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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
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
 
91-1011792
(State of Incorporation)
 
(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) 
 
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 every Interactive Data File required to be submitted 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 such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
Accelerated filer
 
 
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
 
 
 
 
 
Emerging growth company
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, no par value
 
ITRI
 
NASDAQ Global Select Market
As of October 31, 2019, there were outstanding 39,568,376 shares of the registrant's common stock, no par value, which is the only class of common stock of the registrant.
 


Table of Contents

Itron, Inc.
Table of Contents
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1A: Risk Factors
 
 
 
 
 
 
Item 6: Exhibits
 
 
 
 


Table of Contents

PART I: FINANCIAL INFORMATION
Item 1:    Financial Statements (Unaudited)
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
In thousands, except per share data
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
Product revenues
$
552,897

 
$
525,716

 
$
1,663,794

 
$
1,578,740

Service revenues
71,577

 
70,246

 
210,293

 
210,333

Total revenues
624,474

 
595,962

 
1,874,087

 
1,789,073

Cost of revenues
 
 
 
 
 
 
 
Product cost of revenues
389,778

 
357,194

 
1,176,913

 
1,106,586

Service cost of revenues
38,292

 
41,671

 
122,293

 
128,958

Total cost of revenues
428,070

 
398,865

 
1,299,206

 
1,235,544

Gross profit
196,404

 
197,097

 
574,881

 
553,529

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Sales, general and administrative
83,666

 
89,556

 
264,640

 
332,833

Research and development
50,612

 
47,239

 
150,551

 
162,298

Amortization of intangible assets
16,095

 
17,960

 
48,185

 
53,699

Restructuring
6,592

 
666

 
7,685

 
82,908

Total operating expenses
156,965

 
155,421

 
471,061

 
631,738

 
 
 
 
 
 
 
 
Operating income (loss)
39,439

 
41,676

 
103,820

 
(78,209
)
Other income (expense)
 
 
 
 
 
 
 
Interest income
517

 
431

 
1,379

 
1,725

Interest expense
(12,868
)
 
(14,171
)
 
(39,899
)
 
(44,320
)
Other income (expense), net
(2,759
)
 
(2,434
)
 
(6,463
)
 
(2,598
)
Total other income (expense)
(15,110
)
 
(16,174
)
 
(44,983
)
 
(45,193
)
 
 
 
 
 
 
 
 
Income (loss) before income taxes
24,329

 
25,502

 
58,837

 
(123,402
)
Income tax benefit (provision)
(6,152
)
 
(5,715
)
 
(20,692
)
 
1,692

Net income (loss)
18,177

 
19,787

 
38,145

 
(121,710
)
Net income (loss) attributable to noncontrolling interests
1,330

 
(95
)
 
3,759

 
1,417

Net income (loss) attributable to Itron, Inc.
$
16,847

 
$
19,882

 
$
34,386

 
$
(123,127
)
 
 
 
 
 
 
 
 
Net income (loss) per common share - Basic
$
0.43

 
$
0.51

 
$
0.87

 
$
(3.14
)
Net income (loss) per common share - Diluted
$
0.42

 
$
0.50

 
$
0.86

 
$
(3.14
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - Basic
39,478

 
39,340

 
39,508

 
39,177

Weighted average common shares outstanding - Diluted
39,903

 
39,909

 
39,884

 
39,177

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

1

Table of Contents

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

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
In thousands
2019
 
2018
 
2019
 
2018
Net income (loss)
$
18,177

 
$
19,787

 
$
38,145

 
$
(121,710
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(13,902
)
 
(678
)
 
(11,101
)
 
(18,538
)
Net unrealized gain (loss) on derivative instruments, designated as cash flow hedges
695

 
908

 
(804
)
 
2,563

Pension benefit obligation adjustment
502

 
392

 
1,156

 
1,207

Total other comprehensive income (loss), net of tax
(12,705
)
 
622

 
(10,749
)
 
(14,768
)
 
 
 
 
 
 
 
 
Total comprehensive income (loss), net of tax
5,472

 
20,409

 
27,396

 
(136,478
)
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to noncontrolling interests, net of tax
1,330

 
(95
)
 
3,759

 
1,417

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Itron, Inc.
$
4,142

 
$
20,504

 
$
23,637

 
$
(137,895
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents

ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
In thousands
September 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
140,938

 
$
120,221

Accounts receivable, net
468,477

 
437,161

Inventories
231,081

 
220,674

Other current assets
126,527

 
118,085

Total current assets
967,023

 
896,141

 
 
 
 
Property, plant, and equipment, net
225,658

 
226,551

Deferred tax assets, net
59,332

 
64,830

Restricted cash
762

 
2,056

Other long-term assets
44,998

 
45,288

Operating lease right-of-use assets, net
78,386

 

Intangible assets, net
202,321

 
257,583

Goodwill
1,097,408

 
1,116,533

Total assets
$
2,675,888

 
$
2,608,982

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
315,394

 
$
309,951

Other current liabilities
62,017

 
70,136

Wages and benefits payable
117,409

 
88,603

Taxes payable
18,026

 
14,753

Current portion of debt
38,750

 
28,438

Current portion of warranty
38,018

 
47,205

Unearned revenue
94,989

 
93,621

Total current liabilities
684,603

 
652,707

 
 
 
 
Long-term debt
930,394

 
988,185

Long-term warranty
15,864

 
13,238

Pension benefit obligation
88,374

 
91,522

Deferred tax liabilities, net
1,445

 
1,543

Operating lease liabilities
67,024

 

Other long-term obligations
126,268

 
127,739

Total liabilities
1,913,972

 
1,874,934

 
 
 
 
Commitments and contingencies (Note 11)

 

 
 
 
 
Equity
 
 
 
Preferred stock, no par value, 10,000 shares authorized, no shares issued or outstanding

 

Common stock, no par value, 75,000 shares authorized, 39,533 and 39,498 shares issued and outstanding
1,335,353

 
1,334,364

Accumulated other comprehensive loss, net
(207,054
)
 
(196,305
)
Accumulated deficit
(391,010
)
 
(425,396
)
Total Itron, Inc. shareholders' equity
737,289

 
712,663

Noncontrolling interests
24,627

 
21,385

Total equity
761,916

 
734,048

Total liabilities and equity
$
2,675,888

 
$
2,608,982

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

3

Table of Contents

ITRON, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
 
Common Stock
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Total Itron, Inc. Shareholders' Equity
 
Noncontrolling Interests
 
Total Equity
In thousands
Shares
 
Amount
 
 
 
 
 
Balances at January 1, 2019
39,498

 
$1,334,364
 
$
(196,305
)
 
$
(425,396
)
 
$
712,663

 
$
21,385

 
$
734,048

Net income (loss)
 
 
 
 
 
 
(1,907
)
 
(1,907
)
 
1,758

 
(149
)
Other comprehensive income (loss), net of tax
 
 
 
 
(1,780
)
 
 
 
(1,780
)
 
 
 
(1,780
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 

 
(517
)
 
(517
)
Stock issues and repurchases:
 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercised
20

 
889

 
 
 
 
 
889

 
 
 
889

Restricted stock awards released net of repurchased shares for taxes
319

 
(720
)
 
 
 
 
 
(720
)
 
 
 
(720
)
Issuance of stock-based compensation awards
2

 
157

 
 
 
 
 
157

 
 
 
157

Employee stock purchase plan
19

 
869

 
 
 
 
 
869

 
 
 
869

Stock-based compensation expense
 
 
7,048

 
 
 
 
 
7,048

 
 
 
7,048

Shares repurchased
(165
)
 
(7,814
)
 
 
 
 
 
(7,814
)
 
 
 
(7,814
)
Balances at March 31, 2019
39,693

 
1,334,793

 
(198,085
)
 
(427,303
)
 
709,405

 
22,626

 
732,031

Net income (loss)
 
 
 
 
 
 
19,446

 
19,446

 
671

 
20,117

Other comprehensive income (loss), net of tax
 
 
 
 
3,736

 
 
 
3,736

 
 
 
3,736

Stock issues and repurchases:
 
 
 
 
 
 
 
 

 
 
 

Options exercised
39

 
1,501

 
 
 
 
 
1,501

 
 
 
1,501

Restricted stock awards released net of repurchased shares for taxes
7

 
(920
)
 
 
 
 
 
(920
)
 
 
 
(920
)
Issuance of stock-based compensation awards
3

 
158

 
 
 
 
 
158

 
 
 
158

Employee stock purchase plan
17

 
742

 
 
 
 
 
742

 
 
 
742

Stock-based compensation expense
 
 
6,420

 
 
 
 
 
6,420

 
 
 
6,420

Shares repurchased
(364
)
 
(17,186
)
 
 
 
 
 
(17,186
)
 
 
 
(17,186
)
Balances at June 30, 2019
39,395

 
1,325,508

 
(194,349
)
 
(407,857
)
 
723,302

 
23,297

 
746,599

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
 
 
16,847

 
16,847

 
1,330

 
18,177

Other comprehensive income (loss), net of tax
 
 
 
 
(12,705
)
 
 
 
(12,705
)
 
 
 
(12,705
)
Stock issues and repurchases:
 
 
 
 
 
 
 
 

 
 
 

Options exercised
58

 
2,317

 
 
 
 
 
2,317

 
 
 
2,317

Restricted stock awards released net of repurchased shares for taxes
65

 
(552
)
 
 
 
 
 
(552
)
 
 
 
(552
)
Issuance of stock-based compensation awards
2

 
158

 
 
 
 
 
158

 
 
 
158

Employee stock purchase plan
13

 
799

 
 
 
 
 
799

 
 
 
799

Stock-based compensation expense
 
 
7,123

 
 
 
 
 
7,123

 
 
 
7,123

Balances at September 30, 2019
39,533

 
$1,335,353
 
$
(207,054
)
 
$
(391,010
)
 
$
737,289

 
$
24,627

 
$
761,916

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


4

Table of Contents

ITRON, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
 
Common Stock
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Total Itron, Inc. Shareholders' Equity
 
Noncontrolling Interests
 
Total Equity
In thousands
Shares
 
Amount
 
 
 
 
 
Balances at January 1, 2018
38,771

 
$1,294,767
 
$
(170,478
)
 
$
(337,873
)
 
$
786,416

 
$
19,216

 
$
805,632

Net Income (loss)
 
 
 
 
 
 
(145,666
)
 
(145,666
)
 
396

 
(145,270
)
Cumulative effect of accounting change
 
 
 
 
 
 
11,727

 
11,727

 
 
 
11,727

Other comprehensive income (loss), net of tax
 
 
 
 
17,883

 
 
 
17,883

 
 
 
17,883

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 

 
(981
)
 
(981
)
Stock issues and repurchases:
 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercised
62

 
2,883

 
 
 
 
 
2,883

 
 
 
2,883

Restricted stock awards released
338

 

 
 
 
 
 

 
 
 

Issuance of stock-based compensation awards
2

 
207

 
 
 
 
 
207

 
 
 
207

Employee stock purchase plan
8

 
501

 
 
 
 
 
501

 
 
 
501

Stock-based compensation expense
 
 
7,888

 
 
 
 
 
7,888

 
 
 
7,888

Registration fee
 
 
(7
)
 
 
 
 
 
(7
)
 
 
 
(7
)
SSNI acquisition adjustments, net
 
 
4,140

 
 
 
 
 
4,140

 
 
 
4,140

Balances at March 31, 2018
39,181

 
1,310,379

 
(152,595
)
 
(471,812
)
 
685,972

 
18,631

 
704,603

Net income (loss)
 
 
 
 
 
 
2,657

 
2,657

 
1,116

 
3,773

Other comprehensive income (loss), net of tax
 
 
 
 
(33,273
)
 
 
 
(33,273
)
 
 
 
(33,273
)
Contribution from noncontrolling interests
 
 
 
 
 
 
 
 

 
481

 
481

Stock issues and repurchases:
 
 
 
 
 
 
 
 

 
 
 

Options exercised
26

 
655

 
 
 
 
 
655

 
 
 
655

Restricted stock awards released
60

 

 
 
 
 
 

 
 
 

Issuance of stock-based compensation awards
2

 
207

 
 
 
 
 
207

 
 
 
207

Employee stock purchase plan
10

 
627

 
 
 
 
 
627

 
 
 
627

Stock-based compensation expense
 
 
8,317

 
 
 
 
 
8,317

 
 
 
8,317

Registration Fee
 
 
(16
)
 
 
 
 
 
(16
)
 
 
 
(16
)
SSNI acquisition adjustments, net
 
 
(2,388
)
 
 
 
 
 
(2,388
)
 
 
 
(2,388
)
Balances at June 30, 2018
39,279

 
1,317,781

 
(185,868
)
 
(469,155
)
 
662,758

 
20,228

 
682,986

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income (loss)
 
 
 
 
 
 
19,882

 
19,882

 
(95
)
 
19,787

Other comprehensive income (loss), net of tax
 
 
 
 
622

 
 
 
622

 
 
 
622

Distributions to noncontrolling interests
 
 
 
 
 
 
 
 

 
(1
)
 
(1
)
Stock issues and repurchases:
 
 
 
 
 
 
 
 

 
 
 

Options exercised
63

 
2,364

 
 
 
 
 
2,364

 
 
 
2,364

Restricted stock awards released
38

 

 
 
 
 
 

 
 
 

Issuance of stock-based compensation awards
3

 
158

 
 
 
 
 
158

 
 
 
158

Employee stock purchase plan
17

 
992

 
 
 
 
 
992

 
 
 
992

Stock-based compensation expense
 
 
6,292

 
 
 
 
 
6,292

 
 
 
6,292

SSNI acquisition adjustments, net
 
 
(868
)
 
 
 
 
 
(868
)
 
 
 
(868
)
Balances at September 30, 2018
39,400

 
$1,326,719
 
$
(185,246
)
 
$
(449,273
)
 
$
692,200

 
$
20,132

 
$
712,332


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


5

Table of Contents

ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Nine Months Ended September 30,
In thousands
2019
 
2018
Operating activities
 
 
 
Net income (loss)
$
38,145

 
$
(121,710
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization of intangible assets
85,691

 
92,428

Amortization of operating lease right-of-use assets
13,847

 

Stock-based compensation
21,064

 
23,069

Amortization of prepaid debt fees
3,686

 
5,825

Deferred taxes, net
4,990

 
(13,141
)
Restructuring, non-cash
(2,147
)
 
569

Other adjustments, net
(6,121
)
 
(30
)
Changes in operating assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable
(39,385
)
 
7,774

Inventories
(15,762
)
 
(10,072
)
Other current assets
(10,494
)
 
(9,797
)
Other long-term assets
7,945

 
3,817

Accounts payable, other current liabilities, and taxes payable
(4,063
)
 
4,494

Wages and benefits payable
30,220

 
2,166

Unearned revenue
6,746

 
27,869

Warranty
(5,506
)
 
3,167

Other operating, net
(756
)
 
50,955

Net cash provided by operating activities
128,100

 
67,383

 
 
 
 
Investing activities
 
 
 
Acquisitions of property, plant, and equipment
(44,570
)
 
(42,493
)
Business acquisitions, net of cash equivalents acquired

 
(803,075
)
Other investing, net
9,977

 
(181
)
Net cash used in investing activities
(34,593
)
 
(845,749
)
 
 
 
 
Financing activities
 
 
 
Proceeds from borrowings
50,000


761,938

Payments on debt
(100,313
)
 
(332,297
)
Issuance of common stock
7,117

 
8,283

Repurchase of common stock
(25,000
)
 

Prepaid debt fees
(175
)
 
(24,042
)
Other financing, net
(5,221
)
 
(5,526
)
Net cash provided by (used in) financing activities
(73,592
)
 
408,356

 
 
 
 
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
(543
)
 
(6,175
)
Increase (decrease) in cash, cash equivalents, and restricted cash
19,372

 
(376,185
)
Cash, cash equivalents, and restricted cash at beginning of period
122,328

 
487,335

Cash, cash equivalents, and restricted cash at end of period
$
141,700

 
$
111,150

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for: