisitions
or establish cooperative relationships among themselves or with third parties
that would increase their ability to address the needs of the Company's
prospective customers. Accordingly, it is possible that new competitors or
alliances among current and new competitors may emerge and rapidly gain
significant market share. There can be no assurance that the Company will be
able to compete successfully against current and future competitors, and any
failure to do so would have a material adverse effect on the Company's business,
financial condition, results of operations and cash flow.
Uncertainty of Market Acceptance of New Technology. The AMR market is
evolving, and it is difficult to predict the future growth rate and size of this
market with any assurance. The AMR market did not grow as quickly in 1996 as the
Company had expected. Further market acceptance of the Company's new AMR
products and systems, such as its Fixed Network products, will depend in part on
the Company's ability to demonstrate cost effectiveness, and strategic and other
benefits, of the Company's products and systems, the utilities' ability to
justify such expenditures and the direction and pace of federal and state
regulatory reform actions. In the event that the utility industry does not adopt
the Company's technology or does not adopt it as quickly as the Company expects,
the Company's future results will be materially and adversely affected.
International market demand for AMR systems varies by country based on such
factors as the regulatory and business environment, labor costs and other
economic conditions.
Rapid Technological Change. The telecommunications industry, including
the data transmission segment thereof, currently is experiencing rapid and
dramatic technology advances. The advent of computer-linked electronic networks,
fiber optic transmission, advanced data digitization technology, cellular and
satellite communications capabilities, and private communications networks have
greatly expanded communications capabilities and market opportunities. Many
companies from diverse industries are actively seeking solutions for the
transmission of data over traditional communications media, including
radio-based and cellular telephone networks. Competitors may be capable of
offering significant cost savings or other benefits to the Company's customers.
There can be no assurance that technological advances will not cause the
Company's technology to become obsolete or uneconomical.
Availability and Regulation of Radio Spectrum. A significant portion of
the Company's products use radio spectrum and in the United States are subject
to regulation by the U.S. Federal Communications Commission (the "FCC"). In the
past, the FCC has adopted changes to the requirements for equipment using radio
spectrum, and there can be no assurance that the FCC or Congress will not adopt
additional changes in the future. Licenses for radio frequencies must be
renewed, and there can be no assurance that any license granted to the Company
or its customers will be renewed on acceptable terms, if at all. The Company has
committed, and will continue to commit, significant resources to the development
of products that use particular radio frequencies. Action by the FCC could
require modifications to the Company's products, and there can be no assurance
that the Company would be able to modify its products to meet such requirements,
that it would not experience delays in completing such modifications or that the
cost of such modifications would not have a material adverse effect on the
Company's future financial condition and results of operations.
The Company's radio-based products currently employ both licensed and
unlicensed radio frequencies. There must be sufficient radio spectrum allocated
by the FCC for the use the Company intends. As to the licensed frequencies,
there is some risk that there may be insufficient available frequencies in some
markets to sustain the Company's planned operations. The unlicensed frequencies
are available for a wide variety of uses and are not entitled to protection from
interference by other users. In the event that the unlicensed frequencies become
unacceptably crowded or restrictive, and no additional frequencies are
allocated, the Company's business will be materially adversely affected.
The Company is also subject to regulatory requirements in international
markets that vary by country. To the extent the Company wishes to introduce
products designed for use in the United States or another country into a new
market, such products may require significant modification or redesign in order
to meet frequency requirements and power specifications. Further, in some
countries, limitations on frequency availability or the cost of making necessary
modifications may preclude the Company from selling its products.
Dependence on Key Personnel. The Company's success depends in large
part on its ability to retain highly qualified technical and management
personnel, the loss of one or more of whom could have a material adverse effect
on the Company's business. The Company's success also depends on its ability to
continue to attract and retain highly qualified personnel in all disciplines.
There can be no assurance that the Company will be successful in hiring or
retaining the requisite personnel.
Intellectual Property. While the Company believes that its patents,
trademarks and other intellectual property have significant value, there can be
no assurance that these patents and trademarks, or any patents or trademarks
issued in the future, will provide meaningful competitive advantages. There can
be no assurance that the Company's patents or pending applications will not be
challenged, invalidated or circumvented by competitors or that rights granted
thereunder will provide meaningful proprietary protection. Despite the Company's
efforts to safeguard and maintain its proprietary rights, there can also be no
assurance that such rights will remain protected or that the Company's
competitors will not independently develop patentable technologies that are
substantially equivalent or superior to the Company's technologies. On October
3, 1996, the Company brought an action in the United States District Court for
the District of Minnesota against CellNet claiming infringement of one of
Itron's patents. This action is pending, and the discovery phase thereof has
commenced. On April 29, 1997, CellNet brought an action against the Company in
the United States District Court for the Northern District of California
claiming infringement of one of CellNet's patents. Itron management has reviewed
the complaint and believes it to be without merit. There can be no assurance
that the Company will prevail in either action or, even if it prevails, that the
legal costs incurred by the Company in connection with these actions will not
have a material adverse effect on the Company's financial condition or results
of operations.
Dependence on Key Vendors and Internal Manufacturing Capabilities.
Certain of the Company's products, subassemblies and components are procured
from a single source, and others are procured only from limited sources. In
particular, the Company currently obtains approximately 50% of its handheld
devices from one vendor located in the United Kingdom and obtains all the
microcontrollers for its AMR meter modules from a single source, National
Semiconductor. The Company's reliance on such components or on these sole- or
limited-source vendors or subcontractors involves certain risks, including the
possibility of shortages and reduced control over delivery schedules,
manufacturing capability, quality and costs. In addition, Itron may be affected
by worldwide shortages of certain components, such as memory chips. A
significant price increase in certain of such components or subassemblies could
have a material adverse effect on the Company's results of operations. Although
the Company believes alternative suppliers of these products, subassemblies and
components are available, in the event of supply problems from the Company's
sole- or limited-source vendors or subcontractors, the Company's inability to
develop alternative sources of supply quickly or cost-effectively could
materially impair the Company's ability to manufacture its products and,
therefore, could have a material adverse effect on the Company's business,
financial condition and results of operations. In the event of a significant
interruption in production at the Company's manufacturing facilities,
considerable time and effort could be required to establish an alternative
production line. Depending on which production line were affected, such a break
in production would have a material adverse effect on the Company's business,
financial condition and results of operations.
Dependence on Outsourcing Financing. The Company intends to utilize
limited recourse, long-term, fixed-rate project financing for its future
outsourcing contracts. It has established Itron Finance, Inc. as a wholly owned
Delaware subsidiary and plans to establish bankruptcy remote, single and special
purpose subsidiaries of Itron Finance, Inc. for this purpose. Although on May 9,
1997, the Company completed the closing of an $8 million AMR project financing,
there can be no assurance that it will be able to effect other project
financings. If the Company is unable to utilize limited recourse, long-term,
fixed-rate project financing for its outsourcing contracts, its borrowing
capacity will be reduced and it may be subject to the negative effects of
floating interest rates if it cannot hedge its exposure on such contracts.
Ability to Service Debt; Financial Condition. The funds generated by
existing operations may not be at levels sufficient to enable the Company to
meet its debt service obligations and other fixed charges. There can be no
assurance that cash flows from future operations of the Company, together with
funds from such other sources, if any, will be sufficient to enable the Company
to meet its debt service obligations. The Company has a line of credit for $50
million which expires on May 31, 1998. While the Company expects the credit
facility to be renewed in the ordinary course, there can be no assurance that it
will be renewed or will be renewed on terms acceptable to the Company or at
sufficient levels.
International Operations. International sales and operations may be
subject to risks such as the imposition of government controls, political
instability, export license requirements, restrictions on the export of critical
technology, currency exchange rate fluctuations, generally longer receivables
collection periods, trade restrictions, changes in tariffs, difficulties in
staffing and managing international operations, potential insolvency of
international dealers and difficulty in collecting accounts receivable. In
addition, the laws of certain countries do not protect the Company's products to
the same extent as do the laws of the United States. There can be no assurance
that these factors will not have a material adverse effect on the Company's
future international sales and, consequently, on the Company's business,
financial condition and results of operations.
Increased Leverage. The Company has issued $63,400,000 aggregate
principal amount of its 6-3/4% Convertible Subordinated Notes Due 2004 (the
"Notes"). Interest on the Notes is payable semiannually on March 31 and
September 30 of each year, commencing on September 30, 1997. Primarily as a
result of the sale of the Notes, the Company's ratio of total debt to total
capitalization increased from approximately 25.7% at December 31, 1996 to
approximately 36.6% at March 31, 1997. As a result of this increased debt level,
the Company's principal and interest obligations increased substantially. The
degree to which the Company has borrowed funds pursuant to the Notes could limit
the amount of additional financing the Company may obtain, and/or may result in
terms and conditions for any additional financing less favorable than the
Company's current borrowing terms and conditions. Increased borrowings could
make the Company more vulnerable to economic downturns and competitive
pressures. The Company's increased leverage could also materially and adversely
affect its liquidity, as a substantial portion of available cash from operations
may have to be applied to meet debt service requirements, and, in the event of a
cash shortfall, the Company could be forced to reduce other expenditures to be
able to meet such requirements.
Antitakeover Considerations. The Company has the authority to issue 10
million shares of preferred stock in one or more series and to fix the powers,
designations, preferences and relative, participating, optional or other rights
thereof without any further vote or action by the Company's shareholders. The
issuance of preferred stock could dilute the voting power of holders of Common
Stock and could have the effect of delaying or preventing a change in control of
the Company. Certain provisions of the Company's Restated Articles of
Incorporation, Restated Bylaws, shareholder rights plan and employee benefit
plans, as well as Washington law, may operate in a manner that could discourage
or render more difficult a takeover of the Company or the removal of management
or may limit the price certain investors may be willing to pay in the future for
shares of Common Stock.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholder.
SELLING SECURITYHOLDER
The Shares were originally issued in June 1997 upon exercise of
warrants that were issued in connection with a research and development
partnership. The following table sets forth certain information as of December
5, 1997 concerning the number of Shares beneficially owned by the Selling
Securityholder that may be offered from time to time pursuant to this
Prospectus.
Shares
Beneficially
Owned Prior to Shares Beneficially
Offering Shares That May be Sold Owned After Offering
--------------------------------------------------------------------------------------------
Name Number Number Percent(1) Number Percent
- ----------------------------------------------------------------------------------------------------------------------------------
Southern Electric PLC 50,000 50,000 * 0 --
- ------------
* Less than 1%.
(1) Computed in accordance with Rule 13d-3(d)(i) promulgated under the Exchange
Act, and based upon 14,600,212 shares of Common Stock outstanding as of
November 30, 1997.
The preceding table has been prepared based, in part, on the
information furnished to the Company by the Selling Securityholder.
PLAN OF DISTRIBUTION
The Shares offered hereby have been registered to remove their
restricted status under the Securities Act. Pursuant to this registration, the
Selling Securityholder may choose to sell all or any of the Shares from time to
time in transactions on Nasdaq or otherwise at prices and on terms then
prevailing at the time of sale, at prices related to the then-current market
price or in negotiated transactions. The Company may suspend the use of this
Prospectus for sales of Shares under certain circumstances.
The Shares may be sold in one or more of the following transactions:
(i) block trades in which the broker or dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction, (ii) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus, and (iii) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. In effecting sales, brokers and dealers engaged
by the Selling Securityholder may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from the
Selling Securityholder in amounts to be negotiated (and, if such broker-dealer
acts as agent for the purchase of such Shares, from such purchaser).
Broker-dealers may agree with the Selling Securityholder to sell a specified
number of Shares at a stipulated price per Share, and, to the extent such
broker-dealer is unable to do so acting as agent for a Selling Securityholder,
to purchase as principal any unsold Shares at the price required to fulfill the
broker-dealer commitment to such Selling Securityholder. Broker-dealers who
acquire Shares as principal may thereafter resell such Shares from time to time
in transactions (which may involve crosses and block transactions and sales to
and through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market or otherwise at prices and on terms then
prevailing at the time of sale, at prices then related to the then-current
market price or in negotiated transactions and, in connection with such resales,
may pay to or receive from the purchasers of such Shares commissions as
described above.
The Selling Securityholder has agreed to pay all expenses incident to
the registration, offer and sale of the Shares offered hereby, including all
selling commissions, if any.
LEGAL MATTERS
The legality of the Shares being offered hereby is being passed upon
for the Company by Perkins Coie, Seattle, Washington.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer to
sell or solicitation of any offer to buy the securities described herein by
anyone in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making the offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Under no circumstances shall the delivery of this Prospectus or
any sale made pursuant to this Prospectus create any implication that the
information contained in this Prospectus is correct as of any time subsequent to
the date of this Prospectus.
------------------------
TABLE OF CONTENTS
Page
Available Information...................... 2
Forward-Looking Statements................. 2
Incorporation of
Certain Documents by Reference.......... 3
Risk Factors............................... 4
Use of Proceeds............................ 10
Selling Securityholder..................... 10
Plan of Distribution....................... 11
Legal Matters.............................. 11
Experts.................................... 11
ITRON, INC.
50,000 Shares
of Common Stock
PROSPECTUS
December , 1997
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses incurred by the
Registrant, all of which will be reimbursed by the Selling Securityholder, in
connection with the sale of the securities being registered. Normal brokerage
commissions and fees are payable individually by the Selling Securityholder. All
amounts are estimates except the Securities and Exchange Commission ("SEC")
registration fee.
SEC registration fee............................ $ 270
Printing and engraving expenses................. 500
Legal fees and expenses......................... 8,000
Accounting fees and expenses.................... 1,000
Miscellaneous fees and expenses................. 500
----------
Total...................................... $ 10,270
============
Item 15. Indemnification of Directors and Officers
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the Registrant's Restated Bylaws provides for
indemnification of the Registrant's directors and officers to the maximum extent
permitted by Washington law.
Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, self-dealing or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article 9 of the Registrant's Restated Articles of Incorporation
contains provisions implementing, to the fullest extent permitted by Washington
law, such limitations on a director's liability to the Registrant and its
shareholders. Certain of the directors of the Registrant, who are affiliated
with principal shareholders of the Registrant, also may be indemnified by such
shareholders against liability they may incur in their capacity as a director of
the Registrant, including pursuant to a liability insurance policy for such
purpose.
The Registrant has entered into an Indemnification Agreement with each
of its executive officers and directors in which the Registrant agrees to hold
harmless and indemnify the officer or director to the full extent permitted by
Washington law. In addition, the Registrant agrees to indemnify the officer or
director against any and all losses, claims, damages, liabilities or expenses
incurred in connection with any actual, pending or threatened action, suit,
claim or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal, in which the officer or director is, was or
becomes involved by reason of the fact that the officer or director is or was a
director, officer, employee or agent of the Registrant, or that being or having
been such a director, officer, employee or agent, such director is or was
serving at the request of the Registrant as a director, officer, employee,
trustee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, whether the basis of such proceeding is alleged action (or inaction) by
the officer or director in an official capacity as a director, officer,
employee, trustee or agent or in any other capacity while serving as a director,
officer, employee, trustee or agent. The officer or director is not indemnified
for any action, suit, claim or proceeding instituted by or at the direction of
the officer or director unless such action, suit, claim or proceeding is or was
authorized by the Registrant's Board of Directors or unless the action is to
enforce the provisions of the Indemnification Agreement.
No indemnity pursuant to the Indemnification Agreements may be provided
by the Registrant on account of any suit in which a final, unappealable judgment
is rendered against an officer or director for an accounting of profits made
from the purchase or sale by the officer or director of securities of the
Registrant in violation of the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or for damages that have
been paid directly to the officer or director by an insurance carrier under a
policy of directors' and officers' liability insurance maintained by the
Registrant.
Officers and directors of the Registrant are covered by insurance (with
certain exceptions and certain limitations) that indemnifies them against losses
and liabilities arising from certain alleged "wrongful acts," including alleged
errors or misstatements, or certain other alleged wrongful acts or omissions
constituting neglect or breach of duty.
The above discussion of the WBCA and the Registrant's Restated Bylaws
and Restated Articles of Incorporation is not intended to be exhaustive and is
qualified in its entirety by reference to such statute, the Restated Bylaws and
the Restated Articles of Incorporation.
Item 16. Exhibits
5.1 Opinion of Perkins Coie, counsel to the Registrant, regarding the
legality of the securities
23.1 Consent of Deloitte & Touche LLP, independent auditors
23.2 Consent of Perkins Coie (contained in Exhibit 5.1)
24.1 Power of attorney (contained on signature page)
Item 17. Undertakings
A. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 15, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
B. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(b) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-offering amendment
any of the securities being registered which remain unsold at the
termination of the offering.
C. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunder duly
authorized, in the City of Spokane, State of Washington, on the 5th day of
December, 1997.
ITRON, INC.
/S/ JOHNNY M. HUMPHREYS
By: Johnny M. Humphreys
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Johnny M. Humphreys and David G. Remington, or either of them, as
attorneys-in-fact with full power of substitution, to execute in the name and on
the behalf of each person, individually and in each capacity stated below, and
to file, any and all amendments to this Registration Statement, including any
and all post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 5th day of December, 1997
Signature Title
/S/ PAUL A. REDMOND Chairman of the Board
- ------------------------
Paul A. Redmond
/S/ JOHNNY M. HUMPHREYS President, Chief Executive Officer and Director
(Principal Executive Officer)
- ------------------------
Johnny M. Humphreys
/S/ DAVID G. REMINGTON Chief Financial Officer
(Principal Financial and Accounting Officer)
- ------------------------
David G. Remington
/s/ MICHAEL B. BRACY Director
- ------------------------
Michael B. Bracy
/s/ TED C. DEMERRITT Director
- ------------------------
Ted C. DeMerritt
/s/ JON E. ELIASSEN Director
- ------------------------
Jon E. Eliassen
/s/ MARY ANN PETERS Director
- ------------------------
Mary Ann Peters
/s/ STUART EDWARD WHITE Director
- ------------------------
Stuart Edward White
/s/ GRAHAM M. WILSON Director
- ------------------------
Graham M. Wilson
EXHIBIT INDEX
Exhibit
Number
5.1 Opinion of Perkins Coie, counsel to the registrant, regarding the
legality of the Securities
23.1 Consent of Deloitte & Touche LLP, independent auditors
23.2 Consent of Perkins Coie (contained in Exhibit 5.1)
24.1 Power of attorney (contained on signature page)
- -------------------------------------------------------------------------------
Exhibit 5.1
- -------------------------------------------------------------------------------
December 4, 1997
Itron, Inc.
2818 N Sullivan Rd
Spokane, WA 99216
Gentlemen and Ladies:
We have acted as counsel to you in connection with the registration
under the Securities Act of 1933, as amended, by Itron, Inc. (the "Company") of
50,000 shares of Common Stock (the "Shares"). The Shares are to be offered and
sold by a securityholder of the Company. In this regard, we have participated in
the preparation of a Registration Statement on Form S-3 relating to the Shares
(the "Registration Statement") which you are filing with the Securities and
Exchange Commission.
We have examined the Registration Statement and such documents and
records of the Company and other documents as we have deemed necessary for the
purpose of this opinion. Based upon the foregoing, we are of the opinion that
the Shares have been duly authorized and validly issued and are fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all
post-effective amendments, and to the reference to our firm in the Prospectus of
the Registration Statement under the heading "Legal Matters." In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
PERKINS COIE
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Itron, Inc.'s
Registration Statement on Form S-3 of our reports dated February 7, 1997,
appearing in the Annual Report on Form 10-K of Itron, Inc. for the year ended
December 31, 1996 and to the reference to us under the heading "Experts" in the
Prospectus which is a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Seattle, Washington
December 4, 1997
