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
June 30, 1999
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(Date of Report)
ITRON, INC.
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(Exact Name of Registrant as Specified in Charter)
Washington 0-22418 911011792
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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)
Item 5: Other Information
The Company has a contract ("Contract") with Virginia Power dated July 24, 1997,
in which Virginia Power purchased a Fixed Network AMR system from Itron. The
Company recently received notice from Virginia Power that is has met the
deliverables and system functionality requirements for the system and as a
result, has received final systems acceptance. To date, the Company has
recognized revenues of approximately $40 million on this Contract. The system at
Virginia Power is being used to provide advanced meter reading services for
approximately 430,000 meters in areas in Richmond, Northern Virginia and
Norfolk.
In 1998, the Virginia General Assembly passed a law mandating retail electric
competition be fully implemented in Virginia by January 1, 2004. In connection
with the transition into a deregulated market, Virginia Power and the Virginia
State Corporation Commission agreed to a rate settlement that will reduce
Virginia Power's rates by $700 million and requires Virginia Power to write off
$220 million of their regulatory assets. Virginia Power has informed Itron that
in light of the rate settlement it has undertaken an aggressive program to
significantly reduce its purchasing and supply costs. As a significant vendor to
Virginia Power, the Company is being impacted by this cost reduction initiative.
The Company recently agreed to amend its Contract with Virginia Power. The key
change in the Contract relates to the outage detection functionality provided by
the Fixed Network system. While all of the hardware necessary for outage
detection capability is in place in the system, additional software development
work would need to be performed by both the Company and Virginia Power in order
for the outage detection information to be useful. The Contract has been amended
to eliminate outage detection functionality at this time.
The Contract amendment provides for a reduction in the total payment that the
Company is to receive for the system from Virginia Power of $4.2 million. The
Company expects to record the financial impact of the Contract reduction as a
$4.2 million charge to operations in the second quarter. The after-tax impact of
this charge on earnings is expected to be approximately 16 cents per share.
The Company believes that Virginia Power is an important customer and that it
has the potential to do considerable business with Virginia Power in the future.
Virginia Power and Consolidated Natural Gas are in the process of a merger,
which will result in the formation of the nation's fourth largest electric and
natural gas utility, serving nearly 4 million retail customers in five states.
Certain Forward Looking Statements
When used in this discussion, the words "expects", "believes", and 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 the forward-looking
statements. Such risks and uncertainties include, among others, whether Virginia
Power will order any future products or services from the Company. For a more
complete description of these and other risks, see the Company's Annual Report
on Form 10-K for the year ended December 31, 1998, and Form 10-Q for the quarter
ended March 31, 1999.