SEC Filing | Itron

View:

Download DOC

Download PDF

Download XLS

Download XBRL

itri-20220930

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, 2022


☐			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 No.)

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 class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, no par value

ITRI

NASDAQ Global Select Market

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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

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 October 31, 2022, there were outstanding 45,177,993 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
PART I: FINANCIAL INFORMATION

Item 1: Financial Statements (Unaudited)

Consolidated Statements of Operations			1

Consolidated Statements of Comprehensive Income (Loss)			2

Consolidated Balance Sheets			3

Consolidated Statements of Equity			4

Consolidated Statements of Cash Flows			5

Notes to Consolidated Financial Statements			6

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			30

Item 3: Quantitative and Qualitative Disclosures About Market Risk			49

Item 4: Controls and Procedures			50


PART II: OTHER INFORMATION

Item 1: Legal Proceedings			51

Item 1A: Risk Factors			51

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			51

Item 5: Other Information			51

Item 6: Exhibits			52


SIGNATURE			53

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	2022		2021		2022		2021
Revenues
Product revenues	$	347,791	$	410,947	$	1,107,499	$	1,265,470
Service revenues	73,069		76,002		220,574		230,465
Total revenues	420,860		486,949		1,328,073		1,495,935
Cost of revenues
Product cost of revenues	258,541		306,168		818,639		908,923
Service cost of revenues	42,257		45,818		128,043		135,130
Total cost of revenues	300,798		351,986		946,682		1,044,053
Gross profit	120,062		134,963		381,391		451,882

Operating expenses
Sales, general and administrative	63,446		71,838		212,724		221,974
Research and development	43,820		46,889		138,471		147,379
Amortization of intangible assets	6,413		8,944		19,451		26,914
Restructuring	(1,272)		958		(11,097)		(830)
Loss on sale of business	767		2,171		3,182		28,274
Goodwill impairment	—		—		38,480		—
Total operating expenses	113,174		130,800		401,211		423,711

Operating income (loss)	6,888		4,163		(19,820)		28,171
Other income (expense)
Interest income	801		352		1,367		1,326
Interest expense	(1,679)		(2,628)		(4,931)		(27,107)
Other income (expense), net	(1,065)		(1,761)		(3,140)		(16,684)
Total other income (expense)	(1,943)		(4,037)		(6,704)		(42,465)

Income (loss) before income taxes	4,945		126		(26,524)		(14,294)
Income tax provision	(473)		(1,136)		(4,973)		(5,581)
Net income (loss)	4,472		(1,010)		(31,497)		(19,875)
Net income attributable to noncontrolling interests	355		859		447		2,514
Net income (loss) attributable to Itron, Inc.	$	4,117	$	(1,869)	$	(31,944)	$	(22,389)

Net income (loss) per common share - Basic	$	0.09	$	(0.04)	$	(0.71)	$	(0.51)
Net income (loss) per common share - Diluted	$	0.09	$	(0.04)	$	(0.71)	$	(0.51)

Weighted average common shares outstanding - Basic	45,139		45,240		45,075		43,983
Weighted average common shares outstanding - Diluted	45,330		45,240		45,075		43,983

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

Table of Contents

ITRON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands	2022		2021		2022		2021
Net income (loss)	$	4,472	$	(1,010)	$	(31,497)	$	(19,875)

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(28,197)		(7,764)		(55,716)		(17,118)
Foreign currency translation adjustment reclassified to net income (loss) for sale or disposal of business	1,885		—		57,321		—
Net unrealized gain on derivative instruments, designated as cash flow hedges	—		510		—		1,818
Pension benefit obligation adjustment	196		687		4,672		2,087
Total other comprehensive income (loss), net of tax	(26,116)		(6,567)		6,277		(13,213)

Total comprehensive income (loss), net of tax	(21,644)		(7,577)		(25,220)		(33,088)

Comprehensive income attributable to noncontrolling interests, net of tax	355		859		447		2,514

Comprehensive income (loss) attributable to Itron, Inc.	$	(21,999)	$	(8,436)	$	(25,667)	$	(35,602)

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

Table of Contents

ITRON, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


In thousands	September 30, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	215,413	$	162,579
Accounts receivable, net	266,669		298,459
Inventories	203,612		165,799
Other current assets	122,948		123,092
Total current assets	808,642		749,929

Property, plant, and equipment, net	138,768		163,184
Deferred tax assets, net	188,728		181,472

Other long-term assets	44,433		42,178
Operating lease right-of-use assets, net	54,814		65,523
Intangible assets, net	70,346		92,529
Goodwill	1,011,051		1,098,975
Total assets	$	2,316,782	$	2,393,790

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	235,812	$	193,129
Other current liabilities	46,555		81,253
Wages and benefits payable	77,613		113,532
Taxes payable	13,663		12,208

Current portion of warranty	17,943		18,406
Unearned revenue	110,531		82,816
Total current liabilities	502,117		501,344

Long-term debt, net	451,947		450,228
Long-term warranty	7,515		13,616
Pension benefit obligation	71,111		87,863
Deferred tax liabilities, net	1,723		2,000
Operating lease liabilities	47,147		57,314
Other long-term obligations	118,049		138,666
Total liabilities	1,199,609		1,251,031



Equity
Preferred stock, no par value, 10,000 shares authorized, no shares issued or outstanding	—		—
Common stock, no par value, 75,000 shares authorized, 45,154 and 45,152 shares issued and outstanding	1,783,193		1,779,775
Accumulated other comprehensive loss, net	(141,821)		(148,098)
Accumulated deficit	(547,544)		(515,600)
Total Itron, Inc. shareholders' equity	1,093,828		1,116,077
Noncontrolling interests	23,345		26,682
Total equity	1,117,173		1,142,759
Total liabilities and equity	$	2,316,782	$	2,393,790

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

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, 2022	45,152	$	1,779,775	$	(148,098)	$	(515,600)	$	1,116,077	$	26,682	$	1,142,759
Net income (loss)						906		906		(10)		896
Other comprehensive income (loss), net of tax				52,815				52,815				52,815

Net stock issued and repurchased	165	784						784				784




Stock-based compensation expense		6,127						6,127				6,127
Stock repurchased program	(280)	(16,629)						(16,629)				(16,629)




Balances at March 31, 2022	45,037	1,770,057		(95,283)		(514,694)		1,160,080		26,672		1,186,752
Net income (loss)						(36,967)		(36,967)		102		(36,865)
Other comprehensive income (loss), net of tax				(20,422)				(20,422)				(20,422)
Distributions to noncontrolling interests										(3,784)		(3,784)
Net stock issued and repurchased	33	1,014						1,014				1,014




Stock-based compensation expense		6,405						6,405				6,405


Balances at June 30, 2022	45,070	1,777,476		(115,705)		(551,661)		1,110,110		22,990		1,133,100
Net income						4,117		4,117		355		4,472

Other comprehensive income (loss), net of tax				(26,116)				(26,116)				(26,116)

Net stock issued and repurchased	84	833						833				833




Stock-based compensation expense		4,884						4,884				4,884


Balances at September 30, 2022	45,154	$	1,783,193	$	(141,821)	$	(547,544)	$	1,093,828	$	23,345	$	1,117,173


	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, 2021	40,444	$	1,389,419	$	(138,526)	$	(434,345)	$	816,548	$	23,725	$	840,273
Net income						12,603		12,603		977		13,580

Other comprehensive income (loss), net of tax				(11,783)				(11,783)				(11,783)

Net stock issued and repurchased	206	2,009						2,009				2,009




Stock-based compensation expense		6,270						6,270				6,270
Stock issued related to equity offering	4,472	389,419						389,419				389,419
Proceeds from sale of warrants		45,349						45,349				45,349
Purchases of convertible note hedge contracts, net of tax		(63,576)						(63,576)				(63,576)

Registration fee		(373)						(373)				(373)
Balances at March 31, 2021	45,122	1,768,517		(150,309)		(421,742)		1,196,466		24,702		1,221,168
Net income (loss)						(33,123)		(33,123)		678		(32,445)

Other comprehensive income (loss), net of tax				5,137				5,137				5,137

Net stock issued and repurchased	28	458						458				458




Stock-based compensation expense		6,316						6,316				6,316
Registration fee		24						24				24

Balances at June 30, 2021	45,150	1,775,315		(145,172)		(454,865)		1,175,278		25,380		1,200,658
Net income (loss)						(1,869)		(1,869)		859		(1,010)

Other comprehensive income (loss), net of tax				(6,567)				(6,567)				(6,567)

Net stock issued and repurchased	110	1,080						1,080				1,080




Stock-based compensation expense		5,665						5,665				5,665


Balances at September 30, 2021	45,260	$	1,782,060	$	(151,739)	$	(456,734)	$	1,173,587	$	26,239	$	1,199,826

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

Table of Contents

ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended September 30,
In thousands	2022		2021
Operating activities
Net loss	$	(31,497)	$	(19,875)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of intangible assets	50,612		64,252
Non-cash operating lease expense	12,250		12,962
Stock-based compensation	17,416		18,251
Amortization of prepaid debt fees	2,610		17,383
Deferred taxes, net	(6,428)		(5,170)
Loss on sale of business	3,182		28,274
Loss on extinguishment of debt, net	—		10,000
Goodwill impairment	38,480		—
Restructuring, non-cash	(879)		951
Other adjustments, net	2,148		3,720
Changes in operating assets and liabilities, net of acquisition and sale of business:
Accounts receivable	12,270		40,624
Inventories	(48,377)		2,150
Other current assets	(15,907)		26,072
Other long-term assets	(7,897)		5,058
Accounts payable, other current liabilities, and taxes payable	42,550		(27,124)
Wages and benefits payable	(30,877)		14,110
Unearned revenue	32,151		(13,158)
Warranty	(5,031)		(5,969)
Other operating, net	(29,246)		(31,364)
Net cash provided by operating activities	37,530		141,147

Investing activities
Net proceeds related to the sale of business	55,933		3,142
Acquisitions of property, plant, and equipment	(14,886)		(27,781)
Business acquisitions, net of cash and cash equivalents acquired	23		—
Other investing, net	2,424		2,820
Net cash provided by (used in) investing activities	43,494		(21,819)

Financing activities
Proceeds from borrowings	—		460,000
Payments on debt	—		(946,094)
Issuance of common stock	2,631		4,351
Proceeds from common stock offering	—		389,419
Proceeds from sale of warrants	—		45,349
Purchases of convertible note hedge contracts	—		(84,139)
Repurchase of common stock	(16,972)		—
Prepaid debt fees	(697)		(12,021)
Other financing, net	(4,358)		6,327
Net cash used in financing activities	(19,396)		(136,808)

Effect of foreign exchange rate changes on cash and cash equivalents	(8,794)		(762)
Increase (decrease) in cash and cash equivalents	52,834		(18,242)
Cash and cash equivalents at beginning of period	162,579		206,933
Cash and cash equivalents at end of period	$	215,413	$	188,691




Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes, net	$	9,954	$	5,989
Interest	1,409		8,655

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

Table of Contents

ITRON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

(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 and the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021, Consolidated Statements of Equity for the three months ended September 30, 2022 and 2021, June 30, 2022 and 2021, and March 31, 2022 and 2021, the Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021, and the Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, 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 nine months ended September 30, 2022 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, 2021 filed with the SEC in our Annual Report on Form 10-K on February 28, 2022 (2021 Annual Report). There have been no significant changes in financial statement preparation or significant accounting policies since December 31, 2021.

Risks and Uncertainties

The COVID-19 pandemic has had global economic impacts including disrupting customer demand and global supply chains, resulting in 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. New variants of the virus may cause previously lifted restrictions to be reinstated, which could result in more disruptions. As economies have reopened, global supply chains have struggled to keep pace with rapidly changing demand. The resulting supply constraints have manifested across a variety of areas including mechanical, electrical, and logistics portions of the supply chain, which has impacted our ability to ship products in a timely manner. In particular, our ability to obtain adequate supply of semiconductor components has impacted our ability to service recovering customer demand. While we believe the current imbalance in supply and demand is temporal, the timeline to recovery is uncertain. Efforts are ongoing with suppliers to increase supply, including the approval of alternate sources. Recently, inflation in our raw materials and component costs, freight charges, and labor costs have increased above historical levels, due to, among other things, the continuing impacts of the pandemic and uncertain economic environment. We may or may not be able to fully recover these increased costs through pricing actions with our customers. At this time, we have not identified any significant decrease in long-term customer demand for our products and services. However, certain of our customer projects have experienced delay in deliveries, with revenue originally forecasted in prior periods shifting to future periods.

While we have limited direct business exposure in Russia, Belarus and Ukraine, the Russian military actions and the resulting sanctions could adversely affect the global economy, as well as further disrupt the supply chain. A major disruption in the global economy and supply chain could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows. The extent and duration of the military action, sanctions, and resulting market and/or supply disruptions are impossible to predict, but could be substantial. During the third quarter of 2022, we substantially liquidated our legal entity in Russia, recognizing a loss of $1.9 million for the reclassification of the currency translation adjustment from accumulated other comprehensive income (AOCI). The loss was classified within sales, general and administrative expense within the Consolidated Statements of Operations.

Table of Contents

Recently Adopted Accounting Standards

In May 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-04 amending Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). The amendment affects entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. We adopted this amendment as of the effective date of January 1, 2022. The adoption of this amendment did not have a material impact on our financial statements.

In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments. The amendments in this Update modify the lease classification requirements for lessors to align them with practice under Topic 840, particularly in the area of day-one loss accounting. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if certain criteria are met. The effective date for this amendment was January 1, 2022. The adoption of this amendment did not have a material impact on our financial statements.

In November 2021, the FASB issued ASU 2021-10 amending Government Assistance: (Topic 832). The FASB issued this Update to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements. The effective date for this amendment was January 1, 2022. The adoption of this amendment did not have a material impact on our financial statements.

Recent Accounting Standards Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08 amending Business Combination: (Topic 805), which was necessary due to 2014-09, Revenue from Contracts with Customers (Topic 606). The FASB issued this Update to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to (1) recognition of an acquired contract liability and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The effective date for this amendment is January 1, 2023 and all interim periods thereafter. These amendments are to be applied prospectively to business combinations occurring on or after the effective date of the amendments. We currently plan to apply the practical expedients as needed for any future acquisitions. The practical expedients cover contracts that were modified prior to acquisition date as well as determining which date an acquirer would have to determine the standalone selling price of each performance obligation in an acquired contract.

Note 2: Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (EPS):


	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands, except per share data	2022		2021		2022		2021
Net income (loss) available to common shareholders	$	4,117	$	(1,869)	$	(31,944)	$	(22,389)

Weighted average common shares outstanding - Basic	45,139		45,240		45,075		43,983
Dilutive effect of stock-based awards	191		—		—		—
Dilutive effect of convertible notes	—		—		—		—
Weighted average common shares outstanding - Diluted	45,330		45,240		45,075		43,983
Net income (loss) per common share - Basic	$	0.09	$	(0.04)	$	(0.71)	$	(0.51)
Net income (loss) per common share - Diluted	$	0.09	$	(0.04)	$	(0.71)	$	(0.51)

Table of Contents

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 0.4 million and 0.7 million stock-based awards were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2022 because they were anti-dilutive. Approximately 0.4 million and 0.5 million stock-based awards were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2021 because they were anti-dilutive. These stock-based awards could be dilutive in future periods.

Convertible Notes and Warrants

For our Convertible Notes issued in March 2021, the dilutive effect is calculated using the if-converted method. We are required, pursuant to the indenture governing our Convertible Notes, to settle the principal amount of the Convertible Notes in cash and may elect to settle the remaining conversion obligation (stock price in excess of conversion price) in cash, shares, or a combination thereof. Under the if-converted method, we include the number of shares required to satisfy the remaining conversion obligation, assuming all the Convertible Notes were converted. The average closing prices of our common stock for the quarter ended September 30, 2022 were used as the basis for determining the dilutive effect on EPS. The quarterly average closing prices for our common stock did not exceed the conversion price of $126.00, and therefore all associated shares were anti-dilutive.

In conjunction with the issuance of the Convertible Notes, we sold warrants to purchase 3.7 million shares of Itron common stock. The warrants have a strike price of $180.00 per share. For calculating the dilutive effect of the warrants, we use the treasury stock method. With this method, we assume exercise of the warrants at the beginning of the period, or at time of issuance if later, and the issuance of common stock upon exercise. Proceeds from the exercise of the warrants are assumed to be used to repurchase shares of our stock at the average market price during the period. The incremental shares, representing the number of shares assumed to be exercised with the warrants less the number of shares repurchased, are included in diluted weighted average common shares outstanding. For periods where the warrants strike price of $180.00 per share is greater than the average share price of Itron stock for the period, the warrants would be anti-dilutive. For the three and nine months ended September 30, 2022, the quarterly average closing prices of our common stock did not exceed the warrant strike price and therefore 3.7 million shares were considered anti-dilutive.

Convertible Note Hedge Transactions

In connection with the issuance of the Convertible Notes, we entered into privately negotiated call option contracts on our common stock (the Convertible Note Hedge Transactions) with certain commercial banks (the Counterparties). The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Convertible Notes, approximately 3.7 million shares of our common stock, the same number of shares initially underlying the Convertible Notes, at a strike price of approximately $126.00, subject to customary adjustments. The Convertible Note Hedge Transactions will expire upon the maturity of the Convertible Notes, subject to earlier exercise or termination. Exercise of the Convertible Note Hedge Transactions would reduce the number of shares of our common stock outstanding and therefore would be anti-dilutive.

Table of Contents

Note 3: Certain Balance Sheet Components

A summary of accounts receivable from contracts with customers is as follows:


Accounts receivable, net
In thousands	September 30, 2022		December 31, 2021
Trade receivables (net of allowance of $4,506 and $5,730)	$	231,998	$	261,124
Unbilled receivables	34,671		37,335
Total accounts receivable, net	$	266,669	$	298,459



Allowance for credit losses account activity	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands	2022		2021		2022		2021
Beginning balance	$	5,630	$	1,107	$	5,730	$	1,312
Provision for (release of) doubtful accounts, net	(1,062)		2,164		(544)		2,122
Accounts recovered (written-off), net	(214)		(440)		(458)		(582)
Effect of change in exchange rates	152		(33)		(222)		(54)
Ending balance	$	4,506	$	2,798	$	4,506	$	2,798


Inventories
In thousands	September 30, 2022		December 31, 2021
Raw materials	$	160,000	$	122,434
Work in process	8,359		7,856
Finished goods	35,253		35,509
Total inventories	$	203,612	$	165,799


Property, plant, and equipment, net
In thousands	September 30, 2022		December 31, 2021
Machinery and equipment	$	296,488	$	314,502
Computers and software	115,822		111,540
Buildings, furniture, and improvements	125,911		131,764
Land	8,221		8,952
Construction in progress, including purchased equipment	20,212		39,527
Total cost	566,654		606,285
Accumulated depreciation	(427,886)		(443,101)
Property, plant, and equipment, net	$	138,768	$	163,184



Depreciation expense	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands	2022		2021		2022		2021
Depreciation expense	$	10,948	$	12,389	$	31,161	$	37,338

Table of Contents

Note 4: Intangible Assets and Liabilities

The gross carrying amount and accumulated amortization (accretion) of our intangible assets and liabilities, other than goodwill, were as follows:


	September 30, 2022						December 31, 2021
In thousands	Gross		Accumulated (Amortization) Accretion		Net		Gross		Accumulated (Amortization) Accretion		Net
Intangible Assets
Core-developed technology	$	491,898	$	(484,225)	$	7,673	$	505,429	$	(491,047)	$	14,382
Customer contracts and relationships	307,838		(247,555)		60,283		336,421		(261,043)		75,378
Trademarks and trade names	69,562		(67,416)		2,146		74,551		(72,133)		2,418
Other	12,011		(