View:
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 15, 2005
-------------------------------------------------
Date of Report (Date of Earliest Event Reported)
ITRON, INC.
--------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Washington 000-22418 91-1011792
- ----------------------------- ----------------------- --------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
2818 N. Sullivan Road, Spokane, WA 99216
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices, Zip Code)
(509) 924-9900
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
None
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On February 15, 2005, Itron, Inc. issued a press release announcing
preliminary financial results for the fourth quarter and year ending
December 31, 2004. A copy of this press release and accompanying
financial statements are attached as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits are filed as part of this report:
Exhibit
Number Description
- --------- -------------------------------------------------------------
99.1 Press Release dated February 15, 2005.
The information presented in this Current Report on Form 8-K may contain
forward-looking statements and certain assumptions upon which such
forward-looking statements are in part based. Numerous important factors,
including those factors identified in Itron, Inc.'s Annual Report on Form 10-K/A
and other of the Company's filings with the Securities and Exchange Commission,
and the fact that the assumptions set forth in this Current Report on Form 8-K
could prove incorrect, could cause actual results to differ materially from
those contained in such forward-looking statements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
ITRON, INC.
Dated: February 15, 2005 By: /s/ STEVEN M. HELMBRECHT
----------------------------
Steven M. Helmbrecht
Sr. Vice President and Chief Financial
Officer
EXHIBIT INDEX
Exhibit
Number Description
- --------- ------------------------------------------------------------
99.1 Press release dated February 15, 2005.
Exhibit 99.1
Itron Reports Preliminary Fourth Quarter and
Full Year 2004 Financial Results
SPOKANE, Wash.--(BUSINESS WIRE)--Feb. 15, 2005--
Acquisition Related Charges Result in GAAP Loss for the Quarter
and Full Year Pro Forma EPS was 41 Cents for Quarter and 93 Cents
for Full Year
Itron, Inc. (NASDAQ:ITRI), today reported its preliminary
financial results for the quarter and full year ended December 31,
2004.
Summarizing the Company's financial performance for the year,
LeRoy Nosbaum, chairman and CEO noted, "The acquisition of our
electricity metering business on July 1, resulted in an exceptionally
strong finish to the year. The smooth integration of that acquisition,
along with other operational improvements resulted in dramatically
increased revenues, profits and cash flow in the second half of 2004."
Selected Q4 2004 Highlights:
-- Revenues were $131.4 million for the quarter, an increase of
7% over the third quarter and a 64% increase over the year ago
fourth quarter.
-- Acquisition related and restructuring charges led to a GAAP
net loss for the quarter of $6.8 million, or $.32 per diluted
share, compared to a loss of $1.6 million, or $.08 per diluted
share for the year ago fourth quarter.
-- Pro forma net income was $9.1 million in the fourth quarter,
or $.41 per diluted share, compared to $7.1 million, or $.32
per diluted share in the third quarter, and $253,000 or $.01
per diluted share for the year ago fourth quarter.
-- Cash flow from operations in the fourth quarter was $24.5
million, compared with $20.4 million in the third quarter and
negative operating cash flow of $6.0 million in the year ago
fourth quarter.
-- New order bookings in the fourth quarter, excluding
Electricity Metering, were $74 million, the highest quarterly
total in over two years. Total new order bookings including
Electricity Metering were $128 million.
These financial results are preliminary as the Company's
independent auditors have not yet completed their audit fieldwork or
their audit, which audit the Company currently anticipates will be
complete on or about March 8, 2005. Although management is not
currently aware of any adjustments that in the aggregate will require
a material change to these financial results, it is possible that
there may be adjustments prior to the filing of the Company's Annual
Report on Form 10-K. In particular, the Company's annual assessment of
whether goodwill or intangible assets have been impaired is not yet
complete.
Total Company fourth quarter revenues were $131.4 million in 2004
compared with $80.0 million in 2003. For the full year, total Company
revenues were $399.2 million in 2004, compared with $317.0 million in
2003. The increased revenues in 2004 are driven by the addition of our
Electricity Metering business mid-year. Meter Data Collection (MDC)
segment revenues declined in the fourth quarter of 2004 compared with
2003 primarily because approximately two-thirds of our electric AMR
shipments in 2004 were solid-state electricity meters with embedded
AMR (which are reflected in Electricity Metering segment revenues) as
opposed to separate AMR modules for installation on new or existing
mechanical electricity meters (which are shown in MDC segment
revenues). This transition in our electric AMR business, as well as
slow industry-wide order activity from large investor owned utilities
in late 2003 and the first three quarters of 2004, resulted in lower
MDC revenues for the full year 2004 compared with 2003.
We shipped approximately 1.3 million AMR endpoints in the fourth
quarter of 2004, which includes separate AMR modules as well as
electricity meters with embedded AMR, compared with approximately 1.1
million AMR endpoints in the fourth quarter of 2003, all of which were
separate AMR modules. For the full year 2004, total AMR endpoint
shipments were 4.5 million, compared with 4.3 million in 2003. Prior
to the Electricity Metering acquisition on July 1, 2004, revenues from
shipments of electricity meters with our AMR embedded were in the form
of royalties only.
New order bookings, excluding Electricity Metering, were $74
million for the quarter, 64% higher than new order bookings in the
fourth quarter of last year, and our highest quarterly total for new
order bookings since the third quarter of 2002. For the full year
2004, excluding Electricity Metering, new order bookings were $251
million compared with $214 million in 2003. Including Electricity
Metering, new order bookings were $128 million for the fourth quarter
of 2004, resulting in a book to bill ratio of approximately 1.1 to 1.
New order bookings were $358 million for the full year 2004, resulting
in a book to bill ratio of approximately 1 to 1 for the full year
2004, a significant improvement over the book to bill ratio in 2003 of
approximately .8 to 1.
Backlog figures in this release for 2004 include our Electricity
Metering business. Twelve-month backlog, which represents the portion
of backlog that will be earned over the next twelve months, was $97
million at December 31, 2004, compared with $104 million at September
30, 2004, and $62 million a year ago. Total backlog was $179 million
at December 31, 2004 compared with $177 million at the end of last
quarter and $145 million a year ago.
In the fourth quarter of 2004, we completed a valuation analysis
related to our Electricity Metering acquisition that closed on July 1,
2004, which resulted in a $6.4 million in process research and
development (IPR&D) charge in the quarter and in a significant
increase to intangible asset amortization expenses in the quarter. We
expect to file a Form 8-K shortly that reflects an updated
reallocation of the purchase price for our Electricity Metering
acquisition.
As a result of the IPR&D, increased asset amortization expenses,
and restructuring charges, on a GAAP basis, we reported a net loss of
$6.8 million, or $.32 per diluted share, for the fourth quarter of
2004, and a net loss of $5.1 million, or $.24 per diluted share for
the full year 2004. By comparison, on a GAAP basis, we had a net loss
of $1.6 million, or $.08 per diluted share for the fourth quarter of
2003 and net income of $10.5 million, or $.48 per diluted share, for
the full year 2003.
Pro forma net income for the fourth quarter was $9.1 million, or
$.41 per diluted share in 2004, compared with $253,000, or $.01 cents
per diluted share in the fourth quarter of 2003. For the full year
2004, pro forma net income was $20.6 million, or $.93 per diluted
share, compared with $19.3 million, or $.89 per diluted share in 2003.
Pro forma earnings exclude the amortization of intangible assets and
debt placement fees, restructurings, IPR&D and extraordinary
litigation accruals. A schedule reconciling pro forma income with GAAP
income is attached to this release.
Gross margin increased from 40% in the third quarter of 2004 to
42% in the fourth quarter of 2004. By comparison, fourth quarter 2003
gross margin was 35%. The lower gross margin in the fourth quarter of
2003 resulted primarily from higher warranty expense related to a
specific product issue. For the full year, gross margin was 43%,
compared with 45% in 2003. The lower gross margin for the full year
2004 results from the addition of our Electricity Metering business
mid-year, which has a slightly lower gross margin than the rest of our
business, and lower margins in our Meter Data Collection business that
resulted primarily from a shift in the mix of hardware products,
partially offset by lower warranty expense in 2004.
Sales and marketing, product development and general and
administrative expenses were 27% of revenues for the fourth quarter,
and 31% of revenues for the full year 2004. By comparison, they were
31% in the fourth quarter of 2003 and 34% for the full year 2003. The
decreases as a percentage of revenues in 2004 reflect improved
operating leverage and the lower level of spending required for
Electricity Metering marketing and product development due to its more
narrowly focused product line, offset by higher general and
administrative expenses including Sarbanes-Oxley compliance and audit
fees.
Higher intangible asset amortization expenses and interest expense
for the quarter and year-to-date periods in 2004 are attributable to
our Electricity Metering acquisition.
Operating activities generated $24.5 million in cash during the
quarter compared to negative operating cash flow of $6.0 million in
the fourth quarter of 2003. For the full year 2004, operating
activities generated $52.1 million in cash, compared with $10.3
million for the full year in 2003. The higher operating cash flow in
2004 results partially from our new Electricity Metering operations,
but as well from higher collections on accounts receivable in 2004 and
an increase in unearned revenue due primarily to increased service
support renewals.
We made a total of $24.0 million of optional repayments during the
fourth quarter of 2004 on the $185.0 million term loan issued on July
1, 2004 in connection the acquisition of our Electricity Metering
business. At December 31, 2004 the term loan balance was $150.1
million. To date in 2005, we have made additional optional repayments
totaling $3.0 million.
Business Outlook:
Our outlook for 2005 does not include any impact related to the
expensing of stock options or shares issued under our employee stock
purchase plan (ESPP). We expect to implement FASB's Statement 123R
effective July 1, 2005, which requires the expensing of stock options
and ESPP shares issued at a discount. Expensing of stock options will
decrease gross margin, increase expenses and influence our effective
tax rate.
For the quarter ending March 31, 2005, we expect:
-- Revenues to be between $110 and $115 million, reflecting the
seasonal downturn typically experienced in the first quarter
due to weather and utility spending patterns.
-- Pro forma diluted earnings per share between 20 and 22 cents.
For the full year 2005, we expect:
-- Revenues to be between $505 and $515 million.
-- Pro forma diluted earnings per share between $1.40 and $1.45.
-- Operating cash flow between $70 and $80 million.
-- Net capital expenditures of approximately $15 million.
"Our outlook for 2005 reflects low single digit growth in hardware
revenues and high single digit growth in software revenues over the
second half of 2004," said Nosbaum. "AMR activity levels remain high
and we expect to close some orders in the current quarter with several
investor owned utilities. With the reorganization into two primary
operations groups now behind us, we expect to see further efficiencies
in our expanded operations as we move through 2005 and look for
another good year of free cash flow in 2005."
Use of Pro Forma Financial Information:
To supplement our consolidated financial statements presented in
accordance with GAAP, we use pro forma measures of operating results,
net income and earnings per share. Pro forma results are adjusted from
GAAP-based results to exclude certain costs and expenses that we
believe are not indicative of our core operating results. Pro forma
results are one of the primary indicators management uses for
evaluating historical results and for planning and forecasting future
periods. We believe pro forma results provide consistency in our
financial reporting which enhances our investor's understanding of our
current financial performance as well as our future prospects. Pro
forma results should be viewed in addition to, and not in lieu of,
GAAP results.
Earnings Conference Call:
Itron will host a conference call to discuss the financial results
contained in this release at 1:45 p.m. PST on February 15, 2005. The
call will be webcast in a listen only mode by Thomson/CCBN and can be
accessed online at www.itron.com, "About Itron - Investor Events."
Investors may also listen to the live call through Thomson's
StreetEvents Network at www.fulldisclosure.com or
www.streetevents.com. The live webcast will begin at 1:45 p.m. (PT)
and webcast replays will begin shortly 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), and
entering passcode #364612.
Forward Looking Statements:
This release contains forward-looking statements concerning
Itron's operations, financial performance, sales, earnings and cash
flow. These statements reflect our current plans and expectations and
are based on information currently available. They 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 the Company's
products, rescheduling of current customer orders, changes in
estimated liabilities for product warranties, changes in laws and
regulations, and other factors which are more fully described in our
Annual Report on Form 10-K/A for the year ended December 31, 2003 and
Forms 10-Q/A for 2004 on file with the SEC. Itron undertakes no
obligation to update publicly or revise any forward-looking
statements.
About Itron:
Itron is a leading technology provider and critical source of
knowledge to the global energy and water industries. More than 3,000
utilities worldwide rely on Itron technology to deliver the knowledge
they require to optimize the delivery and use of energy and water.
Itron delivers value to its clients by providing industry-leading
solutions for electricity metering, meter data collection, energy
information management, demand side management and response, load
forecasting, analysis and consulting services, distribution system
design and optimization, Web-based workforce automation, commercial
and industrial customer care and residential energy management. To
know more, start here: www.itron.com.
Statements of operations, reconciliation between reported and pro
forma income and EPS, balance sheets and segment information follow.
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands,
except per share data) Three Months Ended Twelve Months Ended
December 31, December 31,
Revenues 2004 2003 2004 2003
-------- -------- -------- --------
Sales $116,185 $ 69,253 $346,543 $273,783
Service 15,261 10,724 52,651 43,182
-------- -------- -------- --------
Total revenues 131,446 79,977 399,194 316,965
-------- -------- -------- --------
Cost of revenues
Sales 67,138 46,763 198,131 151,023
Service 9,254 5,404 30,394 22,388
-------- -------- -------- --------
Total cost of revenues 76,392 52,167 228,525 173,411
-------- -------- -------- --------
Gross profit 55,054 27,810 170,669 143,554
Operating expenses
Sales and marketing 13,308 10,024 45,279 40,985
Product development 11,710 9,734 44,379 41,508
General and administrative 10,784 5,398 35,263 26,141
Amortization of intangibles 16,630 2,574 27,901 9,618
Restructurings 3,253 - 7,258 2,208
In-process research and
development 6,400 - 6,400 900
Litigation accrual - - - 500
-------- -------- -------- --------
Total operating expenses 62,085 27,730 166,480 121,860
-------- -------- -------- --------
Operating income (loss) (7,031) 80 4,189 21,694
Other income (expense)
Equity in affiliates (13) (83) - 79
Interest income 14 (106) 166 159
Interest expense (4,983) (421) (13,145) (2,638)
Other income (expense), net 98 (1,817) (389) (1,395)
-------- -------- -------- --------
Total other income
(expense) (4,884) (2,427) (13,368) (3,795)
-------- -------- -------- --------
Income (loss) before income
taxes (11,915) (2,347) (9,179) 17,899
Income tax benefit (provision) 5,108 708 4,122 (7,421)
-------- -------- -------- --------
Net income (loss) $ (6,807) $ (1,639) $ (5,057) $ 10,478
-------- -------- -------- --------
Earnings per share
Basic net income (loss)
per share $ (0.32) $ (0.08) $ (0.24) $ 0.51
-------- -------- -------- --------
Diluted net income (loss)
per share $ (0.32) $ (0.08) $ (0.24) $ 0.48
-------- -------- -------- --------
Weighted average number of
shares outstanding
Basic 21,204 20,556 20,922 20,413
Diluted 21,204 20,556 20,922 21,740
ITRON, INC.
RECONCILIATION BETWEEN GAAP AND PRO FORMA INCOME (LOSS) AND EPS
(Unaudited, in thousands,
except per share data) Three Months Ended Twelve Months Ended
December 31, December 31,
PRO FORMA NET INCOME 2004 2003 2004 2003
-------- ------- -------- --------
GAAP basis income (loss)
before income taxes $(11,915) $(2,347) $ (9,179) $ 17,899
Adjustments to income (loss)
before income taxes
Amortization of intangibles 16,630 2,574 27,901 9,618
Amortization of debt
placement fees 633 190 1,745 680
Restructurings 3,253 - 7,258 2,208
In-process research and
development 6,400 - 6,400 900
Litigation accrual - - - 500
-------- ------- -------- --------
Total adjustments 26,916 2,764 43,304 13,906
Adjusted income before income
taxes 15,001 417 34,125 31,805
Income tax provision (5,884) (164) (13,572) (12,480)
-------- ------- -------- --------
Pro forma net income $ 9,117 $ 253 $ 20,553 $ 19,325
-------- ------- -------- --------
PRO FORMA EARNINGS PER SHARE
Basic
Weighted average number of
basic shares outstanding 21,204 20,556 20,922 20,413
Basic pro forma net income
per share $ 0.43 $ 0.01 $ 0.98 $ 0.95
-------- ------- -------- --------
Diluted
Weighted average number of
basic shares outstanding 21,204 20,556 20,922 20,413
Employee stock option shares 1,073 1,304 1,134 1,327
-------- ------- -------- --------
Weighted average number of
diluted shares outstanding 22,277 21,860 22,056 21,740
Pro forma net income $ 9,117 $ 253 $ 20,553 $ 19,325
-------- ------- -------- --------
Diluted pro forma net income
per share $ 0.41 $ 0.01 $ 0.93 $ 0.89
-------- ------- -------- --------
ITRON, INC.
RECONCILIATION BETWEEN GAAP NET INCOME (LOSS),
EBITDA AND PRO FORMA EBITDA
(Unaudited, in thousands) Three Months Twelve Months
Ended Ended
December 31, December 31,
2004 2003 2004 2003
------- ------- ------- -------
GAAP basis net income (loss) $(6,807) $(1,639) $(5,057) $10,478
Adjustments to net income (loss)
Interest income (14) 106 (166) (159)
Interest expense 4,983 421 13,145 2,638
Income tax provision (benefit) (5,108) (708) (4,122) 7,421
Depreciation and amortization 19,859 4,950 38,785 19,040
------- ------- ------- -------
Total adjustments 19,720 4,769 47,642 28,940
-------- -------- -------- --------
EBITDA $12,913 $ 3,130 $42,585 $39,418
In-process research and
development 6,400 - 6,400 900
-------- -------- -------- --------
PRO FORMA EBITDA $19,313 $ 3,130 $48,985 $40,318
------- ------- ------- -------
ITRON, INC.
SEGMENT INFORMATION
(Unaudited, in thousands) Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
-------- -------- -------- --------
Revenues
Hardware Solutions
Meter Data Collection $ 59,846 $ 67,469 $238,560 $266,985
Electricity Metering 58,391 - 112,586 -
-------- -------- -------- --------
Total Hardware Solutions 118,237 67,469 351,146 266,985
Software Solutions 13,209 12,508 48,048 49,980
-------- -------- -------- --------
Total Company $131,446 $ 79,977 $399,194 $316,965
-------- -------- -------- --------
Gross profit
Hardware Solutions
Meter Data Collection $ 26,133 $ 24,282 $108,348 $128,505
Electricity Metering 23,334 - 44,517 -
-------- -------- -------- --------
Total Hardware Solutions 49,467 24,282 152,865 128,505
Software Solutions 5,587 3,528 17,804 15,049
-------- -------- -------- --------
Total Company $ 55,054 $ 27,810 $170,669 $143,554
-------- -------- -------- --------
Operating income (loss)
Hardware Solutions
Meter Data Collection $ 21,196 $ 18,669 $ 87,963 $105,605
Electricity Metering 12,762 - 30,047 -
Other unallocated costs (307) (72) (911) (280)
-------- -------- -------- --------
Total Hardware Solutions 33,651 18,597 117,099 105,325
Software Solutions (1,257) (4,841) (14,239) (21,037)
Corporate unallocated (39,425) (13,676) (98,671) (62,594)
-------- -------- -------- --------
Total Company $ (7,031) $ 80 $ 4,189 $ 21,694
-------- -------- -------- --------
ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) December 31, December 31,
2004 2003
----------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 11,624 $ 6,240
Accounts receivable, net 90,097 70,782
Inventories 45,459 16,037
Deferred income taxes, net 22,733 11,673
Other 5,477 4,557
----------- -----------
Total current assets 175,390 109,289
Property, plant and equipment, net 59,690 42,818
Intangible assets, net 162,137 22,979
Goodwill 117,471 90,385
Deferred income taxes, net 27,252 31,755
Other 15,211 6,263
----------- -----------
Total assets $ 557,151 $ 303,489
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 37,440 $ 26,236
Wages and benefits payable 13,947 10,711
Short-term borrowings - 10,000
Current portion of debt 18,647 38,245
Current portion of warranty 7,243 13,939
Unearned revenue 22,991 12,004
----------- -----------
Total current liabilities 100,268 111,135
Long-term debt 256,361 -
Project financing debt 3,227 4,024
Warranty 6,331 3,536
Other obligations 6,535 7,550
----------- -----------
Total liabilities 372,722 126,245
Shareholders' equity
Preferred stock - -
Common stock 211,719 200,567
Accumulated other comprehensive income (loss) 954 (136)
Accumulated deficit (28,244) (23,187)
----------- -----------
Total shareholders' equity 184,429 177,244
----------- -----------
Total liabilities and shareholders'
equity $ 557,151 $ 303,489
----------- -----------
CONTACT: Itron, Inc.
Mima Scarpelli, 509-891-3565
mima.scarpelli@itron.com