Form 11-K
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

Washington, D.C. 20549

 


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, 2005

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 Valley, 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 AND SUPPLEMENTAL SCHEDULES

 

DECEMBER 31, 2005 AND 2004


Table of Contents

TABLE OF CONTENTS

 

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

   4-8

SUPPLEMENTAL SCHEDULES

  

Schedule H, Line 4a - Schedule of delinquent Participant contributions

   9

Schedule H, Line 4i - Schedule of assets (held at end of year)

   10


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Itron, Inc. Incentive Savings Plan Administrative Committee

Spokane, Washington

We have audited the accompanying statement of net assets available for benefits of Itron, Inc. Incentive Savings Plan as of December 31, 2005 and 2004, and the related statement of changes in net assets available for benefits for the year ended December 31, 2005. 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 misstatement. 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 audits provide 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, 2005 and 2004, and the changes in net assets available for benefits for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of delinquent participant contributions and the schedule of assets held at end of year are presented for purposes of additional analysis, and are not a required part of the basic financial statements but is 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

June 22, 2006

 

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ITRON, INC. INCENTIVE SAVINGS PLAN

STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS

 

     December 31,
     2005     2004

ASSETS

    

Investments:

    

At fair market value

    

Registered investment company funds

   $ 67,262,714     $ 33,066,250

Pooled separate accounts

     18,815,264       10,836,917

Common/collective trust funds

     14,246,737       11,331,643

Stock funds

     8,666,129       6,301,552

Individually directed accounts

     926,681       471,102

Participant loans

     2,170,433       861,773
              

Total investments

     112,087,958       62,869,237

Receivables:

    

Participants’ contributions

     221,682       60,866

Employer contributions

     520,853       530,286
              

TOTAL ASSETS

     112,830,493       63,460,389

LIABILITIES

    

Refundable Participant contributions

     (298,029 )     —  

Refundable Employer contributions

     (17,072 )     —  
              

TOTAL LIABILITIES

     (315,101 )     —  
              

NET ASSETS AVAILABLE FOR BENEFITS

   $     112,515,392     $       63,460,389
              

See accompanying notes.

 

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ITRON, INC. INCENTIVE SAVINGS PLAN

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

 

    

Year Ended

December 31, 2005

ADDITIONS TO NET ASSETS

  

Investment income:

  

Net appreciation in fair value of investments:

  

Registered investment company funds

   $ 2,742,715

Common/collective trust funds

     779,326

Stock funds

     4,290,393

Individually directed accounts

     181,355
      
     7,993,789

Interest and dividends

     3,835,977
      
     11,829,766
      

Contributions:

  

Participants’

     6,950,598

Employer

     2,392,468

Rollovers

     355,918

Transfer in from acquisition

     34,751,629
      
     44,450,613
      

Total additions

     56,280,379
      

DEDUCTIONS FROM NET ASSETS

  

Benefits paid to Participants

     7,219,356

Administrative expenses

     6,020
      

Total deductions

     7,225,376
      

NET INCREASE

     49,055,003

NET ASSETS AVAILABLE FOR BENEFITS

  

Beginning of year

     63,460,389
      

End of year

   $     112,515,392
      

See accompanying notes.

 

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ITRON, INC. INCENTIVE SAVINGS PLAN

NOTES TO FINANCIAL STATEMENTS

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 March 1, 1985 (amended and restated August 5, 2005), including subsequent amendments. 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 Administrative 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 the Company shall become a Participant under the Plan as soon as administratively possible following the employee’s employment dates.

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 Company may contribute 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 2005, the Company matched 50% of Participant contributions up to 6% of the Participants’ pretax annual compensation, as defined in the Plan.

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 certain 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.

Participant loans:

Participants may borrow from their fund accounts a minimum of $1,000 and up to a maximum of $50,000, or 50%, of their vested account balance. 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 are 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, 2005 and 2004, amounted to $86,064 and $90,220, respectively. Unallocated forfeitures were $123,561 and $53,821 as of December 31, 2005 and 2004, respectively.

 

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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 the Company has not expressed any intent to do so, the Company, 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.

Note 2 - Summary of Significant Accounting Policies

Valuation of investments:

The Plan’s investments are held by New York Life Benefit Services LLC. Shares of registered investment company funds, common/collective trust funds and individually directed accounts 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 stock funds represent shares of the Company’s common stock held by the Plan and shares of other companies’ common stock transferred into the Plan in connection with the merger of plans acquired from business acquisitions. Company stock is valued at its quoted market price. The fair value of Itron’s common stock at December 31, 2005, was $40.04 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 additions and deductions to net assets available for benefits during the reporting period. Actual results could differ from those estimates.

Allowance for loss on receivables:

An allowance for loss on receivables has not been recorded as all receivables are deemed to be 100% collectible or adequately secured as of the date of this report.

 

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Note 3 - Investments

The following presents investments at December 31, 2005 and 2004, which represent 5% or more of the Plan’s net assets.

 

     December 31,
     2005    2004

Registered investment company funds:

     

PIMCO Total Return Fund (Admin)

   $       14,464,491    $       5,952,332

Artisan International Fund

     10,448,393      4,683,721

Artisan Mid Cap Fund (Inv shrs)

     8,481,933      6,047,434

Artisan Small Cap Value Fund

     7,291,003      4,822,842

American Century Real Estate Fund

     6,851,637      3,470,778

Davis New York Venture Fund (A)

     6,338,359      —  

Pooled separate accounts:

     

New York Life Insurance Anchor Account I

     18,815,264      10,836,917

Common/collective trust fund:

     

Barclays Equity Index Fund Q

     14,246,737      11,331,643

Stock fund:

     

Itron, Inc. Company Stock Fund

     8,543,495      6,301,552

In accordance with the Plan, Participants can direct their contributions to invest in one or more of the following: PIMCO High Yield Fund (Admin), Artisan Mid Cap Fund (Inv Shrs), PIMCO Total Return Fund (Admin), Artisan Small Cap Value Fund, Artisan International Fund, American Century Real Estate Fund, Davis New York Venture Fund (A), TCW Galileo Select Equities Adv Fund, Artisan Mid Cap Value Fund, Baron Growth Fund, Barclays Equity Index Fund Q, New York Life Insurance Anchor Account I, Itron, Inc. Company Stock Fund and individually directed accounts.

Certain investment accounts are frozen, whereas no additional contributions can be made to the respective funds.

On July 1, 2004, the Company acquired Schlumberger Ltd.’s electricity metering business (SEM). As part of the acquisition, $34,751,629 of SEM’s defined contribution plan assets were transferred into the Itron, Inc. Incentive Savings Plan in May 2005.

Note 4 - Tax Status

The Plan obtained its latest determination letter dated February 10, 2005, 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 Administrative Committee 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.

 

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Note 5 - Party in Interest Transactions

Certain Plan assets are managed by New York Life Benefit Services LLC, the custodian of the assets. Certain Plan investments are shares in Itron, Inc. common stock. The Plan also has Participant loans. These transactions qualify as party in interest transactions.

Note 6 - Form 5500

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

 

     December 31,  
     2005     2004  

Net assets available for benefits per the financial statements

   $   112,515,392     $     63,460,389  

Participants’ contributions receivable

     (221,682 )     (60,866 )

Employer contributions receivable

     (520,853 )     (530,286 )

Refundable Participant contributions

     298,029       —    

Refundable Employer contributions

     17,072       —    
                

Net assets available for benefits per the Form 5500

   $ 112,087,958     $ 62,869,237  
                

The following is a reconciliation of contributions received from Participants per the financial statements for the year ended December 31, 2005, to the Form 5500:

 

Contributions received from Participants per the financial statements

   $     6,950,598  

Less: Participants’ contributions receivable at December 31, 2005

     (221,682 )

Add: Participants’ contributions receivable at December 31, 2004

     60,866  

Refundable Participant contributions

     298,029  
        

Contributions received from Participants per the Form 5500

   $ 7,087,811  
        

The following is a reconciliation of contributions received from the Employer per the financial statements for the year ended December 31, 2005, to the Form 5500:

 

Contributions received from the Employer per the financial statements

   $     2,392,468  

Less: Employer contributions receivable at December 31, 2005

     (520,853 )

Add: Employer contributions receivable at December 31, 2004

     530,286  

Refundable Employer contributions

     17,072  
        

Contributions received from the Employer per the Form 5500

   $ 2,418,973  
        

 

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Note 7 - Nonexempt Transactions

During 2005, the Company did not remit $684 in Participant contributions associated with a portion of one pay cycle to the Plan on a timely basis. This late payment is considered a prohibited transaction by the Department of Labor.

Note 8 - Subsequent Events

On May 19, 2006, the Administrative Committee amended the Plan to eliminate the Itron, Inc. Company Stock Fund as an investment choice for new deferrals as of July 1, 2006, with the associated assets to remain in the fund, unless traded or disbursed at the Participant’s option.

 

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ITRON, INC. INCENTIVE SAVINGS PLAN

SCHEDULE H, LINE 4a - SCHEDULE OF DELINQUENT PARTICIPANT

CONTRIBUTIONS

 

Plan’s Sponsor EIN:   91-1011792
Plan Number:   001

 

Participants Contribution

Transferred Late to Plan

  

Total that Constitutes Nonexempt

Prohibited Transactions

  $        684         $        684   
                

 

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ITRON, INC. INCENTIVE SAVINGS PLAN

SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)

 

Plan’s Sponsor EIN:    91-1011792
Plan Number:    001

 

December 31, 2005

(a)

  

(b) Identity of Issue, Borrower, Lessor,
or Similar Party

  

(c) Description of Investment Including
Maturity Date, Rate of Interest, Collateral,
Par, or Maturity value

  

(d)

Cost

   (e)
Current
Value
   Registered Investment Company Funds:         
  

PIMCO High Yield Fund (Admin)

   Registered Investment Company Funds    **    $ 775,817
  

Artisan Mid Cap Fund (Inv Shrs)

   Registered Investment Company Funds    **      8,481,933
  

PIMCO Total Return Fund (Admin)

   Registered Investment Company Funds    **      14,464,491
  

Artisan Small Cap Value Fund

   Registered Investment Company Funds    **      7,291,003
  

Artisan International Fund

   Registered Investment Company Funds    **      10,448,393
  

American Century Real Estate Fund

   Registered Investment Company Funds    **      6,851,637
  

Davis New York Venture Fund (A)

   Registered Investment Company Funds    **      6,338,359
  

TCW Galileo Select Equities Adv Fund

   Registered Investment Company Funds    **      4,330,161
  

Artisan Mid Cap Value Fund

   Registered Investment Company Funds    **      3,593,938

*

  

Mainstay Cash Reserves Fund I

   Registered Investment Company Funds    **      434,360
  

Baron Growth Fund

   Registered Investment Company Funds    **      4,252,622
   Common/Collective Trust Funds:         
  

Barclays Equity Index Fund Q

   Common/Collective Trust Funds    **      14,246,737
   Pooled Separate Accounts:         

*

  

New York Life Insurance Anchor Account I

   Pooled Separate Accounts    **      18,815,264
   Stock Funds:         

*

  

Itron, Inc. Company Stock Fund

   Company Stock Fund    **      8,543,495
  

Schlumberger Ltd. Common Stock Fund

   Company Stock Fund    **      108,905
  

Transocean Inc. Common Stock Fund

   Company Stock Fund    **      13,729
   Individually Directed Accounts    Individually Directed Accounts    **      926,681

*

  

Participant Loans (4.0% - 9.5%, secured by participant’s accounts)

   Participant Loans    **      2,170,433
               
            $       112,087,958
               

* Party in interest transaction as defined by ERISA.

** The cost of participant directed investments is not required to be disclosed.

 

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SIGNATURE

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 23rd of June, 2006.

 

ITRON, INC. INCENTIVE SAVINGS PLAN
(Name of Plan)
/s/    STEVEN M. HELMBRECHT        
Steven M. Helmbrecht
Sr. Vice President and Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit
Number
  

Description of Exhibit

23.1    Consent of Moss Adams LLP, Independent Registered Public Accounting Firm

 

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