Commitments and Contingencies (Text Block)

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies [Text Block]

Commitments and Contingencies

Commitments

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

	Year Ended December 31,
	2015		2014		2013
	(in thousands)
Rental expense	$	15,524	$	19,178	$	18,662

Future minimum lease payments at December 31, 2015, under noncancelable operating leases with initial or remaining terms in excess of one year are as follows:

Year Ending December 31,	Minimum Payments
	(in thousands)
2016	$	10,396
2017	8,600
2018	7,917
2019	5,402
2020	2,605
Beyond 2020	1,156
Future minimum lease payments	$	36,076

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:

	At December 31,
	2015			2014
	(in thousands)
Credit facilities(1)
Multicurrency revolving line of credit	$	500,000		$	660,000
Long-term borrowings	(151,837		)	(91,469		)
Standby LOCs issued and outstanding	(46,574		)	(50,399		)
Net available for additional borrowings under the multi-currency revolving line of credit	$	301,589		$	518,132
Net available for additional standby LOCs under sub-facility	253,426			449,601
Unsecured multicurrency revolving lines of credit with various financial institutions
Multicurrency revolving line of credit	$	97,989		$	106,855
Standby LOCs issued and outstanding	(31,122		)	(28,636		)
Short-term borrowings(2)	(3,884		)	(4,282		)
Net available for additional borrowings and LOCs	$	62,983		$	73,937
Unsecured surety bonds in force	$	87,558		$	116,306

⁽¹⁾ Refer to Note 7 for details regarding our secured credit facilities.

⁽²⁾ 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 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 recorded 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.

In 2010 and 2011, Transdata Incorporated (Transdata) filed lawsuits against four of our customers, CenterPoint Energy (CenterPoint), Tri-County Electric Cooperative, Inc. (Tri-County), San Diego Gas & Electric Company (San Diego), and Texas-New Mexico Power Company (TNMP), as well as several other utilities, alleging infringement of three patents owned by Transdata related to the use of an antenna in a meter. Pursuant to our contractual obligations with our customers, we agreed, subject to certain exceptions, to indemnify and defend them in these lawsuits. The complaints seek unspecified damages as well as injunctive relief. CenterPoint, Tri-County, San Diego, and TNMP have denied all of the substantive allegations and filed counterclaims seeking a declaratory judgment that the patents are invalid and not infringed. In December 2011, the Judicial Panel on Multi-District Litigation consolidated all of these cases in the Western District of Oklahoma for pretrial proceedings. On April 17, 2011, the Oklahoma court stayed the litigation pending the resolution of re-examination proceedings in the United States Patent and Trademark Office (U.S. PTO). The U.S. PTO issued re-examination certificates confirming the patentability of the original claims and allowing certain new claims added by Transdata. The parties conducted a claim construction hearing on February 5, 2013 on one claim term -- “electric meter circuitry.” After initially adopting the defendants' proposed construction of the term, the Court granted Transdata's motion for reconsideration by order of June 25, 2013 and has adopted Transdata's proposed construction. On October 1, 2013, the Court issued an order construing other claim terms. Fact discovery closed on June 29, 2014. Following expert reports and depositions, both sides filed various summary judgment motions. On August 28, 2015, the Court issued orders on the motions. Among other things, the Court granted Transdata’s motion for summary judgment that certain prior art did not invalidate the claims, denied CenterPoint’s and SDG&E’s motion for summary judgment that they did not infringe certain asserted claims, and granted defendants’ motion for summary judgment on the issue of willfulness. The cases were then remanded back to the originating courts --the United States District Court for the Eastern District of Texas and the United States District Court for the Southern District of California for trial. The U.S. PTO also instituted additional re-examinations in May 2014 on all three patents but issued Notices of Intent to Issue Re-examination Certificates confirming the patentability of the challenged claims. Petitions for inter partes review, which is a procedure conducted by the Patent Trial and Appeal Board (the PTAB) of the U.S. PTO in which a party can challenge the validity of a patent, were also filed by General Electric (GE), but the PTAB found the petitions were untimely because, under the PTAB's analysis, GE was in privity with a defendant in the pending litigation (and thus was required to file within one year of the beginning of the litigation). Tri-County Electric and Texas-New Mexico Power were dismissed as a result of a settlement involving General Electric meters, leaving CenterPoint and SDG&E as the two remaining customer defendants. CenterPoint is scheduled to go to a jury trial on July 18, 2016. The SDG&E case has been stayed pending resolution of the CenterPoint trial.

In addition, Transdata filed a complaint in the Eastern District of Texas on September 13, 2015 asserting that Itron infringes the three patents in the litigation above. The complaint seeks unspecified damages and injunctive relief. Itron has answered the Complaint, and denied that it is infringing any valid claims. That case has also been stayed pending resolution of the CenterPoint trial.

We do not believe these matters will have a material adverse effect on our business or financial condition, although an unfavorable outcome could have a material adverse effect on our results of operations for the period in which such loss is recognized. We have reserved an amount we believe is appropriate to cover the anticipated costs related to the resolution of these matters.

In Brazil, the Conselha Administravo de Defensa Economica commenced an investigation of water meter suppliers, including a subsidiary of the Company, to determine whether such suppliers participated in agreements or concerted practices to coordinate their commercial policy in Brazil. Although the Company is unable to determine the final amount of any fine at this time, we believe that we have made adequate provisions based on information available to us. Consequently, we do not believe that the actual fine and ultimate outcome of this matter will have a material adverse effect on our 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			2014
	(in thousands)
Beginning balance	$	36,548		$	46,160
New product warranties	8,380			6,441
Other changes/adjustments to warranties	37,604			2,797
Claims activity	(25,955		)	(16,568		)
Effect of change in exchange rates	(2,065		)	(2,282		)
Ending balance	54,512			36,548
Less: current portion of warranty	36,927			21,145
Long-term warranty	$	17,585		$	15,403

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 is as follows:

	Year Ended December 31,
	2015		2014		2013
	(in thousands)
Total warranty expense	$	45,984	$	9,238	$	16,910

Warranty expense increased $36.7 million during the year ended December 31, 2015 compared with the prior year primarily due to special warranty provisions. 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. The charge recorded for this matter during the year ended December 31, 2015 was $29.4 million.

Extended Warranty

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

	Year Ended December 31,
	2015			2014
	(in thousands)
Beginning balance	$	34,138		$	33,528
Unearned revenue for new extended warranties	2,792			3,529
Unearned revenue recognized	(2,832		)	(2,655		)
Effect of change in exchange rates	(444		)	(264		)
Ending balance	33,654			34,138
Less: current portion of unearned revenue for extended warranty	3,565			2,759
Long-term unearned revenue for extended warranty within Other long-term obligations	$	30,089		$	31,379

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:

	Year Ended December 31,
	2015		2014		2013
	(in thousands)
Plan costs	$	25,355	$	23,206	$	22,324

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

	At December 31,
	2015		2014
	(in thousands)
IBNR accrual	$	2,051	$	1,924

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.