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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 June 30, 2020
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) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valueITRINASDAQ Global Select Market
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 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, a 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 filerAccelerated 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  
As of July 31, 2020, there were outstanding 40,332,428 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 June 30,Six Months Ended June 30,
In thousands, except per share data2020201920202019
Revenues
Product revenues$438,985  $566,047  $967,122  $1,110,897  
Service revenues70,609  68,990  140,887  138,716  
Total revenues509,594  635,037  1,108,009  1,249,613  
Cost of revenues
Product cost of revenues329,293  401,033  713,974  787,135  
Service cost of revenues41,784  42,790  83,952  84,001  
Total cost of revenues371,077  443,823  797,926  871,136  
Gross profit138,517  191,214  310,083  378,477  
Operating expenses
Sales, general and administrative69,538  88,259  150,036  180,974  
Research and development48,994  49,449  102,775  99,939  
Amortization of intangible assets11,140  16,117  22,305  32,090  
Restructuring(2,683) (6,169) (2,931) 1,093  
Loss on sale of business56,915    56,915    
Total operating expenses183,904  147,656  329,100  314,096  
Operating income (loss)(45,387) 43,558  (19,017) 64,381  
Other income (expense)
Interest income1,258  534  1,811  862  
Interest expense(11,684) (13,496) (22,961) (27,031) 
Other income (expense), net(1,873) (2,060) (807) (3,704) 
Total other income (expense)(12,299) (15,022) (21,957) (29,873) 
Income (loss) before income taxes(57,686) 28,536  (40,974) 34,508  
Income tax provision(4,801) (8,419) (12,351) (14,540) 
Net income (loss)(62,487) 20,117  (53,325) 19,968  
Net income attributable to noncontrolling interests315  671  793  2,429  
Net income (loss) attributable to Itron, Inc.$(62,802) $19,446  $(54,118) $17,539  
Net income (loss) per common share - Basic$(1.56) $0.49  $(1.35) $0.44  
Net income (loss) per common share - Diluted$(1.56) $0.49  $(1.35) $0.44  
Weighted average common shares outstanding - Basic40,216  39,389  40,130  39,523  
Weighted average common shares outstanding - Diluted40,216  39,686  40,130  39,875  
The accompanying notes are an integral part of these consolidated financial statements.
1

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

Three Months Ended June 30,Six Months Ended June 30,
In thousands2020201920202019
Net income (loss)$(62,487) $20,117  $(53,325) $19,968  
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
11,310  5,187  (14,135) 2,801  
Foreign currency translation adjustment reclassified to net income on sale of business
52,088    52,088    
Net unrealized gain (loss) on derivative instruments, designated as cash flow hedges
(1,389) (1,634) (2,156) (1,499) 
Pension benefit obligation adjustment
47  183  1,048  654  
Total other comprehensive income (loss), net of tax62,056  3,736  36,845  1,956  
Total comprehensive income (loss), net of tax(431) 23,853  (16,480) 21,924  
Comprehensive income attributable to noncontrolling interests, net of tax
315  671  793  2,429  
Comprehensive income (loss) attributable to Itron, Inc.$(746) $23,182  $(17,273) $19,495  
The accompanying notes are an integral part of these consolidated financial statements.
2

Table of Contents
ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
In thousandsJune 30, 2020December 31, 2019
ASSETS
Current assets
Cash and cash equivalents$544,823  $149,904  
Accounts receivable, net411,200  472,925  
Inventories226,564  227,896  
Other current assets172,241  146,526  
Total current assets1,354,828  997,251  
Property, plant, and equipment, net216,319  233,228  
Deferred tax assets, net57,835  63,899  
Other long-term assets45,610  44,686  
Operating lease right-of-use assets, net78,777  79,773  
Intangible assets, net157,125  185,097  
Goodwill1,101,648  1,103,907  
Total assets$3,012,142  $2,707,841  
LIABILITIES AND EQUITY
Current liabilities
Accounts payable$240,221  $328,128  
Other current liabilities63,429  63,785  
Wages and benefits payable106,215  119,220  
Taxes payable19,878  22,193  
Current portion of debt14,063    
Current portion of warranty33,039  38,509  
Unearned revenue124,834  99,556  
Total current liabilities601,679  671,391  
Long-term debt, net1,320,004  932,482  
Long-term warranty11,718  14,732  
Pension benefit obligation99,184  98,712  
Deferred tax liabilities, net1,794  1,809  
Operating lease liabilities69,337  68,919  
Other long-term obligations105,557  118,981  
Total liabilities2,209,273  1,907,026  
Equity
Preferred stock, no par value, 10,000 shares authorized, no shares issued or outstanding
    
Common stock, no par value, 75,000 shares authorized, 40,234 and 39,941 shares issued and outstanding
1,376,134  1,357,600  
Accumulated other comprehensive loss, net(167,827) (204,672) 
Accumulated deficit(430,508) (376,390) 
Total Itron, Inc. shareholders' equity777,799  776,538  
Noncontrolling interests25,070  24,277  
Total equity802,869  800,815  
Total liabilities and equity$3,012,142  $2,707,841  
The accompanying notes are an integral part of these consolidated financial statements.
3

Table of Contents
ITRON, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
Common StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Itron, Inc. Shareholders' EquityNoncontrolling InterestsTotal Equity
In thousandsSharesAmount
Balances at January 1, 202039,941  $1,357,600  $(204,672) $(376,390) $776,538  $24,277  $800,815  
Net income8,684  8,684  478  9,162  
Other comprehensive income (loss), net of tax(25,211) (25,211) (25,211) 
Net stock issues and repurchases235  2,247  2,247  2,247  
Stock-based compensation expense8,482  8,482  8,482  
Balances at March 31, 202040,176  $1,368,329  $(229,883) $(367,706) $770,740  $24,755  $795,495  
Net income (loss)(62,802) (62,802) 315  (62,487) 
Other comprehensive income (loss), net of tax62,056  62,056  62,056  
Net stock issues and repurchases58  706  706  706  
Stock-based compensation expense7,099  7,099  7,099  
Balances at June 30, 202040,234  $1,376,134  $(167,827) $(430,508) $777,799  $25,070  $802,869  

Common StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Itron, Inc. Shareholders' EquityNoncontrolling InterestsTotal Equity
In thousandsSharesAmount
Balances at January 1, 201939,498  $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) 
Net stock issues and repurchases360  1,195  1,195  1,195  
Stock-based compensation expense7,048  7,048  7,048  
Stock repurchased(165) (7,814) (7,814) (7,814) 
Balances at March 31, 201939,693  $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 tax3,736  3,736  3,736  
Net stock issues and repurchases66  1,481  1,481  1,481  
Stock-based compensation expense6,420  6,420  6,420  
Stock repurchased(364) (17,186) (17,186) (17,186) 
Balances at June 30, 201939,395  $1,325,508  $(194,349) $(407,857) $723,302  $23,297  $746,599  
The accompanying notes are an integral part of these consolidated financial statements.

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ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
In thousands20202019
Operating activities
Net income (loss)$(53,325) $19,968  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization48,230  57,068  
Non-cash operating lease expense9,909  9,481  
Stock-based compensation15,581  13,783  
Amortization of prepaid debt fees2,013  2,402  
Deferred taxes, net5,904  2,076  
Loss on sale of business56,915    
Restructuring, non-cash(1,146) (5,295) 
Other adjustments, net287  (3,471) 
Changes in operating assets and liabilities
Accounts receivable52,031  (29,121) 
Inventories(16,529) (9,202) 
Other current assets(7,861) (14,413) 
Other long-term assets(3,919) 6,616  
Accounts payable, other current liabilities, and taxes payable(76,144) (2,801) 
Wages and benefits payable(11,145) 13,484  
Unearned revenue23,099  14,961  
Warranty(8,417) (3,270) 
Other operating, net(9,697) 5,797  
Net cash provided by operating activities25,786  78,063  
Investing activities
Net payments related to the sale of business(3,630)   
Acquisitions of property, plant, and equipment(29,049) (26,511) 
Other investing, net3,520  9,773  
Net cash used in investing activities(29,159) (16,738) 
Financing activities
Proceeds from borrowings400,000  50,000  
Payments on debt  (72,188) 
Issuance of common stock4,183  4,001  
Repurchase of common stock  (25,000) 
Prepaid debt fees(184) (175) 
Other financing, net(2,036) (3,165) 
Net cash provided by (used in) financing activities401,963  (46,527) 
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash(3,671) 727  
Increase in cash, cash equivalents, and restricted cash394,919  15,525  
Cash, cash equivalents, and restricted cash at beginning of period149,904  122,328  
Cash, cash equivalents, and restricted cash at end of period$544,823  $137,853  
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Income taxes, net$(2,994) $6,571  
Interest32,149  23,333  
The accompanying notes are an integral part of these consolidated financial statements.
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ITRON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(UNAUDITED)
In this Quarterly Report on Form 10-Q, the terms "we," "us," "our," "Itron," and the "Company" refer to Itron, Inc. and its subsidiaries.

Note 1:    Summary of Significant Accounting Policies

Financial Statement Preparation
The consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited and reflect entries necessary for the fair presentation of the Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), and Consolidated Statements of Equity for the three and six months ended June 30, 2020 and 2019, the Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019, and the Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, of Itron, Inc. and its subsidiaries. All entries required for the fair presentation of the financial statements are of a normal recurring nature, except as disclosed. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results expected for the full year or for any other period.

Certain information and notes normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been partially or completely omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) regarding interim results. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2019 filed with the SEC in our Annual Report on Form 10-K on February 27, 2020 (2019 Annual Report). There have been no significant changes in financial statement preparation or significant accounting policies since December 31, 2019.

Risks and Uncertainties
The COVID-19 pandemic has had global economic impacts including disrupting global supply chains and creating market volatility. The extent of the recent pandemic and its ongoing impact on our operations is volatile, but is being monitored closely by our management. We expect that certain of our customers’ projects and deployments may shift to later in 2020 and 2021. At this time, we have not identified any significant decrease in long-term customer demand for our products and services. Nonetheless, a prolonged pandemic could adversely impact the efficiency and effectiveness of our organization, further impact our global supply chain network, result in delays or decreases in customer collections, reduce demand for our products and services, and inhibit our sales efforts, any of which could further materially impact our revenues, results of operations, cash flows and financial condition.

Restricted Cash and Cash Equivalents
Cash and cash equivalents that are contractually restricted from operating use are classified as restricted cash and cash equivalents.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:
In thousandsJune 30, 2020December 31, 2019June 30, 2019
Cash and cash equivalents$544,823  $149,904  $135,736  
Current restricted cash included in other current assets    51  
Long-term restricted cash    2,066  
Total cash, cash equivalents, and restricted cash$544,823  $149,904  $137,853  

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 expected losses in accounts receivable at the date of the balance sheet based on our historical experience of bad debts, our specific review of outstanding receivables, and our review of current and expected economic conditions. Accounts receivable are written-off against the allowance when we believe an account, or a portion thereof, is no longer collectible.

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Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Subsequent to 2016-13 the FASB also issued codification improvements and transition relief in ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02, and ASU 2020-03, hereafter collectively referred to as Accounting Standards Codification (ASC) 326. ASC 326 replaces the incurred loss impairment methodology in previous GAAP with a methodology based on expected credit losses, which results in losses being recognized earlier. The estimate of expected credit losses uses a broader range of reasonable and supportable information. We adopted ASC 326 on January 1, 2020, and the impacts on our consolidated financial position, results of operations, and cash flows were immaterial.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which amended the disclosure requirements under ASC 820. This update clarifies and unifies the disclosure of Level 3 fair value instruments. We adopted this standard on January 1, 2020, and it did not materially impact our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, which amends the disclosure requirements under ASC 715-20. This update clarifies annual disclosures for Defined Benefit Plans. We adopted this standard on January 1, 2020, and it did not materially impact our consolidated financial statements.

Recent Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies certain provisions of ASC 740, in an effort to reduce the complexity of accounting for income taxes. ASU 2019-12 is effective for us beginning with our interim financial reports for the first quarter of 2021. We are currently evaluating the effects and do not believe this standard will have a material impact on our consolidated financial position, results of operations, or cash flows.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. ASU 2020-04 applies to contracts that reference LIBOR or another reference rate expected to be terminated because of reference rate reform. An entity may elect certain optional expedients for hedging relationships that exist as of December 31, 2022, and maintain those optional expedients through the end of the hedging relationship. ASU 2020-04 can be adopted as of March 12, 2020. We do not currently have any contracts that have been changed to a new reference rate, but we will continue to evaluate our contracts and the effects of this standard on our consolidated financial position, results of operations, and cash flows prior to adoption.

Note 2:    Earnings Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (EPS):
Three Months Ended June 30,Six Months Ended June 30,
In thousands, except per share data2020201920202019
Net income (loss) available to common shareholders$(62,802) $19,446  $(54,118) $17,539  
Weighted average common shares outstanding - Basic40,216  39,389  40,130  39,523  
Dilutive effect of stock-based awards  297    352  
Weighted average common shares outstanding - Diluted40,216  39,686  40,130  39,875  
Net income (loss) per common share - Basic$(1.56) $0.49  $(1.35) $0.44  
Net income (loss) per common share - Diluted$(1.56) $0.49  $(1.35) $0.44  

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Stock-based Awards
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 our common stock at the average market price during the period. Related proceeds include the amount the employee must pay upon exercise and the future compensation cost associated with the stock award. Approximately 0.9 million and 0.8 million stock-based awards were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2020 because they were anti-dilutive. Approximately 0.5 million and 0.6 million stock-based awards were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2019 because they were anti-dilutive. These stock-based awards could be dilutive in future periods.

Note 3: