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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
|X| ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________TO____________________
COMMISSION FILE NUMBER 0-22418
ITRON, INC. INCENTIVE SAVINGS PLAN
(Full title of the plan and address of the plan,
if different from that of the issuer named below)
ITRON, INC.
2818 NORTH SULLIVAN ROAD
SPOKANE, WASHINGTON 99216-1897
(509) 924-9900
(Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office)
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ITRON, INC. INCENTIVE
SAVINGS PLAN
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND
FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
TABLE OF CONTENTS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Statement of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4-9
SUPPLEMENTAL INFORMATION
Schedule of assets (held at end of year) 10
Schedule of reportable transactions 11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Advisory Committee
Itron, Inc. Incentive Savings Plan
Spokane, Washington
We have audited the accompanying statement of net assets available for benefits
of Itron, Inc. Incentive Savings Plan as of December 31, 2003 and 2002, and the
related statement of changes in net assets available for benefits for the year
ended December 31, 2003. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Itron, Inc.
Incentive Savings Plan as of December 31, 2003 and 2002, and the changes in net
assets available for benefits for the year ended December 31, 2003, in
conformity with U.S. generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
at end of year and schedule of reportable transactions are presented for
purposes of additional analysis, and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Moss Adams LLP
Spokane, Washington
May 7, 2004
1
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ITRON, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
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December 31,
------------------------
2003 2002 Restated
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ASSETS
Investments:
At fair market value
Registered investment company funds $18,030,952 $10,256,121
Common/collective trust funds 16,578,499 12,484,226
Pooled separate accounts 8,186,249 5,604,785
Company stock 5,820,285 6,844,323
Individually directed accounts 384,508 305,311
Participant loans 885,944 781,741
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Total investments 49,886,437 36,276,507
Receivables:
Participants' contributions 197,352 141,537
Employer contribution 382,578 318,591
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NET ASSETS AVAILABLE FOR BENEFITS $50,466,367 $36,736,635
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SEE ACCOMPANYING NOTES. 2
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ITRON, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
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Year Ended
December 31,
2003
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ADDITIONS TO NET ASSETS
Investment income:
Net appreciation (depreciation) in fair value of investments:
Registered investment company funds $ 3,376,266
Common/collective trust funds 3,302,202
Company stock (157,850)
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6,520,618
Interest and dividends 620,998
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7,141,616
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Contributions:
Participants' 5,251,341
Employer 1,684,150
Rollovers 524,403
Transfer into Plan 1,525,705
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8,985,599
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Total additions 16,127,215
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DEDUCTIONS FROM NET ASSETS
Benefits paid to participants 2,393,083
Administrative expenses 4,400
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Total deductions 2,397,483
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NET INCREASE 13,729,732
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year - restated 36,736,635
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End of year $ 50,466,367
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3 SEE ACCOMPANYING NOTES.
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ITRON, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - DESCRIPTION OF THE PLAN AND BASIS OF PRESENTATION
Itron, Inc. (the Company or Employer) established Itron, Inc. Incentive Savings
Plan (the Plan) effective as of March 1, 1985 (restated November 1, 2000). The
Plan is subject to the applicable provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) as amended. The Plan is administered by an internal
Advisory Committee and is participant directed. The trustee of the Plan is New
York Life Benefit Services LLC. Participants should refer to the Plan agreement
for a more complete description of the Plan's provisions.
ELIGIBILITY:
Full-time and part-time employees of Itron, Inc. shall become a participant
under the Plan as soon as administratively possible following the employee's
employment date.
The employee qualifies to receive Employer match contributions if employed on
the last day of the period for which the Employer contribution is made to the
Plan.
CONTRIBUTIONS:
Each year, participants may contribute up to 50% of pretax annual compensation,
as defined in the Plan. Participants may also contribute amounts representing
distributions from other qualified defined benefit or contribution plans.
Participants direct the investment of their contributions into various
investment options offered by the Plan. The Plan currently offers registered
investment company funds, common/collective trust funds, pooled separate
accounts and company stock as investment options for participants. The Company
may contribute (in cash or Company securities) to the Plan, on behalf of each
employee eligible, a discretionary matching contribution equal to a percentage
(as determined by the Company's Board of Directors) of the elective deferrals
made by each such employee. The Company's Board of Directors may also determine
to suspend or reduce its contribution for any Plan year or any portion thereof.
In 2003, the Company matched 50% of participant contributions up to 6%.
PARTICIPANT ACCOUNTS:
Each participant's account is credited with the participant's contribution and
allocations of (a) the Company's contribution and (b) Plan earnings (losses) and
charged with an allocation of administrative expenses. Allocations are based on
participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested amount.
VESTING:
Participants are immediately vested in their voluntary contributions plus actual
earnings thereon. Vesting in the Company's contribution portion of their
accounts plus actual earnings thereon is based on years of continuous service. A
participant is 100% vested after five years of credited service.
4
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ITRON, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - DESCRIPTION OF THE PLAN AND BASIS OF PRESENTATION (CONTINUED)
PARTICIPANT LOANS:
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum of $50,000 or 50% of their vested account balance, whichever is less.
The loans are secured by the balance in the participant's account and bear
interest at rates determined by the Administrative Committee based on the yield
rates of appropriate U.S. Treasury securities. Principal and interest is paid
ratably through bi-weekly payroll deductions.
PAYMENT OF BENEFITS:
Benefits will be paid to participants when they reach normal retirement age (age
59 1/2 or later), terminate service with the Employer, death, disability or
hardship. Distributions are made in lump-sum payments, or in periodic
installments over a period not exceeding 20 years, if the participant's vested
account exceeds $5,000. A single payment distribution may also be made in the
form of whole shares of Employer stock to the extent the participant's account
is invested in Employer stock.
FORFEITURES:
The Plan may treat forfeitures as a reduction of Employer contributions for the
Plan year in which the forfeiture occurs or pay Plan expenses. Forfeitures used
in the Plan year ended December 31, 2003, amounted to $49,240.
HARDSHIP WITHDRAWALS:
Hardship withdrawals are permitted by the Plan in accordance with Internal
Revenue Code Section 401 (k).
INVESTMENT MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The Plan pays investment management fees. Expenses for administration of the
Plan (recordkeeping, trustee services and consulting services) are paid directly
by the Company at its election.
PLAN TERMINATION:
Although it has not expressed any intent to do so, the Employer, by resolution
of its Board of Directors, reserves the right to terminate the Plan at any time,
subject to Plan provisions. Upon such termination of the Plan, the interest of
each participant in the trust fund shall become fully vested and nonforfeitable.
5
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ITRON, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS:
The Plan's investments are held by New York Life Benefit Services LLC and
recorded at fair value. Investment in Employer stock represents shares of the
Company's common stock held by the Plan. Shares of registered investment company
funds and common/collective trust funds are valued at quoted market prices which
represent the net asset value of shares held by the Plan at year end. Units of
pooled separate accounts are considered highly liquid instruments with original
maturities of three months or less. Pooled separate accounts are recorded at
cost which approximates fair value. The Company stock is valued at its quoted
market price. The fair value at December 31, 2003, was $18.36 per share.
Participant loans are valued at cost which approximates fair value.
Purchases and sales of securities are recorded on a trade date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
PAYMENTS OF BENEFITS:
Benefits are recorded when paid.
BASIS OF ACCOUNTING:
The financial statements of the Plan have been prepared on the accrual basis of
accounting.
RISKS AND UNCERTAINTIES:
The Plan provides for various investment options in any combination of mutual
funds provided by the Plan. Investment securities of these types are exposed to
various risks, such as interest rate, market and credit. Due to the level of
risk associated with certain investment securities, it is at least reasonably
possible that changes in the values of investment securities will occur in the
near-term, and that such changes could materially affect participants' account
balances and the amounts reported in the financial statements.
USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
ALLOWANCE FOR LOSS ON RECEIVABLES:
There has not been recognition of an allowance for loss on receivables as all
receivables are deemed to be 100% collectible or adequately secured as of the
date of this report.
6
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ITRON, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE 3 - INVESTMENTS
The following presents investments at December 31, 2003 and 2002, which
represent 5% or more of the Plan's net assets.
December 31,
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2003 2002
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Shares in registered investment company funds:
Artisan Mid Cap Fund (Inv Shrs) $4,253,639 $ --
PIMCO Total Return Fund (Admin) 3,087,746 2,144,329
Artisan Small Cap Value Fund 3,002,262 --
Mellon-Master Stock Index (l) -- 6,933,160
MSIF Tr Mid Cap Growth Fund-Adv -- 2,564,210
Common/collective trust funds:
Barclays Equity Index Fund Q 9,393,291 --
Barclays LifePath 2020 Fund 6,171,047 5,208,646
Units of pooled separate accounts:
New York Life Insurance Anchor Account I 8,186,249 5,604,785
Shares in company stock:
Itron, Inc. Company Stock 5,820,285 6,844,323
NOTE 4 - TAX STATUS
The Plan obtained its latest determination letter dated October 23, 2001, in
which the Internal Revenue Service stated that the Plan, as then designed, was
in compliance with the applicable requirements of the Internal Revenue Code. The
Plan has been amended since receiving the determination letter. However, the
Plan administrator believes that the Plan is currently designed and is being
operated in compliance with the applicable requirements of the Internal Revenue
Code. Therefore, no provision for income taxes has been included in the Plan's
financial statements.
NOTE 5 - PARTY IN INTEREST TRANSACTIONS
Certain Plan assets are managed by New York Life Benefit Services LLC, the
custodian of the assets. Therefore, these investments qualify as party in
interest transactions. Certain Plan investments are shares in Itron, Inc. common
stock. These transactions represent investments in the Company and therefore,
qualify as party in interest transactions. The Plan also has participant loans,
which qualify as party in interest transactions.
7
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ITRON, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE 6 - TRANSFER OF ASSETS
In March 2003, the Company acquired Silicon Energy Corp. (Silicon). As part of
the acquisition, $1,523,686 of Silicon's defined contribution plan assets were
transferred into Itron, Inc. Incentive Savings Plan.
In October 2002, the Company acquired Regional Economic Research, Inc. (RER). As
part of the acquisition, in 2002 primarily all of the assets of RER's defined
contribution plan were transferred into the Itron, Inc. Incentive Savings Plan.
In 2003, the transfer of residual assets from the RER plan amounted to $2,019.
NOTE 7 - CORRECTION OF PRIOR PERIOD CONTRIBUTIONS
During the 2003 audit of the Plan, it was discovered that the 2002 participant
and employer contributions receivable were not accrued. Therefore, the 2002
financial statements have been restated to reflect the participant and employer
contributions receivable. The result of this correction was to increase the 2002
statement of net assets available for benefits and the statement of changes in
net assets available for benefits by $460,128. This correction is also reflected
in the 2003 statement of changes of net assets available for benefits as an
increase in the beginning of year net assets available for benefits.
8
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ITRON, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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NOTE 8 - FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
December 31,
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2003 2002
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Net assets available for benefits per the financial statements $ 50,466,367 $ 36,736,635
Participants' contributions receivable (197,352) (141,537)
Employer contribution receivable (382,578) (318,591)
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Net assets available for benefits per the Form 5500 $ 49,886,437 $ 36,276,507
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The following is a reconciliation of contributions received from participants
per the financial statements for the year ended December 31, 2003, to the Form
5500:
Contributions received from participants per the financial statements $ 5,251,341
Less: participants' contributions receivable at December 31, 2003 (197,352)
Add: participants' contributions receivable at December 31, 2002 141,537
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Contributions received from participants per the Form 5500 $ 5,195,526
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The following is a reconciliation of contributions received from the Employer
per the financial statements for the year ended December 31, 2003, to the Form
5500:
Contributions received from the Employer per the financial statements $ 1,684,150
Less: Employer contribution receivable at December 31, 2003 (382,578)
Add: Employer contribution receivable at December 31, 2002 318,591
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Contributions received from the Employer per the Form 5500 $ 1,620,163
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9
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ITRON, INC. INCENTIVE SAVINGS PLAN
SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
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Plan's Sponsor EIN: 91-1011792
Plan Number: 001
December 31, 2003
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(a)
Party in (b) Identity of Issue, Borrower, Lessor Fair Market
Interest or Similar Party Value
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Registered Investment Company Funds:
Artisan Mid Cap Fund (Inv Shrs) $ 4,253,639
PIMCO Total Return Fund (Admin) 3,087,746
Artisan Small Cap Value Fund 3,002,262
Artisan International Fund 2,319,215
American Century Real Estate Fund 1,813,068
Davis New York Venture Fund (A) 1,368,710
TCW Galileo Select Equities Adv Fund 1,045,741
* Mainstay A Mid Cap Value Fund 876,551
* Mainstay Cash Reserves Fund I 264,020
Common/Collective Trust Funds:
Barclays Equity Index Fund Q 9,393,291
Barclays LifePath 2020 Fund 6,171,047
Barclays LifePath 2010 Fund 598,503
Barclays LifePath 2030 Fund 415,658
Pooled Separate Accounts:
* New York Life Insurance Anchor Account I 8,186,249
* Itron, Inc. Company Stock 5,820,285
Individually Directed Accounts 384,508
* Participant Loans (5.0%-10.5%, secured by
participant's accounts) 885,944
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$ 49,886,437
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* Party in interest transaction as defined by ERISA.
10
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ITRON, INC. INCENTIVE SAVINGS PLAN
SCHEDULE H, LINE 4J - REPORTABLE TRANSACTIONS
Plan's Sponsor EIN: 91-1011792
Plan Number: 001
There were no reportable transactions for 2003.
11
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SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Advisory Committee has duly caused this annual report to be signed
on its behalf by the undersigned thereunto duly authorized, on the 25 of June,
2004.
ITRON, INC. INCENTIVE SAVINGS PLAN
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(NAME OF PLAN)
/s/ David G. Remington
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DAVID G. REMINGTON
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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23 Consent of Moss Adams LLP, Independent Registered Public
Accounting Firm
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-110703) of Itron, Inc. of our report dated May
7, 2004, relating to the financial statements of the Itron, Inc. Incentive
Savings Plan, which appears in this Form 11-K.
/s/ Moss Adams LLP
Spokane, WA
June 23, 2004