Itron

2   0   1   6

ANNUAL REPORT

TO OUR SHAREHOLDERS
I am pleased to share with you the strong fi nancial
results of 2016, which refl ect a very transformative year 
for Itron. As I look back on our accomplishments, I could 
not be more proud of how we executed on a number 
of initiatives that improved predictability, profi tability and 
growth—three core pillars for Itron’s continued success. 
Over the course of the year, we won new deals in a 
highly competitive landscape as we differentiated Itron 
in the marketplace with the launch our OpenWay RivaTM
in the marketplace with the launch our OpenWay RivaTM
in the marketplace with the launch our OpenWay Riva
Internet of Things (IoT) solution. We improved effi ciencies 
in our global supply chain and hired best-in-class 
experts with outside industry knowledge to accelerate 
our advancement toward operational excellence. We 
aligned the entire organization to our strategy and shared 
business goals. We realized early benefi ts of these 
efforts in 2016 as we fi nished the year with operational 
improvements and revenue growth. I see tremendous 
opportunity to carry the incredible momentum we 
have built forward, bringing even greater value to our 
customers, employees and shareholders. 

BUSINESS HIGHLIGHTS
In 2016, revenue and margins exceeded our annual 
fi nancial targets. We ended the year well-positioned for 
future growth, with strong cash fl ow, a fl exible balance 
sheet and an increased backlog of business.

The company’s backlog totaled $1.7 billion at year-end, 
up 5 percent from 2015. With an additional $325 million
in contracts awarded and not yet booked, we have 
visibility to nearly $2 billion of new project-based 
business. Our increased backlog refl ects our customers’ 
growing interest in Itron’s technologies and services, as 
we aim to provide them with outcomes and additional 
value on their investments. 

Contributing to our solid year, we signed several notable 
wins in 2016, which demonstrate the strength of our 
solutions, including:  
» Enedis in France, which selected Itron for 4.6 
  million smart meters for the second phase of the Linky 
  program—in addition to more than 1.5 million meters 

Itron delivered for the fi rst phase.  

» Snowy Valleys Council in Australia, which is 
  deploying Itron’s water metering automation solution
  as well as advanced data collection and data 
  management software as a service (SaaS).
» Avista Utilities in Washington, which is deploying 
Itron’s OpenWay Riva IoT solution to modernize its 
  electricity and gas network and lay the foundation for 
  smart city applications.
» Peoples Natural Gas in Pennsylvania, which is 
  deploying Itron’s smart gas solution and installing 
  approximately 460,000 OpenWay Riva gas modules 
  over the next fi ve years. 
» National Grid in Massachusetts, which selected
Itron’s OpenWay Riva solution as part of its 
 modernization plan to bring smart grid technology
to its 1.3 million customers throughout the state.

  grid

In addition, the industry has responded enthusiastically 
to OpenWay Riva. We have signed 10 OpenWay Riva 
customers to date—and the list continues to grow. 
Customers recognize the benefi ts of this game-changing 
technology as a foundational platform on which they can 
drive distribution effi ciency, reliability and safety, as well as 
integrate renewable energy sources, engage prosumers, 
support new revenue models and lead smart cities. Itron’s 
OpenWay Riva offering is the only IoT solution available 
today that delivers distributed computing power, adaptive 
communications and control all the way to the meter or 
sensor, bringing new insights, actions and possibilities to 
our customers.  

 
 
 
 
 
Internally, we are driving operational excellence with 
improvements implemented across our business. We 
intensifi ed our focus on quality throughout our supply 
chain and better aligned our sales pipeline management 
and operations planning. We established Itron Idea Labs 
and Centers of Excellence in engineering and services 
to accelerate delivery of new solutions while expanding 
margins and return on invested capital. And we continue 
to standardize and simplify our administrative processes, 
utilizing our shared services center in Ireland.

LOOKING AHEAD
As we look ahead, Itron’s investment in innovation to 
support the continued adoption of smart technology 
by utilities and municipalities provides substantial 
opportunities for future growth—beyond traditional 
smart grid applications. Itron has been connecting 
devices and helping our utility customers operate more 
effi ciently for almost 40 years. We are using our domain 
expertise gained from deploying more than 150 million 
digital endpoints around the world to design even better 
technologies and analytics. With OpenWay Riva, we are 
creating devices that are more intelligent with the ability 
to analyze data and make decisions at every level of the 
distribution network. We are creating a grid that is active, 
dynamic and secure.

This active grid goes beyond the smart systems of today 
to leverage data to make real-time decisions, where and 
when they are needed. It harnesses the power of the 
Internet of Things to reduce waste, improve effi ciencies 
and create value for both utilities and communities. 
This technology can cross over between utility and city 
networks, creating synergies and new potential revenue 
opportunities for our customers at a time when their 
business model is changing.

In an increasingly connected world with rapidly evolving 
technologies, the ability to adapt and make decisions 
quickly has never been so important. Utilities and 
municipalities are using Itron’s solutions – including meters 
and sensors, industry-standard communications networks 
and software and services – to make their cities safer, 
more vibrant and better-connected places in which to live. 
Our growing software and services portfolio provides the 
right tools and real-time data to make informed decisions, 
and more than 500 customers are using Itron’s managed 
services today to provide better business outcomes. At 
the same time, our outcomes-based solutions provide 
recurring revenue streams that enhance the long-term 
predictability of Itron’s fi nancial results.

Coming off a solid year of performance, Itron has never 
been better positioned to build on the strength of our core  
business as we become the leading partner to utilities and 
cities of the future. Our success in this endeavor is fi rmly 
anchored by our innovative technology, solutions and 
people, and when coupled with the relentless pursuit to 
deliver predictable results, achieve greater profi tability and 
drive long-term growth for Itron and its shareholders, Itron 
is truly a company to be admired. It is an exciting time for 
this company and we are still early in this journey. There 
are many more great opportunities ahead for us to seize, 
and I have never been more confi dent in our ability to do so. 

Thank you all for sharing our vision of creating a more 
resourceful world. 

Sincerely, 

Philip Mezey
Philip Mezey
President and Chief Executive Offi cer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 
1934

For the transition period from             to             

Commission file number 000-22418

ITRON, INC.

(Exact name of registrant as specified in its charter)

Washington
(State of Incorporation)

91-1011792
(I.R.S. Employer Identification Number)

2111 N Molter Road, Liberty Lake, Washington 99019
(509) 924-9900
(Address and telephone number of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common stock, no par value

Name of each exchange on which registered
NASDAQ Global Select Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  

  No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  

  No  

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during 
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for 
the past 90 days.  Yes  

  No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be 
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the 
registrant was required to submit and post such files).  Yes  

  No  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not 
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the 
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Non-accelerated filer

  (Do not check if a smaller reporting company)

Accelerated filer
Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  

  No  

As of June 30, 2016 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of common 
stock held by non-affiliates of the registrant (based on the closing price for the common stock on the NASDAQ Global Select Market) was $1,632,121,446.

As of January 31, 2017 there were outstanding 38,327,719 shares of the registrant’s common stock, no par value, which is the only class of common stock of the 
registrant.

DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III is incorporated by reference to the definitive Proxy Statement for the Annual Meeting of Shareholders of the Company to 
be held on May 12, 2017.

 
 
 
 
 
 
 
Itron, Inc.

Table of Contents

PART I

ITEM 1: BUSINESS

ITEM 1A: RISK FACTORS

ITEM 1B: UNRESOLVED STAFF COMMENTS

ITEM 2:

PROPERTIES

ITEM 3:

LEGAL PROCEEDINGS

ITEM 4: MINE SAFETY DISCLOSURES

PART II

ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER 

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6:
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 

SELECTED CONSOLIDATED FINANCIAL DATA

AND RESULTS OF OPERATIONS

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8:

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Balance Sheets

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 

AND FINANCIAL DISCLOSURE

ITEM 9A: CONTROLS AND PROCEDURES

ITEM 9B: OTHER INFORMATION

PART III

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11: EXECUTIVE COMPENSATION
ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR 

INDEPENDENCE

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULE

SIGNATURES

SCHEDULE II:  VALUATION AND QUALIFYING ACCOUNTS

Page

1

6

15

15

15

16

17

19

20

40

42

45

46

47

48

49

50

90

90

93

95

95

95

95

96

97

100

101

In this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “Itron,” and the “Company” refer to Itron, Inc.

Certain Forward-Looking Statements

This document contains forward-looking statements concerning our operations, financial performance, revenues, earnings growth, 
liquidity, and other items. This document reflects our current plans and expectations and is based on information currently available 
as of the date of this Annual Report on Form 10-K. When we use the words “expect,” “intend,” “anticipate,” “believe,” “plan,” 
“project,” “estimate,” “future,” “objective,” “may,” “will,” “will continue,” and similar expressions, they are intended to identify 
forward-looking statements. Forward-looking statements rely on a number of assumptions and estimates. These assumptions and 
estimates could be inaccurate and cause our actual results to vary materially from expected results. Risks and uncertainties include 
1) the rate and timing of customer demand for our products, 2) rescheduling or cancellations of current customer orders and 
commitments, 3) changes in estimated liabilities for product warranties, litigation, and costs to deliver and implement network 
solutions, 4) our dependence on customers’ acceptance of new products and their performance, 5) competition, 6) changes in 
domestic and international laws and regulations, 7) changes in foreign currency exchange rates and interest rates, 8) international 
business  risks,  9)  our  own  and  our  customers’  or  suppliers’  access  to  and  cost  of  capital,  10)  future  business  combinations, 
11) implementation of restructuring projects, and 12) other factors. You should not solely rely on these forward-looking statements 
as they are only valid as of the date of this Annual Report on Form 10-K. We do not have any obligation to publicly update or 
revise any forward-looking statement in this document. For a more complete description of these and other risks, refer to Item 1A: 
“Risk Factors” included in this Annual Report on Form 10-K.

PART I

ITEM 1: 

BUSINESS

Available Information

Documents we provide to the Securities and Exchange Commission (SEC) are available free of charge under the Investors section 
of our website at www.itron.com as soon as practicable after they are filed with or furnished to the SEC. In addition, these documents 
are available at the SEC’s website (http://www.sec.gov) and at the SEC’s Headquarters at 100 F Street, NE, Washington, DC 20549, 
or by calling 1-800-SEC-0330.

General

Itron is among the leading technology and services companies dedicated to the resourceful use of electricity, natural gas, and water. 
We provide comprehensive solutions that measure, manage, and analyze energy and water use. Our broad product portfolio helps 
utilities responsibly and efficiently manage resources.

With increasing populations and resource consumption, there continues to be growing demand for electricity, natural gas, and 
water. This demand comes at a time when utilities are challenged by cost constraints, regulatory requirements, and environmental 
concerns. Our solution is to provide utilities with the knowledge they need to optimize their resources and to better understand 
and serve their customers - knowledge that gives their customers control over their energy and water needs and allows for better 
management and conservation of valuable resources.

We were incorporated in 1977 with a focus on meter reading technology. In 2004, we entered the electricity meter manufacturing 
business  with  the  acquisition  of  Schlumberger  Electricity  Metering.  In  2007,  we  expanded  our  presence  in  global  meter 
manufacturing and systems with the acquisition of Actaris Metering Systems SA.

The following is a discussion of our major products, our markets, and our operating segments. Refer to Item 8: “Financial Statements 
and Supplementary Data” included in this Annual Report on Form 10-K for specific segment results.

Our Business 

We  offer  solutions  that  enable  electric  and  natural  gas  utilities  to  build  smart  grids  to  manage  assets,  secure  revenue,  lower 
operational  costs,  improve  customer  service,  and  enable  demand  response.  Our  solutions  include  standard  meters  and  next-
generation smart metering products, metering systems, and services, which ultimately empower and benefit consumers.

We supply comprehensive solutions to address the unique challenges facing the water industry, including increasing demand and 
resource scarcity. We offer a complete product portfolio, including standard meters and smart metering products, systems, and 
services, for applications in the residential and commercial industrial markets for water and heat.

1

We offer a portfolio of services to our customers from standalone services to end-to-end solutions. These include licensing meter 
data management and analytics software, managed services, software-as-a-service (hosted software), technical support services, 
licensing hardware technology, and consulting services.

We classify metering systems into two categories: standard metering systems and smart metering solutions. These categories are 
described in more detail below:

Standard Metering Systems

Standard metering systems employ a standard meter, which measures electricity, natural gas, water, or thermal energy by 
mechanical, electromechanical, or electronic means, with no built-in remote-reading communication capability. Standard 
meters require manual reading, which is typically performed by a utility representative or meter reading service provider. 
Worldwide, we produce standard residential, commercial and industrial (C&I), and transmission and distribution (T&D) 
electricity, natural gas, water, and heat meters.

Smart Metering Solutions

Smart metering solutions employ meters or modules with one-way or two-way communication capability embedded in or 
attached to a meter to collect and store meter data, which is transmitted to handheld computers, mobile units, telephone, 
radio frequency (RF), cellular, power line carrier (PLC), fixed networks, or through adaptive communication technology 
(ACT). ACT enables dynamic selection of the optimal communications path, utilizing RF or PLC, based on network operating 
conditions, data attributes and application requirements. This allows utilities to collect and analyze meter data to optimize 
operations,, store interval data, remotely connect and disconnect service to the meter, send data, receive commands, and 
interface with other devices, such as in-home displays, smart thermostats and appliances, home area networks, and advanced 
control systems.

Bookings and Backlog of Orders

Bookings for a reported period represent customer contracts and purchase orders received during the period for hardware, software, 
and services that have met certain conditions, such as regulatory and/or contractual approval. Total backlog represents committed 
but undelivered contracts and purchase orders at period-end. Twelve-month backlog represents the portion of total backlog that 
we estimate will be recognized as revenue over the next 12 months. Backlog is not a complete measure of our future revenues as 
we also receive significant book-and-ship orders. Bookings and backlog may fluctuate significantly due to the timing of large 
project awards. In addition, annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the 
long-term nature of the contracts. Beginning total backlog, plus bookings, minus revenues, will not equal ending total backlog 
due to miscellaneous contract adjustments, foreign currency fluctuations, and other factors.

Year Ended

December 31, 2016
December 31, 2015
December 31, 2014

Annual Bookings

Total Backlog
(in millions)

12-Month Backlog

$

$

2,066
1,981
2,385

Information on bookings by our operating segments is as follows:

Year Ended

Total Bookings

Electricity

Gas

December 31, 2016
December 31, 2015
December 31, 2014

$

Our Operating Segments

$

2,066
1,981
2,385

$

(in millions)
1,013
958
1,074

$

$

1,652
1,575
1,516

567
577
753

761
836
737

486
446
558

Water

We operate under the Itron brand worldwide and manage and report under three operating segments, Electricity, Gas, and Water. 
Our Water operating segment includes both our global water and heat solutions. This structure allows each segment to develop 
its own go-to-market strategy, prioritize its marketing and product development requirements, and focus on its strategic investments. 
Our sales, marketing, and delivery functions are managed under each segment. Our product development and manufacturing 
operations are managed on a worldwide basis to promote a global perspective in our operations and processes and yet still maintain 
alignment with the segments.

2

 
 
Sales and Distribution

We use a combination of direct and indirect sales channels in our operating segments. A direct sales force is utilized for large 
electric, natural gas, and water utilities, with which we have long-established relationships. For smaller utilities, we typically use 
an indirect sales force that consists of distributors, sales representatives, partners, and meter manufacturer representatives.

No single customer represented more than 10% of total revenues for the years ended December 31, 2016, 2015, and 2014. Our 
10 largest customers in each of the years ended December 31, 2016, 2015, and 2014, accounted for approximately 31%, 22%, and 
19% of total revenues, respectively.

Raw Materials

Our products require a wide variety of components and materials, which are subject to price and supply fluctuations. We enter 
into standard purchase orders in the ordinary course of business, which can include purchase orders for specific quantities based 
on market prices, as well as open-ended agreements that provide for estimated quantities over an extended shipment period, 
typically  up  to  one  year  at  an  established  unit  cost. Although  we  have  multiple  sources  of  supply  for  most  of  our  material 
requirements, certain components and raw materials are supplied by sole-source vendors, and our ability to perform certain contracts 
depends on the availability of these materials. Refer to Item 1A: “Risk Factors”, included in this Annual Report on Form 10-K, 
for further discussion related to supply risks.

Partners

In connection with delivering products and systems to our customers, we may partner with third party vendors to provide hardware, 
software, or services, e.g., meter installation and communication network equipment and infrastructure. Our ability to perform on 
our contractual obligations with our customers is dependent on these partners meeting their obligations to us. 

Product Development

Our  product  development  is  focused  on  both  improving  existing  technology  and  developing  innovative  new  technology  for 
electricity, natural gas, water and heat meters, sensing and control devices, data collection software, communication technologies, 
data warehousing, and software applications. We invested approximately $168 million, $162 million, and $176 million in product 
development in 2016, 2015 and 2014, which represented 8% of total revenues for 2016, and 9% of total revenues in 2015 and 
2014.

Workforce

As of December 31, 2016, we had approximately 7,300 people in our workforce, including 6,200 permanent employees. We 
have not experienced significant work stoppages and consider our employee relations to be good.

Competition

We provide a broad portfolio of products, solutions, software, and services to electric, gas, and water utility customers globally. 
Consequently, we operate within a large and complex competitive landscape. Some of our competitors have diversified product 
portfolios and participate in multiple geographic markets, while others focus on specific regional markets and/or certain types of 
products, including some low-cost suppliers based in China and India. Our competitors in China have an increasing presence in 
other markets around the world, however, this does not represent a major market share in any one of our global operating regions. 
Our competitors range from small to large established companies. Our primary competitors for each operating segment are discussed 
below.

We believe that our competitive advantage is based on our in-depth knowledge of the utility industries, our capacity to innovate, 
our ability to provide complete end-to-end integrated solutions (including metering, network communications, data collection 
systems, meter data management software, and other metering software applications), our established customer relationships, and 
our track record of delivering reliable, accurate, and long-lived products and services. Refer to Item 1A: “Risk Factors” included 
in this Annual Report on Form 10-K for a discussion of the competitive pressures we face.

3

Electricity
We are among the leading global suppliers of electricity metering solutions, including standard meters and smart metering 
solutions. Within the electricity business line, our primary global competitors include Aclara (Sun Capital Partners), Elster 
(Honeywell International Inc.), Landis+Gyr (Toshiba Corporation), and Silver Spring Networks. On a regional basis, other 
major competitors include OSAKI Group, Sagemcom Energy & Telecom (Charterhouse Capital Partners), Sensus (Xylem, 
Inc.), and Trilliant Networks.

Gas
We are among the leading global suppliers of gas metering solutions, including standard meters and smart metering solutions. 
Our primary global competitor is Elster. On a regional basis, other major competitors include Aclara, Apator, Landis+Gyr, 
LAO Industria, and Sensus.

Water
We are among the leading global suppliers of standard and smart water meters and communication modules. Our primary 
global competitors include Apator, Diehl Metering (Diehl Stiftung & Co. KG), Elster, Sensus, and Zenner Performance (Zenner 
International GmbH & Co. KG). On a regional basis, other major competitors include Badger Meter, LAO Industria, Kamstrup 
Water Metering L.L.C., and Neptune Technologies (Roper Technologies, Inc.).

Strategic Alliances

We pursue strategic alliances with other companies in areas where collaboration can produce product advancement and acceleration 
of entry into new markets. The objectives and goals of a strategic alliance can include one or more of the following: technology 
exchange, product development, joint sales and marketing, or access to new geographic markets. Refer to Item 1A: “Risk Factors” 
included in this Annual Report on Form 10-K for a discussion of risks associated with strategic alliances.

Intellectual Property

Our patents and patent applications cover a range of technologies, which relate to standard metering, smart metering solutions 
and  technology,  meter  data  management  software,  and  knowledge  application  solutions.  We  also  rely  on  a  combination  of 
copyrights, patents, and trade secrets to protect our products and technologies. Disputes over the ownership, registration, and 
enforcement of intellectual property rights arise in the ordinary course of our business. While we believe patents and trademarks 
are important to our operations and, in aggregate, constitute valuable assets, no single patent or trademark, or group of patents or 
trademarks, is critical to the success of our business. We license some of our technology to other companies, some of which are 
our competitors.

Environmental Regulations

In the ordinary course of our business we use metals, solvents, and similar materials that are stored on-site. We believe we are in 
compliance with environmental laws, rules, and regulations applicable to the operation of our business.

4

EXECUTIVE OFFICERS

Set forth below are the names, ages, and titles of our executive officers as of February 28, 2017.

Name
Philip C. Mezey
W. Mark Schmitz
Thomas L. Deitrich
Michel C. Cadieux
Shannon M. Votava

Age
57
65
50
59
56

Position
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Operating Officer
Senior Vice President, Human Resources
Senior Vice President, General Counsel and Corporate Secretary

Philip C. Mezey is President and Chief Executive Officer and a member of our Board of Directors. Mr. Mezey was appointed to 
his current position and to the Board of Directors in January 2013. Mr. Mezey joined Itron in March 2003, and in 2007 Mr. Mezey 
became Senior Vice President and Chief Operating Officer, Itron North America. Mr. Mezey served as President and Chief Operating 
Officer, Energy from March 2011 through December 2012.

W.  Mark  Schmitz  is  Executive  Vice  President  and  Chief  Financial  Officer.  Mr. Schmitz  was  appointed  to  this  role  in 
September 2014.  Prior  to  joining  Itron,  Mr. Schmitz  was  Chief  Financial  Officer  of Alghanim  Industries  from  2009  to  2013. 
Mr. Schmitz served as the Executive Vice President and Chief Financial Officer of The Goodyear Tire and Rubber Company from 
2007 to 2008 and as Vice President and Chief Financial Officer of Tyco International Limited's Fire and Security Segment from 
2003 to 2007.

Thomas L. Deitrich is Executive Vice President and Chief Operating Officer. Mr. Deitrich joined Itron in October 2015. From 
2012  to  September  2015,  Mr.  Deitrich  was  Senior Vice  President  and  General  Manager  for  Digital  Networking  at  Freescale 
Semiconductor, Inc. (Freescale), and he served as the Senior Vice President and General Manager of Freescale's RF, Analog, 
Sensor, and Cellular Products Group from 2009 to 2012. Mr. Deitrich had other roles of increasing responsibility at Freescale 
from 2006 to 2009. Prior to Freescale, Mr. Deitrich worked for Flextronics, Sony-Ericsson/Ericsson, and GE.

Michel C. Cadieux is Senior Vice President, Human Resources and has been so since joining Itron in February 2014. From 2008 
to 2012, Mr. Cadieux was Senior Vice President of Human Resources and Security at Freescale Semiconductor, Inc.

Shannon M. Votava is Senior Vice President, General Counsel and Corporate Secretary. Ms. Votava was promoted to this role 
in March 2016. Ms. Votava joined Itron in May 2010 as Assistant General Counsel and was promoted to Vice President and General 
Counsel in January 2012. She assumed the responsibilities of Corporate Secretary in January 2013. Before joining Itron, Ms. Votava 
served as Associate General Counsel, Commercial at Cooper Industries plc from October 2008 to April 2010, and as General 
Counsel for Honeywell's Electronic Materials business from 2003 to 2008.

5

ITEM 1A:  RISK FACTORS

We are dependent on the utility industry, which has experienced volatility in capital spending.

We derive the majority of our revenues from sales of products and services to utilities. Purchases of our products may be deferred 
as a result of many factors, including economic downturns, slowdowns in new residential and commercial construction, customers’ 
access to capital upon acceptable terms, the timing and availability of government subsidies or other incentives, utility specific 
financial circumstances, mergers and acquisitions, regulatory decisions, weather conditions, and fluctuating interest rates. We have 
experienced, and may in the future experience, variability in operating results on an annual and a quarterly basis as a result of 
these factors.

We depend on our ability to develop new competitive products.

Our future success will depend, in part, on our ability to continue to design and manufacture new competitive products, and to 
enhance and sustain our existing products, keep pace with technological advances and changing customer requirements, gain 
international market acceptance, and manage other factors in the markets in which we sell our products. Product development will 
require continued investment in order to maintain our competitive position, and the periods in which we incur significant product 
development costs may drive variability in our quarterly results. We may not have the necessary capital, or access to capital at 
acceptable terms, to make these investments. We have made, and expect to continue to make, substantial investments in technology 
development.  However,  we  may  experience  unforeseen  problems  in  the  development  or  performance  of  our  technologies  or 
products, which can prevent us from meeting our product development schedules. New products often require certifications or 
regulatory approvals before the products can be used and we cannot be certain that our new products will be approved in a timely 
manner. Finally, we may not achieve market acceptance of our new products and services.

Utility industry sales cycles can be lengthy and unpredictable.

The utility industry is subject to substantial government regulation. Regulations have often influenced the frequency of meter 
replacements. Sales cycles for standalone meter products have typically been based on annual or biennial bid-based agreements. 
Utilities place purchase orders against these agreements as their inventories decline, which can create fluctuations in our sales 
volumes.

Sales  cycles  for  smart  metering  solutions  are  generally  long  and  unpredictable  due  to  several  factors,  including  budgeting, 
purchasing, and regulatory approval processes that can take several years to complete. Our utility customers typically issue requests 
for quotes and proposals, establish evaluation processes, 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. Today, 
governments around the world are implementing new laws and regulations to promote increased energy efficiency, slow or reverse 
growth  in  the  consumption  of  scarce  resources,  reduce  carbon  dioxide  emissions,  and  protect  the  environment.  Many  of  the 
legislative and regulatory initiatives encourage utilities to develop a smart grid infrastructure, and some of these initiatives provide 
for government subsidies, grants, or other incentives to utilities and other participants in their industry to promote transition to 
smart grid technologies. If government regulations regarding the smart grid and smart metering are delayed, revised to permit 
lower or different investment levels in metering infrastructure, or terminated altogether, this could have a material adverse effect 
on our results of operation, cash flow, and financial condition.

Our quarterly results may fluctuate substantially due to several factors.

We have experienced variability in quarterly results, including losses, and believe our quarterly results will continue to fluctuate 
as a result of many factors, including those risks and events included throughout this section. Additional factors that may cause 
our results to vary include:

• 
• 
• 

• 
• 

• 

a higher proportion of products sold with fewer features and functionality, resulting in lower revenues and gross margins;
a shift in sales channel mix, which could impact the revenue received and commissions paid;
a decrease in sales volumes, which could result in lower gross margins as driven by lower absorption of manufacturing 
costs;
a change in accounting standards or practices that may impact us to a greater degree than other companies;
a change in existing taxation rules or practices due to our specific operating structure that may not be comparable to other 
companies; and
a shortfall in sales without a proportional decrease in expenses.

6

Our customer contracts are complex and contain provisions that could cause us to incur penalties, be liable for damages, and/or 
incur unanticipated expenses with respect to the functionality, deployment, operation, and availability of our products and services. 

In addition to the risk of unanticipated warranty or recall expenses, our customer contracts may contain provisions that could cause 
us to incur penalties, be liable for damages, including liquidated damages, or incur other expenses if we experience difficulties 
with respect to the functionality, deployment, operation, and availability of our products and services. Some of these contracts 
contain long-term commitments to a set schedule of delivery or performance. If we failed in our estimated schedule or we fail in 
our management of the project, this may cause delays in completion. In the event of late deliveries, late or improper installations 
or operations, failure to meet product or performance specifications or other product defects, or interruptions or delays in our 
managed service offerings, our customer contracts may expose us to penalties, liquidated damages, and other liabilities. In the 
event we were to incur contractual penalties, such as liquidated damages or other related costs that exceed our expectations, our 
business, financial condition, and operating results could be materially and adversely affected. Further, we could be required to 
recognize a current-period reduction  of revenue related to a specific component of a customer contract at the time we determine 
the products and/or services to be delivered under that component would result in a loss due to expected revenues estimated to be 
less than expected costs. Depending on the amounts of the associated revenues (if any) and the costs, this charge could be material 
to our results of operations in the period it is recognized.

We face increasing competition.

We face competitive pressures from a variety of companies in each of the markets we serve. Some of our present and potential 
future competitors have, or may have, substantially greater financial, marketing, technical, or manufacturing resources and, in 
some cases, have greater name recognition, customer relationships, and experience. Some competitors may enter markets we serve 
and sell products at lower prices in order to gain or grow market share. Our competitors may be able to respond more quickly to 
new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the 
development, promotion, and sale of their products and services than we can. Some competitors have made, and others may make, 
strategic acquisitions or establish cooperative relationships among themselves or with third parties that enhance their ability to 
address the needs of our prospective customers. It is possible that new competitors or alliances among current and new competitors 
may emerge and rapidly gain significant market share. Other companies may also drive technological innovation and develop 
products that are equal in quality and performance or superior to our products, which could put pressure on our market position, 
reduce our overall sales, and require us to invest additional funds in new technology development. In addition, there is a risk that 
low-cost providers will expand their presence in our markets, improve their quality, or form alliances or cooperative relationships 
with our competitors, thereby contributing to future price erosion. Some of our products and services may become commoditized, 
and we may have to adjust the prices of some of our products to stay competitive. Further, some utilities may purchase meters 
separately from the communication devices. The specifications for such meters may require interchangeability, which could lead 
to further commoditization of the meter, driving prices lower and reducing margins. Should we fail to compete successfully with 
current or future competitors, we could experience material adverse effects on our business, financial condition, results of operations, 
and cash flows.

We may face adverse publicity, consumer or political opposition, or liability associated with our products.

The safety and security of the power grid and natural gas and water supply systems, the accuracy and protection of the data collected 
by  meters  and  transmitted  via  the  smart  grid,  concerns  about  the  safety  and  perceived  health  risks  of  using  radio  frequency 
communications, and privacy concerns of monitoring home appliance energy usage have been the focus of recent adverse publicity. 
Negative publicity and consumer opposition may cause utilities or their regulators to delay or modify planned smart grid initiatives. 
Smart grid projects may be, or may be perceived as, unsuccessful. 

Our  products  are  complex  and  may  contain  defects  or  experience  failures  due  to  any  number  of  issues  in  design,  materials, 
deployment, and/or use. If any of our products contain a defect, a compatibility or interoperability issue, or other types of errors, 
we may have to devote significant time and resources to identify and correct the issue. We provide product warranties for varying 
lengths of time and establish allowances in anticipation of warranty expenses. In addition, we recognize contingent liabilities for 
additional product-failure related costs. These warranty and related product-failure allowances may be inadequate due to product 
defects and unanticipated component failures, as well as higher than anticipated material, labor, and other costs we may incur to 
replace projected product failures. A product recall or a significant number of product returns could be expensive; damage our 
reputation and relationships with utilities, meter and communication vendors, and other third-party vendors; result in the loss of 
business to competitors; or result in litigation. We may incur additional warranty expenses in the future with respect to new or 
established products, which could materially and adversely affect our operations and financial position.

7

We may be subject to claims that there are adverse health effects from the radio frequencies utilized in connection with our products. 
If these claims prevail, our customers could suspend implementation or purchase substitute products, which could cause a loss of 
sales.

Changes in tax laws, valuation allowances, and unanticipated tax liabilities could adversely affect our effective income tax rate 
and profitability.

We are subject to income tax in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating 
our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions 
and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based 
on estimates of whether, and the extent to which, additional taxes will be due. These reserves may be established when we believe 
that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these 
reserves in light of changing facts and circumstances. The provision for income taxes includes the impact of reserve positions and 
changes to reserves that are considered appropriate, as well as valuation allowances when we determine it is more likely than not 
that a deferred tax asset cannot be realized. In addition, future changes in tax laws in the jurisdictions in which we operate could 
have a material impact on our effective income tax rate and profitability. We regularly assess all of these matters to determine the 
adequacy of our tax provision, which is subject to significant judgment.

The  Organization  for  Economic  Cooperation  and  Development  guidance  under  the  Base  Erosion  and  Profit  Shifting  (BEPS) 
initiatives aim to minimize perceived tax abuses and modernize global tax policy. More countries are beginning to implement 
legislative changes based on these BEPS recommendations. Additionally, proposed U.S. tax legislative reforms are wide ranging 
and include potential changes to the corporate income tax rate, altering the deductibility or timing of financing costs or capitalized 
assets, taxation of non-U.S. activities, as well as the impacts of proposed border adjusted destination based tax proposals. While 
it is not possible to predict what changes, if any, will become law, the uncertainty around these proposals and the impact to Itron’s 
effective tax rate could be material though at this time it is not possible to determine if it would be a benefit or detriment. 

Disruption and turmoil in global credit and financial markets, which may be exacerbated by the inability of certain countries to 
continue to service their sovereign debt obligations, and the possible negative implications of such events for the global economy, 
may negatively impact our business, liquidity, operating results, and financial condition.

The current economic conditions, including volatility in the availability of credit and foreign exchange rates and extended economic 
slowdowns, have contributed to the instability in some global credit and financial markets. Additionally, at-risk financial institutions 
in certain countries may, without forewarning, seize a portion of depositors' account balances. The seized funds would be used to 
recapitalize the at-risk financial institution and would no longer be available for the depositors' use. If such seizure were to occur 
at financial institutions where we have funds on deposit, it could have a significant impact on our overall liquidity. While the 
ultimate outcome of these events cannot be predicted, it is possible that such events may have a negative impact on the global 
economy and our business, liquidity, operating results, and financial condition.

We are subject to international business uncertainties, obstacles to the repatriation of earnings, and foreign currency fluctuations.

A substantial portion of our revenues is derived from operations conducted outside the United States. International sales and 
operations may be subjected to risks such as the imposition of government controls, government expropriation of facilities, lack 
of a well-established system of laws and enforcement of those laws, access to a legal system free of undue influence or corruption, 
political instability, terrorist activities, restrictions on the import or export of critical technology, currency exchange rate fluctuations, 
and adverse tax burdens. Lack of availability of qualified third-party financing, generally longer receivable collection periods than 
those commonly practiced in the United States, trade restrictions, changes in tariffs, labor disruptions, difficulties in staffing and 
managing  international  operations,  difficulties  in  imposing  and  enforcing  operational  and  financial  controls  at  international 
locations, potential insolvency of international distributors, preference for local vendors, burdens of complying with different 
permitting standards and a wide variety of foreign laws, and obstacles to the repatriation of earnings and cash all present additional 
risk to our international operations. Fluctuations in the value of international currencies may impact our operating results due to 
the translation to the U.S. dollar as well as our ability to compete in international markets. International expansion and market 
acceptance depend on our ability to modify our technology to take into account such factors as the applicable regulatory and 
business environment, labor costs, and other economic conditions. In addition, the laws of certain countries do not protect our 
products or technologies in the same manner as the laws of the United States. Further, foreign regulations or restrictions, e.g., 
opposition from unions or works councils, could delay, limit, or disallow significant operating decisions made by our management, 
including decisions to exit certain businesses, close certain manufacturing locations, or other restructuring actions. There can be 
no assurance that these factors will not have a material adverse effect on our future international sales and, consequently, on our 
business, financial condition, and results of operations.

8

We depend on certain key vendors and components.

Certain of our products, subassemblies, and system components are procured from limited sources. Our reliance on such limited 
sources involves certain risks, including the possibility of shortages and reduced control over delivery schedules, quality, costs, 
and our vendors’ access to capital upon acceptable terms. Any adverse change in the supply, or price, of these components could 
adversely affect our business, financial condition, and results of operations. In addition, we depend on a small number of contract 
manufacturing vendors for a large portion of our low-volume manufacturing business and all of our repair services for our domestic 
handheld meter reading units. Should any of these vendors become unable to perform up to their responsibilities, our operations 
could be materially disrupted.

We may engage in future restructuring activities and incur additional charges in our efforts to improve profitability. We also may 
not achieve the anticipated savings and benefits from current or any future restructuring projects.

We have implemented multiple restructuring projects to adjust our cost structure, and we may engage in similar restructuring 
activities in the future. These restructuring activities reduce our available employee talent, assets, and other resources, which could 
slow product development, impact ability to respond to customers, increase quality issues, temporarily reduce manufacturing 
efficiencies,  and  limit  our  ability  to  increase  production  quickly.  In  addition,  delays  in  implementing  restructuring  projects, 
unexpected costs, unfavorable negotiations with works councils, changes in governmental policies, or failure to meet targeted 
improvements could change the timing or reduce the overall savings realized from the restructuring project.

Business interruptions could adversely affect our business.

Our worldwide operations could be subject to hurricanes, tornadoes, earthquakes, floods, fires, extreme weather conditions, medical 
epidemics or pandemics, or other natural or man-made disasters or business interruptions. The occurrence of any of these business 
disruptions could seriously harm our business, financial condition, and results of operations.

Our  key  manufacturing  facilities  are  concentrated,  and,  in  the  event  of  a  significant  interruption  in  production  at  any  of  our 
manufacturing facilities, considerable expense, time, and effort could be required to establish alternative production lines to meet 
contractual obligations, which would have a material adverse effect on our business, financial condition, and results of operations.

We may encounter strikes or other labor disruptions that could adversely affect our financial condition and results of operations.

We have significant operations throughout the world. In a number of countries outside the U.S., our employees are covered by 
collective bargaining agreements. As the result of various corporate or operational actions, which our management has undertaken 
or may be made in the future, we could encounter labor disruptions. These disruptions may be subject to local media coverage, 
which  could  damage  our  reputation. Additionally,  the  disruptions  could  delay  our  ability  to  meet  customer  orders  and  could 
adversely affect our results of operations. Any labor disruptions could also have an impact on our other employees. Employee 
morale and productivity could suffer, and we may lose valued employees whom we wish to retain.

Asset impairment could result in significant changes that would adversely impact our future operating results.

We have significant intangible assets, long-lived assets, and goodwill that are susceptible to valuation adjustments as a result of 
changes in various factors or conditions, which could impact our results of operations or and financial condition.

Factors that could trigger an impairment of such assets include the following:

• 
• 
• 
• 
• 

underperformance relative to projected future operating results;
changes in the manner or use of the acquired assets or the strategy for our overall business;
negative industry or economic trends;
decline in our stock price for a sustained period or decline in our market capitalization below net book value; and
changes in our organization or management reporting structure, which could result in additional reporting units, requiring 
greater aggregation or disaggregation in our analysis by reporting unit and potentially alternative methods/assumptions 
of estimating fair values.

9

 
We are subject to a variety of litigation that could adversely affect our results of operations, financial condition, and cash flows.

From time to time, we are involved in litigation that arises from our business. In addition, these entities may bring claims against 
our customers, which, in some instances, could result in an indemnification of the customer. Litigation may also relate to, among 
other things, product failure or product liability claims, contractual disputes, employment matters, or securities litigation. Litigation 
can be expensive to defend and can divert the attention of management and other personnel for long periods of time, regardless 
of the ultimate outcome. We may be required to pay damage awards or settlements or become subject to equitable remedies that 
could adversely affect our financial condition and results of operations. While we currently maintain insurance coverage, such 
insurance may not provide adequate coverage against potential claims.

We may face losses associated with alleged unauthorized use of third party intellectual property.

We may be subject to claims or inquiries regarding alleged unauthorized use of a third party’s intellectual property. An adverse 
outcome in any intellectual property litigation or negotiation could subject us to significant liabilities to third parties, require us 
to license technology or other intellectual property rights from others, require us to comply with injunctions to cease marketing 
or the use of certain products or brands, or require us to redesign, re-engineer, or rebrand certain products or packaging, any of 
which could affect our business, financial condition, and results of operations. If we are required to seek licenses under patents 
or other intellectual property rights of others, we may not be able to acquire these licenses at acceptable terms, if at all. In addition, 
the  cost  of  responding  to  an  intellectual  property  infringement  claim,  in  terms  of  legal  fees,  expenses,  and  the  diversion  of 
management resources, whether or not the claim is valid, could have a material adverse effect on our business, financial condition, 
and results of operations.

If our products infringe the intellectual property rights of others, we may be required to indemnify our customers for any damages 
they suffer. We generally indemnify our customers with respect to infringement by our products of the proprietary rights of third 
parties. Third parties may assert infringement claims against our customers. These claims may require us to initiate or defend 
protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed, 
we may be forced to pay damages on behalf of our customers or may be required to obtain licenses for the products they use. If 
we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products.

We are affected by the availability and regulation of radio spectrum and interference with the radio spectrum that we use.

A  significant  number  of  our  products  use  radio  spectrum,  which  are  subject  to  regulation  by  the  Federal  Communications 
Commission (FCC) in the United States. The FCC may adopt changes to the rules for our licensed and unlicensed frequency bands 
that are incompatible with our business. In the past, the FCC has adopted changes to the requirements for equipment using radio 
spectrum, and it is possible that the FCC or the U.S. Congress will adopt additional changes.

Although radio licenses are generally required for radio stations, Part 15 of the FCC’s rules permits certain low-power radio devices 
(Part 15 devices) to operate on an unlicensed basis. Part 15 devices are designed for use on frequencies used by others. These 
other users may include licensed users, which have priority over Part 15 users. Part 15 devices cannot cause harmful interference 
to licensed users and must be designed to accept interference from licensed radio devices. In the United States, our smart metering 
solutions are typically Part 15 devices that transmit information to (and receive information from, if applicable) handheld, mobile, 
or fixed network systems pursuant to these rules.

We depend upon sufficient radio spectrum to be allocated by the FCC for our intended uses. As to the licensed frequencies, there 
is some risk that there may be insufficient available frequencies in some markets to sustain our planned operations. The unlicensed 
frequencies are available for a wide variety of uses and may not be entitled to protection from interference by other users who 
operate in accordance with FCC rules. The unlicensed frequencies are also often the subject of proposals to the FCC requesting 
a change in the rules under which such frequencies may be used. If the unlicensed frequencies become crowded to unacceptable 
levels, restrictive, or subject to changed rules governing their use, our business could be materially adversely affected.

We have 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 our products. The inability to modify our products to meet such 
requirements, the possible delays in completing such modifications, and the cost of such modifications all could have a material 
adverse effect on our future business, financial condition, and results of operations.

Outside of the United States, certain of our products require the use of RF and are subject to regulations in those jurisdictions 
where we have deployed such equipment. In some jurisdictions, radio station licensees are generally required to operate a radio 
transmitter and such licenses may be granted for a fixed term and must be periodically renewed. In other jurisdictions, the rules 
permit certain low power devices to operate on an unlicensed basis. Our smart metering solutions typically transmit to (and receive 

10

information from, if applicable) handheld, mobile, or fixed network reading devices in license-exempt bands pursuant to rules 
regulating such use. In Europe, we generally use the 169 megahertz (MHz), 433 MHz, and 868 MHz bands. In the rest of the 
world, we primarily use the 433 MHz and 2.4000-2.4835 gigahertz (GHz) bands, as well as other local license-exempt bands. To 
the extent we introduce new 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 other regulatory specifications. In 
some countries, limitations on frequency availability or the cost of making necessary modifications may preclude us from selling 
our products in those countries. In addition, new consumer products may create interference with the performance of our products, 
which could lead to claims against us.

We may be unable to adequately protect our intellectual property.

While we believe that our patents and other intellectual property have significant value, it is uncertain that this intellectual property 
or any intellectual property acquired or developed by us in the future will provide meaningful competitive advantages. There can 
be no assurance that our patents or pending applications will not be challenged, invalidated, or circumvented by competitors or 
that rights granted thereunder will provide meaningful proprietary protection. Moreover, competitors may infringe our patents or 
successfully avoid them through design innovation. To combat infringement or unauthorized use of our intellectual property, we 
may need to commence litigation, which can be expensive and time-consuming. In addition, in an infringement proceeding a court 
may decide that a patent or other intellectual property right of ours is not valid or is unenforceable, or may refuse to stop the other 
party from using the technology or other intellectual property right at issue on the grounds that it is non-infringing or the legal 
requirements for an injunction have not been met. Policing unauthorized use of our intellectual property is difficult and expensive, 
and we cannot provide assurance that we will be able to prevent misappropriation of our proprietary rights, particularly in countries 
that do not protect such rights in the same manner as in the United States.

We have pension benefit obligations, which could have a material impact on our earnings, liabilities, and shareholders' equity 
and could have significant adverse impacts in future periods.

We sponsor both funded and unfunded defined benefit pension plans for our international employees, primarily in Germany, 
France, Italy, Indonesia, Brazil, and Spain. Our general funding policy for these qualified pension plans is to contribute amounts 
sufficient to satisfy regulatory funding standards of the respective countries for each plan.

The determination of pension plan expense, benefit obligation, and future contributions depends heavily on market factors such 
as  the  discount  rate  and  the  actual  return  on  plan  assets.  We  estimate  pension  plan  expense,  benefit  obligation,  and  future 
contributions to these plans using assumptions with respect to these and other items. Changes to those assumptions could have a 
significant effect on future contributions as well as on our annual pension costs and/or result in a significant change to shareholders' 
equity.

A number of key personnel are critical to the success of our business.

Our success depends in large part on the efforts of our highly qualified technical and management personnel and highly skilled 
individuals in all disciplines. The loss of one or more of these employees and the inability to attract and retain qualified replacements 
could have a material adverse effect on our business.

If we are unable to protect our information technology infrastructure and network against data corruption, cyber-based attacks 
or network security breaches, we could be exposed to customer liability and reputational risk.

We rely on various information technology systems to capture, process, store, and report data and interact with customers, vendors, 
and  employees.  Despite  security  steps  we  have  taken  to  secure  all  information  and  transactions,  our  information  technology 
systems, and those of our third-party providers, may be subject to cyber attacks. Any data breaches could result in misappropriation 
of data or disruption of operations. In addition, hardware and operating system software and applications that we procure from 
third parties may contain defects in design or manufacture that could interfere with the operation of the systems. Misuse of internal 
applications; theft of intellectual property, trade secrets, or other corporate assets; and inappropriate disclosure of confidential 
information could stem from such incidents.

In addition, we have designed products and services that connect to and are part of the “Internet of Things.” While we attempt to 
provide adequate security measures to safeguard our products from cyber attacks, the potential for an attack remains. A successful 
attack may result in inappropriate access to information or an inability for our products to function properly.

Any such operational disruption and/or misappropriation of information could result in lost sales, negative publicity, or business 
delays and could have a material adverse effect on our business.
11

We may not realize the expected benefits from strategic alliances.

We  have  several  strategic  alliances  with  large  and  complex  organizations  and  other  companies  with  which  we  work  to  offer 
complementary products and services. There can be no assurance we will realize the expected benefits from these strategic alliances. 
If successful, these relationships may be mutually beneficial and result in shared growth. However, alliances carry an element of 
risk because, in most cases, we must both compete and collaborate with the same company from one market to the next. Should 
our strategic partnerships fail to perform, we could experience delays in product development or experience other operational 
difficulties.

We rely on information technology systems.

Our industry requires the continued operation of sophisticated information technology systems and network infrastructures, which 
may be subject to disruptions arising from events that are beyond our control. We are dependent on information technology systems, 
including, but not limited to, networks, applications, and outsourced services. We continually enhance and implement new systems 
and processes throughout our global operations.

We offer managed services and software utilizing several data center facilities located worldwide. Any damage to, or failure of, 
these systems could result in interruptions in the services we provide to our utility customers. As we continue to add capacity to 
our existing and future data centers, we may move or transfer data. Despite precautions taken during this process, any delayed or 
unsuccessful data transfers may impair the delivery of our services to our utility customers. We also sell vending and pre-payment 
systems with security features that, if compromised, may lead to claims against us.

We are completing a phased upgrade of our primary enterprise resource planning (ERP) systems to allow for greater depth and 
breadth of functionality worldwide. System conversions are expensive and time consuming undertakings that impact all areas of 
the Company. While successful implementations of each phase will provide many benefits to us, an unsuccessful or delayed 
implementation of any particular phase may cost us significant time and resources.

The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, or a breach 
in security of these systems due to computer viruses, hacking, acts of terrorism, and other causes could materially and adversely 
affect our business, financial condition, and results of operations by harming our ability to accurately forecast sales demand, 
manage our supply chain and production facilities, achieve accuracy in the conversion of electronic data and records, and report 
financial and management information on a timely and accurate basis. In addition, due to the systemic internal control features 
within ERP systems, we may experience difficulties that could affect our internal control over financial reporting.

Changes in environmental regulations, violations of such regulations, or future environmental liabilities could cause us to incur 
significant costs and could adversely affect our operations.

Our business and our facilities are subject to numerous laws, regulations, and ordinances governing, among other things, the 
storage, discharge, handling, emission, generation, manufacture, disposal, remediation of, and exposure to toxic or other hazardous 
substances, and certain waste products. Many of these environmental laws and regulations subject current or previous owners or 
operators of land to liability for the costs of investigation, removal, or remediation of hazardous materials. In addition, these laws 
and regulations typically impose liability regardless of whether the owner or operator knew of, or was responsible for, the presence 
of any hazardous materials and regardless of whether the actions that led to the presence were conducted in compliance with the 
law. In the ordinary course of our business, we use metals, solvents, and similar materials, which are stored on-site. The waste 
created by the use of these materials is transported off-site on a regular basis by unaffiliated waste haulers. Many environmental 
laws and regulations require generators of waste to take remedial actions at, or in relation to, the off-site disposal location even if 
the disposal was conducted in compliance with the law. The requirements of these laws and regulations are complex, change 
frequently, and could become more stringent in the future. Failure to comply with current or future environmental regulations 
could result in the imposition of substantial fines, suspension of production, alteration of our production processes, cessation of 
operations, or other actions, which could materially and adversely affect our business, financial condition, and results of operations. 
There can be no assurance that a claim, investigation, or liability will not arise with respect to these activities, or that the cost of 
complying with governmental regulations in the future will not have a material adverse effect on us.

12

Our credit facility limits our ability and the ability of many of our subsidiaries to take certain actions.

Our credit facility places restrictions on our ability, and the ability of many of our subsidiaries, dependent on meeting specified 
financial ratios, to, among other things:

•    incur more debt;
•    make certain investments;
•    enter into transactions with affiliates;
•    merge or consolidate;

•    pay dividends, make distributions, and repurchase capital stock;
•    create liens;
•    enter into sale lease-back transactions;
•    transfer or sell assets.

Our credit facility contains other customary covenants, including the requirement to meet specified financial ratios and provide 
periodic financial reporting. Our ability to borrow under our credit facility will depend on the satisfaction of these covenants. 
Events beyond our control can affect our ability to meet those covenants. Our failure to comply with obligations under our borrowing 
arrangements may result in declaration of an event of default. An event of default, if not cured or waived, may permit acceleration 
of required payments against such indebtedness. We cannot be certain we will be able to remedy any such defaults. If our required 
payments are accelerated, we cannot be certain that we will have sufficient funds available to pay the indebtedness or that we will 
have the ability to raise sufficient capital to replace the indebtedness on terms favorable to us or at all. In addition, in the case of 
an event of default under our secured indebtedness such as our credit facility, the lenders may be permitted to foreclose on our 
assets securing that indebtedness.

Our ability to service our indebtedness is dependent on our ability to generate cash, which is influenced by many factors beyond 
our control.

Our ability to make payments on or refinance our indebtedness, fund planned capital expenditures, and continue research and 
development will depend on our ability to generate cash in the future. This is dependent on the degree to which we succeed in 
executing our business plans, which is influenced, in part, by general economic, financial, competitive, legislative, regulatory, 
counterparty, and other risks that are beyond our control. We may need to refinance all or a portion of our indebtedness on or 
before maturity. We cannot provide assurance that we will be able to refinance any of our indebtedness on commercially reasonable 
terms or at all.

Our acquisitions of and investments in third parties have risks.

We may complete additional acquisitions or make investments in the future, both within and outside of the United States. In order 
to finance future acquisitions, we may need to raise additional funds through public or private financings, and there are no assurances 
that such financing would be available at acceptable terms. Acquisitions and investments involve numerous risks such as the 
diversion of senior management’s attention; unsuccessful integration of the acquired entity’s personnel, operations, technologies, 
and products; incurrence of significant expenses to meet an acquiree's customer contractual commitments; lack of market acceptance 
of new services and technologies; or difficulties in operating businesses in international legal jurisdictions. Failure to properly or 
adequately address these issues could result in the diversion of management’s attention and resources and materially and adversely 
impact our ability to manage our business. In addition, acquisitions and investments in third parties may involve the assumption 
of obligations, significant write-offs, or other charges associated with the acquisition. Impairment of an investment, goodwill, or 
an intangible asset may result if these risks were to materialize. For investments in entities that are not wholly owned by Itron, 
such as joint ventures, a loss of control as defined by U.S. generally accepted accounting principles (GAAP) could result in a 
significant change in accounting treatment and a change in the carrying value of the entity. There can be no assurances that an 
acquired business will perform as expected, accomplish our strategic objectives, or generate significant revenues, profits, or cash 
flows. 

We are exposed to counterparty default risks with our financial institutions and insurance providers.

If one or more of the depository institutions in which we maintain significant cash balances were to fail, our ability to access these 
funds might be temporarily or permanently limited, and we could face material liquidity problems and financial losses.

The lenders of our credit facility consist of several participating financial institutions. Our revolving line of credit allows us to 
provide letters of credit in support of our obligations for customer contracts and provides additional liquidity. If our lenders are 
not able to honor their line of credit commitments due to the loss of a participating financial institution or other circumstance, we 
would need to seek alternative financing, which may not be under acceptable terms, and therefore could adversely impact our 
ability to successfully bid on future sales contracts and adversely impact our liquidity and ability to fund some of our internal 
initiatives or future acquisitions.

13

Our international sales and operations are subject to complex laws relating to foreign corrupt practices and anti-bribery laws, 
among many others, and a violation of, or change in, these laws could adversely affect our operations.

The  Foreign  Corrupt  Practices Act  in  the  United  States  requires  United  States  companies  to  comply  with  an  extensive  legal 
framework to prevent bribery of foreign officials. The laws are complex and require that we closely monitor local practices of our 
overseas offices. The United States Department of Justice has recently heightened enforcement of these laws. In addition, other 
countries  continue  to  implement  similar  laws  that  may  have  extra-territorial  effect.  In  the  United  Kingdom,  where  we  have 
operations, the U.K. Bribery Act imposes significant oversight obligations on us and could impact our operations outside of the 
United Kingdom. The costs for complying with these and similar laws may be significant and could require significant management 
time and focus. Any violation of these or similar laws, intentional or unintentional, could have a material adverse effect on our 
business, financial condition, or results of operations.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, prevent 
fraud, or maintain investor confidence. 

Effective internal controls are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud. We 
have  devoted  significant  resources  and  time  to  comply  with  the  internal  control  over  financial  reporting  requirements  of  the 
Sarbanes-Oxley Act. In addition, Section 404 under the Sarbanes-Oxley Act requires that our auditors attest to the design and 
operating effectiveness of our controls over financial reporting. Our compliance with the annual internal control report requirement 
for each fiscal year will depend on the effectiveness of our financial reporting, data systems, and controls across our operating 
subsidiaries. Furthermore, an important part of our growth strategy has been, and will likely continue to be, the acquisition of 
complementary businesses, and we expect these systems and controls to become increasingly complex to the extent that we integrate 
acquisitions and our business grows. Likewise, the complexity of our transactions, systems, and controls may become more difficult 
to manage. In addition, new accounting standards may have a significant impact on our financial statements in future periods, 
requiring new or enhanced controls. We cannot be certain that we will ensure that we design, implement, and maintain adequate 
controls over our financial processes and reporting in the future, especially for acquisition targets that may not have been required 
to be in compliance with Section 404 of the Sarbanes-Oxley Act at the date of acquisition. 

Failure to implement new controls or enhancements to controls, difficulties encountered in control implementation or operation, 
or  difficulties  in  the  assimilation  of  acquired  businesses  into  our  control  system  could  result  in  additional  errors,  material 
misstatements, or delays in our financial reporting obligations. Inadequate internal controls could also cause investors to lose 
confidence in our reported financial information, which could have a negative effect on the trading price of our stock and our 
access to capital.

Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or 
equity capital.

We did not file our 2015 Annual Report on Form 10-K or our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 
and June 30, 2016 within the time frame required by SEC rules. As a result, we are currently ineligible to use SEC Form S-3, 
which is a short-form registration statement, to register our securities for public offer and sale, until we have timely filed all periodic 
reports under the Securities Exchange Act of 1934, as amended, for a period of twelve months from the due date of the last timely 
report. Our inability to use Form S-3 limits our ability to access the public capital markets rapidly, including in reaction to changing 
business needs or market conditions. While we may currently register an offering of our securities on Form S-1, doing so would 
likely increase transaction costs and adversely impact our ability to raise capital or complete any related transaction, such as an 
acquisition, in a timely manner. We filed our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 within 
the time frame required by SEC rules. We anticipate regaining eligibility to file SEC Form S-3 on November 9, 2017 assuming 
all periodic reports are filed within the time frames required by the SEC.

We are subject to regulatory compliance.

We are subject to various governmental regulations in all of the jurisdictions in which we conduct business. Failure to comply 
with current or future regulations could result in the imposition of substantial fines, suspension of production, alteration of our 
production processes, cessation of operations, or other actions, which could materially and adversely affect our business, financial 
condition, and results of operations.

14

Regulations  related  to  “conflict  minerals”  may  force  us  to  incur  additional  expenses,  may  result  in  damage  to  our  business 
reputation, and may adversely impact our ability to conduct our business.

In August 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC adopted requirements 
for companies that use certain minerals and derivative metals (referred to as “conflict minerals,” regardless of their actual country 
of origin) in their products. Some of these metals are commonly used in electronic equipment and devices, including our products. 
These requirements require companies to investigate, disclose and report whether or not such metals originated from the Democratic 
Republic  of  Congo  or  adjoining  countries  and  required  due  diligence  efforts.  There  may  be  increased  costs  associated  with 
complying with these disclosure requirements, including for diligence to determine the sources of conflict minerals used in our 
products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. 
Further interpretation and implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used 
in our products.

ITEM 1B:  UNRESOLVED STAFF COMMENTS

None.

ITEM 2: 

PROPERTIES

We own our headquarters facility, which is located in Liberty Lake, Washington. 

Our Gas and Water manufacturing facilities are located throughout the world, while our Electricity manufacturing facilities are 
located primarily in Europe, Middle East, and Africa (EMEA) and North America. The following table lists our major manufacturing 
facilities by the location and product line.

Product Line

Region

Electricity

Gas

North America

Oconee, SC (O)

Owenton, KY (O)

Water

None

Multiple Product Lines

Waseca, MN - G,W (L)

Chasseneuil, France (O)

Argenteuil, France (L)

Massy, France (L)

None

Godollo, Hungary (O)

Reims, France (O)

Macon, France (O)

EMEA

Karlsruhe, Germany (O)

Haguenau, France (O)

Oldenburg, Germany (O)

Asti, Italy (O)

Asia/Pacific

Latin America

None

None

Wujiang, China (L)

Suzhou, China (L)

Buenos Aires, Argentina
(O)

Dehradun, India (L)
Americana, Brazil (O)

Bekasi, Indonesia - E,W
(O)

None

(O) - Manufacturing facility is owned
(L) - Manufacturing facility is leased
E - Electricity manufacturing facility, G - Gas manufacturing facility, W - Water manufacturing facility

Our principal properties are in good condition, and we believe our current facilities are sufficient to support our operations. Our 
major manufacturing facilities are owned, while smaller factories are typically leased.

In addition to our manufacturing facilities, we have numerous sales offices, product development facilities, and distribution centers, 
which are located throughout the world.

ITEM 3: 

LEGAL PROCEEDINGS

Please refer to Item 8: “Financial Statements and Supplementary Data, Note 12: Commitments and Contingencies” included in 
this Annual Report on Form 10-K. Except as described therein, there were no material pending legal proceedings, as defined by 
Item 103 of Regulation S-K, at December 31, 2016.

15

ITEM 4:  MINE SAFETY DISCLOSURES

Not applicable.

16

PART II

ITEM 5:  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND 

ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock is traded on the NASDAQ Global Select Market. The following table reflects the range of high and low common 
stock sales prices for the four quarters of 2016 and 2015 as reported by the NASDAQ Global Select Market.

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Performance Graph

2016

2015

High

Low

High

Low

$
$
$
$

43.00
45.51
56.23
65.75

$
$
$
$

30.31
39.78
42.34
51.90

$
$
$
$

41.86
37.81
33.91
37.53

$
$
$
$

35.05
34.44
28.30
31.75

The following graph compares the five-year cumulative total return to shareholders on our common stock with the five-year 
cumulative total return of our peer group of companies used for the year ended December 31, 2016 and the NASDAQ Composite 
Index.

* $100 invested on 12/31/11 in stock or index, including reinvestment of dividends.
Fiscal years ending December 31.

17

The performance graph above is being furnished solely to accompany this Report pursuant to Item 201(e) of Regulation S-K, and 
is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by 
reference into any of our filings, whether made before or after the date hereof, regardless of any general incorporation language 
in such filing.

The above presentation assumes $100 invested on December 31, 2011 in the common stock of Itron, Inc., the peer group, and the 
NASDAQ Composite Index, with all dividends reinvested. With respect to companies in the peer group, the returns of each such 
corporation have been weighted to reflect relative stock market capitalization at the beginning of each annual period plotted. The 
stock prices shown above for our common stock are historical and not necessarily indicative of future price performance.

Each year, we reassess our peer group to identify global companies that are either direct competitors or have similar industry and 
business operating characteristics. Our 2016 peer group includes the following publicly traded companies: Badger Meter, Inc., 
Echelon Corporation, National Instruments Corporation, Roper Technologies, Inc., and Silver Spring Networks, Inc.

Issuer Repurchase of Equity Securities

No shares of our common stock were repurchased during the quarter ended December 31, 2016.

Holders

At January 31, 2017, there were 218 holders of record of our common stock.

Dividends

Since the inception of the Company, we have not declared or paid cash dividends. We intend to retain future earnings for the 
development of our business and do not anticipate paying cash dividends in the foreseeable future.

18

ITEM 6: 

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below is derived from our consolidated financial statements. Information included in the 
table below from fiscal years 2013 through 2016 Consolidated Statements of Operations and Consolidated Statements of Cash 
Flows,  and  the  Consolidated  Balance  Sheets  for  2014  through  2016,  have  been  audited  by  an  independent  registered  public 
accounting firm.

These selected consolidated financial and other data represent portions of our financial statements. You should read this information 
together with Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8: 
“Financial Statements and Supplementary Data” included in this Annual Report on Form 10-K. Historical results are not necessarily 
indicative of future performance.

Consolidated Statements of Operations Data

Revenues

Cost of revenues

Gross profit

Operating income (loss)

Net income (loss) attributable to Itron, Inc.

Earnings (loss) per common share - Basic

Earnings (loss) per common share - Diluted

2016(5)

Year Ended December 31,
2013(3)
2014(4)
(in thousands, except per share data)

2015

2012(2)

$

2,013,186

$

1,883,533

$

1,947,616

$

1,938,025

$

2,156,365

1,352,866

1,326,848

1,333,566

1,323,257

1,448,753

660,320

96,211

31,770

556,685

52,846

12,678

614,050

480

(23,670)

614,768

(139,863)

(153,153)

$

$

0.83

0.82

$

$

0.33

0.33

$

$

(0.60) $

(0.60) $

(3.90) $

(3.90) $

707,612

139,153

99,839

2.52

2.50

39,625

39,934

Weighted average common shares outstanding - Basic

Weighted average common shares outstanding - Diluted

38,207

38,643

38,224

38,506

39,184

39,184

39,281

39,281

Consolidated Balance Sheets Data
Working capital(1)
Total assets (6)
Total debt (6)
Total Itron, Inc. shareholders' equity

Other Financial Data

$

319,420

$

281,166

$

262,393

$

338,476

$

338,985

1,577,811

1,680,316

1,751,085

1,906,025

2,109,134

304,523

631,604

370,165

604,758

323,307

681,001

377,596

839,011

415,809

982,253

Cash provided by operating activities

$

115,842

$

73,350

$

132,973

$

105,421

$

205,090

Cash used in investing activities

Cash provided by (used in) financing activities

Capital expenditures

(47,528)

(63,023)

(43,543)

(48,951)

7,740

(43,918)

(41,496)

(91,877)

(44,495)

(56,771)

(57,438)

(60,020)

(125,445)

(77,528)

(50,543)

(1)  Working capital represents current assets less current liabilities.

(2)  On May 1, 2012, we completed our acquisition of SmartSynch, Inc. for $77.7 million in cash (net of $6.7 million of cash and cash equivalents 

acquired).

(3)  During 2013, we incurred a goodwill impairment charge of $174.2 million. In addition, we incurred costs of $36.3 million in 2013 related 

to restructuring projects to increase efficiency.

(4)  During 2014, we incurred costs of $49.5 million related to restructuring projects to improve operational efficiencies and reduce expenses. 
Refer to Item 8: “Financial Statements and Supplementary Data, Note 13: Restructuring” included in this Annual Report on Form 10-K for 
further disclosures regarding the restructuring charges.

(5)  During 2016, we incurred costs of $49.1 million related to restructuring projects to restructure various company activities in order to improve 
operational efficiencies, reduce expenses and improve competiveness. Refer to Item 8: “Financial Statements and Supplementary Data, 
Note 13: Restructuring” included in this Annual Report on Form 10-K for further disclosures regarding the restructuring charges.

(6)  Total assets and total debt for all periods presented were adjusted for the adoption of Accounting Standards Update 2015-03, Interest - 
Imputation of Interest. Refer to Item 8: “Financial Statements and Supplementary Data, Note 1: Summary of Significant Accounting Policies” 
included in this Annual Report on Form 10-K for further disclosures regarding accounting pronouncements.

19

ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 

OPERATIONS

The following discussion and analysis should be read in conjunction with Item 8: “Financial Statements and Supplementary Data” 
included in this Annual Report on Form 10-K.

Overview

We are a technology company, offering end-to-end solutions to enhance productivity and efficiency, primarily focused on utilities 
and municipalities around to globe. Our solutions generally include robust industrial grade networks, smart meters, meter data 
management software, and knowledge application solutions, which bring additional value to the customer. Our professional services 
help our customers project-manage, install, implement, operate, and maintain their systems. We operate under the Itron brand 
worldwide and manage and report under three operating segments, Electricity, Gas, and Water. Our Water operating segment 
includes both our global water and heat solutions. This structure allows each segment to develop its own go-to-market strategy, 
prioritize its marketing and product development requirements, and focus on its strategic investments. Our sales, marketing, and 
delivery functions are managed under each segment. Our product development and manufacturing operations are managed on a 
worldwide basis to promote a global perspective in our operations and processes and yet maintain responsiveness to the market.

We have three measures of segment performance: revenues, gross profit (margin), and operating income (margin). Intersegment 
revenues  are  minimal.  Certain  operating  expenses  are  allocated  to  the  operating  segments  based  upon  internally  established 
allocation methodologies. Interest income, interest expense, other income (expense), income tax provision, and certain corporate 
operating expenses are neither allocated to the segments nor included in the measures of segment performance.

The following discussion includes financial information prepared in accordance with accounting principles generally accepted in 
the United States (GAAP), as well as certain adjusted or non-GAAP financial measures such as constant currency, free cash flow, 
non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, adjusted EBITDA, and non-GAAP diluted 
earnings per share (EPS). We believe that non-GAAP financial measures, when reviewed in conjunction with GAAP financial 
measures,  can  provide  more  information  to  assist  investors  in  evaluating  current  period  performance  and  in  assessing  future 
performance. For these reasons, our internal management reporting also includes non-GAAP measures. We strongly encourage 
investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any 
single financial measure. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by 
other companies.

In our discussions of the operating results below, we sometimes refer to the impact of foreign currency exchange rate fluctuations, 
which are references to the differences between the foreign currency exchange rates we use to convert operating results from local 
currencies into U.S. dollars for reporting purposes. We also use the term “constant currency,” which represents results adjusted to 
exclude foreign currency exchange rate impacts. We calculate the constant currency change as the difference between the current 
period results translated using the current period currency exchange rates and the comparable prior period’s results restated using 
current period currency exchange rates. We believe the reconciliations of changes in constant currency provide useful supplementary 
information to investors in light of fluctuations in foreign currency exchange rates.

Refer to the Non-GAAP Measures section below on pages 38-40 for information about these non-GAAP measures and the detailed 
reconciliation of items that impacted free cash flow, non-GAAP operating expenses, non-GAAP operating income, non-GAAP 
net income, adjusted EBITDA, and non-GAAP diluted EPS in the presented periods.

20

Total Company Highlights

Highlights and significant developments for the twelve months ended December 31, 2016 

•  Revenues were $2.0 billion compared with $1.9 billion in the same period last year, an increase of $129.7 million, or 7%.

•  Gross  margin  was  32.8%  compared  with  29.6%  in  the  same  period  last  year.  The  increase  of  320  basis  points  included 

improvements in all segments.

•  Operating expenses were $60.3 million higher compared with the same period last year, primarily due to increased restructuring 

expense.

•  Net income attributable to Itron, Inc. was $31.8 million compared with $12.7 million for the same period in 2015.

•  Adjusted EBITDA increased $99.1 million, or 91% compared with the same period in 2015.

•  GAAP diluted EPS was $0.82, a $0.49 improvement compared with the same period in 2015.

•  Non-GAAP diluted EPS improved $1.81 to $2.54 compared with the same period last year.

•  Total backlog was $1.7 billion and twelve-month backlog was $761 million at December 31, 2016.

On September 1, 2016, we announced projects (2016 Projects) to restructure various company activities in order to improve 
operational efficiencies, reduce expenses and improve competiveness. We expect to close or consolidate several facilities and 
reduce our global workforce as a result of the 2016 Projects. We recognized $47.8 million of restructuring expense related to the 
2016 Projects during the year ended December 31, 2016.

We expect to substantially complete the 2016 Projects by the end of 2018. Many of the affected employees are represented by 
unions or works councils, which requires consultation, and potential restructuring projects may be subject to regulatory approval, 
both  of  which  could  impact  the  timing  of  charges,  total  expected  charges,  costs  recognized,  and  planned  savings  in  certain 
jurisdictions.  We  estimate  pre-tax  restructuring  charges  of  approximately  $68  million,  with  expected  annualized  savings  of 
approximately $40 million upon completion.

21

Total Company GAAP and Non-GAAP Highlights and Unit Shipments

GAAP
Revenues
Gross profit
Operating expenses
Operating income
Other income (expense)
Income tax provision
Net income (loss) attributable to Itron, Inc.

Non-GAAP(1)
Non-GAAP operating expenses
Non-GAAP operating income
Non-GAAP net income attributable to Itron,
Inc.
Adjusted EBITDA

GAAP Margins and Earnings Per Share
Gross margin
Operating margin
Basic EPS
Diluted EPS

Non-GAAP Earnings Per Share(1)
Non-GAAP diluted EPS

$

$

$
$

$

2016

2,013,186
660,320
564,109
96,211
(11,584)
(49,574)
31,770

490,104
170,216

98,284
208,638

32.8%
4.8%
0.83
0.82

2.54

Year Ended December 31,
2015
(in thousands, except margin and per share data)

% Change

% Change

2014

7 % $
19 %
12 %
82 %
(26)%
124 %
151 %

1 % $

137 %

251 %
91 %

1,883,533
556,685
503,839
52,846
(15,744)
(22,099)
12,678

484,967
71,718

27,981
109,497

29.6%
2.8%
0.33
0.33

0.73

$
$

$

(3)% $
(9)%
(18)%
10,910 %
(16)%
448 %
N/A

1,947,616
614,050
613,570
480
(18,745)
(4,035)
(23,670)

(4)% $
(34)%

(54)%
(29)%

504,931
109,119

60,621
154,632

31.5%
—%
(0.60)
(0.60)

1.54

$
$

$

(1)  These measures exclude certain expenses that we do not believe are indicative of our core operating results. See pages 38-40 for 

information about these non-GAAP measures and reconciliations to the most comparable GAAP measures.

22

Meter and Communication Module Summary

We classify meters into two categories:

• 
• 

Standard metering – no built-in remote reading communication technology
Smart metering – one-way communication of meter data or two-way communication including remote meter configuration 
and upgrade (consisting primarily of our OpenWay technology)

In addition, smart meter communication modules can be sold separately from the meter.

Our revenue is driven significantly by sales of meters and communication modules. A summary of our meter and communication 
module shipments is as follows:

Meters

Standard
Smart

Total meters

Stand-alone communication modules

Smart

Results of Operations

Revenues and Gross Margin

2016

Year Ended December 31,
2015
(units in thousands)

2014

15,540
9,340
24,880

17,560
7,290
24,850

18,740
6,090
24,830

5,980

5,840

5,770

The actual results and effects of changes in foreign currency exchange rates in revenues and gross profit were as follows:

Year Ended December 31,
2015
2016

Effect of
Changes in
Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

2,013,186
660,320

$

1,883,533
556,685

$

(34,781) $
(9,381)

164,434
113,016

$

129,653
103,635

Year Ended December 31,
2014
2015

Effect of
Changes in
Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

1,883,533
556,685

$

1,947,616
614,050

$

(178,250) $
(51,264)

114,167
(6,101)

$

(64,083)
(57,365)

$

$

Total Company
Revenues
Gross Profit

Total Company
Revenues
Gross Profit

(1)  Constant currency change is a non-GAAP financial measure and represents the total change between periods excluding the effect of changes 

in foreign currency exchange rates.

Revenues

Revenues increased $129.7 million, or 7%, in 2016, compared with 2015. Changes in currency exchange rates unfavorably impacted 
revenues by $34.8 million across all segments. Revenues decreased $64.1 million, or 3%, in 2015, compared with 2014. Changes 
in currency exchange rates unfavorably impacted revenues by $178.3 million across all segments. A more detailed analysis of 
these fluctuations is provided in Operating Segment Results.

23

 
No single customer represented more than 10% of total revenues for the years ended December 31, 2016, 2015, and 2014. Our 
10 largest customers accounted for 31%, 22%, and 19% of total revenues in 2016, 2015, and 2014.

Gross Margin

Gross margin was 32.8% for 2016, compared with 29.6% in 2015. The improvement was primarily driven by a $29.4 million 
warranty charge that unfavorably impacted gross margin in 2015 related to the premature failure of certain communication modules 
that necessitated a product replacement notification in our Water segment, as well as improved revenues and product mix in our 
Electricity and Gas segments. Gross margin was 29.6% in 2015, compared with 31.5% in 2014. The decrease was primarily driven 
by the warranty charge previously discussed.

Operating Expenses

The following table shows the components of operating expense:

Year Ended December 31,
2015
2016

Effect of
Changes in
Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

158,883
168,209
162,815
25,112
49,090
564,109

$

$

161,380
162,334
155,715
31,673
(7,263)
503,839

$

$

(2,883) $
(1,273)
(2,047)
(705)
(412)
(7,320) $

386
7,148
9,147
(5,856)
56,765
67,590

$

$

(2,497)
5,875
7,100
(6,561)
56,353
60,270

Year Ended December 31,
2014
2015

Effect of
Changes in
Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

161,380
162,334
155,715
31,673
(7,263)
503,839

$

$

182,503
175,500
162,466
43,619
49,482
613,570

$

$

(18,985) $
(10,267)
(14,356)
(4,121)
(6,164)
(53,893) $

(2,138) $
(2,899)
7,605
(7,825)
(50,581)
(55,838) $

(21,123)
(13,166)
(6,751)
(11,946)
(56,745)
(109,731)

$

$

$

$

Total Company
Sales and marketing
Product development
General and administrative
Amortization of intangible assets
Restructuring

Total Operating expenses

Total Company
Sales and marketing
Product development
General and administrative
Amortization of intangible assets
Restructuring

Total Operating expenses

(1)  Constant currency change is a non-GAAP financial measure and represents the total change between periods excluding the effect of changes 

in foreign currency exchange rates.

Operating expenses increased $60.3 million for the year ended December 31, 2016 as compared with the same period in 2015. 
This was primarily related to increased restructuring expense related to the 2016 Projects. The increases in general and administrative 
and product development were related to variable compensation, professional service, and temporary worker expenses. This was 
partially offset by a decrease in amortization of intangible assets.

For the year ended December 31, 2015, operating expenses decreased $109.7 million as compared with the same period in 2014.  
The decrease was primarily related to a reduction in restructuring expense, variable compensation, acquisition related expense, 
and favorable foreign exchange impact of $53.9 million. These decreases were partially offset by increased litigation, professional 
service, and temporary worker expenses.

24

Other Income (Expense)

The following table shows the components of other income (expense):

2016
(in thousands)

% Change

Year Ended December 31,
2015
(in thousands)

% Change

2014
(in thousands)

Interest income
Interest expense
Amortization of prepaid debt fees
Other income (expense), net

Total other income (expense)

$

$

865
(9,872)
(1,076)
(1,501)
(11,584)

14%
(3)%
(49)%
(64)%
(26)%

$

$

761
(10,161)
(2,128)
(4,216)
(15,744)

54%
2%
32%
(45)%
(16)%

$

$

494
(9,990)
(1,612)
(7,637)
(18,745)

Total  other  income  (expense)  for  the year  ended  December  31,  2016 was  a  net  expense  of $11.6  million  compared 
with $15.7 million in 2015. The change for the year ended December 31, 2016 as compared with 2015 was due to fluctuations in 
the recognized foreign currency exchange gains and losses due to transactions denominated in a currency other than the reporting 
entity's functional currency. The decreased expense in 2016 was also due to the write off of unamortized prepaid debt fees in 2015.

Total  other  income  (expense)  for  the year  ended  December  31,  2015 was  a  net  expense  of $15.7  million  compared 
with $18.7 million in 2014. The decreased expense was primarily due to reduced losses in the recognized foreign currency exchange 
losses due to transactions denominated in a currency other than the reporting entity's functional currency.

Income Tax Provision

Our income tax provision was $49.6 million, $22.1 million, and $4.0 million for the years ended December 31, 2016, 2015, and 
2014, respectively. Our tax rates of 59%, 60%, and (22)% for the years ended December 31, 2016, 2015, and 2014 differ from the 
35% U.S. federal statutory tax rate due to the level of profit or losses in domestic and foreign jurisdictions, tax credits (including 
research and development and foreign tax), state income taxes, adjustments to valuation allowances, and uncertain tax positions, 
among other items. For additional discussion related to income taxes, see Item 8: “Financial Statements and Supplementary Data, 
Note 11: Income Taxes.”

In December 2016, we filed a formal protest letter with the Internal Revenue Service requesting an Appeals hearing regarding the 
2011-2013 tax audit assessment received earlier this year relating to research and development tax credits.

25

 
 
Operating Segment Results

For a description of our operating segments, refer to Item 8: “Financial Statements and Supplementary Data, Note 16: Segment 
Information” in this Annual Report on Form 10-K. The following tables and discussion highlight significant changes in trends or 
components of each operating segment.

Segment Revenues
Electricity
Gas
Water

Total revenues

2016
(in thousands)
938,374
$
569,476
505,336
2,013,186

$

% Change

% Change

Year Ended December 31,
2015
(in thousands)
820,306
$
543,805
519,422
1,883,533

$

6%
(9)%
(10)%
(3)%

14%
5%
(3)%
7%

Segment Gross Profit and Margin

Electricity
Gas
Water

Total gross profit and margin $

2016

Gross
Profit

Gross
Margin

(in thousands)
282,677
$
205,063
172,580
660,320

30.1%
36.0%
34.2%
32.8%

Year Ended December 31,
2015

Gross
Profit

Gross
Margin

(in thousands)
225,446
$
185,559
145,680
556,685

$

27.5%
34.1%
28.0%
29.6%

Segment Operating Expenses

Electricity
Gas
Water
Corporate unallocated

Total operating expenses

2016
(in thousands)
214,390
$
138,250
135,314
76,155
564,109

$

% Change

% Change

Year Ended December 31,
2015
(in thousands)
194,342
$
118,088
125,816
65,593
503,839

$

(30)%
(13)%
(4)%
(5)%
(18)%

10%
17%
8%
16%
12%

2014
(in thousands)
771,857
$
599,091
576,668
1,947,616

$

2014

Gross
Profit

Gross
Margin

25.9%
35.3%
35.1%
31.5%

(in thousands)
200,249
$
211,623
202,178
614,050

$

2014
(in thousands)
278,000
$
135,522
130,822
69,226
613,570

$

2016

Year Ended December 31,
2015

2014

Operating
Income
(Loss)

Operating
Margin

Operating
Income
(Loss)

Operating
Margin

Operating
Income
(Loss)

Operating
Margin

3.8%
12.4%
3.8%

2.8%

$

(in thousands)
$

(77,751)
76,101
71,356
(69,226)
480

(10.1)%
12.7%
12.4%

—%

Segment Operating Income (Loss) and
Operating Margin
Electricity
Gas
Water
Corporate unallocated

Total operating income

(in thousands)
68,287
$
66,813
37,266
(76,155)
96,211

$

7.3%
11.7%
7.4%

4.8%

(in thousands)
31,104
$
67,471
19,864
(65,593)
52,846

$

26

Electricity: 

The effects of changes in foreign currency exchange rates and the constant currency changes in certain Electricity segment financial 
results were as follows:

Year Ended December 31,
2015
2016

Effect of Changes
in Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

$

938,374
282,677
214,390

$

820,306
225,446
194,342

(17,643) $
(5,606)
(3,368)

$

135,711
62,837
23,416

118,068
57,231
20,048

Year Ended December 31,
2014
2015

Effect of Changes
in Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

$

820,306
225,446
194,342

$

771,857
200,249
278,000

(55,440) $
(14,322)
(20,234)

$

103,889
39,519
(63,424)

48,449
25,197
(83,658)

Electricity Segment
Revenues
Gross Profit
Operating Expenses

Electricity Segment
Revenues
Gross Profit
Operating Expenses

$

$

(1)  Constant currency change is a non-GAAP financial measure and represents the total change between periods excluding the effect of changes 

in foreign currency exchange rates.

Revenues - 2016 vs. 2015

Electricity revenues for 2016 increased by $118.1 million, or 14%, compared with 2015. This increase was primarily driven by 
increased smart metering revenues in North America and Europe, Middle East, and Africa (EMEA), higher volumes of prepaid 
smart metering solutions in our Asia Pacific region, and improved service revenue in North America. These improvements were 
partially offset by a decline in EMEA service revenue and declines in product revenue in our Latin America region. The total 
change in Electricity revenues was unfavorably impacted by $17.6 million due to the effect of changes in foreign currency exchange 
rates.

Revenues - 2015 vs. 2014

Revenues for 2015 increased by $48.4 million, or 6%, compared with 2014. The increase was primarily driven by increases in 
product revenue from North America smart metering solutions and service revenues, and improved service revenue in EMEA. 
The improvements were partially offset by lower product revenue in EMEA due to the planned exit of certain markets and products 
under our restructuring plan. The total change in Electricity revenues was unfavorably impacted by $55.4 million due to the effect 
of changes in foreign currency exchange rates.

Two customers represented 12% and 10% of total Electricity operating segment revenues, respectively,  for the year ended December 
31, 2016. No customer represented more than 10% of total Electricity operating segment revenues in 2015 or 2014.

Gross Margin - 2016 vs. 2015

Gross  margin  was  30.1%  in  2016,  compared  with  27.5%  in  2015. The  260 basis  point  improvement over  the  prior  year  was 
primarily the result of increased sales of higher margin smart metering solutions in North America and planned reductions in lower 
margin product sales.

Gross Margin - 2015 vs. 2014

Gross margin was 27.5% in 2015, compared with 25.9% in 2014. The margin improvement was driven by net charges for an 
OpenWay project in North America of $15.9 million, which unfavorably impacted 2014 gross margin by 220 basis points. In 
addition, we had lower variable compensation expense in 2015. These improvements were partially offset by decreased product 
revenue in EMEA.

27

Operating Expenses - 2016 vs. 2015

Operating expenses increased $20.0 million, or 10%. The increase was primarily due to increased restructuring charges. In addition, 
general and administrative expenses for the year ended December 31, 2015 included a recovery of $8.2 million related to the 
settlement of litigation arising from the SmartSynch acquisition. These increases were partially offset by a decrease in amortization 
of intangible assets expense.

Operating Expenses - 2015 vs. 2014

Operating expenses decreased by $83.7 million, or 30%, in 2015 compared with 2014, primarily due to reduced restructuring 
charges. In addition, general and administrative expenses decreased due to an $8.2 million litigation expense reimbursement related 
to a $14.7 million charge in 2014, which is included in general and administrative expense. Variable compensation expense included 
in the sales and marketing, product development, and general and administrative expenses were all lower when comparing 2015 
to 2014, while amortization expense also decreased year over year.

Gas:

The effects of changes in foreign currency exchange rates and the constant currency changes in certain Gas segment financial 
results were as follows:

Year Ended December 31,
2015
2016

Effect of Changes
in Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

$

569,476
205,063
138,250

$

543,805
185,559
118,088

(6,990) $
(982)
(1,336)

$

32,661
20,486
21,498

25,671
19,504
20,162

Year Ended December 31,
2014
2015

Effect of Changes
in Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

$

543,805
185,559
118,088

$

599,091
211,623
135,522

(49,908) $
(11,786)
(14,054)

(5,378) $
(14,278)
(3,380)

(55,286)
(26,064)
(17,434)

Gas Segment
Revenues
Gross Profit
Operating Expenses

Gas Segment
Revenues
Gross Profit
Operating Expenses

$

$

(1)  Constant currency change is a non-GAAP financial measure and represents the total change between periods excluding the effect of changes 

in foreign currency exchange rates.

Revenues - 2016 vs. 2015

Revenues increased by $25.7 million, or 5%, in 2016 compared with 2015. This was due to an increase in product revenue in 
North America, EMEA, and Asia Pacific. The total change in Gas revenues was unfavorably impacted by $7.0 million due to the 
effect of changes in foreign currency exchange rates.

Revenues - 2015 vs. 2014

Revenues decreased by $55.3 million, or 9%, in 2015 compared with 2014. This decrease was primarily due to the effects of 
changes in foreign currency exchange rates, as well as a decrease in EMEA revenues due to the phase out of a large project and 
a planned reduction in standard meter volumes as we shift our focus to smart meters, which did show increased sales during 2015.

No single customer represented more than 10% of the Gas operating segment revenues in 2016, 2015, or 2014.

Gross Margin - 2016 vs. 2015

Gross margin was 36.0% in 2016, compared with 34.1% in 2015. The increase of 190 basis points was related to improved product 
mix and increased volumes.

28

Gross Margin - 2015 vs. 2014

Gross margin was 34.1% in 2015, compared with 35.3% in 2014. The decrease in gross margin was driven by lower standard 
meter volumes and lower margins associated with sales of first generation smart meters in EMEA. In addition, EMEA experienced 
higher inventory costs associated with the closure of our Naples manufacturing facility as part of our restructuring activities. This 
decline more than offset improvements in Latin America and Asia Pacific due to higher overall sales as well as improved sales in 
North America of our higher margin communication modules.

Operating Expenses - 2016 vs. 2015

Operating expenses increased by $20.2 million, or 17%, in 2016. The increase resulted primarily due to increased restructuring 
charges as a result of the announcement of the 2016 Projects, partially offset by a decrease in general and administrative expense.

Operating Expenses - 2015 vs. 2014

Operating expenses decreased by $17.4 million, or 13% in 2015. This decrease was primarily due to the effects of changes in 
foreign currency exchange rates, along with lower restructuring expense.

Water:

The effects of changes in foreign currency exchange rates and the constant currency changes in certain Water segment financial 
results were as follows:

Year Ended December 31,
2015
2016

Effect of Changes
in Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

$

505,336
172,580
135,314

$

519,422
145,680
125,816

(10,148) $
(2,793)
(1,003)

(3,938) $
29,693
10,501

(14,086)
26,900
9,498

Year Ended December 31,
2014
2015

Effect of Changes
in Foreign
Currency
Exchange Rates
(in thousands)

Constant 
Currency 
Change(1)

Total Change

$

519,422
145,680
125,816

$

576,668
202,178
130,822

(72,902) $
(25,156)
(16,723)

$

15,656
(31,342)
11,717

(57,246)
(56,498)
(5,006)

Water Segment
Revenues
Gross Profit
Operating Expenses

Water Segment
Revenues
Gross Profit
Operating Expenses

$

$

(1)  Constant currency change is a non-GAAP financial measure and represents the total change between periods excluding the effect of changes 

in foreign currency exchange rates.

Revenues - 2016 vs. 2015

Revenues decreased $14.1 million, or 3%, in 2016. This decrease was primarily due to the effects of changes in foreign currency 
exchange rates, along with lower meter volumes in EMEA. This was partially offset by improved product sales and services 
revenues in North America and Asia Pacific.

Revenues - 2015 vs. 2014

Revenues decreased $57.2 million, or 10%, in 2015. This decrease was primarily due to the effects of changes in foreign currency 
exchange rates. Excluding those impacts, there was an increase of $15.7 million, driven primarily by growth in product sales of 
smart meters and modules in North America and EMEA, partially offset by lower product sales in Latin America.

No single customer represented more than 10% of the Water operating segment revenues in 2016, 2015, or 2014.

Gross Margin - 2016 vs. 2015

Gross margin increased to 34.2% in 2016, compared with 28.0% in 2015, driven by reduced warranty charges in 2016. Gross 
margin in 2015 was unfavorably impacted 570 basis points by a warranty charge.

29

Gross Margin - 2015 vs. 2014

Gross  margin  decreased  to  28.0%  in  2015,  compared  with  35.1%  in  2014,  primarily  as  the  result  of  a  warranty  charge  of 
$29.4 million. This warranty charge unfavorably impacted 2015 gross margin by 570 basis points.

Operating Expenses - 2016 vs. 2015

Operating expenses increased $9.5 million, or 8%, in 2016. The increase was primarily due to increased restructuring charges as 
a result of the commencement of the 2016 Projects.

Operating Expenses - 2015 vs. 2014

Operating expenses decreased by $5.0 million, or 4% in 2015. This decrease was primarily due to decreases in sales and marketing 
and amortization expenses. Operating expenses were favorably impacted by $16.7 million in foreign currency exchange rate 
impacts.

Corporate unallocated:

Operating expenses not directly associated with an operating segment are classified as “Corporate unallocated.” These expenses 
increased  $10.6  million,  or  16%,  in  2016.  The  increase  was  primarily  in  general  and  administrative  expense  due  to  higher 
professional service fees and variable compensation.

Corporate unallocated expenses decreased $3.6 million, or 5%, in 2015. This decrease was primarily due to reduced restructuring 
expense and a decrease in variable compensation. These decreases were partially offset by higher litigation expense.

Financial Condition

Cash Flow Information:

Operating activities
Investing activities
Financing activities
Effect of exchange rates on cash and cash equivalents
Increase (decrease) in cash and cash equivalents

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

115,842
(47,528)
(63,023)
(2,744)
2,547

$

$

73,350
(48,951)
7,740
(13,492)
18,647

$

$

132,973
(41,496)
(91,877)
(12,034)
(12,434)

Cash and cash equivalents at December 31, 2016 were $133.6 million, compared with $131.0 million at December 31, 2015. The 
moderate increase in cash and cash equivalents was primarily the result of an increase in cash flow provided by operating activities, 
which was substantially offset by an increase in cash used in financing activities. Cash and cash equivalents at December 31, 2015
were higher compared with the prior year primarily due to an increase in cash provided by financing activities, partially offset by 
a decrease in cash flow provided by operating activities.

Operating activities

Net cash provided by operating activities in 2016 was $42.5 million higher than in 2015. This increase was primarily due to an 
improvement in net income (loss) adjusted for non-cash items and changes in operating asset and liabilities. These adjustments 
include  a  $75.1 million  decreased  use  of  cash  for  inventory  caused  by  a  prior  year  buildup  for  expected  demand.  In 
addition, $49.1 million of restructuring expense was recognized related to the 2016 Projects, much of which will be paid in future 
periods or relates to non-cash items. These improvements were partially offset by the $29.4 million warranty charge recognized 
during the year ended December 31, 2015 related to a product replacement notification to customers of our Water business line 
for which many replacements have been processed during 2016. In addition, there was a $37.8 million net reduction for unearned 
revenue recognized during the year for which cash was collected in previous years.

Net  cash  provided  by  operating  activities  in  2015  was  $59.6  million  lower  than  2014. This  decrease  was  primarily  due  to  a 
$52.7 million increase in inventory in 2015 for expected demand, and a $57.4 million increased use of cash in other current 
liabilities due to payments and releases of significant restructuring accruals in 2015, compared with a substantial increase in 
restructuring liabilities in 2014. Additionally, while warranty liabilities increased $18.0 million in 2015, cash paid for claims 
activity was lower compared with 2014, resulting in a $27.5 million decreased use of cash. A year over year increase of $37.3 million 

30

in net income (loss) and a $36.2 million increase in deferred income taxes also increased cash provided by operating activities as 
compared with 2014.

Investing activities

Net cash used in investing activities in 2016 was $1.4 million lower than in 2015.

Net cash used in investing activities in 2015 was $7.5 million higher than in 2014. This increase was primarily the result of an 
immaterial acquisition.

Financing activities

Net cash used by financing activities in 2016 was $70.8 million greater than in 2015, primarily a result of the net repayment of 
$63.2 million of borrowings in 2016, compared to utilizing $50.5 million of net proceeds during the same period in 2015. This 
was partially offset by a $38.3 million reduction in cash used for repurchases of common stock during the year ended December 31, 
2016, compared with the same period in 2015.

Net cash provided by financing activities in 2015 was $99.6 million higher than in 2014, primarily as a result of $65.8 million of 
additional proceeds from borrowings and a $39.4 million decrease in debt repayments.

Effect of exchange rates on cash and cash equivalents

Changes in exchange rates on the cash balances of currencies held in foreign denominations resulted in a decrease of $2.7 million, 
a decrease of $13.5 million, and a decrease of $12.0 million in 2016, 2015, and 2014, respectively. Our foreign currency exposure 
relates to non-U.S. dollar denominated balances in our international subsidiary operations, the most significant of which is the 
euro.

Free cash flow (Non-GAAP)

To supplement our Consolidated Statements of Cash Flows presented on a GAAP basis, we use the non-GAAP measure of free 
cash flow to analyze cash flows generated from our operations. The presentation of non-GAAP free cash flow is not meant to be 
considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows 
from operating activities as a measure of liquidity. We calculate free cash flows, using amounts from our Consolidated Statements 
of Cash Flows, as follows:

Net cash provided by operating activities
Acquisitions of property, plant, and equipment

Free cash flow

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

115,842
(43,543)
72,299

$

$

73,350
(43,918)
29,432

$

$

132,973
(44,495)
88,478

Free cash flow fluctuated primarily as a result of changes in cash provided by operating activities. See the cash flow discussion 
of operating activities above.

Off-balance sheet arrangements:

We have no off-balance sheet financing agreements or guarantees as defined by Item 303 of Regulation S-K at December 31, 2016 
and December 31, 2015 that we believe are reasonably likely to have a current or future effect on our financial condition, results 
of operations, or cash flows.

31

Disclosures about contractual obligations and commitments:

The following table summarizes our known obligations to make future payments pursuant to certain contracts as of December 31, 
2016, as well as an estimate of the timing in which these obligations are expected to be satisfied.

Total

Less than
1 year

1-3
years

3-5
years

Beyond
5 years

(in thousands)

Credit Facilities(1)

USD denominated term loan

$

225,877

$

18,625

$

52,923

$

154,329

$

Multicurrency revolving line of credit

Operating lease obligations(2)
Purchase and service commitments(3)
Other long-term liabilities reflected on the balance sheet 
under generally accepted accounting principles(4)
Total

103,790

54,417

171,793

94,060

1,653

13,128

171,251

3,951

21,390

526

98,186

11,389

16

—

55,653

13,003

$

649,937

$

204,657

$

134,443

$

276,923

$

—

—

8,510

—

25,404

33,914

(1)  Borrowings are disclosed within Item 8: “Financial Statements and Supplementary Data, Note 6: Debt” included in this Annual Report on 

Form 10-K, with the addition of estimated interest expense but not including the amortization of prepaid debt fees.

(2)  Operating  lease  obligations  are  disclosed  in  Item 8:  “Financial  Statements  and  Supplementary  Data,  Note  12:  Commitments  and 
Contingencies” included in this Annual Report on Form 10-K and do not include common area maintenance charges, real estate taxes, and 
insurance charges for which we are obligated.

(3)  We enter into standard purchase orders in the ordinary course of business that typically obligate us to purchase materials and other items. 
Purchase orders can include open-ended agreements that provide for estimated quantities over an extended shipment period, typically up 
to one year at an established unit cost. Our long-term executory purchase agreements that contain termination clauses have been classified 
as less than one year, as the commitments are the estimated amounts we would be required to pay at December 31, 2016 if the commitments 
were canceled.

(4)  Other long-term liabilities consist of warranty obligations, estimated pension benefit payments, and other obligations. Estimated pension 
benefit payments include amounts from 2018-2026. Long-term unrecognized tax benefits totaling $28.5 million (net of pre-payments), 
which include accrued interest and penalties, are not included in the above contractual obligations and commitments table as we cannot 
reliably estimate the period of cash settlement with the respective taxing authorities. Additionally, because the amount and timing of the 
future cash outflows are uncertain, deferred revenue totaling $49.3 million, which includes deferred revenue related to extended warranty 
guarantees, is not included in the table. For further information on defined benefit pension plans, income taxes, and warranty obligations 
and deferred revenue for extended warranties, see Item 8: “Financial Statements and Supplementary Data, Notes 8, 11, and 12,” respectively, 
included in this Annual Report on Form 10-K.

Liquidity and Capital Resources:

Our principal sources of liquidity are cash flows from operations, borrowings, and sales of common stock. Cash flows may fluctuate 
and are sensitive to many factors including changes in working capital and the timing and magnitude of capital expenditures and 
payments of debt. Working capital, which represents current assets less current liabilities, was $319.4 million at December 31, 
2016.

Borrowings

Our credit facility consists of a $225 million U.S. dollar term loan and a multicurrency revolving line of credit (the revolver) with 
a principal amount of up to $500 million. The revolver also contains a $250 million letter of credit sub-facility and a $50 million 
swingline sub-facility (available for immediate cash needs at a higher interest rate). At December 31, 2016, $97.2 million was 
outstanding  under  the  revolver,  and  $356.7  million  was  available  for  additional  borrowings  or  standby  letters  of  credit. At 
December 31, 2016, $46.1 million was utilized by outstanding standby letters of credit, resulting in $203.9 million available for 
additional letters of credit.

For further description of the term loan and the revolver under our 2015 credit facility, refer to Item 8: “Financial Statements and 
Supplementary Data, Note 6: Debt” included in this Annual Report on Form 10-K.

For a description of our letters of credit and performance bonds, and the amounts available for additional borrowings or letters of 
credit under our lines of credit, including the revolver that is part of our credit facility, refer to Item 8: “Financial Statements and 
Supplementary Data, Note 12: Commitments and Contingencies” included in this Annual Report on Form 10-K.

32

Restructuring

We expect pre-tax restructuring charges associated with the 2016 Projects of approximately $68 million, with expected annualized 
savings of approximately $40 million upon completion. Of the total estimated charge, more than 90% is expected to result in cash 
expenditures.

As of December 31, 2016, $48.0 million was accrued for the restructuring projects, of which $26.2 million is expected to be paid 
over the next 12 months.

For further details regarding our restructuring activities, refer to Item 8: “Financial Statements and Supplementary Data, Note 13: 
Restructuring.”

Stock Repurchases

On February 23, 2017, Itron's Board of Directors authorized a new repurchase program of up to $50 million of our common stock 
over  a  12-month  period,  beginning  February  23,  2017.  Repurchases  are  made  in  the  open  market  or  in  privately  negotiated 
transactions and in accordance with applicable securities laws. Repurchases are subject to the Company's alternative uses of capital 
as well as financial, market, and industry conditions.

Income Tax

Our tax provision as a percentage of income (loss) before tax typically differs from the U.S. federal statutory rate of 35%. Changes 
in our actual tax rate are subject to several factors, including fluctuations in operating results, new or revised tax legislation and 
accounting pronouncements, changes in the level of business in domestic and foreign jurisdictions, tax credits (including research 
and development and foreign tax), state income taxes, adjustments to valuation allowances, and uncertain tax positions, among 
other items. Changes in tax laws, valuation allowances, and unanticipated tax liabilities could significantly impact our tax rate.

Our cash income tax payments were as follows:

U.S. federal taxes paid
State income taxes paid
Foreign and local income taxes paid
Total income taxes paid

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

9,000
4,526
10,761
24,287

$

$

15,700
1,543
11,946
29,189

$

$

3,300
438
14,484
18,222

Based on current projections, we expect to pay, net of refunds, approximately $22 million in federal taxes, $9 million in state taxes 
and $15 million in foreign and local income taxes in 2017.

We have not provided U.S. deferred taxes related to the cash in certain foreign subsidiaries because our investment is considered 
permanent in duration. As of December 31, 2016, there was $42.1 million of cash and short-term investments held by certain 
foreign subsidiaries in which we are permanently reinvested for tax purposes. If this cash were repatriated to fund U.S. operations, 
additional tax costs may be incurred. Tax is one of many factors that we consider in the management of global cash. Included in 
the determination of the tax costs in repatriating foreign cash into the United States are the amount of earnings and profits in a 
particular jurisdiction, withholding taxes that would be imposed, and available foreign tax credits. Accordingly, the amount of 
taxes that we would need to accrue and pay to repatriate foreign cash could vary significantly.

Other Liquidity Considerations

In several of our consolidated international subsidiaries, we have joint venture partners, who are minority shareholders. Although 
these entities are not wholly-owned by Itron, Inc., we consolidate them because we have a greater than 50% ownership interest 
and/or because we exercise control over the operations. The noncontrolling interest balance in our Consolidated Balance Sheets 
represents the proportional share of the equity of the joint venture entities, which is attributable to the minority shareholders. At 
December 31, 2016, $28.0 million of our consolidated cash balance is held in our joint venture entities. As a result, the minority 
shareholders of these entities have rights to their proportional share of this cash balance, and there may be limitations on our ability 
to repatriate cash to the United States from these entities.

At December 31, 2016, we have accrued $23.0 million of bonus and profit sharing plans expense for the expected achievement 
of financial and nonfinancial targets, which we expect to pay in cash during the first quarter of 2017.

33

General Liquidity Overview

We expect to grow through a combination of internal new product development, licensing technology from and to others, distribution 
agreements, partnering arrangements, and acquisitions of technology or other companies. We expect these activities to be funded 
with existing cash, cash flow from operations, borrowings, or the sale of common stock or other securities. We believe existing 
sources of liquidity will be sufficient to fund our existing operations and obligations for the next 12 months and into the foreseeable 
future, but offer no assurances. Our liquidity could be affected by the stability of the electricity, gas, and water industries, competitive 
pressures, changes in estimated liabilities for product warranties and/or litigation, future business combinations, capital market 
fluctuations, international risks, and other factors described under Item 1A: “Risk Factors,” as well as Item 7A: “Quantitative and 
Qualitative Disclosures About Market Risk,” both included in this Annual Report on Form 10-K.

Contingencies

Refer to Item 8: “Financial Statements and Supplementary Data, Note 12: Commitments and Contingencies” included in this 
Annual Report on Form 10-K.

Critical Accounting Estimates and Policies

Our consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated 
financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, 
revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical 
accounting policies for us include revenue recognition, warranty, restructuring, income taxes, goodwill and intangible assets, 
defined  benefit  pension  plans,  contingencies,  and  stock-based  compensation.  Refer  to  Item  8:  “Financial  Statements  and 
Supplementary Data, Note 1: Summary of Significant Accounting Policies” included in this Annual Report on Form 10-K for 
further disclosures regarding accounting policies and new accounting pronouncements.

Revenue Recognition

Many of our revenue arrangements involve multiple deliverables, which require us to determine the fair value of each deliverable 
and then allocate the total arrangement consideration among the separate deliverables based on the relative fair value percentages. 
Revenues for each deliverable are then recognized based on the type of deliverable, such as 1) when the products are shipped, 
2) services are delivered, 3) percentage-of-completion for implementation services, 4) upon receipt of customer acceptance, or 5) 
transfer of title and risk of loss. A majority of our revenue is recognized when products are shipped to or received by a customer 
or when services are provided.

For implementation services, revenue is recognized using the percentage-of-completion method of contract accounting if project 
costs can be reliably estimated, or the completed contract method if project costs cannot be reliably estimated. The estimation of 
costs through completion of a project is subject to many variables such as the length of time to complete, changes in wages, 
subcontractor  performance,  supplier  information,  and  business  volume  assumptions.  Changes  in  underlying  assumptions  and 
estimates may adversely or favorably affect financial performance.

Under contract accounting, if we estimate that the completion of a contract component (unit of accounting) will result in a loss, 
the loss is recognized in the period in which the loss becomes evident. We reevaluate the estimated loss through the completion 
of the contract component, and adjust the estimated loss for changes in facts and circumstances.

Many  of  our  customer  arrangements  contain  clauses  for  liquidated  damages,  related  to  the  timing  of  delivery  or  milestone 
accomplishments, which could become material in an event of failure to meet the contractual deadlines. At the inception of the 
arrangement and on an ongoing basis, we evaluate if the liquidated damages represent contingent revenue and, if so, we reduce 
the amount of consideration allocated to the delivered products and services and recognize it as a reduction in revenue in the period 
of default. If the arrangement is subject to contract accounting, liquidated damages resulting from anticipated events of default 
are estimated and are accounted for as a reduction in revenue in the period in which the liquidated damages are deemed probable 
of occurrence and are reasonably estimable.

Certain of our revenue arrangements include an extended or noncustomary warranty provision that covers all or a portion of a 
customer's replacement or repair costs beyond the standard or customary warranty period. Whether or not the extended warranty 
is separately priced in the arrangement, a portion of the arrangement's total consideration is allocated to this extended warranty 
deliverable. This revenue is deferred and recognized over the extended warranty coverage period. Extended or noncustomary 
warranties do not represent a significant portion of our revenue.

We allocate consideration to each deliverable in an arrangement based on its relative selling price. We determine selling price 
using vendor specific objective evidence (VSOE), if it exists, otherwise we use third-party evidence (TPE). We define VSOE as 

34

a median price of recent standalone transactions that are priced within a narrow range. TPE is determined based on the prices 
charged by our competitors for a similar deliverable when sold separately. If neither VSOE nor TPE of selling price exists for a 
unit of accounting, we use estimated selling price (ESP). The objective of ESP is to determine the price, or fair value, at which 
we would transact if the product or service were regularly sold by us on a standalone basis. Our determination of ESP involves a 
weighting of several factors based on the specific facts and circumstances of the arrangement. The factors considered include 
historical sales, the cost to produce the deliverable, the anticipated margin on that deliverable, our ongoing pricing strategy and 
policies, and the characteristics of the varying markets in which the deliverable is sold.

Fair value represents the estimated price charged if an element were sold separately. If the fair value of any undelivered element 
included in a multiple deliverable arrangement cannot be objectively determined, revenue is deferred until all elements are delivered 
and services have been performed, or until the fair value can be objectively determined for any remaining undelivered elements. 
We review our fair values on an annual basis or more frequently if a significant trend is noted.

We analyze the selling prices used in our allocation of arrangement consideration on an annual basis. Selling prices are analyzed 
on a more frequent basis if a significant change in our business necessitates a more timely analysis or if we experience significant 
variances in our selling prices.

Warranty

We offer standard warranties on our hardware products and large application software products. We accrue the estimated cost of 
new product warranties based on historical and projected product performance trends and costs during the warranty period. Testing 
of new products in the development stage helps identify and correct potential warranty issues prior to manufacturing. Quality 
control efforts during manufacturing reduce our exposure to warranty claims. When testing or quality control efforts fail to detect 
a fault in one of our products, we may experience an increase in warranty claims. We track warranty claims to identify potential 
warranty trends. If an unusual trend is noted, an additional warranty accrual would be recognized if a failure event is probable and 
the cost can be reasonably estimated. When new products are introduced, our process relies on historical averages of similar 
products until sufficient data are available. As actual experience on new products becomes available, it is used to modify the 
historical averages to ensure the expected warranty costs are within a range of likely outcomes. Management regularly evaluates 
the sufficiency of the warranty provisions and makes adjustments when necessary. The warranty allowances may fluctuate due to 
changes in estimates for material, labor, and other costs we may incur to repair or replace projected product failures, and we may 
incur additional warranty and related expenses in the future with respect to new or established products, which could adversely 
affect our financial position and results of operations. The long-term warranty balance includes estimated warranty claims beyond 
one year.

Restructuring

We recognize a liability for costs associated with an exit or disposal activity under a restructuring project at its fair value in the 
period in which the liability is incurred. Employee termination benefits considered post-employment benefits are accrued when 
the  obligation  is  probable  and  estimable,  such  as  benefits  stipulated  by  human  resource  policies  and  practices  or  statutory 
requirements. One-time termination benefits are recognized at the date the employee is notified. If the employee must provide 
future service greater than 60 days, such benefits are recognized ratably over the future service period. For contract termination 
costs, we recognize a liability upon the later of when we terminate a contract in accordance with the contract terms or when we 
cease using the rights conveyed by the contract.

Asset impairments associated with a restructuring project are determined at the asset group level. An impairment may be recognized 
for assets that are to be abandoned, are to be sold for less than net book value, or are held for sale in which the estimated proceeds 
are less than the net book value less costs to sell. We may also recognize impairment on an asset group, which is held and used, 
when the carrying value is not recoverable and exceeds the asset group's fair value. If an asset group is considered a business, a 
portion of our goodwill balance is allocated to it based on relative fair value. If the sale of an asset group under a restructuring 
project results in proceeds that exceed the net book value of the asset group, the resulting gain is recognized within restructuring 
expense in the Consolidated Statements of Operations.

In determining restructuring charges, we analyze our future operating requirements, including the required headcount by business 
functions and facility space requirements. Our restructuring costs and any resulting accruals involve significant estimates using 
the best information available at the time the estimate are made. Our estimates involve a number of risks and uncertainties, some 
of which are beyond our control, including real estate market conditions and local labor and employment laws, rules, and regulations. 
If the amounts and timing of cash flows from restructuring activities are significantly different from what we have estimated, the 
actual amount of restructuring and asset impairment charges could be materially different, either higher or lower, than those we 
have recognized.

35

Income Taxes

We estimate income tax expense in each of the taxing jurisdictions in which we operate. Changes in our actual tax rate are subject 
to several factors,  including fluctuations in operating results, new or revised tax legislation and accounting pronouncements, 
changes in the level of business in domestic and foreign jurisdictions, tax credits (including research and development and foreign 
tax), state income taxes, adjustments to valuation allowances, and uncertain tax positions, among other items. Changes in tax laws, 
valuation allowances, and unanticipated tax liabilities could significantly impact our tax rate.

We recognize valuation allowances to reduce deferred tax assets to the extent we believe it is more likely than not that a portion 
of such assets will not be realized. In making such determinations, we consider all available favorable and unfavorable evidence, 
including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and our ability 
to carry back losses to prior years. We are required to make assumptions and judgments about potential outcomes that lie outside 
our control. Our most sensitive and critical factors are the projection, source, and character of future taxable income. Although 
realization is not assured, management believes it is more likely than not that deferred tax assets, net of valuation allowance, will 
be realized. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of 
future taxable income during the carryforward periods are reduced or current tax planning strategies are not implemented.

We are subject to audits in multiple taxing jurisdictions in which we operate. These audits may involve complex issues, which 
may require an extended period of time to resolve. We believe we have recognized adequate income tax provisions and reserves 
for uncertain tax positions.

In evaluating uncertain tax positions, we consider the relative risks and merits of positions taken in tax returns filed and to be filed, 
considering statutory, judicial, and regulatory guidance applicable to those positions. We make assumptions and judgments about 
potential outcomes that lie outside management’s control. To the extent the tax authorities disagree with our conclusions and 
depending on the final resolution of those disagreements, our actual tax rate may be materially affected in the period of final 
settlement with the tax authorities.

Goodwill and Intangible Assets

Goodwill and intangible assets may result from our business acquisitions. Intangible assets may also result from the purchase of 
assets and intellectual property where we do not acquire a business. We use estimates, including estimates of useful lives of 
intangible assets, the amount and timing of related future cash flows, and fair values of the related operations, in determining the 
value assigned to goodwill and intangible assets. Our finite-lived intangible assets are amortized over their estimated useful lives 
based  on  estimated  discounted  cash  flows.  In-process  research  and  development  (IPR&D)  is  considered  an  indefinite-lived 
intangible asset and is not subject to amortization until the associated projects are completed or terminated. Finite-lived intangible 
assets are tested for impairment at the asset group level when events or changes in circumstances indicate the carrying value may 
not be recoverable. Indefinite-lived intangible assets are tested for impairment annually, when events or changes in circumstances 
indicate the asset may be impaired, or at the time when their useful lives are determined to be no longer indefinite.

Goodwill is assigned to our reporting units based on the expected benefit from the synergies arising from each business combination, 
determined by using certain financial metrics, including the forecast discounted cash flows associated with each reporting unit. 
Each reporting unit corresponds with its respective operating segment.

We test goodwill for impairment each year as of October 1, or more frequently should a significant impairment indicator occur. 
As part of the impairment test, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates 
that it is more likely than not that the fair value of a reporting unit, including goodwill, is less than its carrying amount, or if we 
elect to bypass the qualitative assessment, we would then proceed with the two-step impairment test. The impairment test involves 
comparing the fair values of the reporting units to their carrying amounts. If the carrying amount of a reporting unit exceeds its 
fair value, a second step is required to measure the goodwill impairment loss amount. This second step determines the current fair 
values of all assets and liabilities of the reporting unit and then compares the implied fair value of the reporting unit's goodwill to 
the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the 
goodwill, an impairment loss is recognized in an amount equal to the excess.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. 
We forecast discounted future cash flows at the reporting unit level using risk-adjusted discount rates and estimated future revenues 
and operating costs, which take into consideration factors such as existing backlog, expected future orders, supplier contracts, and 
expectations  of  competitive  and  economic  environments.  We  also  identify  similar  publicly  traded  companies  and  develop  a 
correlation, referred to as a multiple, to apply to the operating results of the reporting units. These combined fair values are then 
reconciled to the aggregate market value of our common stock on the date of valuation, while considering a reasonable control 
premium.

36

Based on our analysis as of October 1, 2016, all reporting units' fair values exceeded their respective carrying values by at least 
100%. Changes in market demand, fluctuations in the economies in which we operate, the volatility and decline in the worldwide 
equity markets, and a decline in our market capitalization could unfavorably impact the remaining carrying value of our goodwill, 
which could have a significant effect on our current and future results of operations and financial condition.

Defined Benefit Pension Plans

We sponsor both funded and unfunded defined benefit pension plans for our international employees, primarily in Germany, 
France, Italy, Indonesia, Brazil, and Spain. We recognize a liability for the projected benefit obligation in excess of plan assets or 
an asset for plan assets in excess of the projected benefit obligation. We also recognize the funded status of our defined benefit 
pension plans on our Consolidated Balance Sheets and recognize as a component of other comprehensive income (loss) (OCI), 
net of tax, the actuarial gains or losses and prior service costs or credits, if any, that arise during the period but are not recognized 
as components of net periodic benefit cost.

Several economic assumptions and actuarial data are used in calculating the expense and obligations related to these plans. The 
assumptions are updated annually at December 31 and include the discount rate, the expected remaining service life, the expected 
rate of return on plan assets, and the rate of future compensation increase. The discount rate is a significant assumption used to 
value our pension benefit obligation. We determine a discount rate for our plans based on the estimated duration of each plan’s 
liabilities. For our euro denominated defined benefit pension plans, which represent 94% of our benefit obligation, we use two 
discount rates, with consideration of the duration of the plans, using a hypothetical yield curve developed from euro-denominated 
AA-rated corporate bond issues, partially weighted for market value, with minimum amounts outstanding of €500  million for 
bonds with less than 10 years to maturity and €50  million for bonds with 10 or more years to maturity, and excluding the highest 
and lowest yielding 10% of bonds within each maturity group. The discount rates used, depending on the duration of the plans, 
were 0.75% and 1.75%, respectively. The weighted average discount rate used to measure the projected benefit obligation for all 
of the plans at December 31, 2016 was 2.18%. A change of 25 basis points in the discount rate would change our projected benefit 
obligation by approximately $4.6 million. The financial and actuarial assumptions used at December 31, 2016 may differ materially 
from actual results due to changing market and economic conditions and other factors. These differences could result in a significant 
change in the amount of pension expense recognized in future periods. 

Contingencies

A loss contingency is recognized if it is probable that an asset has been impaired or a liability has been incurred and the amount 
of the loss can be reasonably estimated. We evaluate, among other factors, the degree of probability of an unfavorable outcome 
and our ability to make a reasonable estimate of the amount of the ultimate loss. Loss contingencies that we determine to be 
reasonably possible, but not probable, are disclosed but not recognized. Changes in these factors and related estimates could 
materially affect our financial position and results of operations. Legal costs to defend against contingent liabilities are recognized 
as incurred.

Stock-Based Compensation

We grant various stock-based compensation awards to our officers, employees and Board of Directors with service, market, and/
or performance vesting conditions. We also grant phantom stock units, which are settled in cash upon vesting and accounted for 
as liability-based awards.

We measure and recognize compensation expense for all stock-based compensation based on estimated fair values. The fair value 
of stock options is estimated at the date of grant using the Black-Scholes option-pricing model, which includes assumptions for 
the dividend yield, expected volatility, risk-free interest rate, and expected term. For unrestricted stock awards with no market 
conditions, the fair value is the market close price of our common stock on the date of grant. For restricted stock units with market 
conditions, the fair value is estimated at the date of award using a Monte Carlo simulation model, which includes assumptions for 
dividend yield and expected volatility for our common stock and the common stock for companies within the Russell 3000 index, 
as well as the risk-free interest rate and expected term of the awards. For phantom stock units, fair value is the market close price 
of our common stock at the end of each reporting period.

In valuing our stock options and restricted stock units with a market condition, significant judgment is required in determining 
the expected volatility of our common stock and the expected life that individuals will hold their stock options prior to exercising. 
Expected volatility for stock options is based on the historical and implied volatility of our own common stock while the volatility 
for  our restricted stock units  with  a market condition is based  on the historical volatility of  our  own  stock and the  stock for 
companies comprising the market index within the market condition. The expected life of stock option grants is derived from the 
historical actual term of option grants and an estimate of future exercises during the remaining contractual period of the option. 
While volatility and estimated life are assumptions that do not bear the risk of change subsequent to the grant date of stock options, 
these assumptions may be difficult to measure as they represent future expectations based on historical experience. Further, our 
expected volatility and expected life may change in the future, which could substantially change the grant-date fair value of future 
37

awards of stock options and ultimately the expense we recognize. We consider many factors when estimating expected forfeitures, 
including types of awards, employee class, and historical experience. Actual results and future estimates may differ substantially 
from our current estimates. 

We expense stock-based compensation at the date of grant for unrestricted stock awards. For awards with only a service condition, 
we expense stock-based compensation, adjusted for estimated forfeitures, using the straight-line method over the requisite service 
period for the entire award. For awards with both performance and service conditions, we expense the stock-based compensation, 
adjusted for estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of 
the award. Excess tax benefits are credited to common stock when the deduction reduces cash taxes payable. When we have tax 
deductions in excess of the compensation cost, they are classified as financing cash inflows in the Consolidated Statements of 
Cash Flows.

Non-GAAP Measures

Our consolidated financial statements are prepared in accordance with GAAP, which we supplement with certain non-GAAP 
financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP 
measures, and other companies may define such measures differently. We encourage investors to review our financial statements 
and publicly-filed reports in their entirety and not to rely on any single financial measure. These non-GAAP measures exclude 
the impact of certain expenses that we do not believe are indicative of our core operating results. We use these non-GAAP financial 
measures for financial and operational decision making and/or as a means for determining executive compensation. These non-
GAAP financial measures facilitate management's internal comparisons to our historical performance.

Non-GAAP operating expenses and non-GAAP operating income – We define non-GAAP operating expenses as operating expenses 
excluding certain expenses related to the amortization of intangible assets, restructuring, acquisitions and goodwill impairment. 
We define non-GAAP operating income as operating income excluding the expenses related to the amortization of intangible 
assets, restructuring, acquisitions and goodwill impairment. We consider these non-GAAP financial measures to be useful metrics 
for management and investors because they exclude the effect of expenses that are related to previous acquisitions and restructuring 
projects. By excluding these expenses, we believe that it is easier for management and investors to compare our financial results 
over multiple periods and analyze trends in our operations. For example, in certain periods expenses related to amortization of 
intangible assets may decrease, which would improve GAAP operating margins, yet the improvement in GAAP operating margins 
due to this lower expense is not necessarily reflective of an improvement in our core business. There are some limitations related 
to the use of non-GAAP operating expenses and non-GAAP operating income versus operating expenses and operating income 
calculated in accordance with GAAP. 

Non-GAAP net income and non-GAAP diluted EPS – We define non-GAAP net income as net income (loss) attributable to Itron, 
Inc. excluding the expenses associated with amortization of intangible assets, restructuring, acquisitions, goodwill impairment 
and amortization of debt placement fees, and the tax effect of excluding these expenses. We define non-GAAP diluted EPS as 
non-GAAP net income divided by the weighted average shares, on a diluted basis, outstanding during each period. We consider 
these financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating 
income. The same limitations described above regarding our use of non-GAAP operating income apply to our use of non-GAAP 
net income and non-GAAP diluted EPS. We compensate for these limitations by providing specific information regarding the 
GAAP amounts excluded from these non-GAAP measures and evaluating non-GAAP net income and non-GAAP diluted EPS 
together with GAAP net income (loss) attributable to Itron Inc. and GAAP diluted EPS.

Adjusted EBITDA – We define adjusted EBITDA as net income (a) minus interest income, (b) plus interest expense, depreciation, 
amortization of intangible assets, restructuring, acquisition related expense, goodwill impairment and (c) exclude the tax expense 
or benefit. Management uses adjusted EBITDA as a performance measure for executive compensation. A limitation to using 
adjusted EBITDA is that it does not represent the total increase or decrease in the cash balance for the period and the measure 
includes some non-cash items and excludes other non-cash items. Additionally, the items that we exclude in our calculation of 
adjusted EBITDA may differ from the items that our peer companies exclude when they report their results. We compensate for 
these limitations by providing a reconciliation of this measure to GAAP net income.

Free cash flow - We define free cash flow as net cash provided by operating activities less cash used for acquisitions of property, 
plant and equipment. We believe free cash flow provides investors with a relevant measure of liquidity and a useful basis for 
assessing our ability to fund our operations and repay our debt. The same limitations described above regarding our use of adjusted 
EBITDA apply to our use of free cash flow. We compensate for these limitations by providing specific information regarding the 
GAAP amounts and reconciling to free cash flow.

38

Constant currency - We refer to the impact of foreign currency exchange rate fluctuations in our discussions of financial results, 
which  references  the  differences  between  the  foreign  currency  exchange  rates  used  to  translate  operating  results  from  local 
currencies into U.S. dollars for financial reporting purposes. We also use the term “constant currency,” which represents financial 
results adjusted to exclude changes in foreign currency exchange rates as compared with the rates in the comparable prior year 
period. We calculate the constant currency change as the difference between the current period results and the comparable prior 
period’s results restated using current period foreign currency exchange rates.

Reconciliation of GAAP Measures to Non-GAAP Measures

The tables below reconcile the non-GAAP financial measures of operating expenses, operating income, net income, diluted EPS, 
adjusted EBITDA, free cash flow, and operating income by segment with the most directly comparable GAAP financial measures.

(Unaudited; in thousands, except per share data)

TOTAL COMPANY RECONCILIATIONS

NON-GAAP OPERATING EXPENSES

GAAP operating expenses

Amortization of intangible assets

Restructuring

Acquisition related recovery (expense)

Non-GAAP operating expenses

NON-GAAP OPERATING INCOME

GAAP operating income

Amortization of intangible assets

Restructuring

Acquisition related (recovery) expense

Non-GAAP operating income

NON-GAAP NET INCOME & DILUTED EPS

GAAP net income (loss) attributable to Itron, Inc.

Amortization of intangible assets

Amortization of debt placement fees

Restructuring

Acquisition related (recovery) expense
Income tax effect of non-GAAP adjustments(1)

Non-GAAP net income

Non-GAAP diluted EPS

Weighted average common shares outstanding - Diluted

ADJUSTED EBITDA

GAAP net income (loss) attributable to Itron, Inc.

Interest income

Interest expense

Income tax provision

Depreciation and amortization

Restructuring

Acquisition related (recovery) expense

Adjusted EBITDA

FREE CASH FLOW

Net cash provided by operating activities

Acquisitions of property, plant, and equipment

Free Cash Flow

Year Ended December 31,

2016

2015

2014

564,109

$

(25,112)

(49,090)

197

503,839

$

(31,673)

7,263

5,538

490,104

$

484,967

$

96,211

$

52,846

$

25,112

49,090

(197)

31,673

(7,263)

(5,538)

170,216

$

71,718

$

31,770

$

12,678

$

25,112

987

49,090

(197)

(8,478)

98,284

2.54

38,643

$

$

31,673

2,021

(7,263)

(5,538)

(5,590)

27,981

0.73

38,506

$

$

31,770

$

12,678

$

(865)

10,948

49,574

68,318

49,090

(197)

(761)

12,289

22,099

75,993

(7,263)

(5,538)

208,638

$

109,497

$

115,842

(43,543)

72,299

$

$

73,350

(43,918)

29,432

$

$

613,570

(43,619)

(49,482)

(15,538)

504,931

480

43,619

49,482

15,538

109,119

(23,670)

43,619

1,512

49,482

15,538

(25,860)

60,621

1.54

39,461

(23,670)

(494)

11,602

4,035

98,139

49,482

15,538

154,632

132,973

(44,495)

88,478

$

$

$

$

$

$

$

$

$

$

$

(1) 

The income tax effect of non-GAAP adjustments is calculated using the statutory tax rates for the relevant jurisdictions if no valuation allowance exists. If a valuation allowance 
exists, there is no tax impact to the non-GAAP adjustment.

39

(Unaudited; in thousands)

SEGMENT RECONCILIATIONS

NON-GAAP OPERATING INCOME - ELECTRICITY

Electricity - GAAP operating income (loss)

Amortization of intangible assets

Restructuring

Acquisition related (recovery) expense

Electricity - Non-GAAP operating income (loss)

NON-GAAP OPERATING INCOME - GAS

Gas - GAAP operating income

Amortization of intangible assets

Restructuring

Gas - Non-GAAP operating income

NON-GAAP OPERATING INCOME - WATER

Water - GAAP operating income

Amortization of intangible assets

Restructuring

Acquisition related expense

Water - Non-GAAP operating income

NON-GAAP OPERATING INCOME - CORPORATE UNALLOCATED

Corporate unallocated - GAAP operating loss

Restructuring

Acquisition related expense

Corporate unallocated - Non-GAAP operating loss

Year Ended December 31,

2016

2015

2014

$

$

$

$

$

$

$

$

68,287

$

31,104

$

13,273

7,694

(197)

17,663

(7,253)

(5,655)

89,057

$

35,859

$

66,813

$

67,471

$

6,456

25,744

7,787

(287)

99,013

$

74,971

$

37,266

$

19,864

$

5,383

13,116

—

6,223

778

104

55,765

$

26,969

$

(76,155)

$

(65,593)

$

2,536

—

(501)

13

(73,619)

$

(66,081)

$

(77,751)

24,452

20,430

15,491

(17,378)

76,101

10,471

9,149

95,721

71,356

8,696

2,335

—

82,387

(69,226)

17,568

47

(51,611)

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we are exposed to interest rate and foreign currency exchange rate risks that could impact our 
financial position and results of operations. As part of our risk management strategy, we may use derivative financial instruments 
to hedge certain foreign currency and interest rate exposures. Our objective is to offset gains and losses resulting from these 
exposures with losses and gains on the derivative contracts used to hedge them, therefore reducing the impact of volatility on 
earnings or protecting the fair values of assets and liabilities. We use derivative contracts only to manage existing underlying 
exposures. Accordingly, we do not use derivative contracts for trading or speculative purposes.

Interest Rate Risk

We are exposed to interest rate risk through our variable rate debt instruments. In May 2012, we entered into six forward starting 
pay-fixed receive one-month LIBOR interest rate swaps. The interest rate swaps convert $200 million of our LIBOR based debt 
from a floating LIBOR interest rate to a fixed interest rate of 1.00% (excluding the applicable margin on the debt) and were 
effective from July 31, 2013 to August 8, 2016.

In October 2015, we entered into an interest rate swap, which is effective from August 31, 2016 to June 23, 2020, and converts 
$214 million of our LIBOR-based debt from a floating LIBOR interest rate to a fixed interest rate of 1.42% (excluding the applicable 
margin on the debt). The notional balance will amortize to maturity at the same rate as required minimum payments on our term 
loan. At December 31, 2016, our LIBOR-based debt balance was $248.1 million.

In November 2015, we entered into three interest rate cap contracts with a total notional amount of $100 million at a cost of 
$1.7 million. The interest rate cap contracts expire on June 23, 2020 and were entered into in order to limit our interest rate exposure 
on $100 million of our variable LIBOR based debt up to 2.00%. In the event LIBOR is higher than 2.00%, we will pay interest 
at the capped rate of 2.00% with respect to the $100 million notional amount of such agreements. The interest rate cap contracts 
do not include the effect of the applicable margin.

40

The table below provides information about our financial instruments that are sensitive to changes in interest rates and the scheduled 
minimum repayment of principal and the weighted average interest rates at December 31, 2016. Weighted average variable rates 
in the table are based on implied forward rates in the Reuters U.S. dollar yield curve as of December 31, 2016 and our estimated 
leverage ratio, which determines our additional interest rate margin at December 31, 2016.

2017

2018

2019

2020

2021

Total

Fair Value

(in thousands)

Variable Rate Debt

Principal: U.S. dollar term loan
Average interest rate

$ 14,063

$ 19,688

$ 22,500

$ 151,874

$

2.21 %

2.80%

3.23%

3.39%

— $ 208,125
—%

$ 205,676

Principal: Multicurrency revolving

line of credit
Average interest rate

Interest rate swap on LIBOR based debt

$

— $

— $

— $ 97,167

$

1.65 %

1.89%

2.06%

2.13%

— $ 97,167
—%

$ 95,906

Average interest rate (pay)
Average interest rate (receive)
Net/spread

1.42 %
0.96 %
(0.46)%

1.42%
1.55%
0.13%

1.42%
1.98%
0.56%

1.42%
2.14%
0.72%

—%
—%
—%

Based on a sensitivity analysis as of December 31, 2016, we estimate that, if market interest rates average one percentage point 
higher in 2017 than in the table above, our financial results in 2017 would not be materially impacted.

We  continually  monitor  and  assess  our  interest  rate  risk  and  may  institute  additional  interest  rate  swaps  or  other  derivative 
instruments to manage such risk in the future.

Foreign Currency Exchange Rate Risk

We  conduct  business  in  a  number  of  countries. As  a  result,  approximately  half  of  our  revenues  and  operating  expenses  are 
denominated in foreign currencies, which expose our account balances to movements in foreign currency exchange rates that 
could have a material effect on our financial results. Our primary foreign currency exposure relates to non-U.S. dollar denominated 
transactions in our international subsidiary operations, the most significant of which is the euro. Revenues denominated in functional 
currencies other than the U.S. dollar were 47% of total revenues for the year ended December 31, 2016, compared with 51% and 
58% for the years ended December 31, 2015 and 2014.

We are also exposed to foreign exchange risk when we enter into non-functional currency transactions, both intercompany and 
third-party. At each period-end, non-functional currency monetary assets and liabilities are revalued with the change recognized 
to other income and expense. We enter into monthly foreign exchange forward contracts, which are not designated for hedge 
accounting, with the intent to reduce earnings volatility associated with currency exposures. As of December 31, 2016, a total of 
49 contracts were offsetting our exposures from the euro, Canadian dollar, Indonesian Rupiah, South African rand, Indian Rupee, 
Chinese Yuan, and various other currencies, with notional amounts ranging from $120,000 to $42.3 million. Based on a sensitivity 
analysis as of December 31, 2016, we estimate that, if foreign currency exchange rates average ten percentage points higher in 
2017 for these financial instruments, our financial results in 2017 would not be materially impacted.

In future periods, we may use additional derivative contracts to protect against foreign currency exchange rate risks.

41

ITEM 8: 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

To the Board of Directors and Shareholders of Itron, Inc.

REPORT OF MANAGEMENT

Management is responsible for the preparation of our consolidated financial statements and related information appearing in this 
Annual Report on Form 10-K. Management believes that the consolidated financial statements fairly reflect the form and substance 
of transactions and that the financial statements reasonably present our results of operations, financial position, and cash flows in 
conformity with U.S. generally accepted accounting principles (GAAP). Management has included in our financial statements 
amounts based on estimates and judgments that it believes are reasonable under the circumstances.

Management’s  explanation  and  interpretation  of  our  overall  operating  results  and  financial  position,  with  the  basic  financial 
statements presented, should be read in conjunction with the entire report. The notes to the consolidated financial statements, an 
integral part of the basic financial statements, provide additional detailed financial information. Our Board of Directors has an 
Audit/Finance  Committee  composed  of  independent  directors.  The Audit/Finance  Committee  meets  regularly  with  financial 
management and Deloitte & Touche LLP to review internal control, auditing, and financial reporting matters.

Philip C. Mezey
President and Chief Executive Officer

W. Mark Schmitz
Executive Vice President and Chief Financial Officer

42

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Itron, Inc.
Liberty Lake, Washington

We have audited the accompanying consolidated balance sheet of Itron, Inc. and subsidiaries (the “Company”) as of December 31, 
2016, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the year then 
ended. Our audit also included the 2016 financial statement schedule listed in the Index at Item 15. These financial statements 
and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion 
on these financial statements and financial statement schedule based on our audit.

We conducted our audit 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 audit provides a reasonable 
basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Itron, Inc. 
and subsidiaries as of December 31, 2016 and the results of their operations and their cash flows for the year then ended, in 
conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the 2016 financial 
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, 
in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 
Company's internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control 
- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report 
dated February 28, 2017 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Seattle, Washington

February 28, 2017

43

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Itron, Inc.

We have audited the accompanying consolidated balance sheets of Itron, Inc. as of December 31, 2015, and the related consolidated 
statements  of  operations,  comprehensive  income  (loss),  equity  and  cash  flows  for  each  of  the  two  years  in  the  period  ended 
December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial 
statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these 
financial statements and schedule 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 consolidated financial position 
of Itron, Inc. at December 31, 2015, and the consolidated results of its operations and its cash flows for each of the two years in 
the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the 
related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly 
in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Seattle, Washington
June 29, 2016

44

Revenues
Cost of revenues
Gross profit

Operating expenses

Sales and marketing
Product development
General and administrative
Amortization of intangible assets
Restructuring

Total operating expenses

Operating income
Other income (expense)
Interest income
Interest expense
Other income (expense), net

Total other income (expense)

Income (loss) before income taxes
Income tax provision
Net income (loss)

ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

2016

Year Ended December 31,
2015
(in thousands, except per share data)

2014

$

$

2,013,186
1,352,866
660,320

$

1,883,533
1,326,848
556,685

1,947,616
1,333,566
614,050

158,883
168,209
162,815
25,112
49,090
564,109

96,211

865
(10,948)
(1,501)
(11,584)

84,627
(49,574)
35,053
3,283
31,770

0.83
0.82

38,207
38,643

$

$
$

161,380
162,334
155,715
31,673
(7,263)
503,839

52,846

761
(12,289)
(4,216)
(15,744)

37,102
(22,099)
15,003
2,325
12,678

0.33
0.33

38,224
38,506

$

$
$

182,503
175,500
162,466
43,619
49,482
613,570

480

494
(11,602)
(7,637)
(18,745)

(18,265)
(4,035)
(22,300)
1,370
(23,670)

(0.60)
(0.60)

39,184
39,184

Net income attributable to noncontrolling interests

Net income (loss) attributable to Itron, Inc.

Earnings (loss) per common share - Basic
Earnings (loss) per common share - Diluted

Weighted average common shares outstanding - Basic
Weighted average common shares outstanding - Diluted

$

$
$

The accompanying notes are an integral part of these consolidated financial statements.

45

ITRON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Net income (loss)

$

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Net unrealized gain (loss) on derivative instruments, designated
as cash flow hedges
Pension benefit obligation adjustment

Total other comprehensive income (loss), net of tax

2016

Year Ended December 31,
2015
(in thousands)
15,003
$

$

35,053

2014

(22,300)

(24,977)

(72,929)

(89,297)

(275)
(3,468)
(28,720)

1,086
6,296
(65,547)

488
(24,947)
(113,756)

Total comprehensive income (loss), net of tax

6,333

(50,544)

(136,056)

Comprehensive income (loss) attributable to noncontrolling
interest, net of tax:

3,283

2,325

1,370

Comprehensive income (loss) attributable to Itron, Inc.

$

3,050

$

(52,869) $

(137,426)

The accompanying notes are an integral part of these consolidated financial statements.

46

 
 
ITRON, INC.
CONSOLIDATED BALANCE SHEETS

December 31, 2016

December 31, 2015

(in thousands)

ASSETS

Current assets

Cash and cash equivalents
Accounts receivable, net
Inventories
Other current assets

Total current assets

Property, plant, and equipment, net
Deferred tax assets, net
Other long-term assets
Intangible assets, net
Goodwill

Total assets

LIABILITIES AND EQUITY

Current liabilities

Accounts payable
Other current liabilities
Wages and benefits payable
Taxes payable
Current portion of debt
Current portion of warranty
Unearned revenue

Total current liabilities

Long-term debt
Long-term warranty
Pension benefit obligation
Deferred tax liabilities, net
Other long-term obligations

Total liabilities

Commitments and contingencies (Note 12)

Equity

Preferred stock, no par value, 10 million shares authorized, no shares
issued or outstanding
Common stock, no par value, 75 million shares authorized, 38,317 and
37,906 shares issued and outstanding
Accumulated other comprehensive loss, net
Accumulated deficit

Total Itron, Inc. shareholders' equity

Noncontrolling interests

Total equity
Total liabilities and equity

$

$

$

$

$

$

$

133,565
351,506
163,049
84,346
732,466

176,458
94,113
50,129
72,151
452,494
1,577,811

172,711
43,625
82,346
10,451
14,063
24,874
64,976
413,046

290,460
18,428
84,498
3,073
117,953
927,458

—

1,270,467
(229,327)
(409,536)
631,604
18,749
650,353
1,577,811

$

131,018
330,895
190,465
106,562
758,940

190,256
109,387
51,679
101,932
468,122
1,680,316

185,827
78,630
76,980
14,859
11,250
36,927
73,301
477,774

358,915
17,585
85,971
1,723
115,645
1,057,613

—

1,246,671
(200,607)
(441,306)
604,758
17,945
622,703
1,680,316

The accompanying notes are an integral part of these consolidated financial statements.

47

ITRON, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands)

Common Stock

Shares

Amount

Accumulated
Other
Comprehensive
Loss

Accumulated
Deficit

Total Itron,
Inc.
Shareholders'
Equity

Noncontrolling
Interests

Total
Equity

Balances at January 1, 2014

39,149

$ 1,290,629

$

(21,304) $

(430,314) $

839,011

$

17,735

$

856,746

Net income (loss)

Other comprehensive income (loss), net
of tax

Distributions to noncontrolling interests

Stock issues and repurchases:

Options exercised

Restricted stock awards released

Issuance of stock-based
compensation awards

Employee stock purchase plan

Stock-based compensation
expense

Employee stock plans income tax
deficiencies

65

281

21

61

Repurchase of common stock

(986)

1,621

—

936

2,247

16,924

(2,647)

(39,665)

(23,670)

(23,670)

1,370

(22,300)

(113,756)

(113,756)

—

(113,756)

(1,564)

(1,564)

1,621

—

936

2,247

16,924

(2,647)

(39,665)

1,621

—

936

2,247

16,924

(2,647)

(39,665)

Balances at December 31, 2014

38,591

$ 1,270,045

$

(135,060) $

(453,984) $

681,001

$

17,541

$

698,542

Net income

Other comprehensive income (loss), net
of tax

Distributions to noncontrolling interests

Stock issues and repurchases:

Options exercised

Restricted stock awards released

Issuance of stock-based
compensation awards

Employee stock purchase plan

Stock-based compensation
expense

Employee stock plans income tax
deficiencies

24

296

20

54

Repurchase of common stock

(1,079)

853

—

706

1,819

13,384

(1,853)

(38,283)

12,678

12,678

2,325

15,003

(65,547)

(65,547)

—

(1,921)

(65,547)

(1,921)

853

—

706

1,819

13,384

(1,853)

(38,283)

853

—

706

1,819

13,384

(1,853)

(38,283)

Balances at December 31, 2015

37,906

$ 1,246,671

$

(200,607) $

(441,306) $

604,758

$

17,945

$

622,703

Net income
Other comprehensive income (loss), net
of tax

Distributions to noncontrolling interests

Stock issues and repurchases:

Options exercised

Restricted stock awards released

Issuance of stock-based
compensation awards

Employee stock purchase plan

Stock-based compensation
expense

Excess tax benefits from employee
stock plans

58

312

21

20

2,144

—

955

747

17,080

2,870

31,770

31,770

3,283

35,053

(28,720)

(28,720)

—

(2,479)

(28,720)

(2,479)

2,144

—

955

747

17,080

2,870

2,144

—

955

747

17,080

2,870

Balances at December 31, 2016

38,317

$ 1,270,467

$

(229,327) $

(409,536) $

631,604

$

18,749

$

650,353

The accompanying notes are an integral part of these consolidated financial statements.

48

 
ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating activities

Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:

$

Depreciation and amortization
Stock-based compensation
Amortization of prepaid debt fees
Deferred taxes, net
Restructuring, non-cash
Other adjustments, net

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable
Inventories
Other current assets
Other long-term assets
Accounts payables, other current liabilities, and taxes payable
Wages and benefits payable
Unearned revenue
Warranty
Other operating, net

Net cash provided by operating activities

Investing activities

Acquisitions of property, plant, and equipment
Business acquisitions, net of cash equivalents acquired
Other investing, net

Net cash used in investing activities

Financing activities

Proceeds from borrowings
Payments on debt
Issuance of common stock
Repurchase of common stock
Other financing, net

Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash and cash
equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Income taxes, net
Interest

$

$

2016

Year Ended December 31,
2015
(in thousands)

2014

35,053

$

15,003

$

(22,300)

68,318
18,035
1,076
13,790
7,188
4,309

(27,162)
22,343
20,705
(339)
(37,312)
7,808
(25,810)
(10,246)
18,086
115,842

(43,543)
(951)
(3,034)
(47,528)

15,877
(79,119)
2,891
—
(2,672)
(63,023)

(2,744)
2,547
131,018
133,565

24,287
9,921

$

$

75,993
14,089
2,128
1,488
976
2,003

(9,009)
(52,737)
12,512
(3,721)
(7,060)
(10,866)
11,943
20,161
447
73,350

(43,918)
(5,754)
721
(48,951)

113,467
(62,998)
2,663
(38,283)
(7,109)
7,740

(13,492)
18,647
112,371
131,018

29,189
10,198

$

$

98,139
17,860
1,612
(34,757)
5,172
914

(15,119)
7,208
(10,947)
(12,540)
56,158
7,502
30,584
(7,297)
10,784
132,973

(44,495)
—
2,999
(41,496)

47,657
(102,438)
3,647
(39,665)
(1,078)
(91,877)

(12,034)
(12,434)
124,805
112,371

18,222
9,912

The accompanying notes are an integral part of these consolidated financial statements.

49

ITRON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 

In this Annual Report, the terms “we,” “us,” “our,” “Itron,” and the “Company” refer to Itron, Inc.

Note 1:    Summary of Significant Accounting Policies

We were incorporated in the state of Washington in 1977. We provide a portfolio of solutions to utilities for the electricity, gas, 
and water markets throughout the world.

Financial Statement Preparation

The  consolidated  financial  statements  presented  in  this Annual  Report  include  the  Consolidated  Statements  of  Operations, 
Comprehensive  Income  (Loss),  Equity,  and  Cash  Flows  for  the  years  ended  December 31,  2016,  2015,  and  2014  and  the 
Consolidated Balance Sheets as of December 31, 2016 and 2015 of Itron, Inc. and its subsidiaries.

Basis of Consolidation

We consolidate all entities in which we have a greater than 50% ownership interest or in which we exercise control over the 
operations. We use the equity method of accounting for entities in which we have a 50% or less investment and exercise significant 
influence. Entities in which we have less than a 20% investment and where we do not exercise significant influence are accounted 
for under the cost method. Intercompany transactions and balances are eliminated upon consolidation.

Noncontrolling Interests

In several of our consolidated international subsidiaries, we have joint venture partners, who are minority shareholders. Although 
these entities are not wholly-owned by Itron, we consolidate them because we have a greater than 50% ownership interest or 
because we exercise control over the operations. The noncontrolling interest balance is adjusted each period to reflect the allocation 
of net income (loss) and other comprehensive income (loss) attributable to the noncontrolling interests, as shown in our Consolidated 
Statements of Operations and our Consolidated Statements of Comprehensive Income (Loss) as well as contributions from and 
distributions to the owners. The noncontrolling interest balance in our Consolidated Balance Sheets represents the proportional 
share of the equity of the joint venture entities, which is attributable to the minority shareholders.

Cash and Cash Equivalents

We consider all highly liquid instruments with remaining maturities of three months or less at the date of acquisition to be cash 
equivalents.

Accounts Receivable,net

Accounts receivable are recognized for invoices issued to customers in accordance with our contractual arrangements. Interest 
and late payment fees are minimal. Unbilled receivables are recognized when revenues are recognized upon product shipment or 
service delivery and invoicing occurs at a later date. We recognize an allowance for doubtful accounts representing our estimate 
of the probable losses in accounts receivable at the date of the balance sheet based on our historical experience of bad debts and 
our specific review of outstanding receivables. Accounts receivable are written-off against the allowance when we believe an 
account, or a portion thereof, is no longer collectible.

Inventories

Inventories are stated at the lower of cost or market using the first-in, first-out method. Cost includes raw materials and labor, plus 
applied direct and indirect costs.

Derivative Instruments

All derivative instruments, whether designated in hedging relationships or not, are recognized on the Consolidated Balance Sheets 
at fair value as either assets or liabilities. The components and fair values of our derivative instruments are determined using the 
fair value measurements of significant other observable inputs (Level 2), as defined by GAAP. The fair value of our derivative 
instruments may switch between an asset and a liability depending on market circumstances at the end of the period. We include 
the effect of our counterparty credit risk based on current published credit default swap rates when the net fair value of our derivative 
instruments are in a net asset position and the effect of our own nonperformance risk when the net fair value of our derivative 
instruments are in a net liability position.

For any derivative designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable 
to the hedged risk are recognized in earnings. For any derivative designated as a cash flow hedge, the effective portions of changes 

50

in the fair value of the derivative are recognized as a component of other comprehensive income (loss) (OCI) and are recognized 
in  earnings  when  the  hedged  item  affects  earnings.  Ineffective  portions  of  cash  flow  hedges  are  recognized  in  other  income 
(expense) in the Consolidated Statements of Operations. For a hedge of a net investment, the effective portion of any unrealized 
gain or loss from the foreign currency revaluation of the hedging instrument is reported in OCI as a net unrealized gain or loss on 
derivative instruments. Upon termination of a net investment hedge, the net derivative gain/loss will remain in accumulated other 
comprehensive  income  (loss)  (AOCI)  until  such  time  when  earnings  are  impacted  by  a  sale  or  liquidation  of  the  associated 
operations. Ineffective portions of fair value changes or the changes in fair value of derivative instruments that do not qualify for 
hedging activities are recognized in other income (expense) in the Consolidated Statements of Operations. We classify cash flows 
from our derivative programs as cash flows from operating activities in the Consolidated Statements of Cash Flows.

Derivatives are not used for trading or speculative purposes. Our derivatives are with credit worthy multinational commercial 
banks, with whom we have master netting agreements; however, our derivative positions are not recognized on a net basis in the 
Consolidated Balance Sheets. There are no credit-risk-related contingent features within our derivative instruments. Refer to Note 7 
and Note 14 for further disclosures of our derivative instruments and their impact on OCI.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line 
method over the estimated useful lives of the assets, generally 30 years for buildings and improvements and three to ten years for 
machinery and equipment, computers and software, and furniture. Leasehold improvements are capitalized and depreciated over 
the term of the applicable lease, including renewable periods if reasonably assured, or over the useful lives, whichever is shorter. 
Construction in process represents capital expenditures incurred for assets not yet placed in service. Costs related to internally 
developed software and software purchased for internal uses are capitalized and are amortized over the estimated useful lives of 
the assets. Repair and maintenance costs are recognized as incurred. We have no major planned maintenance activities.

We review long-lived assets for impairment whenever events or circumstances indicate the carrying amount of an asset group may 
not be recoverable. Assets held for sale are classified within other current assets in the Consolidated Balance Sheets, are reported 
at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. Gains and losses from asset 
disposals and impairment losses are classified within the Consolidated Statement of Operations according to the use of the asset, 
except those gains and losses recognized in conjunction with our restructuring activities, which are classified within restructuring 
expense.

Prepaid Debt Fees

Prepaid debt fees for term debt represent the capitalized direct costs incurred related to the issuance of debt and are recognized as 
a direct deduction from the carrying amount of the corresponding debt liability. We have elected to present prepaid debt fees for 
revolving debt within other long-term assets in the Consolidated Balance Sheets. These costs are amortized to interest expense 
over the terms of the respective borrowings, including contingent maturity or call features, using the effective interest method, or 
straight-line method when associated with a revolving credit facility. When debt is repaid early, the related portion of unamortized 
prepaid debt fees is written off and included in interest expense.

Business Combinations

On the date of acquisition, the assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree are recognized 
at their fair values. The acquiree's results of operations are also included as of the date of acquisition in our consolidated results. 
Intangible assets that arise from contractual/legal rights, or are capable of being separated, as well as in-process research and 
development (IPR&D), are measured and recognized at fair value, and amortized over the estimated useful life. IPR&D is not 
amortized until such time as the associated development projects are completed or terminated. If a development project is completed, 
the IPR&D is reclassified as a core technology intangible asset and amortized over its estimated useful life. If the development 
project is terminated, the recorded value of the associated IPR&D is immediately recognized. If practicable, assets acquired and 
liabilities assumed arising from contingencies are measured and recognized at fair value. If not practicable, such assets and liabilities 
are measured and recognized when it is probable that a gain or loss has occurred and the amount can be reasonably estimated. The 
residual  balance  of  the  purchase  price,  after  fair  value  allocations  to  all  identified  assets  and  liabilities,  represents  goodwill. 
Acquisition-related costs are recognized as incurred. Restructuring costs associated with an acquisition are generally recognized 
in periods subsequent to the acquisition date, and changes in deferred tax asset valuation allowances and acquired income tax 
uncertainties, including penalties and interest, after the measurement period are recognized as a component of the provision for 
income taxes. Our acquisitions may include contingent consideration, which require us to recognize the fair value of the estimated 
liability at the time of the acquisition. Subsequent changes in the estimate of the amount to be paid under the contingent consideration 
arrangement are recognized in the Consolidated Statements of Operations.

51

Goodwill and Intangible Assets

Goodwill and intangible assets may result from our business acquisitions. Intangible assets may also result from the purchase of 
assets and intellectual property in a transaction that does not qualify as a business combination. We use estimates, including 
estimates of useful lives of intangible assets, the amount and timing of related future cash flows, and fair values of the related 
operations, in determining the value assigned to goodwill and intangible assets. Our finite-lived intangible assets are amortized 
over their estimated useful lives based on estimated discounted cash flows, generally three years to seven years for core-developed 
technology and customer contracts and relationships. Finite-lived intangible assets are tested for impairment at the asset group 
level when events or changes in circumstances indicate the carrying value may not be recoverable. Indefinite-lived intangible 
assets are tested for impairment annually, when events or changes in circumstances indicate the asset may be impaired, or at the 
time when their useful lives are determined to be no longer indefinite.

Goodwill is assigned to our reporting units based on the expected benefit from the synergies arising from each business combination, 
determined by using certain financial metrics, including the forecasted discounted cash flows associated with each reporting unit. 
Each reporting unit corresponds with its respective operating segment.

We test goodwill for impairment each year as of October 1, or more frequently should a significant impairment indicator occur. 
As part of the impairment test, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates 
that it is more likely than not that the fair value of a reporting unit, including goodwill, is less than its carrying amount, or if we 
elect to bypass the qualitative assessment, we would then proceed with the two-step impairment test. The impairment test involves 
comparing the fair values of the reporting units to their carrying amounts. If the carrying amount of a reporting unit exceeds its 
fair value, a second step is required to measure the goodwill impairment loss amount. This second step determines the current fair 
values of all assets and liabilities of the reporting unit and then compares the implied fair value of the reporting unit's goodwill to 
the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the 
goodwill, an impairment loss is recognized in an amount equal to the excess. 

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. 
We forecast discounted future cash flows at the reporting unit level using risk-adjusted discount rates and estimated future revenues 
and operating costs, which take into consideration factors such as existing backlog, expected future orders, supplier contracts, and 
expectations  of  competitive  and  economic  environments.  We  also  identify  similar  publicly  traded  companies  and  develop  a 
correlation, referred to as a multiple, to apply to the operating results of the reporting units. These combined fair values are then 
reconciled to the aggregate market value of our common stock on the date of valuation, while considering a reasonable control 
premium.

Contingencies

A loss contingency is recognized if it is probable that an asset has been impaired or a liability has been incurred and the amount 
of the loss can be reasonably estimated. We evaluate, among other factors, the degree of probability of an unfavorable outcome 
and our ability to make a reasonable estimate of the amount of the ultimate loss. Loss contingencies that we determine to be 
reasonably possible, but not probable, are disclosed but not recognized. Changes in these factors and related estimates could 
materially affect our financial position and results of operations. Legal costs to defend against contingent liabilities are recognized 
as incurred.

Bonus and Profit Sharing

We have various employee bonus and profit sharing plans, which provide award amounts for the achievement of financial and 
nonfinancial targets. If management determines it is probable that the targets will be achieved, and the amounts can be reasonably 
estimated, a compensation accrual is recognized based on the proportional achievement of the financial and nonfinancial targets. 
Although we monitor and accrue expenses quarterly based on our progress toward the achievement of the targets, the actual results 
may result in awards that are significantly greater or less than the estimates made in earlier quarters.

Warranty

We offer standard warranties on our hardware products and large application software products. We accrue the estimated cost of 
new product warranties based on historical and projected product performance trends and costs during the warranty period. Testing 
of new products in the development stage helps identify and correct potential warranty issues prior to manufacturing. Quality 
control efforts during manufacturing reduce our exposure to warranty claims. When testing or quality control efforts fail to detect 
a fault in one of our products, we may experience an increase in warranty claims. We track warranty claims to identify potential 
warranty trends. If an unusual trend is noted, an additional warranty accrual would be recognized if a failure event is probable and 
the cost can be reasonably estimated. When new products are introduced, our process relies on historical averages of similar 
products until sufficient data is available. As actual experience on new products becomes available, it is used to modify the historical 
averages  to  ensure  the  expected  warranty  costs  are  within  a  range  of  likely  outcomes.  Management  regularly  evaluates  the 
sufficiency of the warranty provisions and makes adjustments when necessary. The warranty allowances may fluctuate due to 
52

changes in estimates for material, labor, and other costs we may incur to repair or replace projected product failures, and we may 
incur additional warranty and related expenses in the future with respect to new or established products, which could adversely 
affect our financial position and results of operations. The long-term warranty balance includes estimated warranty claims beyond 
one year. Warranty expense is classified within cost of revenues.

Restructuring

We recognize a liability for costs associated with an exit or disposal activity under a restructuring project in the period in which 
the liability is incurred. Employee termination benefits considered postemployment benefits are accrued when the obligation is 
probable and estimable, such as benefits stipulated by human resource policies and practices or statutory requirements. One-time 
termination benefits are recognized at the date the employee is notified. If the employee must provide future service greater than 
60 days, such benefits are recognized ratably over the future service period. For contract termination costs, we recognize a liability 
upon the termination of a contract in accordance with the contract terms or the cessation of the use of the rights conveyed by the 
contract, whichever occurs later.

Asset impairments associated with a restructuring project are determined at the asset group level. An impairment may be recognized 
for assets that are to be abandoned, are to be sold for less than net book value, or are held for sale in which the estimated proceeds 
less costs to sell are less than the net book value. We may also recognize impairment on an asset group, which is held and used, 
when the carrying value is not recoverable and exceeds the asset group's fair value. If an asset group is considered a business, a 
portion of our goodwill balance is allocated to it based on relative fair value. If the sale of an asset group under a restructuring 
project results in proceeds that exceed the net book value of the asset group, the resulting gain is recognized within restructuring 
expense in the Consolidated Statements of Operations.

Defined Benefit Pension Plans

We sponsor both funded and unfunded defined benefit pension plans for certain international employees. We recognize a liability 
for the projected benefit obligation in excess of plan assets or an asset for plan assets in excess of the projected benefit obligation. 
We also recognize the funded status of our defined benefit pension plans on our Consolidated Balance Sheets and recognize as a 
component of OCI, net of tax, the actuarial gains or losses and prior service costs or credits, if any, that arise during the period 
but that are not recognized as components of net periodic benefit cost. If actuarial gains and losses exceed ten percent of the greater 
of plan assets or plan liabilities, we amortize them over the employees' average future service period.

Share Repurchase Plan

From time to time, we may repurchase shares of Itron common stock under programs authorized by our Board of Directors. Share 
repurchases are made in the open market or in privately negotiated transactions and in accordance with applicable securities laws. 
Under applicable Washington State law, shares repurchased are retired and not displayed separately as treasury stock on the financial 
statements; the value of the repurchased shares is deducted from common stock.

Revenue Recognition

Revenues  consist  primarily  of  hardware  sales,  software  license  fees,  software  implementation,  project  management  services, 
installation,  consulting,  and  post-sale  maintenance  support.  Revenues  are  recognized  when  (1) persuasive  evidence  of  an 
arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable, and 
(4) collectability is reasonably assured.

Many of our revenue arrangements involve multiple deliverables, which combine two or more of the following: hardware, meter 
reading system software, installation, and/or project management services. Separate contracts entered into with the same customer 
that meet certain criteria such as those that are entered into at or near the same time are evaluated as one single arrangement for 
purposes of applying multiple element arrangement revenue recognition. Revenue arrangements with multiple deliverables are 
divided into separate units of accounting at the inception of the arrangement and as each item in the arrangement is delivered. If 
the delivered item(s) has value to the customer on a standalone basis and delivery/performance of the undelivered item(s) is 
probable. The total arrangement consideration is allocated among the separate units of accounting based on their relative fair 
values and the applicable revenue recognition criteria are then considered for each unit of accounting. The amount allocable to a 
delivered item is limited to the amount that we are entitled to collect and that is not contingent upon the delivery/performance of 
additional items. Revenues for each deliverable are then recognized based on the type of deliverable, such as 1) when the products 
are shipped, 2) services are delivered, 3) percentage-of-completion for implementation services,  4) upon receipt of customer 
acceptance, or 5) transfer of title and risk of loss. The majority of our revenue is recognized when products are shipped to or 
received by a customer or when services are provided.

Hardware revenues are generally recognized at the time of shipment, receipt by the customer, or, if applicable, upon completion 
of customer acceptance provisions.

53

Under contract accounting where revenue is recognized using percentage of completion, the cost to cost method is used to measure 
progress to completion. Revenue from certain OpenWay network software and services arrangements is recognized using the 
units-of-delivery method of contract accounting, as network design services and network software are essential to the functionality 
of the related hardware (network). This methodology results in the deferral of costs and revenues as professional services and 
software implementation commence prior to deployment of hardware.

In the unusual instances when we are unable to reliably estimate the cost to complete a contract at its inception, we use the completed 
contract method of contract accounting. Revenues and costs are recognized upon substantial completion when remaining costs 
are insignificant and potential risks are minimal.

Change orders and contract modifications entered into after inception of the original contract are analyzed to determine if change 
orders or modifications are extensions of an existing agreement or are accounted for as a separate arrangement for purposes of 
applying contract accounting.

If we estimate that the completion of a contract component (unit of accounting) will result in a loss, the loss is recognized in the 
period in which the loss becomes evident. We reevaluate the estimated loss through the completion of the contract component and 
adjust the estimated loss for changes in facts and circumstances.

Many  of  our  customer  arrangements  contain  clauses  for  liquidated  damages,  related  to  the  timing  of  delivery  or  milestone 
accomplishments, which could become material in an event of failure to meet the contractual deadlines. At the inception of the 
arrangement and on an ongoing basis, we evaluate if the liquidated damages represent contingent revenue and, if so, we reduce 
the amount of consideration allocated to the delivered products and services and recognize it as a reduction in revenue in the period 
of default. If the arrangement is subject to contract accounting, liquidated damages resulting from anticipated events of default 
are estimated and are accounted for as a reduction of revenue in the period in which the liquidated damages are deemed probable 
of occurrence and are reasonably estimable.

Our software customers often purchase a combination of software, service, and post contract customer support. For these types 
of arrangement, revenue recognition is dependent upon the availability of vendor specific objective evidence (VSOE) of fair value 
for any undelivered element. We determine VSOE by reference to the range of comparable standalone sales or stated renewals. 
We review these standalone sales or renewals on at least an annual basis. If VSOE is established for all undelivered elements in 
the contract, revenue is recognized for delivered elements when all other revenue recognition criteria are met. Arrangements in 
which VSOE for all undelivered elements is not established, we recognize revenue under the combined services approach where 
revenue for software and software related elements is deferred until all software products have been delivered, all software related 
services have commenced, and undelivered services do not include significant production, customization or modification. Revenue 
would be recognized over the longest period that services would be provided.

Cloud services and software as a service (“SaaS”) arrangements where customers have access to certain of our software within a 
cloud-based IT environment that we manage, host and support are offered to customers on a subscription basis.  Revenue for the 
cloud services and SaaS offerings are generally recognized ratably over the contact term commencing with the date the services 
is made available to customers and all other revenue recognition criteria have been satisfied.  For arrangements where cloud 
services and SaaS is provided on a per meter basis, revenue is recognized based on actual meters read during the period.  

Certain of our revenue arrangements include an extended or noncustomary warranty provision that covers all or a portion of a 
customer's replacement or repair costs beyond the standard or customary warranty period. Whether or not the extended warranty 
is separately priced in the arrangement, a portion of the arrangement's total consideration is allocated to this extended warranty 
deliverable. This revenue is deferred and recognized over the extended warranty coverage period. Extended or noncustomary 
warranties do not represent a significant portion of our revenue.

We allocate consideration to each deliverable in an arrangement based on its relative selling price. We determine selling price 
using VSOE, if it exists, otherwise we use third-party evidence (TPE). We define VSOE as a median price of recent standalone 
transactions that are priced within a narrow range. TPE is determined based on the prices charged by our competitors for a similar 
deliverable when sold separately. If neither VSOE nor TPE of selling price exists for a unit of accounting, we use estimated selling 
price (ESP) to determine the price at which we would transact if the product or service were regularly sold by us on a standalone 
basis. Our determination of ESP involves a weighting of several factors based on the specific facts and circumstances of the 
arrangement. The factors considered include, historical sales, the cost to produce the deliverable, the anticipated margin on that 
deliverable, our ongoing pricing strategy and policies, and the characteristics of the varying markets in which the deliverable is 
sold.

54

We analyze the selling prices used in our allocation of arrangement consideration on an annual basis. Selling prices are analyzed 
on a more frequent basis if a significant change in our business necessitates a more timely analysis or if we experience significant 
variances in our selling prices.

Unearned revenue is recognized when a customer pays for products or services, but the criteria for revenue recognition have not 
been met as of the balance sheet date. Unearned revenue of $114.3 million and $139.5 million at December 31, 2016 and 2015
related primarily to professional services and software associated with our smart metering contracts, extended or noncustomary 
warranty, and prepaid post-contract support. Deferred costs are recognized for products or services for which ownership (typically 
defined as title and risk of loss) has transferred to the customer, but the criteria for revenue recognition have not been met as of 
the balance sheet date. Deferred costs were $34.4 million and $56.6 million at December 31, 2016 and 2015 and are recognized 
within other assets in the Consolidated Balance Sheets.

Hardware and software post-sale maintenance support fees are recognized ratably over the life of the related service contract. 
Shipping and handling costs and incidental expenses billed to customers are recognized as revenue, with the associated cost charged 
to cost of revenues. We recognize sales, use, and value added taxes billed to our customers on a net basis.

Product and Software Development Costs

Product and software development costs primarily include employee compensation and third party contracting fees. We do not 
capitalize product development costs, and we do not generally capitalize software development expenses as the costs incurred are 
immaterial for the relatively short period of time between technological feasibility and the completion of software development.

Stock-Based Compensation

We grant various stock-based compensation awards to our officers, employees and Board of Directors with service, market, and/
or performance vesting conditions. We also grant phantom stock units, which are settled in cash upon vesting and accounted for 
as liability-based awards.

We measure and recognize compensation expense for all stock-based compensation based on estimated fair values. The fair value 
of stock options is estimated at the date of grant using the Black-Scholes option-pricing model, which includes assumptions for 
the dividend yield, expected volatility, risk-free interest rate, and expected term. For unrestricted stock awards with no market 
conditions, the fair value is the market close price of our common stock on the date of grant. For restricted stock units with market 
conditions, the fair value is estimated at the date of award using a Monte Carlo simulation model, which includes assumptions for 
dividend yield and expected volatility for our common stock and the common stock for companies within the Russell 3000 index, 
as well as the risk-free interest rate and expected term of the awards. For phantom stock units, fair value is the market close price 
of our common stock at the end of each reporting period.

We expense stock-based compensation at the date of grant for unrestricted stock awards. For awards with only a service condition, 
we expense stock-based compensation, adjusted for estimated forfeitures, using the straight-line method over the requisite service 
period for the entire award. For awards with performance and service conditions, if vesting is probable, we expense the stock-
based compensation, adjusted for estimated forfeitures, on a straight-line basis over the requisite service period for each separately 
vesting portion of the award. For awards with a market condition, we expense the fair value over the requisite service period. 
Excess tax benefits are credited to common stock when the deduction reduces cash taxes payable. When we have tax deductions 
in excess of the compensation cost, they are classified as financing cash inflows in the Consolidated Statements of Cash Flows.

Certain of our employees are eligible to participate in our Employee Stock Purchase Plan (ESPP). The discount provided for ESPP 
purchases is 5% from the fair market value of the stock at the end of each fiscal quarter and is not considered compensatory.

Income Taxes

We account for income taxes using the asset and liability method of accounting. Deferred tax assets and liabilities are recognized 
based upon anticipated future tax consequences, in each of the jurisdictions that we operate, attributable to: (1) the differences 
between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases; and (2) 
net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured annually using enacted tax rates 
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The 
calculation of our tax liabilities involves applying complex tax regulations in different tax jurisdictions to our tax positions. The 
effect on deferred tax assets and liabilities of a change in tax legislation and/or rates is recognized in the period that includes the 
enactment date. A valuation allowance is recognized to reduce the carrying amounts of deferred tax assets if it is not more likely 
than not that such assets will be realized. We do not recognize tax liabilities on undistributed earnings of international subsidiaries 
that are permanently reinvested.

55

Foreign Exchange

Our consolidated financial statements are reported in U.S. dollars. Assets and liabilities of international subsidiaries with non-
U.S. dollar functional currencies are translated to U.S. dollars at the exchange rates in effect on the balance sheet date, or the last 
business day of the period, if applicable. Revenues and expenses for each subsidiary are translated to U.S. dollars using a weighted 
average rate for the relevant reporting period. Translation adjustments resulting from this process are included, net of tax, in OCI. 
Gains and losses that arise from exchange rate fluctuations for monetary asset and liability balances that are not denominated in 
an entity’s functional currency are included within other income (expense), net in the Consolidated Statements of Operations. 
Currency gains and losses of intercompany balances deemed to be long-term in nature or designated as a hedge of the net investment 
in international subsidiaries are included, net of tax, in OCI. Foreign currency losses, net of hedging, of $0.3 million, $3.0 million, 
and $5.1 million were included in other expenses, net, for the years ended December 31, 2016, 2015 and 2014, respectively.

Fair Value Measurements

For assets and liabilities measured at fair value, the GAAP fair value hierarchy prioritizes the inputs used in different valuation 
methodologies, assigning the highest priority to unadjusted quoted prices for identical assets and liabilities in actively traded 
markets (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs consist of quoted prices for similar 
assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in non-active markets; and model-
derived valuations in which significant inputs are corroborated by observable market data either directly or indirectly through 
correlation or other means. Inputs may include yield curves, volatility, credit risks, and default rates.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These 
estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Examples of significant estimates include revenue recognition, 
warranty, restructuring, income taxes, goodwill and intangible assets, defined benefit pension plans, contingencies, and stock-
based compensation. Due to various factors affecting future costs and operations, actual results could differ materially from these 
estimates. 

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue 
from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under 
U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to 
customers in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, 
the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the 
effective date for implementation of ASU 2014-09 by one year and is now effective for annual reporting periods beginning after 
December 15, 2017, with early adoption permitted but not earlier than the original effective date. In March 2016, the FASB issued 
ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08), which clarifies the 
implementation guidance of principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Identifying 
Performance Obligations and Licensing (ASU 2016-10), which clarifies the identification of performance obligations and licensing 
implementation guidance. In May 2016, the FASB issued ASU 2016-12, Narrow-Scope Improvements and Practical Expedients 
(ASU 2016-12), to improve guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed 
contracts and contract modifications at transition. The effective date and transition requirements in ASU 2016-08, ASU 2016-10, 
and ASU 2016-12 are the same as the effective date and transition requirements of ASU 2015-14. 

The revenue guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective 
method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application 
(the cumulative catch-up transition method). We currently anticipate adopting the standard effectively January 1, 2018 using the 
cumulative catch-up transition method, and therefore, will recognize the cumulative effect of initially applying the revenue standard 
as an adjustment to the opening balance of retained earnings in the period of initial application. We currently believe the most 
significant impact relates to our accounting for software license revenue, but are continuing to evaluate the effect that the updated 
standard  will  have  on  our  consolidated  results  of  operations,  financial  position,  cash  flows,  and  related  financial  statement 
disclosures.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (ASU 2015-03). ASU 2015-03 requires that debt 
issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount 
of the corresponding debt liability. In August 2015, the FASB issued ASU 2015-15, Interest - Imputation of Interest: Presentation 
and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (ASU 2015-15). ASU 2015-15 
provides additional guidance on the presentation and subsequent measurement of debt issuance costs associated with line-of-credit 
arrangements. ASU 2015-03 and ASU 2015-15 are effective for interim and annual periods beginning after December 15, 2015, 
with early adoption permitted, and is to be applied on a retrospective basis. We adopted this standard on January 1, 2016, and it 
56

did not materially impact our consolidated results of operations, financial position, cash flows, and related financial statement 
disclosures.

In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), 
Customer's Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05), which provides guidance about whether 
a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the 
customer should account for the software license element of the arrangement consistent with the acquisition of other software 
licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement 
as a service contract. ASU 2015-05 is effective for us on January 1, 2016. We adopted this standard on January 1, 2016, and it did 
not  materially  impact  our  consolidated  results  of  operations,  financial  position,  cash  flows,  and  related  financial  statement 
disclosures.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory (ASU 2015-11). 
The amendments in ASU 2015-11 apply to inventory measured using first-in, first-out (FIFO) or average cost and will require 
entities to measure inventory at the lower of cost and net realizable value. Net realizable value is the ESP in the normal course of 
business, minus the cost of completion, disposal and transportation. Replacement cost and net realizable value less a normal profit 
margin will no longer be considered. We adopted this standard on January 1, 2017 and it did not materially impact our consolidated 
results of operations, financial position, cash flows, and related financial statement disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires substantially all leases be recognized by 
lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as 
operating leases. The new standard also will result in enhanced quantitative and qualitative disclosures, including significant 
judgments made by management, to provide greater insight into the extent of revenue and expense recognized and expected to be 
recognized from existing leases. The standard requires modified retrospective adoption and will be effective for annual reporting 
periods beginning after December 15, 2018, with early adoption permitted. We are currently assessing the impact of adoption on 
our consolidated results of operations, financial position, cash flows, and related financial statement disclosures.

In  March  2016,  the  FASB  issued ASU  2016-09,  Improvements  to  Employee  Share-Based  Payment  Accounting  (Topic  718) 
(ASU 2016-09), which simplifies several areas within Topic 718. These include the income tax consequences, classification of 
awards as either equity or liabilities, and classification on the statement of cash flows. The amendment in this ASU becomes 
effective on a modified retrospective basis for accounting in tax benefits recognized, retrospectively for accounting related to the 
presentation  of  employee  taxes  paid,  prospectively  for  accounting  related  to  recognition  of  excess  tax  benefits,  and  either 
prospectively or retrospectively for accounting related to presentation of excess employee tax benefits for annual periods, and 
interim periods within those annual periods, beginning after December 15, 2016. We adopted this standard effective January 1, 
2017 and the most significant impact relates to the recognition of excess tax benefits which resulted in an approximately $15 
million one-time adjustment to retained earnings and deferred tax assets related to cumulative excess tax benefits previously 
unrecognized. This amendment was adopted on a prospective basis, which does not require the restatement of prior years.

In  January  2017,  the  FASB  issued ASU  2017-01, Clarifying  the  Definition  of  a  Business (ASU  2017-01),  which  narrows  the 
definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a 
transaction involves an asset or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets 
acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. 
If this initial test is not met, a set cannot be considered a business unless it includes an input and a substantive process that together 
significantly contribute to the ability to create output. ASU 2017-01 is effective for fiscal years beginning after December 15, 
2019 with early adoption permitted. We adopted this standard on January 1, 2017 and it will not materially impact our consolidated 
results of operations, financial position, cash flows, and related financial statement disclosures.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04), which simplifies 
the measurement of goodwill impairment by removing step two of the goodwill impairment test that requires the determination 
of the fair value of individual assets and liabilities of a reporting unit. ASU 2017-04 requires goodwill impairment to be measured 
as the amount by which a reporting unit’s carrying value exceeds its fair value; however, the loss recognized should not exceed 
the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 
15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We are 
currently assessing the impact of adoption on our consolidated results of operations, financial position, cash flows, and related 
financial statement disclosures.

57

Note 2:    Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (EPS):

Net income (loss) available to common shareholders

Weighted average common shares outstanding - Basic

Dilutive effect of stock-based awards

Weighted average common shares outstanding - Diluted
Earnings (loss) per common share - Basic
Earnings (loss) per common share - Diluted

Stock-based Awards

$

$
$

2016

Year Ended December 31,
2015
(in thousands, except per share data)
31,770

12,678

$

$

2014

38,207
436
38,643
0.83
0.82

$
$

38,224
282
38,506
0.33
0.33

$
$

(23,670)

39,184
—
39,184
(0.60)
(0.60)

For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is 
computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related 
proceeds were used to repurchase common stock at the average market price during the period. Related proceeds include the 
amount the employee must pay upon exercise, future compensation cost associated with the stock award, and the amount of excess 
tax benefits, if any. As a result of our net losses for 2014, there was no dilutive effect to the weighted average common shares 
outstanding for that year. Approximately 0.7 million, 1.2 million, and 1.4 million stock-based awards were excluded from the 
calculation of diluted EPS for the years ended December 31, 2016, 2015, and 2014, respectively, because they were anti-dilutive. 
These stock-based awards could be dilutive in future periods.

Note 3:    Certain Balance Sheet Components

Accounts receivable, net

December 31, 2016

December 31, 2015

(in thousands)

299,870
51,636
351,506

$

$

298,550
32,345
330,895

Year Ended December 31,

2016

2015

$

(in thousands)
5,949
60
(2,422)
(267)
3,320

$

6,195
1,025
(549)
(722)
5,949

December 31, 2016

December 31, 2015

(in thousands)

103,274
7,925
51,850
163,049

$

$

111,191
9,400
69,874
190,465

Trade receivables (net of allowance of $3,320 and $5,949)
Unbilled receivables

Total accounts receivable, net

Allowance for doubtful account activity

Beginning balance

Provision for doubtful accounts, net
Accounts written-off
Effects of change in exchange rates

Ending balance

Inventories

Materials
Work in process
Finished goods

Total inventories

$

$

$

$

$

$

58

Property, plant, and equipment, net

Machinery and equipment
Computers and software
Buildings, furniture, and improvements
Land
Construction in progress, including purchased equipment

Total cost
Accumulated depreciation

Property, plant, and equipment, net

Depreciation expense

December 31, 2016

December 31, 2015

(in thousands)

$

$

279,746
98,125
122,680
17,179
29,358
547,088
(370,630)
176,458

$

$

289,015
104,310
127,531
19,882
32,639
573,377
(383,121)
190,256

2016

Year Ended December 31,
2015
(in thousands)

2014

Depreciation expense

$

43,206

$

44,320

$

54,435

Note 4:    Intangible Assets

The gross carrying amount and accumulated amortization of our intangible assets, other than goodwill, are as follows:

December 31, 2016
Accumulated
Amortization

Gross Assets

Net

Gross Assets

December 31, 2015
Accumulated
Amortization

$

(in thousands)
17,690
54,411
19
31
72,151

$

388,981
238,379
64,069
11,078
702,507

$

$

(358,092) $
(168,885)
(62,571)
(11,027)
(600,575) $

Net

30,889
69,494
1,498
51
101,932

Core-developed technology
Customer contracts and relationships
Trademarks and trade names
Other

Total intangible assets

$

$

372,568
224,467
61,785
11,076
669,896

$

$

(354,878) $
(170,056)
(61,766)
(11,045)
(597,745) $

A summary of the intangible asset account activity is as follows:

Beginning balance, intangible assets, gross

Intangible assets acquired
Intangible assets impaired
Effect of change in exchange rates
Ending balance, intangible assets, gross

Year Ended December 31,
2015
2016

(in thousands)

$

$

702,507
—
—
(32,611)
669,896

$

$

748,148
4,827
(497)
(49,971)
702,507

Intangible assets impaired includes purchased software licenses to be sold to others. This amount was recognized as part of cost 
of revenues in the Consolidated Statement of Operations.

A summary of intangible asset amortization expense is as follows:

Amortization expense

$

25,112

$

31,673

$

43,619

2016

Year Ended December 31,
2015
(in thousands)

2014

59

Estimated future annual amortization expense is as follows:

Year Ending December 31,

2017
2018
2019
2020
2021
Beyond 2021

Total intangible assets subject to amortization

Note 5:    Goodwill

Estimated Annual
Amortization
(in thousands)

17,914
12,383
9,695
7,866
6,845
17,448
72,151

$

$

The following table reflects goodwill allocated to each reporting segment at December 31, 2016 and 2015:

Goodwill balance at January 1, 2015
Goodwill before impairment
Accumulated impairment losses

Goodwill, net

Goodwill acquired
Effect of change in exchange rates

Goodwill balance at December 31, 2015
Goodwill before impairment
Accumulated impairment losses

Goodwill, net

Effect of change in exchange rates

Goodwill balance at December 31, 2016
Goodwill before impairment
Accumulated impairment losses

Goodwill, net

Electricity

Gas

Water

Total Company

(in thousands)

$

$

$

449,668
(393,981)
55,687

—
(2,954)

$

359,485
—
359,485

—
(28,049)

$

382,655
(297,007)
85,648

4,684
(6,379)

414,910
(362,177)
52,733

331,436
—
331,436

350,314
(266,361)
83,953

1,191,808
(690,988)
500,820

4,684
(37,382)

1,096,660
(628,538)
468,122

(1,360)

(11,523)

(2,745)

(15,628)

400,299
(348,926)
51,373

$

319,913
—
319,913

$

334,505
(253,297)
81,208

$

1,054,717
(602,223)
452,494

During our 2016 and 2015 annual goodwill impairment test, performed as of October 1, 2016 and 2015, respectively, we performed 
the first step of the quantitative impairment test for Electricity, Gas, and Water and determined that the fair value of each of the 
reporting  units  exceeded  their  carrying  values.  No  goodwill  impairment  was  required  to  be  recognized  as  the  result  of  this 
quantitative analysis.

Refer to Note 1 for a description of our reporting units and the methods used to determine the fair values of our reporting units 
and to determine the amount of any goodwill impairment.

60

 
Note 6:    Debt

The components of our borrowings are as follows:

Credit Facilities

USD denominated term loan
Multicurrency revolving line of credit

Total debt

Less: current portion of debt
Less: unamortized prepaid debt fees - term loan

Long-term debt

Credit Facilities

December 31, 2016

December 31, 2015

(in thousands)

$

$

208,125
97,167
305,292
14,063
769
290,460

$

$

219,375
151,837
371,212
11,250
1,047
358,915

On June 23, 2015, we entered into an amended and restated credit agreement providing for committed credit facilities in the amount 
of $725 million U.S. dollars (the 2015 credit facility). The 2015 credit facility consists of a $225 million U.S. dollar term loan (the 
term loan) and a multicurrency revolving line of credit (the revolver) with a principal amount of up to $500 million. The revolver 
also contains a $250 million standby letter of credit sub-facility and a $50 million swingline sub-facility (available for immediate 
cash needs at a higher interest rate). Both the term loan and the revolver mature on June 23, 2020, and amounts borrowed under 
the revolver are classified as long-term and, during the credit facility term, may be repaid and reborrowed until the revolver's 
maturity, at which time the revolver will terminate, and all outstanding loans, together with all accrued and unpaid interest, must 
be repaid. Amounts not borrowed under the revolver are subject to a commitment fee, which is paid in arrears on the last day of 
each fiscal quarter, ranging from 0.18% to 0.30% per annum depending on our total leverage ratio as of the most recently ended 
fiscal quarter. Amounts repaid on the term loan may not be reborrowed. The 2015 credit facility permits us and certain of our 
foreign subsidiaries to borrow in U.S. dollars, euros, British pounds, or, with lender approval, other currencies readily convertible 
into U.S. dollars. All obligations under the 2015 credit facility are guaranteed by Itron, Inc. and material U.S. domestic subsidiaries 
and are secured by a pledge of substantially all of the assets of Itron, Inc. and material U.S. domestic subsidiaries, including a 
pledge of 100% of the capital stock of material U.S. domestic subsidiaries and up to 66% of the voting stock (100% of the non-
voting stock) of their first-tier foreign subsidiaries. In addition, the obligations of any foreign subsidiary who is a foreign borrower, 
as defined by the 2015 credit facility, are guaranteed by the foreign subsidiary and by its direct and indirect foreign parents. 

On June 13, 2016, we entered into an amendment to the 2015 credit facility, which reduced our $300 million standby letter of 
credit sub-facility to $250 million. 

Scheduled principal repayments for the term loan are due quarterly in the amount of $2.8 million through June 2017, $4.2 million
from September 2017 through June 2018, $5.6 million from September 2018 through March 2020, and the remainder due at 
maturity on June 23, 2020. The term loan may be repaid early in whole or in part, subject to certain minimum thresholds, without 
penalty.

Required minimum principal payments on our outstanding credit facilities are as follows:

Year Ending December 31,

2017
2018
2019
2020
2021

Total minimum payments on debt

Minimum Payments
(in thousands)

$

$

14,063
19,687
22,500
249,042
—
305,292

Under the 2015 credit facility, we elect applicable market interest rates for both the term loan and any outstanding revolving loans. 
We also pay an applicable margin, which is based on our total leverage ratio (as defined in the credit agreement). The applicable 
rates per annum may be based on either: (1) the LIBOR rate or EURIBOR rate (floor of 0%), plus an applicable margin, or (2) the 
Alternate Base Rate, plus an applicable margin. The Alternate Base Rate election is equal to the greatest of three rates: (i) the prime 
rate, (ii) the Federal Reserve effective rate plus 1/2 of 1%, or (iii) one month LIBOR plus 1%. At December 31, 2016 and 2015,

61

the interest rates for both the term loan and the USD revolver was 2.02% and 2.18%, which includes the LIBOR rate plus a margin 
of 1.25% and 1.75%, respectively. At December 31, 2016 and 2015, the interest rates for the EUR revolver was 1.25% and 1.75%, 
which includes the EURIBOR floor rate plus a margin of 1.25% and 1.75%, respectively.

Total credit facility repayments were as follows:

Term loan
Multicurrency revolving line of credit

Total credit facility repayments

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

11,250
67,869
79,119

$

$

13,125
49,873
62,998

$

$

26,250
76,188
102,438

At December 31, 2016, $97.2 million was outstanding under the 2015 credit facility revolver, and $46.1 million was utilized by 
outstanding standby letters of credit, resulting in $356.7 million available for additional borrowings or standby letters of credit. 
At December 31, 2016, $203.9 million was available for additional standby letters of credit under the letter of credit sub-facility 
and no amounts were outstanding under the swingline sub-facility.

Note 7:    Derivative Financial Instruments

As part of our risk management strategy, we use derivative instruments to hedge certain foreign currency and interest rate exposures. 
Refer to Note 1, Note 14, and Note 15 for additional disclosures on our derivative instruments.

The fair values of our derivative instruments are determined using the income approach and significant other observable inputs 
(also known as “Level 2”). We have used observable market inputs based on the type of derivative and the nature of the underlying 
instrument. The key inputs include interest rate yield curves (swap rates and futures) and foreign exchange spot and forward rates, 
all of which are available in an active market. We have utilized the mid-market pricing convention for these inputs. We include, 
as a discount to the derivative asset, the effect of our counterparty credit risk based on current published credit default swap rates 
when the net fair value of our derivative instruments is in a net asset position. We consider our own nonperformance risk when 
the net fair value of our derivative instruments is in a net liability position by discounting our derivative liabilities to reflect the 
potential credit risk to our counterparty through applying a current market indicative credit spread to all cash flows.

The fair values of our derivative instruments are as follows:

Balance Sheet Location

Fair Value

December 31,
2016

December 31,
2015

(in thousands)

Asset Derivatives
Derivatives designated as hedging instruments under ASC 815-20

Interest rate cap contracts
Interest rate swap contracts
Interest rate cap contracts

Other current assets
Other long-term assets
Other long-term assets

Derivatives not designated as hedging instruments under ASC 815-20

Foreign exchange forward contracts
Interest rate cap contracts
Interest rate cap contracts

Total asset derivatives

Other current assets
Other current assets
Other long-term assets

Liability Derivatives
Derivatives designated as hedging instruments under ASC 815-20

Interest rate swap contracts

Other current liabilities

Derivatives not designated as hedging instruments under ASC 815-20

Foreign exchange forward contracts

Other current liabilities

Total liability derivatives

62

$

$

$

$

3
1,830
376

169
4
563
2,945

$

$

934

$

449
1,383

$

—
1,632
1,423

27
—
—
3,082

868

99
967

OCI during the reporting period for our derivative and nonderivative instruments designated as hedging instruments, net of tax, 
was as follows:

Net unrealized gain (loss) on hedging instruments at January 1,

Unrealized gain (loss) on derivative instruments
Realized (gains) losses reclassified into net income (loss)

Net unrealized gain (loss) on hedging instruments at December 31,

$

$

(14,062) $
(1,087)
812
(14,337) $

(15,148) $
76
1,010
(14,062) $

(15,636)
(566)
1,054
(15,148)

2016

2015
(in thousands)

2014

Reclassification of amounts related to hedging instruments are included in interest expense in the Consolidated Statements of 
Operations for the years ended December 31, 2016, 2015, and 2014. Included in the net unrealized loss on hedging instruments 
at December 31, 2016 and 2015 is a loss of $14.4 million, net of tax, related to our nonderivative net investment hedge, which 
terminated in 2011. This loss on our net investment hedge will remain in AOCI until such time when earnings are impacted by a 
sale or liquidation of the associated foreign operation.

A summary of the potential effect of netting arrangements on our financial position related to the offsetting of our recognized 
derivative assets and liabilities under master netting arrangements or similar agreements is as follows:

Offsetting of Derivative Assets

December 31, 2016

December 31, 2015

Offsetting of Derivative Liabilities

December 31, 2016

December 31, 2015

Gross Amounts Not Offset in the
Consolidated Balance Sheets

Gross Amounts of
Recognized
Assets Presented
in the
Consolidated
Balance Sheets

$

$

2,945

3,082

$

$

Gross Amounts of
Recognized
Liabilities
Presented in the
Consolidated
Balance Sheets

$

$

1,383

967

$

$

Derivative
Financial
Instruments

Cash Collateral
Received

Net Amount

(in thousands)
(1,322) $

(565) $

— $

— $

1,623

2,517

Gross Amounts Not Offset in the
Consolidated Balance Sheets

Derivative
Financial
Instruments

Cash Collateral
Pledged

Net Amount

(in thousands)
(1,322) $

(565) $

— $

— $

61

402

Our derivative assets and liabilities subject to netting arrangements consist of foreign exchange forward and interest rate contracts 
with three counterparties at December 31, 2016 and nine counterparties at December 31, 2015. No derivative asset or liability 
balance with any of our counterparties was individually significant at December 31, 2016 or 2015. Our derivative contracts with 
each of these counterparties exist under agreements that provide for the net settlement of all contracts through a single payment 
in a single currency in the event of default. We have no pledges of cash collateral against our obligations nor have we received 
pledges of cash collateral from our counterparties under the associated derivative contracts.

Cash Flow Hedges

As a result of our floating rate debt, we are exposed to variability in our cash flows from changes in the applicable interest rate 
index. We enter into swaps to achieve a fixed rate of interest on the hedged portion of debt in order to decrease this variability in 

63

our  cash flows. The objective of these swaps is to reduce the variability of cash flows from increases in the LIBOR-based borrowing 
rates on our floating rate credit facility. The swaps do not protect us from changes to the applicable margin under our credit facility.

In May 2012, we entered into six interest rate swaps, which were effective July 31, 2013 and expired on August 8, 2016, to convert 
$200 million of our LIBOR based debt from a floating LIBOR interest rate to a fixed interest rate of 1.00% (excluding the applicable 
margin on the debt). The cash flow hedges were expected to be highly effective in achieving offsetting cash flows attributable to 
the hedged risk through the term of the hedge. Consequently, effective changes in the fair value of the interest rate swaps were 
recognized as a component of OCI and recognized in earnings when the hedged item affected earnings. The amounts paid on the 
hedges were recognized as adjustments to interest expense.

In October 2015, we entered into an interest rate swap, which is effective from August 31, 2016 to June 23, 2020, and converts 
$214 million of our LIBOR based debt from a floating LIBOR interest rate to a fixed interest rate of 1.42% (excluding the applicable 
margin on the debt). The notional balance will amortize to maturity at the same rate as required minimum payments on our term 
loan. The cash flow hedge is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk 
through  the  term  of  the  hedge.  Consequently,  effective  changes  in  the  fair  value  of  the  interest  rate  swap  is  recognized  as  a 
component of OCI and will be recognized in earnings when the hedged item affects earnings. The amounts paid or received on 
the hedge are recognized as an adjustment to interest expense. The amount of net losses expected to be reclassified into earnings 
in the next 12 months is $0.9 million. At December 31, 2016, our LIBOR-based debt balance was $248.1 million.

In November 2015, we entered into three interest rate cap contracts with a total notional amount of $100 million at a cost of 
$1.7 million. The interest rate cap contracts expire on June 23, 2020 and were entered into in order to limit our interest rate exposure 
on $100 million of our variable LIBOR based debt up to 2.00%. In the event LIBOR is higher than 2.00%, we will pay interest 
at the capped rate of 2.00% with respect to the $100 million notional amount of such agreements. The interest rate cap contracts 
do not include the effect of the applicable margin. As of December 31, 2016, due to the accelerated revolver payments from surplus 
cash, we have elected to de-designate two of the interest rate cap contracts as cash flow hedges and discontinue the use of cash 
flow hedge accounting. The amounts recognized in AOCI from de-designated interest rate cap contracts will continue to be reported 
in AOCI unless it is not probable that the forecasted transactions will occur. As a result of the discontinuance of cash flow hedge 
accounting, all subsequent changes in fair value of the de-designated derivative instruments are recognized within interest expense 
instead of OCI. The amount of net losses expected to be reclassified into earnings for all interest rate cap contracts in the next 12 
months is $0.2 million.

The before-tax effects of our cash flow derivative hedging instruments on the Consolidated Balance Sheets and the Consolidated 
Statements of Operations for the years ended December 31 are as follows:

Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion)
2015
(in thousands)

2016

2014

$ (1,163) $

367

$ (915)

Derivatives in
ASC 815 Cash
Flow Hedging
Relationships

Interest rate

swap
contracts

Interest rate cap

contracts

$ (605) $ (244) $ —

Loss Reclassified from
AOCI into Income (Effective Portion)
Location

2016

Amount
2015
(in thousands)

2014

Interest
expense

Interest
expense

$ (1,296) $ (1,639) $(1,704)

$

(27) $ — $ —

Loss Recognized in Income on
Derivative (Ineffective Portion)

Location

2016

Amount
2015
(in thousands)

2014

Interest
expense

Interest
expense

$ — $ — $ —

$

(1) $ — $ —

Derivatives Not Designated as Hedging Relationships

We are also exposed to foreign exchange risk when we enter into non-functional currency transactions, both intercompany and 
third-party. At each period-end, non-functional currency monetary assets and liabilities are revalued with the change recognized 
to other income and expense. We enter into monthly foreign exchange forward contracts, which are not designated for hedge 
accounting, with the intent to reduce earnings volatility associated with currency exposures. As of December 31, 2016, a total of 
49 contracts were offsetting our exposures from the euro, Canadian dollar, Indonesian Rupiah, South African rand, Indian Rupee, 
Chinese Yuan, and various other currencies, with notional amounts ranging from $120,000 to $42.3 million.

64

The before-tax effects of our derivatives not designated as hedging instruments on the Consolidated Statements of Operations for 
the years ended December 31 are as follows:

Derivatives Not Designated as Hedging
Instrument under ASC 815

Location

Gain (Loss) Recognized in Income on Derivative
2015
(in thousands)

2014

2016

Foreign exchange forward contracts
Interest rate cap contracts

Other income (expense), net
Interest expense

$
$

537
129

$
$

(3,145) $
— $

(5,248)
—

We will continue to monitor and assess our interest rate  and foreign exchange risk and may institute additional derivative instruments 
to manage such risk in the future.

Note 8:    Defined Benefit Pension Plans

We  sponsor  both  funded  and  unfunded  defined  benefit  pension  plans  offering  death  and  disability,  retirement,  and  special 
termination benefits for our international employees, primarily in Germany, France, Italy, Indonesia, Brazil, and Spain. The defined 
benefit obligation is calculated annually by using the projected unit credit method. The measurement date for the pension plans 
was December 31, 2016.

Our general funding policy for these qualified pension plans is to contribute amounts sufficient to satisfy regulatory funding 
standards of the respective countries for each plan. Our contributions for both funded and unfunded plans are paid from cash flows 
from our operations. The timing of when contributions are made can vary by plan and from year to year.

The following tables set forth the components of the changes in benefit obligations and fair value of plan assets:

Year Ended December 31,
2015
2016

(in thousands)

98,767
3,472
2,573
7,733
(9,481)
(4,386)
14
(1,431)
—
97,261

9,662
604
348
(370)
(29)
10,215
87,046

$

$

$

$

116,178
4,572
2,380
(5,211)
(4,382)
(12,190)
(1,683)
—
(897)
98,767

10,761
159
671
(308)
(1,621)
9,662
89,105

$

$

$

$

Change in benefit obligation:
Benefit obligation at January 1,

Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Foreign currency exchange rate changes
Curtailment
Settlement
Other

Benefit obligation at December 31,

Change in plan assets:
Fair value of plan assets at January 1,
Actual return on plan assets
Company contributions
Benefits paid
Foreign currency exchange rate changes

Fair value of plan assets at December 31,

Net pension benefit obligation at fair value

65

 
 
 
Amounts recognized on the Consolidated Balance Sheets consist of:

Assets

Plan assets in other long-term assets

Liabilities

Current portion of pension benefit obligation in wages and benefits payable
Long-term portion of pension benefit obligation

Pension benefit obligation, net

At December 31,

2016

2015

(in thousands)

$

$

654

$

359

3,202
84,498

3,493
85,971

87,046

$

89,105

Amounts in AOCI (pre-tax) that have not yet been recognized as components of net periodic benefit costs consist of:

At December 31,

2016

2015

Net actuarial loss
Net prior service cost

Amount included in AOCI

Amounts recognized in OCI (pre-tax) are as follows:

$

$

$

(in thousands)
26,767
619
27,386

$

Net actuarial (gain) loss
Settlement/curtailment loss
Plan asset (gain) loss
Amortization of net actuarial loss
Amortization of prior service cost
Other

Other comprehensive (income) loss

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

6,316
(1,343)
(64)
(1,351)
(58)
4
3,504

$

$

(6,894) $
(336)
343
(1,979)
(59)
(46)
(8,971) $

24,687
706
25,393

25,838
(55)
129
(572)
(138)
68
25,270

If actuarial gains and losses exceed ten percent of the greater of plan assets or plan liabilities, we amortize them over the employees' 
average future service period. The estimated net actuarial loss and prior service cost that will be amortized from AOCI into net 
periodic benefit cost during 2017 is $1.6 million.

Net periodic pension benefit costs for our plans include the following components:

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service costs
Amortization of actuarial net loss
Settlements and other

Net periodic pension benefit costs

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

3,472
2,573
(540)
58
1,351
1,340
8,254

$

$

4,572
2,380
(502)
59
1,979
420
8,908

$

$

3,559
3,476
(619)
138
572
55
7,181

66

The significant actuarial weighted average assumptions used in determining the benefit obligations and net periodic benefit cost 
for our benefit plans are as follows:

At and For The Year Ended December 31,
2015

2014

2016

Actuarial assumptions used to determine benefit obligations at end of
period:

Discount rate
Expected annual rate of compensation increase

Actuarial assumptions used to determine net periodic benefit cost for the
period:

Discount rate
Expected rate of return on plan assets
Expected annual rate of compensation increase

2.18%
3.65%

2.59%
5.29%
3.60%

2.59%
3.60%

2.36%
5.45%
3.37%

2.36%
3.37%

3.76%
5.40%
3.33%

We determine a discount rate for our plans based on the estimated duration of each plan’s liabilities. For our euro denominated 
defined benefit pension plans, which represent 94% of our benefit obligation, we use two discount rates, with consideration of the 
duration of the plans, using a hypothetical yield curve developed from euro-denominated AA-rated corporate bond issues, partially 
weighted for market value, with minimum amounts outstanding of €500  million for bonds with less than 10 years to maturity and 
€50  million for bonds with 10 or more years to maturity, and excluding the highest and lowest yielding 10% of bonds within each 
maturity group. The discount rates used, depending on the duration of the plans, were 0.75% and 1.75%. The weighted average 
discount rate used to measure our benefit obligations, increased by 41 basis points from December 31, 2015 to December 31, 
2016, driving a $7.7 million actuarial gain during 2016, which is recognized in OCI.

Our expected rate of return on plan assets is derived from a study of actual historic returns achieved and anticipated future long-
term performance of plan assets, specific to plan investment asset category. While the study primarily gives consideration to recent 
insurers’ performance and historical returns, the assumption represents a long-term prospective return.

The total accumulated benefit obligation for our defined benefit pension plans was $87.2 million and $89.0 million at December 31, 
2016 and 2015, respectively.

The total obligations and fair value of plan assets for plans with projected benefit obligations and accumulated benefit obligations 
exceeding the fair value of plan assets are as follows:

Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

At December 31,

2016

2015

$

(in thousands)
94,110
84,448
6,410

95,814
86,534
6,502

$

Our asset investment strategy focuses on maintaining a portfolio using primarily insurance funds, which are accounted for as 
investments and measured at fair value, in order to achieve our long-term investment objectives on a risk adjusted basis. Our 
general funding policy for these qualified pension plans is to contribute amounts sufficient to satisfy regulatory funding standards 
of the respective countries for each plan.

67

 
 
 
The fair values of our plan investments by asset category are as follows:

Cash
Insurance funds
Other securities

Total fair value of plan assets

Cash
Insurance funds
Other securities

Total fair value of plan assets

Quoted Prices in 
Active Markets 
for Identical 
Assets
(Level 1)
(in thousands)
December 31, 2016
783
$
—
—
783

$

Total

783
7,011
2,421
10,215

December 31, 2015
795
$
—
—
795

$

795
7,089
1,778
9,662

$

$

$

$

$

$

$

$

Significant 
Unobservable 
Inputs
(Level 3)

—
7,011
2,421
9,432

—
7,089
1,778
8,867

The following tables present a reconciliation of Level 3 assets held during the years ended December 31, 2016 and 2015.

Balance at
January 1,
2016

Net Realized
and Unrealized
Gains

Net Purchases,
Issuances,
Settlements,
and Other

Net Transfers
Into Level 3

Effect of
Foreign
Currency

Balance at
December 31,
2016

7,089
1,778
8,867

$

$

235
405
640

$

$

(in thousands)

$

54
(84)
(30) $

— $
—
— $

(367) $
322
(45) $

7,011
2,421
9,432

Balance at
January 1,
2015

Net Realized
and Unrealized
Gains

Net Purchases,
Issuances,
Settlements,
and Other

Net Transfers
Into Level 3

Effect of
Foreign
Currency

Balance at
December 31,
2015

7,440
2,595
10,035

$

$

49
44
93

$

$

(in thousands)

372
(82)
290

$

$

— $
—
— $

(772) $
(779)
(1,551) $

7,089
1,778
8,867

Insurance funds
Other securities
Total

Insurance funds
Other securities
Total

$

$

$

$

As the plan assets and contributions are not significant to our total company assets, no further breakdown is provided.

Annual benefit payments for the next 10 years, including amounts to be paid from our assets for unfunded plans, and reflecting 
expected future service, as appropriate, are expected to be paid as follows:

Year Ending December 31,

2017
2018
2019
2020
2021
2022-2026

68

Estimated
Annual Benefit
Payments
(in thousands)
3,655
$
2,662
2,737
3,285
3,918
22,929

 
Note 9:    Stock-Based Compensation

We  recognize  stock-based  compensation  expense  for  awards  of  stock  options,  and  the  issuance  of  restricted  stock  units  and 
unrestricted stock awards. We expense stock-based compensation primarily using the straight-line method over the requisite service 
period. For the years ended December 31, stock-based compensation expense and the related tax benefit were as follows:

Stock options
Restricted stock units
Unrestricted stock awards
Phantom stock units

Total stock-based compensation

Related tax benefit

2016

2015
(in thousands)

2014

2,357
14,723
955
1,077
19,112

4,927

$

$

$

2,648
10,735
706
—
14,089

4,228

$

$

$

2,333
14,591
936
—
17,860

4,994

$

$

$

We issue new shares of common stock upon the exercise of stock options or when vesting conditions on restricted stock units are 
fully satisfied.

Subject to stock splits, dividends, and other similar events, 7,473,956 shares of common stock are reserved and authorized for 
issuance under our 2010 Stock Incentive Plan (Stock Incentive Plan). Awards consist of stock options, restricted stock units, and 
unrestricted stock awards. At December 31, 2016, 2,092,602 shares were available for grant under the Stock Incentive Plan. The 
Stock Incentive Plan shares are subject to a fungible share provision such that, with respect to grants made after December 31, 2009, 
the authorized share reserve is reduced by (i) one share for every one share subject to a stock option or share appreciation right 
granted under the Plan and (ii) 1.7 shares for every one share of common stock that was subject to an award other than an option 
or stock appreciation right.

Stock Options

Options to purchase our common stock are granted to certain employees, senior management, and members of our Board of 
Directors with an exercise price equal to the market close price of the stock on the date the Board of Directors approves the grant. 
Options generally become exercisable in three equal annual installments beginning one year from the date of grant and generally 
expire 10 years from the date of grant. Compensation expense is recognized only for those options expected to vest, with forfeitures 
estimated based on our historical experience and future expectations.

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option-pricing model with the 
following weighted average assumptions:

Dividend yield
Expected volatility
Risk-free interest rate
Expected term (years)

2016

Year Ended December 31,
2015

2014

—
33.5%
1.3%
5.5

—
34.3%
1.7%
5.5

—
39.3%
1.7%
5.5

Expected volatility is based on a combination of the historical volatility of our common stock and the implied volatility of our 
traded options for the related expected term. We believe this combined approach is reflective of current and historical market 
conditions and is an appropriate indicator of expected volatility. The risk-free interest rate is the rate available as of the award date 
on zero-coupon U.S. government issues with a term equal to the expected life of the award. The expected life is the weighted 
average expected life of an award based on the period of time between the date the award is granted and the estimated date the 
award will be fully exercised. Factors considered in estimating the expected life include historical experience of similar awards, 
contractual terms, vesting schedules, and expectations of future employee behavior. We have not paid dividends in the past and 
do not plan to pay dividends in the foreseeable future.

69

A summary of our stock option activity for the years ended December 31 is as follows:

Outstanding, January 1, 2014

Granted
Exercised
Forfeited
Expired

Outstanding, December 31, 2014

Granted
Exercised
Forfeited
Expired

Outstanding, December 31, 2015

Granted
Exercised
Forfeited
Expired

Outstanding, December 31, 2016

Exercisable, December 31, 2016

Expected to vest, December 31, 2016

Shares
(in thousands)
1,180
160
(67)
(7)
(143)
1,123

291
(24)
(17)
(193)
1,180

191
(58)
(36)
(318)
959

562

385

Weighted
Average Exercise
Price per Share

Weighted Average
Remaining
Contractual Life
(years)

Aggregate 
Intrinsic Value(1)
(in thousands)

Weighted
Average Grant
Date Fair Value

$

$

$

$

$

$

$

$

54.79
35.65
28.03
44.06
68.97
51.90

35.25
36.05
37.47
52.17
48.31

40.40
37.00
35.29
55.13
45.64

51.18

37.76

$

$

$

13.65

12.09

13.27

4.6

$

1,300

826

4.4

$

1,676

$

5.7

$

$

$

$

$

6.6

5.1

8.7

26

405

742

19,125

9,181

9,658

(1)  The aggregate intrinsic value of outstanding stock options represents amounts that would have been received by the optionees had all in- 
the-money options been exercised on that date. Specifically, it is the amount by which the market value of Itron’s stock exceeded the exercise 
price of the outstanding in-the-money options before applicable income taxes, based on our closing stock price on the last business day of 
the period. The aggregate intrinsic value of stock options exercised during the period is calculated based on our stock price at the date of 
exercise.

As of December 31, 2016, total unrecognized stock-based compensation expense related to nonvested stock options was $3.2 
million, which is expected to be recognized over a weighted average period of approximately 1.9 years.

Restricted Stock Units

Certain employees, senior management, and members of our Board of Directors receive restricted stock units as a component of 
their total compensation. The fair value of a restricted stock unit is the market close price of our common stock on the date of 
grant. Restricted stock units generally vest over a three year period. Compensation expense, net of forfeitures, is recognized over 
the vesting period.

Subsequent to vesting, the restricted stock units are converted into shares of our common stock on a one-for-one basis and issued 
to employees. We are entitled to an income tax deduction in an amount equal to the taxable income reported by the employees 
upon vesting of the restricted stock units.

In 2013, the performance-based restricted stock units that were awarded under the Performance Award Agreement were determined 
based on (1) our achievement of specified non-GAAP EPS targets, as established at the beginning of each year for each of the 
calendar years contained in the performance periods (2-year and 3-year awards) (the performance condition) and (2) our total 
shareholder  return  (TSR)  relative  to  the  TSR  attained  by  companies  that  are  included  in  the  Russell  3000  Index  during  the 
performance periods (the market condition). Compensation expense, net of forfeitures, was recognized on a straight-line basis, 
and the units vest upon achievement of the performance condition, provided participants are employed by Itron at the end of the 
respective performance periods. For U.S. participants who retire during the performance period, a pro-rated number of restricted 
stock units (based on the number of days of employment during the performance period) immediately vest based on the attainment 
of the performance goals as assessed after the end of the performance period.

70

Depending on the level of achievement of the performance condition, the actual number of shares to be earned ranges between 
0% and 160% of the awards originally granted. At the end of the 2-year and 3-year performance periods, if the performance
conditions are achieved at or above threshold, the number of shares earned is further adjusted by a TSR multiplier payout percentage, 
which ranges between 75% and 125%, based on the market condition. Therefore, based on the attainment of the performance and 
market conditions, the actual number of shares that vest may range from 0% to 200% of the awards originally granted. For the 2-
year  awards  granted  under  the  2013  performance  award,  14,433  restricted  stock  units  became  eligible  for  distribution  at 
December 31, 2014. For the 3-year awards granted under the 2013 performance award, 15,648 restricted stock units became eligible 
for distribution at December 31, 2015.

For  years  subsequent  to  2013,  the  performance-based  restricted  stock  units  to  be  issued  are  determined  based  on  the  same 
performance and market conditions as the 2013 awards, but the performance period is 3-years. For the 3-year awards granted under 
the 2014 performance award, 110,259 restricted stock units became eligible for distribution at December 31, 2016. No awards 
became  eligible  for  distribution  under  the  2015  and  2016  awards  since  the  performance  periods  had  not  concluded  as  of 
December 31, 2016. 

Due to the presence of the TSR multiplier market condition, we utilize a Monte Carlo valuation model to determine the fair value 
of the awards at the grant date. This pricing model uses multiple simulations to evaluate the probability of our achievement of 
various stock price levels to determine our expected TSR performance ranking. The weighted-average assumptions used to estimate 
the fair value of performance-based restricted stock units granted and the resulting weighted average fair-value are as follows:

Dividend yield
Expected volatility
Risk-free interest rate
Expected term (years)

2016

Year Ended December 31,
2015

2014

—
30.0%
0.7%
1.8

—
30.1%
0.7%
2.1

—
32.3%
0.4%
2.0

Weighted-average grant date fair value

$

44.92

$

33.48

$

35.15

Expected volatility is based on the historical volatility of our common stock for the related expected term. We believe this approach 
is reflective of current and historical market conditions and is an appropriate indicator of expected volatility. The risk-free interest 
rate is the rate available as of the award date on zero-coupon U.S. government issues with a term equal to the expected term of 
the award. The expected term is the term of an award based on the period of time between the date of the award and the date the 
award is expected to vest. The expected term assumption is based upon the plan's performance period as of the date of the award. 
We have not paid dividends in the past and do not plan to pay dividends in the foreseeable future.

71

The following table summarizes restricted stock unit activity for the years ended December 31:

Outstanding, January 1, 2014

Granted(2)
Released
Forfeited

Outstanding, December 31, 2014

Granted(3)
Released
Forfeited

Outstanding, December 31, 2015

Granted (4)
Released
Forfeited

Outstanding, December 31, 2016

Vested but not released, December 31, 2016

Expected to vest, December 31, 2016

Number of
Restricted Stock 
Units
(in thousands)

Weighted
Average Grant
Date Fair Value

Aggregate 
Intrinsic Value(1)
(in thousands)

$

$

$

658
350
(291)
(35)
682

434
(296)
(64)
756

306
(312)
(82)
668

115

477

35.74

35.09

41.58

$

$

$

$

$

14,402

12,204

11,944

7,242

30,006

(1)  The aggregate intrinsic value is the market value of the stock, before applicable income taxes, based on the closing price on the stock release 

dates or at the end of the period for restricted stock units expected to vest.

(2)  Restricted stock units include 14,433 shares for the 2-year award under the 2013 Performance Award Agreement, which are eligible for 

distribution at December 31, 2014.

(3)  Restricted stock units include 15,648 shares for the 3-year award under the 2013 Performance Award Agreement, which are eligible for 

distribution at December 31, 2015.

(4)  Restricted stock units include 110,259 shares for the 3-year award under the 2014 Performance Award Agreement, which are eligible for 

distribution at December 31, 2016.

At December 31, 2016, unrecognized compensation expense on restricted stock units was $21.6 million, which is expected to be 
recognized over a weighted average period of approximately 1.8 years.

Unrestricted Stock Awards

We grant unrestricted stock awards to members of our Board of Directors as part of their compensation. Awards are fully vested 
and recognized when granted. The fair value of unrestricted stock awards is the market close price of our common stock on the 
date of grant.

The following table summarizes unrestricted stock award activity for the years ended December 31:

2016

2015
(in thousands, except per share data)

2014

Shares of unrestricted stock granted

21

20

24

Weighted average grant date fair value per share

$

44.94

$

35.01

$

39.06

Phantom Stock Units

Phantom stock units are a form of share-based award that are indexed to our stock price and are settled in cash upon vesting. Since 
phantom stock units are settled in cash, compensation expense recognized over the vesting period will vary based on changes in 
fair value. Fair value is remeasured at the end of each reporting period based on the market close price of our common stock.

72

The following table summarizes phantom stock unit activity:

Outstanding, January 1, 2016

Granted
Forfeited

Outstanding, December 31, 2016

Expected to vest, December 31, 2016

Number of Phantom
Stock Units
(in thousands)

Weighted
Average Grant
Date Fair Value

$

40.11

—
63
(1)
62

57

At December 31, 2016, total unrecognized compensation expense on phantom stock units was $2.8 million, which is expected to 
be recognized over a weighted average period of approximately 2.2 years. We have recognized a phantom stock liability of $1.0 
million within wages and benefits payable in the Consolidated Balance Sheets as of December 31, 2016.

Employee Stock Purchase Plan

Under the terms of the ESPP, employees can deduct up to 10% of their regular cash compensation to purchase our common stock 
at a discount from the fair market value of the stock at the end of each fiscal quarter, subject to other limitations under the plan. 
The sale of the stock to the employees occurs at the beginning of the subsequent quarter.

The following table summarizes ESPP activity for the years ended December 31:

Shares of stock sold to employees(1)

2016

2015
(in thousands)

2014

20

54

61

(1)  Stock sold to employees during each fiscal quarter under the ESPP is associated with the offering period ending on the last day of the 

previous fiscal quarter.

There were approximately 371,000 shares of common stock available for future issuance under the ESPP at December 31, 2016.

Note 10:    Defined Contribution, Bonus, and Profit Sharing Plans

Defined Contribution Plans

In the United States, United Kingdom, and certain other countries, we make contributions to defined contribution plans. For our 
U.S. employee savings plan, which represents a majority of our contribution expense, we provide a 50% match on the first 6% of 
the employee salary deferral, subject to statutory limitations. For our international defined contribution plans, we provide various 
levels of contributions, based on salary, subject to stipulated or statutory limitations. The expense for our defined contribution 
plans was as follows:

Defined contribution plans expense

$

7,941

$

6,579

$

7,097

2016

Year Ended December 31,
2015
(in thousands)

2014

73

Bonus and Profit Sharing Plans and Awards

We have employee bonus and profit sharing plans in which many of our employees participate, as well as an award program, 
which allows for recognition of individual employees' achievements. The bonus and profit sharing plans provide award amounts 
for  the  achievement  of  performance  and  financial  targets. As  the  bonuses  are  being  earned  during  the  year,  we  estimate  a 
compensation accrual each quarter based on the progress towards achieving the goals, the estimated financial forecast for the year, 
and the probability of achieving results. Bonus and profit sharing plans and award expense was as follows:

2016

Year Ended December 31,
2015
(in thousands)

2014

Bonus and profit sharing plans and award expense

$

43,377

$

14,192

$

34,989

Note 11:    Income Taxes

The  following  table  summarizes  the  provision  (benefit)  for  U.S.  federal,  state,  and  foreign  taxes  on  income  from  continuing 
operations:

Current:

Federal
State and local
Foreign

Total current

Deferred:

Federal
State and local
Foreign

Total deferred

Change in valuation allowance

Total provision for income taxes

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

$

20,490
2,708
12,586
35,784

$

5,033
1,633
13,945
20,611

10,805
1,160
(24,815)
(12,850)

3,951
(972)
(41,893)
(38,914)

26,640
49,574

$

40,402
22,099

$

17,749
775
20,269
38,793

(82,186)
(979)
(51,646)
(134,811)

100,053
4,035

74

The change in the valuation allowance does not include the impacts of currency translation adjustments or significant intercompany 
transactions. 

Our tax provision as a percentage of income before tax was 58.6%, 59.6%, and (22.1)% for 2016, 2015, and 2014, respectively. 
Our actual tax rate differed from the 35% U.S. federal statutory tax rate due to various items. A reconciliation of income taxes at 
the U.S. federal statutory rate of 35% to the consolidated actual tax rate is as follows:

Income (loss) before income taxes

Domestic
Foreign

Total income (loss) before income taxes

Expected federal income tax provision (benefit)
Goodwill impairment
Change in valuation allowance
Stock-based compensation
Foreign earnings
Tax credits
Uncertain tax positions, including interest and penalties
Change in tax rates
State income tax provision (benefit), net of federal effect
U.S. tax provision on foreign earnings
Domestic production activities deduction
Local foreign taxes
Other, net

Total provision for income taxes

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

$

$

196,750
(112,123)
84,627

29,619
—
26,640
2,762
(12,584)
(7,471)
3,817
67
2,806
997
(2,424)
2,914
2,431
49,574

$

$

$

$

115,526
(78,424)
37,102

12,986
—
40,402
939
(33,364)
(5,257)
4,274
312
(14)
203
(1,100)
1,450
1,268
22,099

$

$

$

$

86,605
(104,870)
(18,265)

(6,393)
119
100,053
1,255
(31,544)
(91,148)
1,519
(20)
(1,235)
31,309
(2,312)
2,295
137
4,035

75

Deferred tax assets and liabilities consist of the following:

Deferred tax assets

Loss carryforwards(1)
Tax credits(2)
Accrued expenses
Pension plan benefits expense
Warranty reserves
Depreciation and amortization
Equity compensation
Inventory valuation
Deferred revenue
Tax effect of accumulated translation
Other deferred tax assets, net
Total deferred tax assets

Valuation allowance

Total deferred tax assets, net of valuation allowance

Deferred tax liabilities

Depreciation and amortization
Tax effect of accumulated translation
Other deferred tax liabilities, net
Total deferred tax liabilities

Net deferred tax assets

At December 31,

2016

2015

(in thousands)

$

$

$

194,381
53,323
36,336
16,822
21,306
15,698
6,924
3,086
4,896
—
13,621
366,393
(249,560)
116,833

(19,995)
(100)
(5,698)
(25,793)
91,040

$

190,545
52,131
33,546
16,232
25,129
21,499
9,303
4,068
9,097
291
11,770
373,611
(235,339)
138,272

(27,000)
—
(3,608)
(30,608)
107,664

(1)  For tax return purposes at December 31, 2016, we had U.S. federal loss carryforwards of $13.2 million that expire during the years 2020 
and 2021. At December 31, 2016, we have net operating loss carryforwards in Luxembourg of $483.5 million that can be carried forward 
indefinitely, offset by a full valuation allowance. The remaining portion of the loss carryforwards are composed primarily of losses in various 
other state and foreign jurisdictions. The majority of these losses can be carried forward indefinitely. At December 31, 2016, there was a 
valuation allowance of $249.6 million primarily associated with foreign loss carryforwards and foreign tax credit carryforwards (discussed 
below).

(2)  For tax return purposes at December 31, 2016, we had: (1) U.S. general business credits of $15.3 million, which begin to expire in 2022; 
(2) U.S. alternative minimum tax credits of $2.5 million that can be carried forward indefinitely; (3) U.S. foreign tax credits of $49.4 million, 
which begin to expire in 2024; and (4) state tax credits of $10.0 million, which begin to expire in 2017. At December 31, 2016, there was 
a valuation allowance of $32.3 million associated with foreign tax credit carryforwards, and $6.0 million associated with state tax credit 
carryforwards.

We recognize valuation allowances to reduce deferred tax assets to the extent we believe it is more likely than not that a portion 
of such assets will not be realized. In making such determinations, we consider all available favorable and unfavorable evidence, 
including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and our ability 
to carry back losses to prior years. We are required to make assumptions and judgments about potential outcomes that lie outside 
management’s control. Our most sensitive and critical factors are the projection, source, and character of future taxable income. 
Although  realization  is  not  assured,  management  believes  it  is  more  likely  than  not  that  deferred  tax  assets,  net  of  valuation 
allowance, will be realized. The amount of deferred tax assets considered realizable, however, could be reduced in the near term 
if  estimates  of  future  taxable  income  during  the  carryforward  periods  are  reduced  or  current  tax  planning  strategies  are  not 
implemented.

Our deferred tax assets at December 31, 2016 do not include the tax effect on $40.9 million of excess tax benefits from employee 
stock plan exercises. Common stock will be increased by approximately $15 million when such excess tax benefits reduce cash 
taxes payable. See Note 1 for further discussion regarding the impact of adopting ASU 2016-09.

We do not provide U.S. deferred taxes on temporary differences related to our foreign investments that are considered permanent 
in duration. These temporary differences consist primarily of undistributed foreign earnings of $4.9 million and $8.7 million at 
December 31, 2016 and 2015, respectively. Foreign taxes have been provided on these undistributed foreign earnings. We have 

76

not computed the unrecognized deferred income tax liability on these temporary differences. There are many assumptions that 
must be considered to calculate the liability, thereby making it impractical to compute at this time.

We are subject to income tax in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating 
our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions 
and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on 
estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that 
certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves 
in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact 
of reserve positions and changes to reserves that are considered appropriate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Unrecognized tax benefits at January 1, 2014
Gross increase to positions in prior years
Gross decrease to positions in prior years
Gross increases to current period tax positions
Audit settlements
Decrease related to lapsing of statute of limitations
Effect of change in exchange rates

Unrecognized tax benefits at December 31, 2014

Gross increase to positions in prior years
Gross decrease to positions in prior years
Gross increases to current period tax positions
Audit settlements
Decrease related to lapsing of statute of limitations
Effect of change in exchange rates

Unrecognized tax benefits at December 31, 2015

Gross increase to positions in prior years
Gross decrease to positions in prior years
Gross increases to current period tax positions
Audit settlements
Decrease related to lapsing of statute of limitations
Effect of change in exchange rates

Unrecognized tax benefits at December 31, 2016

(in thousands)

28,615
2,749
(1,641)
3,008
—
(1,715)
(2,870)
28,146

6,461
(2,512)
25,741
—
(908)
(2,048)
54,880

1,164
(612)
5,071
(1,116)
(860)
(901)
57,626

$

$

$

$

The amount of unrecognized tax benefits that, if recognized, would affect
our effective tax rate

$

56,411

$

53,602

$

26,980

If certain unrecognized tax benefits are recognized they would create additional deferred tax assets. These assets would require 
a full valuation in certain locations based upon present circumstances.

2016

At December 31,
2015
(in thousands)

2014

77

We  classify  interest  expense  and  penalties  related  to  unrecognized  tax  benefits  and  interest  income  on  tax  overpayments  as 
components of income tax expense. The net interest and penalties expense recognized is as follows:

Net interest and penalties expense

$

193

$

880

$

469

2016

Year Ended December 31,
2015
(in thousands)

2014

Accrued interest
Accrued penalties

At December 31,

2016

2015

$

(in thousands)
2,473
2,329

$

2,105
2,577

At December 31, 2016, we are under examination by certain tax authorities for the 2000 to 2015 tax years. The material jurisdictions 
where we are subject to examination for the 2000 to 2015 tax years include, among others, the U.S., France, Germany, Italy, Brazil 
and the United Kingdom. No material changes have occurred to previously disclosed assessments. In December 2016, we filed a 
formal protest letter with the Internal Revenue Service requesting an Appeals hearing regarding the 2011-2013 tax audit assessment 
received  earlier  this  year  relating  to  research  and  development  tax  credits. We  believe  we  have  appropriately  accrued  for  the 
expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a 
material adverse effect on our financial condition, future results of operations, or cash flows.

Based upon the timing and outcome of examinations, litigation, the impact of legislative, regulatory, and judicial developments, 
and the impact of these items on the statute of limitations, it is reasonably possible that the related unrecognized tax benefits could 
change from those recognized within the next twelve months. However, at this time, an estimate of the range of reasonably possible 
adjustments to the balance of unrecognized tax benefits cannot be made.

We file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We are subject to income 
tax examination by tax authorities in our major tax jurisdictions as follows:

Tax Jurisdiction
U.S. federal
France
Germany
Brazil
United Kingdom
Italy

Years Subject to Audit
Subsequent to 1999
Subsequent to 2009
Subsequent to 2010
Subsequent to 2010
Subsequent to 2012
Subsequent to 2007

Note 12:    Commitments and Contingencies

Commitments

Operating lease rental expense for factories, service and distribution locations, offices, and equipment was as follows:

Rental expense

$

14,232

$

15,524

$

19,178

2016

Year Ended December 31,
2015
(in thousands)

2014

78

Future minimum lease payments at December 31, 2016, under noncancelable operating leases with initial or remaining terms in 
excess of one year are as follows:

Year Ending December 31,

2017
2018
2019
2020
2021
Beyond 2021

Future minimum lease payments

Minimum Payments
(in thousands)

$

$

13,128
12,238
9,152
6,026
5,363
8,510
54,417

Rent expense is recognized straight-line over the lease term, including renewal periods if reasonably assured. We lease most of 
our sales and distribution locations and administrative offices. Our leases typically contain renewal options similar to the original 
terms with lease payments that increase based on the consumer price index.

Guarantees and Indemnifications

We are often required to obtain standby letters of credit (LOCs) or bonds in support of our obligations for customer contracts. 
These standby LOCs or bonds typically provide a guarantee to the customer for future performance, which usually covers the 
installation phase of a contract and may, on occasion, cover the operations and maintenance phase of outsourcing contracts.

Our available lines of credit, outstanding standby LOCs, and bonds are as follows:

Credit facilities(1)

Multicurrency revolving line of credit
Long-term borrowings
Standby LOCs issued and outstanding

Net available for additional borrowings under the multi-currency revolving line of credit
Net available for additional standby LOCs under sub-facility(2)

Unsecured multicurrency revolving lines of credit with various financial institutions

Multicurrency revolving line of credit
Standby LOCs issued and outstanding
Short-term borrowings(3)

Net available for additional borrowings and LOCs

Unsecured surety bonds in force

At December 31,

2016

2015

(in thousands)

500,000
(97,167)
(46,103)

356,730
203,897

91,809
(21,734)
(69)
70,006

48,221

$

$

$

$

$

500,000
(151,837)
(46,574)

301,589
253,426

97,989
(31,122)
(3,884)
62,983

87,558

$

$

$

$

$

(1)  Refer to Note 6 for details regarding our secured credit facilities.
(2)  During the year ended December 31, 2016, as a result of entering into the first and second amendments to the 2015 credit facility, the 

maximum limit available for additional standby LOCs under sub-facility was reduced from $300 million to $250 million.

(3)  Short-term borrowings are included in “Other current liabilities” on the Consolidated Balance Sheets.

In the event any such standby LOC or bond is called, we would be obligated to reimburse the issuer of the standby LOC or bond; 
however, we do not believe that any outstanding LOC or bond will be called.

We generally provide an indemnification related to the infringement of any patent, copyright, trademark, or other intellectual 
property right on software or equipment within our sales contracts, which indemnifies the customer from and pays the resulting 
costs, damages, and attorney’s fees awarded against a customer with respect to such a claim provided that (a) the customer promptly 
notifies us in writing of the claim and (b) we have the sole control of the defense and all related settlement negotiations. We may 
also provide an indemnification to our customers for third party claims resulting from damages caused by the negligence or willful 
misconduct of our employees/agents in connection with the performance of certain contracts. The terms of our indemnifications 

79

generally do not limit the maximum potential payments. It is not possible to predict the maximum potential amount of future 
payments under these or similar agreements.

Legal Matters

We are subject to various legal proceedings and claims of which the outcomes are subject to significant uncertainty. Our policy 
is to assess the likelihood of any adverse judgments or outcomes related to legal matters, as well as ranges of probable losses. 
A determination of the amount of the liability required, if any, for these contingencies is made after an analysis of each known 
issue. A liability is recognized and charged to operating expense when we determine that a loss is probable and the amount can 
be reasonably estimated. Additionally, we disclose contingencies for which a material loss is reasonably possible, but not probable.

On July 14, 2016, we entered into a confidential settlement agreement with Transdata Incorporated (Transdata) under which 
Transdata agreed to dismiss with prejudice all pending litigation in various United States District Courts against us and certain of 
our customers. As a part of the settlement, we received a patent license from Transdata for the use of the patents in future meter 
production and sales.

In Brazil, the Conselho Administravo de Defesa Economica commenced an investigation of water meter suppliers, including our 
subsidiary, to determine whether such suppliers participated in agreements or concerted practices to coordinate their commercial 
policy in Brazil. On October 18, 2016, we settled with the Conselho Administravo de Defesa Economica. The settlement was not 
material to our results of operations or financial condition.

Itron and its subsidiaries are parties to various employment-related proceedings in jurisdictions where it does business. None of 
the proceedings are individually material to Itron, and we believe that we have made adequate provision such that the ultimate 
disposition of the proceedings will not materially affect Itron's business or financial condition.

Warranty

A summary of the warranty accrual account activity is as follows:

Year Ended December 31,
2015
2016

Beginning balance

New product warranties
Other adjustments and expirations
Claims activity
Effect of change in exchange rates

Ending balance
Less: current portion of warranty

Long-term warranty

$

$

$

(in thousands)
54,512
7,987
5,933
(24,364)
(766)
43,302
24,874
18,428

$

36,548
8,380
37,604
(25,955)
(2,065)
54,512
36,927
17,585

Total warranty expense is classified within cost of revenues and consists of new product warranties issued, costs related to extended 
warranty contracts, and other changes and adjustments to warranties. Warranty expense was as follows:

Total warranty expense

$

13,920

$

45,984

$

9,238

2016

Year Ended December 31,
2015
(in thousands)

2014

80

Extended Warranty

A summary of changes to unearned revenue for extended warranty contracts is as follows:

Year Ended December 31,
2015
2016

Beginning balance

Unearned revenue for new extended warranties
Unearned revenue recognized
Effect of change in exchange rates

Ending balance
Less: current portion of unearned revenue for extended warranty

$

Long-term unearned revenue for extended warranty within other long-term obligations

$

$

(in thousands)
33,654
1,437
(3,594)
52
31,549
4,226
27,323

$

34,138
2,792
(2,832)
(444)
33,654
3,565
30,089

Health Benefits

We are self insured for a substantial portion of the cost of our U.S. employee group health insurance. We purchase insurance from 
a third party, which provides individual and aggregate stop loss protection for these costs. Each reporting period, we expense the 
costs of our health insurance plan including paid claims, the change in the estimate of incurred but not reported (IBNR) claims, 
taxes, and administrative fees (collectively, the plan costs).

Plan costs were as follows:

Plan costs

$

27,276

$

25,355

$

23,206

IBNR accrual, which is included in wages and benefits payable, was as follows:

2016

Year Ended December 31,
2015
(in thousands)

2014

IBNR accrual

At December 31,

2016

2015

$

(in thousands)
2,441

$

2,051

Our IBNR accrual and expenses may fluctuate due to the number of plan participants, claims activity, and deductible limits. For 
our employees located outside of the United States, health benefits are provided primarily through governmental social plans, 
which are funded through employee and employer tax withholdings.

Note 13:     Restructuring

2016 Projects

On September 1, 2016, we announced projects (2016 Projects) to restructure various company activities in order to improve 
operational efficiencies, reduce expenses and improve competiveness. We expect to close or consolidate several facilities and 
reduce our global workforce as a result of the restructuring.

The 2016 Projects began during the three months ended September 30, 2016, and we expect to substantially complete the 2016 
Projects by the end of 2018. Many of the affected employees are represented by unions or works councils, which require consultation, 
and potential restructuring projects may be subject to regulatory approval, both of which could impact the timing of charges, total 
expected charges, cost recognized, and planned savings in certain jurisdictions.

81

 
 
 
 
 
The  total  expected  restructuring  costs,  the  restructuring  costs  recognized  during  the  year  ended  December 31,  2016,  and  the 
remaining expected restructuring costs as of December 31, 2016 related to the 2016 Projects are as follows:

Total Expected Costs
at December 31, 2016

Costs Recognized
During the Year
Ended December 31,
2016
(in thousands)

Remaining Costs to
be Recognized at
December 31, 2016

$

$

$

$

44,186
7,219
16,389
67,794

10,827
34,468
20,061
2,438
67,794

$

$

$

$

39,686
7,219
889
47,794

8,827
23,968
13,061
1,938
47,794

$

$

$

$

4,500
—
15,500
20,000

2,000
10,500
7,000
500
20,000

Employee severance costs
Asset impairments & net loss on sale or disposal
Other restructuring costs

Total

Segments:

Electricity
Gas
Water
Corporate unallocated

Total

2014 Projects

In November 2014, our management approved restructuring projects (2014 Projects) to restructure our Electricity business and 
related general and administrative activities, along with certain Gas and Water activities, to improve operational efficiencies and 
reduce expenses. The 2014 Projects include consolidation of certain facilities and reduction of our global workforce. The improved 
structure positions us to meet our long-term profitability goals by better aligning global operations with markets where we can 
serve our customers profitably.

We began implementing these projects in the fourth quarter of 2014, and substantially completed them in the third quarter of 2016. 
Project activities will continue through the fourth quarter of 2017, however, no further costs are expected to be recognized related 
to the 2014 Projects.

The total expected restructuring costs, the restructuring costs recognized in prior periods, the restructuring costs recognized during 
the year ended December 31, 2016, and the remaining expected restructuring costs as of December 31, 2016 related to the 2014 
Projects are as follows:

Total Expected Costs
at December 31, 2016

Costs Recognized in
Prior Periods

Costs Recognized
During the Year
Ended December 31,
2016

Remaining Costs to
be Recognized at
December 31, 2016

Employee severance costs
Asset impairments & net loss on sale

or disposal

Other restructuring costs

Total

Segments:

Electricity
Gas
Water
Corporate unallocated

Total

2013 Projects

$

$

$

$

34,630

$

8,849
4,999
48,478

20,610
13,631
1,995
12,242
48,478

$

$

$

(in thousands)
34,373

$

8,880
3,929
47,182

21,743
11,855
1,940
11,644
47,182

$

$

$

257

$

(31)
1,070
1,296

$

(1,133) $
1,776
55
598
1,296

$

—

—
—
—

—
—
—
—
—

In September 2013, our management approved projects (the 2013 Projects) to restructure our operations to improve profitability 
and increase efficiencies. We began implementing these projects in the third quarter of 2013, and completed the projects during 
the third quarter of 2016.

82

The 2013 Projects resulted in approximately $26.2 million of restructuring expense, which was recognized from the third quarter 
of 2013 through the fourth quarter of 2014.

The following table summarizes the activity within the restructuring related balance sheet accounts for the 2016, 2014 and 2013 
Projects during the year ended December 31, 2016:

Accrued Employee
Severance

Asset Impairments &
Net Loss on Sale or
Disposal

Other Accrued Costs

Total

Beginning balance, January 1, 2016
Costs incurred and charged to

expense
Cash payments
Non-cash items
Effect of change in exchange rates
Ending balance, December 31, 2016

$

$

26,533

$

39,943
(18,452)
—
(2,656)
45,368

$

(in thousands)
— $

7,188
—
(7,188)
—
— $

3,048

$

1,959
(2,389)
—
(16)
2,602

$

29,581

49,090
(20,841)
(7,188)
(2,672)
47,970

Asset impairments are determined at the asset group level. Revenues and net operating income from the activities we have exited 
or will exit under the restructuring projects are not material to our operating segments or consolidated results.

Other restructuring costs include expenses for employee relocation, professional fees associated with employee severance, and 
costs to exit the facilities once the operations in those facilities have ceased. Costs associated with restructuring activities are 
generally presented in the Consolidated Statements of Operations as restructuring, except for certain costs associated with inventory 
write-downs, which are classified within cost of revenues, and accelerated depreciation expense, which is recognized according 
to the use of the asset.

The current restructuring liabilities were $26.2 million and $25.2 million as of December 31, 2016 and 2015, respectively. The 
current restructuring liabilities are classified within other current liabilities on the Consolidated Balance Sheets. The long-term 
restructuring liabilities balances were $21.8 million and $4.4 million as of December 31, 2016 and 2015, respectively. The long-
term restructuring liabilities are classified within other long-term obligations on the Consolidated Balance Sheets, and include 
facility exit costs and severance accruals.

Note 14:     Shareholders’ Equity

Preferred Stock

We have authorized the issuance of 10 million shares of preferred stock with no par value. In the event of a liquidation, dissolution, 
or winding up of the affairs of the corporation, whether voluntary or involuntary, the holders of any outstanding preferred stock 
will be entitled to be paid a preferential amount per share to be determined by our Board of Directors prior to any payment to 
holders of common stock. There was no preferred stock issued or outstanding at December 31, 2016, 2015, and 2014.

Stock Repurchase Plan

On February 19, 2015, our Board authorized a new repurchase program of up to $50 million of our common stock over a 12-
month period, beginning February 19, 2015. From February 19, 2015 through December 31, 2015, we repurchased 743,444 shares 
of our common stock, totaling $25.0 million. This program expired on February 19, 2016 with no share repurchases made subsequent 
to December 31, 2015.

83

Other Comprehensive Income (Loss)

OCI is reflected as a net increase (decrease) to shareholders’ equity and is not reflected in our results of operations. The changes 
in the components of AOCI, net of tax, were as follows:

Foreign Currency
Translation
Adjustments

Net Unrealized
Gain (Loss) on
Derivative
Instruments

Net Unrealized
Gain (Loss) on
Nonderivative
Instruments
(in thousands)

Pension Benefit
Obligation
Adjustments

Accumulated
Other
Comprehensive
Income (Loss)

Balances at January 1, 2014

$

OCI before reclassifications
Amounts reclassified from
AOCI

Total other comprehensive
income (loss)
Balances at December 31, 2014 $
OCI before reclassifications
Amounts reclassified from
AOCI

Total other comprehensive
income (loss)
Balances at December 31, 2015 $
OCI before reclassifications
Amounts reclassified from
AOCI

Total other comprehensive
income (loss)
Balances at December 31, 2016 $

4,217
(89,297)

$

(1,256) $
(566)

(14,380) $
—

(9,885) $
(25,702)

(21,304)
(115,565)

—

1,054

—

755

1,809

(89,297)
(85,080) $
(73,891)

488
(768) $
76

—
(14,380) $
—

(24,947)
(34,832) $
4,570

(113,756)
(135,060)
(69,245)

962

1,010

—

1,726

3,698

(72,929)
(158,009) $
(23,570)

(1,407)

(24,977)
(182,986) $

1,086
318
(1,087)

$

812

(275)
43

$

—
(14,380) $
—

6,296
(28,536) $
(6,191)

(65,547)
(200,607)
(30,848)

—

2,723

2,128

—
(14,380) $

(3,468)
(32,004) $

(28,720)
(229,327)

84

The  before-tax  amount,  income  tax  (provision)  benefit,  and  net-of-tax  amount  related  to  each  component  of  OCI  during  the 
reporting periods were as follows:

Before-tax amount

Foreign currency translation adjustment
Foreign currency translation adjustment reclassified into net income on
disposal
Net unrealized gain (loss) on derivative instruments designated as cash
flow hedges
Net hedging (gain) loss reclassified into net income (loss)
Pension benefit obligation adjustment

Total other comprehensive income (loss), before tax

Tax (provision) benefit

Foreign currency translation adjustment
Foreign currency translation adjustment reclassified into net income on
disposal
Net unrealized gain (loss) on derivative instruments designated as cash
flow hedges
Net hedging (gain) loss reclassified into net income (loss)
Pension benefit obligation adjustment

Total other comprehensive income (loss) tax (provision) benefit

Year Ended December 31,

2016

2015

2014

(in thousands)

$

(23,280) $

(74,219) $

(89,329)

(1,407)

(1,768)
1,322
(3,504)
(28,637)

(290)

—

681
(510)
36
(83)

962

123
1,639
8,971
(62,524)

328

—

(47)
(629)
(2,675)
(3,023)

—

(915)
1,704
(25,270)
(113,810)

32

—

349
(650)
323
54

Net-of-tax amount

Foreign currency translation adjustment
Foreign currency translation adjustment reclassified into net income on
disposal
Net unrealized gain (loss) on derivative instruments designated as cash
flow hedges
Net hedging (gain) loss reclassified into net income (loss)
Pension benefit obligation adjustment

Total other comprehensive income (loss), net of tax

$

(23,570)

(1,407)

(1,087)
812
(3,468)
(28,720) $

(73,891)

(89,297)

962

—

76
1,010
6,296
(65,547) $

(566)
1,054
(24,947)
(113,756)

Details about the AOCI components reclassified to the Consolidated Statements of Operations during the reporting periods are as 
follows:

Amortization of defined benefit pension items

Prior-service costs
Actuarial losses
Loss on settlement
Other

Total, before tax
Tax benefit
Total, net of tax

Amount Reclassified from AOCI(1)

2016

Year Ended December 31,
2015
(in thousands)

2014

Affected Line Item in the
Income Statement

$

$

(58) $

(59) $

(1,351)
(1,343)
—

(2,752)
29
(2,723) $

(1,979)
(375)
(46)

(2,459)
733
(1,726) $

(138)
(572)
(55)
—

(765)
10

(2)

(2)

(2)

(2)

Income (loss) before
income taxes
Income tax provision

(755) Net income (loss)

(1)  Amounts in parenthesis indicate debits to the Consolidated Statements of Operations.
(2)  These AOCI components are included in the computation of net periodic pension cost. Refer to Note 8 for additional details.

85

Reclassification of amounts related to foreign currency translation adjustment relate to the sale of a subsidiary and are included 
in restructuring expense in the Consolidated Statements of Operations for the years ended December 31, 2016 and 2015.

Refer to Note 7 for additional details related to derivative activities that resulted in reclassification of AOCI to the Consolidated 
Statements of Operations.

Note 15:    Fair Values of Financial Instruments

The fair values at December 31, 2016 and 2015 do not reflect subsequent changes in the economy, interest rates, tax rates, and 
other variables that may affect the determination of fair value.

Assets

Cash and cash equivalents
Foreign exchange forwards
Interest rate swaps
Interest rate caps

Liabilities

Credit facility

USD denominated term loan
Multicurrency revolving line of credit

Interest rate swaps
Foreign exchange forwards

December 31, 2016

December 31, 2015

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

(in thousands)

$

$

$

$

133,565
169
1,830
946

208,125
97,167
934
449

$

$

133,565
169
1,830
946

205,676
95,906
934
449

$

$

131,018
27
1,632
1,423

219,375
151,837
868
99

131,018
27
1,632
1,423

217,830
150,570
868
99

The following methods and assumptions were used in estimating fair values:

Cash and cash equivalents: Due to the liquid nature of these instruments, the carrying value approximates fair value (Level 1).

Credit Facility - term loan and multicurrency revolving line of credit: The term loan and revolver are not traded publicly. The fair 
values, which are determined based upon a hypothetical market participant, are calculated using a discounted cash flow model 
with Level 2 inputs, including estimates of incremental borrowing rates for debt with similar terms, maturities, and credit profiles. 
Refer to Note 6 for a further discussion of our debt.

Derivatives: See Note 7 for a description of our methods and assumptions in determining the fair value of our derivatives, which 
were determined using Level 2 inputs.

Note 16:    Segment Information

We operate under the Itron brand worldwide and manage and report under three operating segments, Electricity, Gas, and Water. 
Our Water operating segment includes both our global water and heat solutions. This structure allows each segment to develop 
its own go-to-market strategy, prioritize its marketing and product development requirements, and focus on its strategic investments. 
Our sales, marketing, and delivery functions are managed under each segment. Our product development and manufacturing 
operations are managed on a worldwide basis to promote a global perspective in our operations and processes and yet still maintain 
alignment with the segments.

We have three GAAP measures of segment performance: revenues, gross profit (margin), and operating income (margin). Our 
operating segments have distinct products, and, therefore, intersegment revenues are minimal. Certain operating expenses are 
allocated to the operating segments based upon internally established allocation methodologies. Corporate operating expenses, 
interest income, interest expense, other income (expense), and income tax provision are not allocated to the segments, nor are 
included in the measure of segment profit or loss. In addition, we allocate only certain production assets and intangible assets to 
our operating segments. We do not manage the performance of the segments on a balance sheet basis.

86

Segment Products

Electricity

Standard electricity (electromechanical and electronic) meters; smart metering solutions that include one or several 
of  the  following:  smart  electricity  meters;  smart  electricity  communication  modules;  prepayment  systems, 
including smart key, keypad, and smart card communication technologies; smart systems including handheld, 
mobile, and fixed network collection technologies; smart network technologies; meter data management software; 
knowledge application solutions; installation; implementation; and professional services including consulting and 
analysis.

Gas

Water

Standard gas meters; smart metering solutions that include one or several of the following: smart gas meters; 
smart  gas  communication  modules;  prepayment  systems,  including  smart  key,  keypad,  and  smart  card 
communication  technologies;  smart  systems,  including  handheld,  mobile,  and  fixed  network  collection 
technologies; smart network technologies; meter data management software; knowledge application solutions 
installation; implementation; and professional services including consulting and analysis.

Standard water and heat meters; smart metering solutions that include one or several of the following: smart water 
meters and communication modules; smart heat meters; smart systems including handheld, mobile, and fixed 
network collection technologies; meter data management software; knowledge application solutions; installation; 
implementation; and professional services including consulting and analysis.

Revenues, gross profit, and operating income associated with our segments were as follows:

Revenues

Electricity
Gas
Water

Total Company

Gross profit

Electricity
Gas
Water

Total Company

Operating income (loss)

Electricity
Gas
Water
Corporate unallocated

Total Company

Total other income (expense)
Income (loss) before income taxes

2016

Year Ended December 31,
2015
(in thousands)

2014

938,374
569,476
505,336
2,013,186

282,677
205,063
172,580
660,320

68,287
66,813
37,266
(76,155)
96,211
(11,584)
84,627

$

$

$

$

$

$

820,306
543,805
519,422
1,883,533

225,446
185,559
145,680
556,685

31,104
67,471
19,864
(65,593)
52,846
(15,744)
37,102

$

$

$

$

$

$

771,857
599,091
576,668
1,947,616

200,249
211,623
202,178
614,050

(77,751)
76,101
71,356
(69,226)
480
(18,745)
(18,265)

$

$

$

$

$

$

During the second quarter of 2015, we concluded it was necessary to issue a product replacement notification to customers of our 
Water segment who had purchased certain communication modules manufactured between July 2013 and December 2014. We 
determined that a component of the modules was failing prematurely. This resulted in a decrease to gross profit of $29.4 million
for the year ended December 31, 2015. After adjusting for the tax impact, this charge resulted in a decrease to basic and diluted 
EPS of $0.47 for the year ended December 31, 2015.

During 2014, in our Electricity segment, we revised our estimate of the cost to complete an OpenWay project in North America. 
This resulted in a decrease to gross profit of $15.9 million, which decreased basic and diluted EPS by $0.25 for the year ended 
December 31, 2014.

For the years ended December 31, 2016, 2015, and 2014, no single customer represented more than 10% of total Company or the 
Gas or Water operating segment revenues. Two customers represented 12% and 10% of total Electricity revenue, respectively, for 
the  year  ended  December 31,  2016.  No  customer  represented  more  than  10%  of  Electricity  revenue  for  the  years  ended 
December 31, 2015 and 2014.

87

Revenues by region were as follows:

United States and Canada
Europe, Middle East, and Africa (EMEA)
Other

Total Company

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

1,126,787
698,106
188,293
2,013,186

$

$

997,293
701,301
184,939
1,883,533

$

$

875,796
849,841
221,979
1,947,616

Revenues are allocated to countries and regions based on the location of the selling entity.

Property, plant, and equipment, net, by geographic area were as follows:

United States
Outside United States
Total Company

$

$

Depreciation and amortization expense associated with our segments was as follows:

At December 31,

2016

2015

(in thousands)
70,435
106,023
176,458

$

$

72,179
118,077
190,256

Electricity
Gas
Water
Corporate Unallocated

Total Company

2016

Year Ended December 31,
2015
(in thousands)

2014

$

$

28,468
20,714
18,675
461
68,318

$

$

35,896
20,288
19,459
350
75,993

$

$

47,889
25,706
24,257
287
98,139

88

Note 17:    Quarterly Results (Unaudited)

2016

Statement of operations data (unaudited):

Revenues
Gross profit
Net income (loss) attributable to Itron, Inc.

Earnings (loss) per common share - Basic(1)
Earnings (loss) per common share - Diluted(1)

2015

Statement of operations data (unaudited):

Revenues
Gross profit
Net income (loss) attributable to Itron, Inc.

Earnings (loss) per common share - Basic(1)
Earnings (loss) per common share - Diluted(1)

$

$
$

$

$
$

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total Year

(in thousands, except per share data)

497,590
163,203
10,089

0.27
0.26

$

$
$

513,024
169,705
19,917

0.52
0.52

$

$
$

$

506,859
170,749
(9,885)

(0.26) $
(0.26) $

495,713
156,663
11,649

0.30
0.30

$

$
$

2,013,186
660,320
31,770

0.83
0.82

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total Year

(in thousands, except per share data)

446,746
138,422
5,398

0.14
0.14

$

$
$

$

470,811
118,554
(14,346)

(0.37) $
(0.37) $

469,528
147,290
12,640

0.33
0.33

$

$
$

496,448
152,419
8,986

0.23
0.23

$

$
$

1,883,533
556,685
12,678

0.33
0.33

(1)  The sum of the quarterly EPS data presented in the table may not equal the annual results due to rounding and the impact of dilutive securities 

on the annual versus the quarterly EPS calculations.

During the third quarter of 2016, we announced the 2016 Projects to restructure various company activities in order to improve 
operational efficiencies, reduce expenses and improve competiveness. As a result, we recognized $40.0 million and $7.8 million
in restructuring costs during the third and fourth quarters of 2016, respectively, related to the 2016 Projects.

For the year ended December 31, 2015, management concluded earnings fell below the threshold at which incentive compensation 
was appropriate. As a result, $13.3 million of previously accrued compensation expense was reversed in the fourth quarter of 2015.

During the second quarter of 2015, we concluded it was necessary to issue a product replacement notification to customers of our 
Water segment who had purchased certain communication modules manufactured between July 2013 and December 2014. We 
determined that a component of the modules was failing prematurely. As a result, we recognized a warranty charge of $23.6 million
during the second quarter of 2015.

Note 18: Subsequent Events

Stock Repurchases

On February 23, 2017, Itron's Board of Directors authorized a new repurchase program of up to $50 million of our common stock 
over  a  12-month  period,  beginning  February  23,  2017.  Repurchases  are  made  in  the  open  market  or  in  privately  negotiated 
transactions and in accordance with applicable securities laws. Repurchases are subject to the Company's alternative uses of capital 
as well as financial, market, and industry conditions.

89

ITEM 9:

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no disagreements with our independent accountants on accounting and financial disclosure matters within the three 
year period ended December 31, 2016, or in any period subsequent to such date, through the date of this report.

ITEM 9A:  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of our Company’s management, including the Chief 
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls 
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934 as amended. 
Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded 
that as of December 31, 2016, the Company’s disclosure controls and procedures were effective to ensure the information required 
to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and 
communicated to our management, including our principal executive and principal financial officers, or persons performing similar 
functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness 
of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding 
of  the  controls  and  procedures. Accordingly,  even  effective  disclosure  controls  and  procedures  can  only  provide  reasonable 
assurance of achieving their control objectives.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term 
is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our 
Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over 
financial reporting based on the framework in Internal Control— Integrated Framework issued by the Committee of Sponsoring 
Organizations of the Treadway Commission (2013 Framework). Based on our evaluation under the 2013 Framework, management 
concluded that our internal control over financial reporting was effective as of December 31, 2016.

The  effectiveness  of  our  internal  control  over  financial  reporting  as  of  December 31,  2016  has  been  audited  by 
Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report that is included in this Annual 
Report on Form 10-K.

Changes in internal control over financial reporting

In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our 
applications and processes to improve such controls and increase efficiency, while ensuring that we maintain an effective internal 
control environment. Changes may include such activities as implementing new, more efficient applications and automating manual 
processes. We are currently upgrading our global enterprise resource software applications at certain of our locations outside of 
the United States. We will continue to upgrade our financial applications in stages, and we believe the related changes to processes 
and internal controls will allow us to be more efficient and further enhance our internal control over financial reporting.

Additionally,  we  have  established  a  shared  services  center  in  Europe,  and  we  are  currently  transitioning  certain  finance  and 
accounting activities to the shared services center in a staged approach. The transition to shared services is ongoing, and we believe 
the related changes to processes and internal control will allow us to be more efficient and further enhance our internal control 
over financial reporting.

Except for these changes and the remediation of the prior year material weakness noted below, there have been no other changes 
in our internal control over financial reporting during the three months ended December 31, 2016 that materially affected, or are 
reasonably likely to materially affect, internal control over financial reporting.

Remediation of prior year material weakness in internal control over financial reporting

As disclosed in Item 9A of the Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and for each interim 
period in Item 4 of our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2016 we 
previously did not maintain effective internal controls over financial reporting, specifically relating to our revenue processes and 
controls to determine whether vendor specific objective evidence (VSOE) of fair value could be demonstrated for substantially 

90

all maintenance contracts associated with certain software solutions and whether software was essential to the functionality of 
certain hardware.

As of December 31, 2016, we completed our remediation of the prior year material weakness in our internal controls over financial 
reporting. This remediation included the following:

• 

• 
• 

Performing  a  revenue  controls  gap  assessment  and  root  cause  analysis  with  the  assistance  of  external  advisers  and 
developing detailed remediation plans for all gaps identified;
Implementing a more precise VSOE analysis to determine fair value for Itron’s software products;
Implementing additional revenue internal controls to more effectively monitor complex arrangements; including those 
containing software elements;

•  Updating revenue recognition policies and procedures;
•  Hiring additional resources with technical revenue recognition accounting expertise;
•  Completion of training for revenue accounting employees and other employees directly associated with sales contracts; 

and

•  Engaging external advisers to assist with technical matters related to complex sales contracts.

Based on the implementation and monitoring of these enhancements in internal controls over financial reporting, the Company 
concluded that the material weakness as described above was remediated as of December 31, 2016.

91

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Itron, Inc.
Liberty Lake, Washington

We have audited the internal control over financial reporting of Itron, Inc. and subsidiaries (the “Company”) as of December 31, 
2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring 
Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control 
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the 
accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an 
opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control 
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control 
over  financial  reporting,  assessing  the  risk  that  a  material  weakness  exists,  testing  and  evaluating  the  design  and  operating 
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in 
the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal 
executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, 
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation 
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal 
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in 
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable 
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally 
accepted  accounting  principles,  and  that  receipts  and  expenditures  of  the  company  are  being  made  only  in  accordance  with 
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely 
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial 
statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper 
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. 
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject 
to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the 
policies or procedures may deteriorate.

In  our  opinion,  the  Company  maintained,  in  all  material  respects,  effective  internal  control  over  financial  reporting  as  of 
December 31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee 
of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 
consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016 of the Company 
and our report dated February 28, 2017 expressed an unqualified opinion on those financial statements and financial statement 
schedule.

/s/ DELOITTE & TOUCHE LLP

Seattle, Washington

February 28, 2017

92

ITEM 9B:  OTHER INFORMATION

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory 
Arrangements of Certain Officers

1.  On February 23, 2017, Jon Eliassen and Charlie Gaylord, each members of the Board of Itron, Inc. (the “Company”) informed 
the Board that they will not stand for re-election and will retire at the Company’s next annual general meeting. Mr. Eliassen 
also serves as a member of the Corporate Governance Committee and the Value Enhancement Committee. Mr. Gaylord also 
serves as a member of the Audit/Finance Committee and the Corporate Governance Committee. There were no disagreements 
with the Company on any matter related to the Company’s operations, policies or practices that led to Mr. Eliassen’s or Mr. 
Gaylord’s decision to retire from the Board. Both directors plan to continue serving on the Board until the Company’s next 
annual general meeting in the second quarter of 2017. The Company would like to thank each of Mr. Eliassen and Mr. Gaylord 
for their many contributions to the Company and wish them the best in their future endeavors.

2.  On February 23, 2017, the Board of the Company authorized the forms of Performance Restricted Share Unit Award Agreement 
(the  “PRSU Agreement”),  Stock  Option Agreement  (the  “Stock  Option Agreement”)  and  Restricted  Share  Unit Award 
Agreement (the “RSU Agreement” and collectively, the “Award Agreements”) to be used for grants under the Amended and 
Restated Itron, Inc. 2010 Stock Incentive Plan to, among others, the Company’s executives covered by Section 16 of the 
Securities Exchange Act of 1934.

The PRSU Agreement provides for an award of a target number of restricted share units based on the Company’s achievement 
of specified financial performance goals (performance conditions) and total shareholder return (TSR) over a three year period 
relative to a peer group (market condition). Common shares are delivered to the participant only if the performance conditions 
have been achieved and certified by the Compensation Committee, and the participant has become vested in the restricted 
share units. The actual number of shares to be earned in each performance period ranges between 0% and 160% of the target 
amount  as  determined  by  the  achievement  of  the  performance  conditions. At  the  end  of  the  performance  periods,  if  the 
performance conditions are achieved at or above threshold, the number of shares earned is further adjusted by a TSR multiplier 
payout percentage, which ranges between 75% and 125%, based on the market condition. Therefore, based on the attainment 
of the performance and market conditions, the actual number of shares that vest may range from 0% to 200% of the target 
amount. As soon as practicable following the last day of the performance period, the Compensation Committee will certify 
the extent to which the performance and market conditions have been achieved and the corresponding multiplier. Subject to 
continued employment with the Company, or except as otherwise provided in the PRSU Agreement, the restricted share units 
delivered under the PRSU Agreement, if any, will vest on the third anniversary of the award date. Under the terms of the 
PRSU Agreement, upon termination due to death or disability, the award will continue to vest subject to actual achievement 
of the performance goals after the performance period ending in the year of death or disability. Upon termination, due to 
retirement after the second anniversary of the award date, the award will continue to vest subject to actual achievement of the 
performance and market conditions. In the event of a change in control where the award is not assumed by the acquirer, the 
performance period will terminate on the date of the change in control and will vest at the greater of the target number of 
PRSUs or the number of PRSUs based on actual achievement of the performance and market conditions for the year in which 
the change in control occurs.

The Stock Option Agreement and RSU Agreement generally provide for vesting of one third of the applicable award on each 
of the first, second and third anniversaries of the date of grant, subject to the participant’s continued employment with the 
Company. Upon termination of employment due to death or disability, awards under the Stock Option Agreement and RSU 
Agreement will become vested in full. Upon termination of employment due to retirement after the second anniversary of the 
award date, awards under the Stock Option Agreement and RSU Agreement will continue to vest over the remaining vesting 
schedule until fully vested. Vested options under the Stock Option Agreement are exercisable at any time before the earliest 
to occur of: (i) the tenth anniversary of the date of grant, (ii) in the event of termination of employment due to retirement, the 
earlier to occur of the third anniversary of the retirement date or the tenth anniversary of the grant date, (iii) in the event of 
termination of employment due to death or disability, the tenth anniversary of the date of grant, (iv) ninety days following 
termination of employment for any reason other than cause or (v) immediately upon notification of termination of employment 
for cause. Under the RSU Agreement, participants will receive one common share of the Company for each vested restricted 
share unit as soon as practicable following the applicable vesting date.

Each of the Award Agreements provides that in the event the participant’s employment with the Company is terminated by 
the Company without cause or by the participant for good reason, in each case within twenty-four months of a change in 
control, all unvested awards will become immediately vested. For purposes of the Award Agreements, the definition of “good 
reason” is the definition contained in the Award Agreements. If the Award Agreements are not assumed or substituted under 

93

the terms of the Award Agreements in connection with a change in control, all unvested portions of the awards will become 
vested immediately upon the occurrence of the change in control.

The Award Agreements also contain covenants regarding confidential information, non-solicitation and non-competition that 
are effective following termination due to retirement. If a participant breaches any of these covenants during the restricted 
period following the date of termination, any unvested portion of the award will be forfeited.

94

PART III

ITEM 10:  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The section entitled “Proposal 1 – Election of Directors” appearing in our Proxy Statement for the Annual Meeting of Shareholders 
to be held on May 12, 2017 (the 2017 Proxy Statement) sets forth certain information with regard to our directors as required by 
Item 401 of Regulation S-K and is incorporated herein by reference.

Certain information with respect to persons who are or may be deemed to be executive officers of Itron, Inc. as required by Item 401 
of Regulation S-K is set forth under the caption “Executive Officers” in Part I of this Annual Report on Form 10-K.

The section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” appearing in the 2017 Proxy Statement sets 
forth certain information as required by Item 405 of Regulation S-K and is incorporated herein by reference.

The section entitled “Corporate Governance” appearing in the 2017 Proxy Statement sets forth certain information with respect 
to the Registrant’s code of conduct and ethics as required by Item 406 of Regulation S-K and is incorporated herein by reference. 
Our code of conduct and ethics can be accessed on our website, at www.itron.com under the Investors section.

There were no material changes to the procedures by which security holders may recommend nominees to Itron's board of directors 
during 2017, as set forth by Item 407(c)(3) of Regulation S-K.

The section entitled “Corporate Governance” appearing in the 2017 Proxy Statement sets forth certain information regarding the 
Audit/Finance Committee, including the members of the Committee and the Audit/Finance Committee financial experts, as set 
forth by Item 407(d)(4) and (d)(5) of Regulation S-K and is incorporated herein by reference.

ITEM 11: 

EXECUTIVE COMPENSATION

The sections entitled “Compensation of Directors” and “Executive Compensation” appearing in the 2017 Proxy Statement set 
forth  certain  information  with  respect  to  the  compensation  of  directors  and  management  of  Itron  as  required  by  Item 402  of 
Regulation S-K and are incorporated herein by reference.

The section entitled “Corporate Governance” appearing in the 2017 Proxy Statement sets forth certain information regarding 
members of the Compensation Committee required by Item 407(e)(4) of Regulation S-K and is incorporated herein by reference.

The section entitled “Compensation Committee Report” appearing in the 2017 Proxy Statement sets forth certain information 
required by Item 407(e)(5) of Regulation S-K and is incorporated herein by reference.

ITEM 12: 

SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT  AND 
RELATED STOCKHOLDER MATTERS

The section entitled “Equity Compensation Plan Information” appearing in the 2017 Proxy Statement sets forth certain information 
required by Item 201(d) of Regulation S-K and is incorporated herein by reference.

The section entitled “Security Ownership of Certain Beneficial Owners and Management” appearing in the 2017 Proxy Statement 
sets forth certain information with respect to the ownership of our common stock as required by Item 403 of Regulation S-K and 
is incorporated herein by reference.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The section entitled “Corporate Governance” appearing in the 2017 Proxy Statement sets forth certain information required by 
Item 404 of Regulation S-K and is incorporated herein by reference.

The section entitled “Corporate Governance” appearing in the 2017 Proxy Statement sets forth certain information with respect 
to director independence as required by Item 407(a) of Regulation S-K and is incorporated herein by reference.

95

ITEM 14: 

PRINCIPAL ACCOUNTING FEES AND SERVICES

The section entitled “Independent Registered Public Accounting Firm’s Audit Fees and Services” appearing in the 2017 Proxy 
Statement  sets  forth  certain  information  with  respect  to  the  principal  accounting  fees  and  services  and  the  Audit/Finance 
Committee’s policy on pre-approval of audit and permissible non-audit services performed by our independent auditors as required 
by Item 9(e) of Schedule 14A and is incorporated herein by reference.

96

PART IV

ITEM 15: 

EXHIBITS, FINANCIAL STATEMENT SCHEDULE

(a) (1) Financial Statements:

The financial statements required by this item are submitted in Item 8 of this Annual Report on Form 10-K.

(a) (2) Financial Statement Schedule:

Schedule II: Valuation and Qualifying Accounts

Financial Statement Schedules not listed above have been omitted because of the absence of conditions under which they are 
required or because the required information is included in the consolidated financial statements or the notes thereto.

(a) (3) Exhibits:

Exhibit
Number

Description of Exhibits

3.1

3.2

4.1

4.2

10.1*

10.2*

10.3*

10.4*

10.5

10.6

10.7*

Amended and Restated Articles of Incorporation of Itron, Inc. (Filed as Exhibit 3.1 to Itron, Inc.’s Annual
Report on Form 10-K, filed on March 27, 2003)

Amended and Restated Bylaws of Itron, Inc. (Filed as Exhibit 3.2 to Itron, Inc.'s Annual Report on Form 10-K,
filed on June 30, 2016)

Amended and Restated Credit Agreement dated June 23, 2015 among Itron, Inc. and a syndicate of banks led
by Wells Fargo Bank, National Association, JPMorgan Chase Bank, N.A., J.P. Morgan Europe Limited, and
BNP Paribas. (Filed as Exhibit 4.1 to Itron, Inc.’s Current Report on Form 8-K, filed on June 23, 2015)

First Amendment to Security Agreement dated June 23, 2015 among Itron, Inc. and Wells Fargo Bank,
National Association. (Filed as Exhibit 4.2 to Itron, Inc.’s Current Report on Form 8-K, filed on June 23, 2015)

Form of Amended and Restated Change in Control Severance Agreement for Executive Officers. (Filed as
Exhibit 10.1 to Itron, Inc.’s Annual Report on Form 10-K, filed on February 22, 2013)

Schedule of certain executive officers who are parties to Change in Control Severance Agreements with Itron,
Inc. (filed with this report)

Form of Indemnification Agreements between Itron, Inc. and certain directors and officers. (Filed as Exhibit
10.9 to Itron, Inc.’s Annual Report on Form 10-K, filed on March 30, 2000)

Schedule of directors and executive officers who are parties to Indemnification Agreements with Itron, Inc.
(filed with this report)

Amended and Restated 2000 Stock Incentive Plan. (Filed as Appendix A to Itron, Inc.’s Proxy Statement for
the 2007 Annual Meeting of Shareholders, filed on March 26, 2007)

Amended and Restated 2010 Stock Incentive Plan. (Filed as Appendix A to Itron, Inc.’s Proxy Statement for
the 2014 Annual Meeting of Shareholders, filed on March 13, 2014)

Rules of Itron Inc.'s Amended and Restated 2010 Stock Incentive Plan for the grant of Restricted Stock Unit
(RSU's) to participants in France. (Filed as Exhibit 10.6 to Itron Inc.'s Quarterly Report on Form 10-Q, filed on
August 8, 2014)

10.8*

Executive Management Incentive Plan. (Filed as Appendix B to Itron, Inc.’s Proxy Statement for the 2010
Annual Meeting of Shareholders, filed on March 17, 2010)

97

 
Exhibit
Number

10.9

10.10

10.11*

10.12*

10.13*

10.14*

10.15*

10.16*

10.17*

10.18*

10.19*

10.20*

10.21*

10.22*

Description of Exhibits

Terms of the Amended and Restated Equity Grant Program for Nonemployee Directors under the Itron, Inc.
Amended and Restated 2000 Stock Incentive Plan. (Filed as Exhibit 10.4 to Itron, Inc.’s Annual Report on
Form 10-K, filed on February 26, 2008)

Form of Non-Qualified Stock Option Grant Notice and Agreement for Nonemployee Directors under the
Itron, Inc. Amended and Restated 2000 Stock Incentive Plan. (Filed as Exhibit 10.9 to Itron, Inc.’s Annual
Report on Form 10-K, filed on February 26, 2009)

Form of Stock Option Grant Notice and Agreement for use in connection with both incentive and non-
qualified stock options granted under Itron, Inc.'s Amended and Restated 2000 Stock Incentive Plan. (Filed as
Exhibit 10.6 to Itron, Inc.’s Current Report on Form 8-K, filed on February 18, 2010)

Form of RSU Award Notice and Agreement for U.S. Participants for use in connection with the Company’s
Long-Term Performance Plan (LTPP) and issued under Itron, Inc.'s Amended and Restated 2000 Stock
Incentive Plan. (Filed as Exhibit 10.1 to Itron, Inc.’s Current Report on Form 8-K, filed on February 18, 2010)

Form of RSU Award Notice and Agreement for International Participants (excluding France) for use in
connection with the Company’s LTPP and issued under Itron, Inc.'s Amended and Restated 2000 Stock
Incentive Plan. (Filed as Exhibit 10.2 to Itron, Inc.’s Current Report on Form 8-K, filed on February 18, 2010)

Form of RSU Award Notice and Agreement for Participants in France for use in connection with Itron, Inc.'s
LTPP and issued under Itron, Inc.'s Amended and Restated 2000 Stock Incentive Plan. (Filed as Exhibit 10.3
to Itron, Inc.’s Current Report on Form 8-K, filed on February 18, 2010)

Form of RSU Award Notice and Agreement for all Participants (excluding France) for use in connection with
Itron, Inc.'s Amended and Restated 2000 Stock Incentive Plan. (Filed as Exhibit 10.4 to Itron, Inc.’s Current
Report on Form 8-K, filed on February 18, 2010)

Form of RSU Award Notice and Agreement for Participants in France for use in connection with Itron, Inc.'s
Amended and Restated 2000 Stock Incentive Plan. (Filed as Exhibit 10.5 to Itron, Inc.’s Current Report on
Form 8-K, filed on February 18, 2010)

Form of Long Term Performance RSU Award Notice and Agreement for U.S. Participants for use in
connection with Itron, Inc.'s Amended and Restated 2010 Stock Incentive Plan. (Filed as Exhibit 10.4 to Itron,
Inc.’s Quarterly Report on Form 10-Q, filed on August 6, 2014)

Form of Long Term Performance RSU Award Notice and Agreement for International Participants (excluding
France) for use in connection with Itron, Inc.'s Amended and Restated 2010 Stock Incentive Plan. (Filed as
Exhibit 10.19 to Itron, Inc.’s Annual Report on Form 10-K, filed on February 25, 2011)

Form of Long Term Performance RSU Award Notice and Agreement for Participants in France for use in
connection with Itron, Inc.'s Amended and Restated 2010 Stock Incentive Plan. (Filed as Exhibit 10.5 to Itron,
Inc.’s Quarterly Report on Form 10-Q, filed on August 6, 2014)

Form of RSU Award Notice and Agreement for all Participants (excluding France) for use in connection with
Itron, Inc.'s Amended and Restated 2010 Stock Incentive Plan. (Filed as Exhibit 10.2 to Itron, Inc.’s Quarterly
Report on Form 10-Q, filed on August 6, 2014)

Form of RSU Award Notice and Agreement for Participants in France for use in connection with Itron, Inc.'s
Amended and Restated 2010 Stock Incentive Plan. (Filed as Exhibit 10.3 to Itron, Inc.’s Quarterly Report on
Form 10-Q, filed on August 6, 2014)

Form of RSU Award Notice and Agreement for Non-employee Directors for use in connection with Itron,
Inc.'s Amended and Restated 2010 Stock Incentive Plan. (Filed as Exhibit 10.3 to Itron, Inc.’s Quarterly
Report on Form 10-Q, filed on May 3, 2013)

98

Exhibit
Number

10.23*

Description of Exhibits

Form of Stock Option Grant Notice and Agreement for use in connection with both incentive and non-
qualified stock options granted under Itron, Inc.'s Amended and Restated 2010 Stock Incentive Plan. (Filed as
Exhibit 10.1 to Itron, Inc's Quarterly Report on Form 10-Q, filed on August 6, 2014 - File No. 22418)

10.24*

Restated and Amended Executive Deferred Compensation Plan. (Filed as Exhibit 10.1 to Itron, Inc.’s
Quarterly Report on Form 10-Q, filed on November 3, 2016)

10.25

10.26

10.27*

10.28*

10.29

12.1

21.1

23.1

23.2

31.1

31.2

32.1

Amended and Restated 2002 Employee Stock Purchase Plan. (Filed as Exhibit 10.20 to Itron’s Annual Report
on Form 10-K, filed on February 26, 2009)

Stock Option Plan for Nonemployee Directors. (Filed as Exhibit 10.11 to Itron, Inc.’s Registration Statement
on Form S-1 dated July 22, 1992)

Offer Letter, dated as of November 16, 2012, between Itron, Inc. and Philip C. Mezey. (Filed as Exhibit 10.1
to Itron, Inc.’s Current Report on Form 8-K, filed on November 19, 2012)

Offer Letter, dated as of November 16, 2012, between Itron, Inc. and John W. Holleran. (Filed as Exhibit 10.2
to Itron, Inc.’s Current Report on Form 8-K, filed on November 19, 2012)

Amendment to Cooperation Agreement by and among Itron, Inc., Coppersmith Capital Management LLC,
Scopia Management, Inc. and certain of their specified affiliates, Jerome J. Lande and Peter Mainz. (Filed as
Exhibit 10.2 to Itron, Inc.’s Quarterly Report on Form 10-Q, filed on November 3, 2016)

Computation of Ratio of Earnings to Fixed Charges. (filed with this report)

Subsidiaries of Itron, Inc. (filed with this report)

Consent of Deloitte & Touche LLP Independent Registered Public Accounting Firm. (filed with this report)

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. (filed with this report)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed with this report)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed with this report)

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished with this report)

101.INS

XBRL Instance Document. (submitted electronically with this report in accordance with the provisions of
Regulation S-T)

101.SCH

XBRL Taxonomy Extension Schema. (submitted electronically with this report in accordance with the
provisions of Regulation S-T)

101.CAL

XBRL Taxonomy Extension Calculation Linkbase. (submitted electronically with this report in accordance
with the provisions of Regulation S-T)

101.DEF

XBRL Taxonomy Extension Definition Linkbase. (submitted electronically with this report in accordance
with the provisions of Regulation S-T)

101.LAB

XBRL Taxonomy Extension Label Linkbase. (submitted electronically with this report in accordance with the
provisions of Regulation S-T)

101.PRE

XBRL Taxonomy Extension Presentation Linkbase. (submitted electronically with this report in accordance
with the provisions of Regulation S-T)

*

Management contract or compensatory plan or arrangement.

99

 
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this 
report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Liberty Lake, State of Washington, 
on the 28th day of February, 2017.

ITRON, INC.

By:

/s/ W. MARK SCHMITZ
W. Mark Schmitz
Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons 
on behalf of the Registrant and in the capacities indicated on the 28th day of February, 2017.

Signatures

/s/    PHILIP C. MEZEY
Philip C. Mezey

/s/    W. MARK SCHMITZ
W. Mark Schmitz

/s/    KIRBY A. DYESS
Kirby A. Dyess

/s/    JON E. ELIASSEN
Jon E. Eliassen

/s/    CHARLES H. GAYLORD, JR.
Charles H. Gaylord, Jr.

/s/    THOMAS S. GLANVILLE
Thomas S. Glanville

/s/    FRANK M. JAEHNERT
Frank M. Jaehnert

/s/    JEROME J. LANDE
Jerome J. Lande

/s/    TIMOTHY M. LEYDEN
Timothy M. Leyden

/s/    PETER MAINZ
Peter Mainz

/s/    DANIEL S. PELINO
Daniel S. Pelino

/s/    GARY E. PRUITT
Gary E. Pruitt

/s/    DIANA D. TREMBLAY
Diana D. Tremblay

/s/    LYNDA L. ZIEGLER
Lynda L. Ziegler

Title

President and Chief Executive Officer (Principal Executive Officer), Director

Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Chair of the Board

100

SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS

Description

 Year ended December 31, 2016:

Deferred tax assets valuation allowance

 Year ended December 31, 2015:

Deferred tax assets valuation allowance

 Year ended December 31, 2014:

Deferred tax assets valuation allowance

Balance at
Beginning of
Period

Other
Adjustments

Additions
Charged to Costs
and Expenses

Balance at
End of Period,
Noncurrent

(in thousands)

$

$

$

235,339

257,728

162,588

$

$

$

(12,419) $

26,640

(62,791) $

40,402

(4,913) $

100,053

$

$

$

249,560

235,339

257,728

101

CORPORATE &
SHAREHOLDER 
INFORMATION

Corporate Headquarters
Itron, Inc.
2111 North Molter Road
Liberty Lake, WA 99019
www.itron.com

Shareholder Inquiries
Please contact Investor Relations
at (800) 635-5461 or
investors@itron.com

Common Stock
Itron’s Common Stock is traded on 
the NASDAQ Global Select Market 
under the symbol ITRI 

Independent Auditors
Deloitte & Touche LLP
Seattle, Washington

Transfer Agent
Computershare
PO Box 30170
College Station, TX 77842-3170
(877)-277-9949
www.computershare.com/investor

DIRECTORS

Lynda L. Ziegler
Chair of the Board

Philip C. Mezey
President and Chief Executive Offi cer

Kirby A. Dyess

Jon E. Eliassen

Charles H. Gaylord, Jr.

Thomas S. Glanville

Frank M. Jaehnert

Jerome J. Lande

Timothy M. Leyden

Peter Mainz

Daniel S. Pelino

Gary E. Pruitt

Diana D. Tremblay

EXECUTIVE OFFICERS

Philip C. Mezey
President and Chief Executive Offi cer 

W. Mark Schmitz
Executive Vice President
and Chief Financial Offi cer 

Thomas L. Deitrich
Executive Vice President
and Chief Operating Offi cer

Michel C. Cadieux
Senior Vice President,
Human Resources

Shannon M. Votava
Senior Vice President, General Counsel
and Corporate Secretary

Publication # 101527CP-01