Itron Announces Fourth Quarter and Fiscal 2010 Results (including a restatement of the first three quarters of 2010)

February 16, 2011

Record Full Year Revenue of $2.26 Billion

Record Full Year Non-GAAP Diluted EPS of $3.89

Restatement of Fiscal 2010 Quarterly Results to Reflect Revenue Deferral

LIBERTY LAKE, Wash.--(BUSINESS WIRE)-- Itron, Inc. (NASDAQ:ITRI) today reported financial results for its fourth quarter and full year ended December 31, 2010. Highlights include:

  • Record quarterly and full year revenues of $620.7 million and $2.26 billion;
  • Quarterly and record full year GAAP diluted EPS of 65 cents and $2.56, respectively;
  • Quarterly non-GAAP diluted EPS of 95 cents;
  • Record full year non-GAAP diluted EPS of $3.89;
  • Non-GAAP tax rate for the quarter of 20.6% reflecting benefits from the retroactive extension of the U.S. research and development tax credit passed in the fourth quarter and lower than forecasted income in higher tax jurisdictions;
  • Twelve-month backlog of $913 million and total backlog of $1.6 billion; and
  • Quarterly bookings of $581 million.

In addition, Itron announced that it has restated financial results for the quarters ended March 31, June 30, and September 30, 2010 which will be set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010. These revisions were made primarily to defer revenue that had been incorrectly recognized on one contract due to a misinterpretation of an extended warranty obligation. The effect was to reduce revenue and earnings in each of the first three quarters of the year. For the first nine months of 2010, total revenue was reduced by $6.1 million and both GAAP and non-GAAP diluted EPS were reduced by 11 cents. All comparative information within this release is on a restated basis.

"Our record results for the year resulted from our continued commitment to technological innovation as well as our balanced and diversified portfolio of products and solutions for the electric, gas and water industries," said Malcolm Unsworth, president and CEO. "Our main objectives in 2010 were to successfully deploy our smart metering solutions for our large contracts in North America, prepare for developing opportunities in Europe and other regions of the world, and grow our gas and water businesses. We met those objectives and more and are positioned for continued growth in 2011."

Operations Highlights:

Revenues increased $143.8 million, or 30.2%, for the quarter and $571.8 million, or 33.9%, for the year compared to the same periods last year. The increase in revenues was primarily driven by higher shipments of smart meters and modules in North America. During the fourth quarter we shipped 1.4 million OpenWay units. The increase in fourth quarter revenue included an $11.5 million unfavorable effect from changes in foreign currency exchange rates. The unfavorable foreign exchange effect on revenues for the year was $5.3 million.

Gross margin for the quarter was 29.9% which was lower than the prior year fourth quarter margin of 30.5%. Both segments contributed to the decline from the prior year. Itron North America declined 130 basis points from fourth quarter 2009 primarily due to a higher mix of OpenWay revenue which, including installation services, currently has a lower margin than non-OpenWay revenue. Itron International gross margin declined 120 basis points from fourth quarter 2009 primarily due to special charges. International gross margins were also impacted by higher material costs which were offset by higher volumes and a more favorable product mix.

Operating expenses, excluding amortization of intangibles, were $124.1 million, or 20.0% of revenue, for the quarter compared to $104.1 million, or 21.8% of revenue, in the prior year. The increase was due primarily to higher compensation expenses as well as research and development costs for new and enhanced products.

Net income and diluted EPS for the fourth quarter and year were $26.6 million, or 65 cents per share, and $104.8 million, or $2.56 per share. This compares with net income of $5.2 million, or 13 cents per share, and a loss of $2.2 million, or 6 cents per share, in the same periods in 2009. The increase in 2010 net income was primarily due to higher operating income in our North America segment.

Forward Looking Statements:

This release contains forward-looking statements concerning our expectations about operations, financial performance, sales, earnings and cash flows. These statements reflect our current plans and expectations and are based on information currently available. The statements rely on a number of assumptions and estimates, which could be inaccurate, and which are subject to risks and uncertainties that could cause our actual results to vary materially from those anticipated. Risks and uncertainties include the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, changes in laws and regulations, our dependence on new product development and intellectual property, future acquisitions, changes in estimates for stock-based and bonus compensation, increasing volatility in foreign exchange rates, international business risks and other factors which are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2009 and other reports on file with the Securities and Exchange Commission. Itron undertakes no obligation to update publicly or revise any forward-looking statements, including our business outlook.

2011 Guidance:

Itron's guidance for 2011 is as follows:

  • Revenue between $2.15 billion and $2.30 billion
  • Non-GAAP diluted EPS between $3.95 and $4.40

Our guidance assumes a Euro to U.S. dollar exchange rate of $1.35, average shares outstanding of approximately 41.4 million and a non-GAAP effective tax rate between 27% and 29%.

Non-GAAP Financial Information:

To supplement our consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, adjusted EBITDA, and free cash flow. We provide these non-GAAP financial measures because we believe they provide greater transparency and represent supplemental information used by management in its financial and operational decision making. Specifically, these non-GAAP financial measures are provided to enhance investors' overall understanding of our current financial performance and our future anticipated performance by excluding infrequent costs, particularly those associated with acquisitions. We exclude certain infrequent costs, particularly those associated with acquisitions, in our non-GAAP financial measures as we believe the net result is a measure of our core business. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. Finally, our non-GAAP financial measures may be different from those reported by other companies. A more detailed discussion of why we use non-GAAP financial measures, the limitations of using such measures, and reconciliations between non-GAAP and the nearest GAAP financial measures are included in this press release.

Earnings Conference Call:

Itron will host a conference call to discuss the financial results contained in this release at 2:00 p.m. (PST) on February 16, 2011. The call will be webcast in a listen only mode. Webcast information and conference call materials will be made available in the "Investors/Investor Events" section of Itron's website (www.itron.com) prior to the start of the call. The webcast replay will begin after the conclusion of the live call and will be available for two weeks. A telephone replay of the call will also be available approximately one hour after the conclusion of the live call, for 48 hours, and is accessible by dialing (888) 203-1112 (Domestic) or (719) 457-0820 (International), entering passcode #4354205.

About Itron:

At Itron, we're dedicated to delivering end-to-end smart grid and smart distribution solutions to electric, gas and water utilities around the globe. Our company is the world's leading provider of smart metering, data collection and utility software systems, with nearly 8,000 utilities worldwide relying on our technology to optimize the delivery and use of energy and water. Our offerings include electricity, gas, water and heat meters; network communication technology; collection systems and related software applications; and professional services. To realize your smarter energy and water future, start here: www.itron.com.

Statements of operations, segment information, balance sheets, cash flow statements and reconciliations of non-GAAP financial measures to the most directly comparable financial measures follow.

       
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
(Unaudited, in thousands, except per share data)
 
Three Months Ended December 31,   Twelve Months Ended December 31,
  2010     2009     2010     2009  
 
Revenues $ 620,658 $ 476,823 $ 2,259,271 $ 1,687,447
Cost of revenues   435,302     331,539     1,561,032     1,149,991  
Gross profit 185,356 145,284 698,239 537,456
Gross margin 29.9 % 30.5 % 30.9 % 31.9 %
 
Operating expenses
Sales and marketing

47,968

39,836 171,676 152,405
Product development 40,129 29,270 140,229 122,314
General and administrative 36,034 35,040 133,086 119,137
Amortization of intangible assets   17,592     25,785     69,051     98,573  
Total operating expenses   141,723     129,931     514,042     492,429  
 
Operating income 43,633 15,353 184,197 45,027
Other income (expense)
Interest income 148 215 592 1,186
Interest expense (12,688 ) (16,992 ) (54,904 ) (70,311 )
Loss on extinguishment of debt, net - - - (12,800 )
Other income (expense), net   (3,701 )   269     (9,141 )   (9,176 )
Total other income (expense)   (16,241 )   (16,508 )   (63,453 )   (91,101 )
 
Income (loss) before income taxes 27,392 (1,155 ) 120,744 (46,074 )
Income tax benefit (provision)   (822 )   6,308     (15,974 )   43,825  
Net income (loss) $ 26,570   $ 5,153   $ 104,770   $ (2,249 )
 
 
Earnings (loss) per common share-Basic $ 0.66   $ 0.13   $ 2.60   $ (0.06 )
Earnings (loss) per common share-Diluted $ 0.65   $ 0.13   $ 2.56   $ (0.06 )
 
 
Weighted average common shares outstanding-Basic 40,424 40,129 40,337 38,539
Weighted average common shares outstanding-Diluted 40,938 40,607 40,947 38,539

     
ITRON, INC.
SEGMENT INFORMATION
 
(Unaudited, in thousands)
Three Months Ended December 31, Twelve Months Ended December 31,
  2010     2009     2010     2009  
Revenues
Itron North America $ 321,534 $ 196,073 $ 1,177,391 $ 615,731
Itron International   299,124     280,750     1,081,880     1,071,716  
Total Company $ 620,658   $ 476,823   $ 2,259,271   $ 1,687,447  
 
Gross profit
Itron North America $ 105,565 $ 66,945 $ 394,247 $ 211,682
Itron International   79,791     78,339     303,992     325,774  
Total Company $ 185,356   $ 145,284   $ 698,239   $ 537,456  
 
Operating income (loss)
Itron North America $ 51,716 $ 24,472 $ 201,410 $ 36,931
Itron International 3,394 (2,404 ) 26,363 37,614
Corporate unallocated   (11,477 )   (6,715 )   (43,576 )   (29,518 )
Total Company $ 43,633   $ 15,353   $ 184,197   $ 45,027  
 
 
METER AND MODULE SUMMARY
(Units in thousands)
Three Months Ended December 31, Twelve Months Ended December 31,
  2010     2009     2010     2009  
Total meters (standard, advanced, and smart)
Itron North America
Electricity 1,950 1,140 6,940 3,480
Gas 90 90 510 350
Itron International
Electricity 2,280 2,120 7,870 7,790
Gas 1,080 1,100 4,020 4,980
Water   2,150     1,890     9,110     8,430  
Total meters   7,550     6,340     28,450     25,030  
 
Additional meter information (Total Company)
Advanced meters 1,150 910 3,980 3,110
Smart meters 1,470 490 4,460 710
Standalone advanced and smart communication modules   1,550     970     5,960     3,830  
Advanced and smart meters and communication modules   4,170     2,370     14,400     7,650  
 
Meters with other vendors' advanced or smart communication modules   120     160     510     630  

 
ITRON, INC.
CONSOLIDATED BALANCE SHEETS
   
(Unaudited, in thousands)
December 31,
  2010     2009
ASSETS
Current assets
Cash and cash equivalents $ 169,477 $ 121,893
Accounts receivable, net 371,662 337,948
Inventories 208,157 170,084
Deferred tax assets current, net 55,351 20,762
Other current assets   77,570     75,229
Total current assets 882,217 725,916
 
Property, plant, and equipment, net 299,242 318,217
Prepaid debt fees 4,483 8,628
Deferred tax assets noncurrent, net 35,050 89,932
Other noncurrent assets 23,759 18,117
Intangible assets, net 291,670 388,212
Goodwill   1,209,376     1,305,599
Total assets $ 2,745,797   $ 2,854,621
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 241,949 $ 219,255
Other current liabilities 49,243 64,583
Wages and benefits payable 110,479 71,592
Taxes payable 19,725 14,377
Current portion of debt 228,721 10,871
Current portion of warranty 24,912 20,941
Unearned revenue 28,258 40,140
Deferred tax liabilities current, net   447     1,625
Total current liabilities 703,734 443,384
 
Long-term debt 382,220 770,893
Long-term warranty 26,371 12,932
Pension plan benefit liability 61,450 63,040
Deferred tax liabilities noncurrent, net 54,412 80,695
Other long-term obligations   89,315     83,163
Total liabilities 1,317,502 1,454,107
 
Commitments and contingencies
 
Shareholders' equity
Preferred stock - -
Common stock 1,328,249 1,299,134
Accumulated other comprehensive income (loss), net (34,974 ) 71,130
Retained earnings   135,020     30,250
Total shareholders' equity   1,428,295     1,400,514
Total liabilities and shareholders' equity $ 2,745,797   $ 2,854,621

 
ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
   
(Unaudited, in thousands)
Twelve Months Ended December 31,
  2010     2009  
 
Operating activities
Net income (loss) $ 104,770 $ (2,249 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 131,205 155,737
Stock-based compensation 19,107 16,982
Excess tax benefits from stock-based compensation (1,232 ) -
Amortization of prepaid debt fees 5,492 8,258
Amortization of convertible debt discount 10,099 9,673
Loss on extinguishment of debt, net - 9,960
Deferred taxes, net (17,992 ) (64,216 )
Other adjustments, net 6,797 3,102
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (45,612 ) (2,962 )
Inventories (41,417 ) 3,535
Accounts payables, other current liabilities, and taxes payable 40,884 9,873
Wages and benefits payable 42,245 (8,261 )
Unearned revenue (2,356 ) 14,836
Warranty 14,656 (5,273 )
Other operating, net   (12,055 )   (8,208 )
Net cash provided by operating activities 254,591 140,787
 
Investing activities
Acquisitions of property, plant, and equipment (62,822 ) (52,906 )
Business acquisitions & contingent consideration, net of cash equivalents acquired - (4,317 )
Other investing, net   6,548     3,229  
Net cash used in investing activities (56,274 ) (53,994 )
 
Financing activities
Payments on debt (155,163 ) (275,796 )
Issuance of common stock 8,776 166,372
Prepaid debt fees (1,347 ) (3,936 )
Excess tax benefits from stock-based compensation 1,232 -
Other financing, net   (2,135 )   (761 )
Net cash used in financing activities (148,637 ) (114,121 )
 
Effect of foreign exchange rate changes on cash and cash equivalents   (2,096 )   4,831  
Increase (decrease) in cash and cash equivalents 47,584 (22,497 )
Cash and cash equivalents at beginning of period   121,893     144,390  
Cash and cash equivalents at end of period $ 169,477   $ 121,893  

       
ITRON, INC.
RESTATED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR FISCAL PERIODS IN 2010
 
(Unaudited, in thousands, except per share data)
 
RESTATED
Three Three Six Three Nine
Months Ended Months Ended Months Ended Months Ended Months Ended
March 31 June 30 September 30
 
Revenues $ 497,623 $ 567,339 $ 1,064,962 $ 573,651 $ 1,638,613
Cost of revenues   340,559     393,283     733,842     391,888     1,125,730  
Gross profit 157,064 174,056 331,120 181,763 512,883
 
Operating expenses
Sales and marketing 41,537 40,974 82,511 41,197 123,708
Product development 33,040 33,022 66,062 34,038 100,100
General and administrative 33,057 33,285 66,342 30,710 97,052
Amortization of intangible assets   17,811     16,766     34,577     16,882     51,459  
Total operating expenses   125,445     124,047     249,492     122,827     372,319  
 
Operating income 31,619 50,009 81,628 58,936 140,564
Other income (expense)
Interest income 167 111 278 166 444
Interest expense (14,923 ) (13,965 ) (28,888 ) (13,328 ) (42,216 )
Other income (expense), net   (592 )   (425 )   (1,017 )   (4,423 )   (5,440 )
Total other income (expense)   (15,348 )   (14,279 )   (29,627 )   (17,585 )   (47,212 )
 
Income before income taxes 16,271 35,730 52,001 41,351 93,352
Income tax benefit (provision)   8,979     (10,419 )   (1,440 )   (13,712 )   (15,152 )
Net income $ 25,250   $ 25,311   $ 50,561   $ 27,639   $ 78,200  
 
 
Earnings per common share-Basic $ 0.63   $ 0.63   $ 1.26   $ 0.68   $ 1.94  
Earnings per common share-Diluted $ 0.62   $ 0.61   $ 1.23   $ 0.68   $ 1.91  
 
 
Weighted average common shares outstanding-Basic 40,191 40,329 40,261 40,400 40,307
Weighted average common shares outstanding-Diluted 40,862 41,161 41,011 40,828 40,950
 
 
The unaudited quarterly financial information for the first three quarters of 2010 has been restated. The restatement was made primarily to defer revenue previously recognized on one contract due to a misinterpretation of an extended warranty provision. While the restatement was not deemed material to the first three quarters of 2010, we concluded that the aggregate correction of such amounts would be material to the fourth quarter of 2010.
 
Accordingly, the restatement impacted the consolidated financial statements in the previously filed Quarterly Reports on Form 10-Q for each of the first three quarters of 2010. While certain captions within cash provided by operating activities in the consolidated statements of cash flows were impacted by the correction, total cash provided by operating activities did not change from amounts previously reported. The consolidated statements of operations have been restated, as above.

         
ITRON, INC.
RESTATED CONSOLIDATED SEGMENT INFORMATION
FOR FISCAL PERIODS IN 2010
 
(Unaudited, in thousands)
 
RESTATED
Three Three Six Three Nine
Months Ended Months Ended Months Ended Months Ended Months Ended
March 31 June 30 September 30
Revenues
Itron North America $ 241,559 $ 301,143 $ 542,702 $ 313,155 $ 855,857
Itron International   256,064     266,196     522,260     260,496     782,756  
Total Company $ 497,623   $ 567,339   $ 1,064,962   $ 573,651   $ 1,638,613  
 
Gross profit
Itron North America $ 78,159 $ 100,972 $ 179,131 $ 109,551 $ 288,682
Itron International   78,905     73,084     151,989     72,212     224,201  
Total Company $ 157,064   $ 174,056   $ 331,120   $ 181,763   $ 512,883  
 
Operating income (loss)
Itron North America $ 32,036 $ 55,384 $ 87,420 $ 62,274 $ 149,694
Itron International 10,437 5,017 15,454 7,515 22,969
Corporate unallocated   (10,854 )   (10,392 )   (21,246 )   (10,853 )   (32,099 )
Total Company $ 31,619   $ 50,009   $ 81,628   $ 58,936   $ 140,564  
 
 

Itron, Inc.

About Non-GAAP Financial Measures

The accompanying press release contains non-GAAP financial measures. To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, including non-GAAP operating expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, adjusted EBITDA, and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures please see the table captioned "Reconciliations of Non-GAAP Financial Measures to Most Directly Comparable GAAP Financial Measures."

We use these non-GAAP financial measures for financial and operational decision making and as a means for determining executive compensation. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and ability to service debt by excluding certain expenses that may not be indicative of our recurring core operating results. These non-GAAP financial measures facilitate management's internal comparisons to our historical performance as well as comparisons to our competitors' operating results. Our executive compensation plans exclude non-cash charges related to amortization of intangibles and non-recurring discrete cash and non-cash charges that are infrequent in nature such as purchase accounting adjustments or extinguishment of debt gains and losses. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because they provide greater transparency with respect to key metrics used by management in its financial and operational decision making and because they are used by our institutional investors and the analyst community to help them analyze the health of our business.

Non-GAAP operating expense and non-GAAP operating income — We define non-GAAP operating expense as operating expense excluding the expense related to the amortization of intangible assets. We define non-GAAP operating income as operating income excluding the expense related to the amortization of intangible assets. 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. 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, expenses related to amortization of intangible assets are now decreasing, which is improving 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 expense and non-GAAP operating income versus operating expense and operating income calculated in accordance with GAAP. Non-GAAP operating expense and non-GAAP operating income exclude some costs that are recurring. Additionally, the expenses that we exclude in our calculation of non-GAAP operating expense and non-GAAP operating income may differ from the expenses that our peer companies exclude when they report the results of their operations. We compensate for these limitations by providing specific information about the GAAP amounts we have excluded from our non-GAAP operating expense and non-GAAP operating income and evaluating non-GAAP operating expense and non-GAAP operating income together with GAAP operating expense and GAAP operating income.

Non-GAAP net income and non-GAAP diluted EPS — We define non-GAAP net income as net income excluding the expenses associated with amortization of intangible assets, amortization of debt placement fees, amortization of convertible debt discount, and the non-cash net loss on the extinguishment of debt. 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 and GAAP diluted EPS.

Adjusted EBITDA — We define adjusted EBITDA as net income (a) minus interest income, (b) plus interest expense, depreciation and amortization of intangible asset expenses, and the non-cash net loss on the extinguishment of debt, and (c) exclude the tax expense or benefit. We believe that providing this financial measure is important for management and investors to understand our ability to service our debt as it is a measure of the cash generated by our core business. 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. Management compensates for this limitation 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 non-GAAP operating income 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.

The accompanying tables have more detail on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures and the related reconciliations between these financial measures.

 
ITRON, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
       
(Unaudited, in thousands, except per share data)
 
Three Months Ended December 31, Twelve Months Ended December 31,
  2010     2009     2010     2009  
Non-GAAP operating expense:
GAAP operating expense $ 141,723 $ 129,931 $ 514,042 $ 492,429
Amortization of intangible assets   (17,592 )   (25,785 )   (69,051 )   (98,573 )
Non-GAAP operating expense $ 124,131   $ 104,146   $ 444,991   $ 393,856  
 
Non-GAAP operating income:
GAAP operating income $ 43,633 $ 15,353 $ 184,197 $ 45,027
Amortization of intangible assets   17,592     25,785     69,051     98,573  
Non-GAAP operating income $ 61,225   $ 41,138   $ 253,248   $ 143,600  
 
Non-GAAP net income:
GAAP net income (loss) $ 26,570 $ 5,153 $ 104,770 $ (2,249 )
Amortization of intangible assets 17,592 25,785 69,051 98,573
Amortization of debt placement fees 1,222 1,823 5,285 8,037
Amortization of convertible debt discount 2,595 2,411 10,099 9,673
Loss on extinguishment of debt, net - - - 9,960
Income tax effect of non-GAAP adjustments   (9,232 )   (1,694 )   (29,752 )   (41,525 )
Non-GAAP net income $ 38,747   $ 33,478   $ 159,453   $ 82,469  
       
Non-GAAP diluted EPS $ 0.95   $ 0.82   $ 3.89   $ 2.12  
 
Weighted average common shares outstanding - Diluted   40,938     40,607     40,947     38,946  
 
Adjusted EBITDA:
GAAP net income (loss) $ 26,570 $ 5,153 $ 104,770 $ (2,249 )
Interest income (148 ) (215 ) (592 ) (1,186 )
Interest expense 12,688 16,992 54,904 70,311
Income tax (benefit) provision 822 (6,308 ) 15,974 (43,825 )
Depreciation and amortization 34,021 41,925 131,205 155,737
Loss on extinguishment of debt, net   -     -     -     9,960  
Adjusted EBITDA $ 73,953   $ 57,547   $ 306,261   $ 188,748  
 
Free Cash Flow:
Net cash provided by operating activities $ 87,475 $ 53,700 $ 254,591 $ 140,787
Acquisitions of property, plant, and equipment   (17,315 )   (14,883 )   (62,822 )   (52,906 )
Free Cash Flow $ 70,160   $ 38,817   $ 191,769   $ 87,881  

         
ITRON, INC.
RESTATED RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
FOR FISCAL PERIODS IN 2010
 
(Unaudited, in thousands, except per share data)
 
RESTATED
Three Three Six Three Nine
Months Ended Months Ended Months Ended Months Ended Months Ended
March 31 June 30 September 30
Non-GAAP operating income:
GAAP operating income $ 31,619 $ 50,009 $ 81,628 $ 58,936 $ 140,564
Amortization of intangible assets   17,811     16,766     34,577     16,882     51,459  
Non-GAAP operating income $ 49,430   $ 66,775   $ 116,205   $ 75,818   $ 192,023  
 
Non-GAAP net income:
GAAP net income (loss) $ 25,250 $ 25,311 $ 50,561 $ 27,639 $ 78,200
Amortization of intangible assets 17,811 16,766 34,577 16,882 51,459
Amortization of debt placement fees 1,201 1,458 2,659 1,404 4,063
Amortization of convertible debt discount 2,456 2,501 4,957 2,547 7,504
Income tax effect of non-GAAP adjustments   (6,789 )   (7,184 )   (13,973 )   (6,547 )   (20,520 )
Non-GAAP net income $ 39,929   $ 38,852   $ 78,781   $ 41,925   $ 120,706  
         
Non-GAAP diluted EPS $ 0.98   $ 0.94   $ 1.92   $ 1.03   $ 2.95  
 
Weighted average common shares outstanding - Diluted   40,862     41,161     41,011     40,828     40,950  
 
Adjusted EBITDA:
GAAP net income (loss) $ 25,250 $ 25,311 $ 50,561 $ 27,639 $ 78,200
Interest income (167 ) (111 ) (278 ) (166 ) (444 )
Interest expense 14,923 13,965 28,888 13,328 42,216
Income tax (benefit) provision (8,979 ) 10,419 1,440 13,712 15,152
Depreciation and amortization   33,277     31,794     65,071     32,113     97,184  
Adjusted EBITDA $ 64,304   $ 81,378   $ 145,682   $ 86,626   $ 232,308  
 
Free Cash Flow:
Net cash provided by operating activities $ 65,779 $ 51,307 $ 117,086 $ 50,030 $ 167,116
Acquisitions of property, plant, and equipment   (16,151 )   (11,565 )   (27,716 )   (17,791 )   (45,507 )
Free Cash Flow $ 49,628   $ 39,742   $ 89,370   $ 32,239   $ 121,609  

Itron, Inc.
Ranny Dwiggins, 509-891-3443
Vice President, Investor Relations
ranny.dwiggins@itron.com

Source: Itron, Inc.

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