Segment Information (Text Block)

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Information [Text Block]

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: revenue, 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 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.

Segment Products

Electricity	Standard electricity (electromechanical and electronic) meters; advanced electricity meters and communication modules; smart electricity meters; smart electricity communication modules; prepayment systems, including smart key, keypad, and smart card communication technologies; advanced 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	Standard gas meters; advanced gas meters and communication modules; smart gas meters; smart gas communication modules; prepayment systems, including smart key, keypad, and smart card communication technologies; advanced 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.
Water	Standard water and heat meters; advanced and smart water meters and communication modules; smart heat meters; advanced 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:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(in thousands)
Revenues
Electricity	$	206,389		$	203,441		$	603,651		$	567,414
Gas	136,588			149,276			401,063			449,707
Water	126,115			143,737			382,728			443,481
Total Company	$	469,092		$	496,454		$	1,387,442		$	1,460,602
Gross profit
Electricity	$	56,859		$	45,959		$	164,601		$	141,675
Gas	45,916			53,492			133,541			168,609
Water	44,191			51,311			105,594			158,054
Total Company	$	146,966		$	150,762		$	403,736		$	468,338
Operating income (loss)
Electricity	$	10,575		$	(11,196	)	$	16,875		$	(35,412	)
Gas	15,741			23,836			44,075			73,889
Water	14,290			19,157			10,876			60,319
Corporate unallocated	(13,398		)	(15,339		)	(35,030		)	(45,872		)
Total Company	27,208			16,458			36,796			52,924
Total other income (expense)	(3,739		)	(4,421		)	(11,899		)	(13,966		)
Income before income taxes	$	23,469		$	12,037		$	24,897		$	38,958

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 $1.5 million and $28.2 million for the three and nine months ended September 30, 2015. After adjusting for the tax impact, this charge resulted in a decrease to basic and diluted earnings per share of $0.02 and $0.45 for the three and nine months ended September 30, 2015.

For the three and nine months ended September 30, 2015, our Electricity segment recognized reimbursements of $3.4 million and $8.0 million (classified as an acquisition-related cost recovery within general and administrative expense). These reimbursements were received from certain former SmartSynch, Inc. (SmartSynch) shareholders related to the settlement of litigation, arising from the SmartSynch acquisition, which we paid in February 2015.

For the three months ended September 30, 2015, one customer represented 11% of total Electricity segment revenues. For the three months ended September 30, 2015, no single customer represented more than 10% of the total Company, Gas, or Water operating segment revenues. For the three months ended September 30, 2014, no single customer represented more than 10% of total Company or the Electricity, Gas, or Water operating segment revenues. For the nine months ended September 30, 2015 and September 30, 2014, no single customer represented more than 10% of total Company or the Electricity, Gas, or Water operating segment revenues.

Revenues by region were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in thousands)
United States and Canada	$	257,901	$	237,684	$	742,927	$	652,390
Europe, Middle East, and Africa	166,231		201,673		509,322		641,434
Other (1)	44,960		57,097		135,193		166,778
Total revenues	$	469,092	$	496,454	$	1,387,442	$	1,460,602

⁽¹⁾ The Other region includes our operations in Latin America and Asia Pacific.

Depreciation and amortization expense associated with our segments was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in thousands)
Electricity	$	8,875	$	11,596	$	27,419	$	36,754
Gas	5,502		6,486		16,045		19,590
Water	5,282		6,466		14,810		18,679
Corporate Unallocated	95		79		240		210
Total Company	$	19,754	$	24,627	$	58,514	$	75,233