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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
July 19, 2004
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(Date of Report)
ITRON, INC.
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(Exact Name of Registrant as Specified in Charter)
Washington 000-22418 91-1011792
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
2818 N. Sullivan Road, Spokane, WA 99216
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(Address of Principal Executive Offices, including Zip Code)
(509) 924-9900
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(Registrant's Telephone Number, Including Area Code)
None
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(Former Name or Former Address, if Changed Since Last Report)
Item 7. Financial Statements and Exhibits. The following item is attached as an
exhibit hereto:
(c) Exhibits.
Exhibit No. 99.1 Press Release dated July 19, 2004
Item 12. Results of Operations and Financial Condition.
On July 19, 2004, Itron, Inc. issued a press release announcing the
financial results for the second quarter ending June 30, 2004. A copy of this
press release and accompanying financial statements are attached as Exhibit
99.1.
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: July 19, 2004 By: /s/ DAVID G. REMINGTON
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David G. Remington
Vice President and Chief Financial Officer
Exhibit 99.1
Itron Reports Financial Results for Second Quarter 2004
SPOKANE, Wash.--(BUSINESS WIRE)--July 19, 2004--Itron, Inc. (Nasdaq:ITRI),
today reported its financial results for the quarter ended June 30, 2004.
In January 2004, we began to implement an organizational change which
resulted in a change in our segment reporting from four primary market facing
business units, Electric, Natural Gas, Water & Public Power and International,
to two operating groups, Hardware Solutions and Software Solutions. Segment
information in this press release is based on the new segment reporting
structure. Previous segment information has been restated to conform to the
current organizational presentation. In addition, in the process of implementing
the organizational change, we reviewed the classification of expenses related to
certain activities and as a result, certain amounts in 2003 and the first
quarter of 2004 have been reclassified to conform to the current period
presentation.
On July 1, 2004, we closed the acquisition of Schlumberger's electricity
metering products division (SEM) for a purchase price of $248 million. We used
proceeds from a new $240 million senior secured credit facility and $125 million
in senior subordinated notes to finance the acquisition, pay related fees and
expenses, and repay approximately $50.2 million of outstanding debt under our
existing credit facility. The $125 million of senior subordinated notes was
closed into escrow in early May and is reflected as long-term restricted cash on
our balance sheet at June 30, 2004. Our results for the second quarter include
approximately two months of net interest expense related to that debt as well as
certain miscellaneous expenses associated with the acquisition and integration.
We will begin to report combined operating results effective with our third
quarter 2004 financial results.
Second quarter revenues were $79.6 million compared with $80.3 million in
the second quarter of 2003. Hardware Solutions revenues decreased $1.9 million
in 2004 compared to 2003 due to lower handheld meter reading revenues offset by
higher shipments of automatic meter reading (AMR) hardware and increased
revenues for AMR installation and implementation services. Software Solutions
revenues increased $1.3 million in 2004 due to higher software license revenues
along with related implementation and consulting services.
Year-to-date 2004 revenues were $145.2 million compared with $154.9 million
in the first six months of 2003, with the lower revenues this year primarily
related to lower handheld meter reading system revenues.
While revenues in 2004 declined for the quarter and year-to-date periods,
new order bookings increased. New order bookings for the quarter were $66
million compared with $41 million in the second quarter of 2003. New order
bookings in the first six months of 2004 were $132 million, 30% higher than in
the first six months of 2003. Total backlog at June 30, 2004 was $153 million
compared with $155 million last quarter and $173 million a year ago.
Twelve-month backlog, which represents the portion of backlog that will be
earned over the next twelve months, was $76 million at June 30, 2004, compared
with $79 million at March 31, 2004 and June 30, 2003.
Earnings in the second quarter of 2004 were impacted by unusual
non-operating expenses, including $1.3 million of net interest expense
associated with debt financing for the SEM acquisition and a $775,000 write-off
of the Company's remaining minority investment in Lanthorn Technologies.
On a GAAP basis, Itron had net income of $818,000 in the quarter, compared
with $4.2 million in the second quarter of 2003. Year-to-date GAAP net income
was $80,000 compared with $7.1 million in 2003.
Pro forma net income for the second quarter was $2.1 million, or 10 cents
per diluted share, compared with $6.1 million, or 28 cents per diluted share in
the second quarter of 2003. Year-to-date pro forma net income was $4.1 million,
or 19 cents per diluted share, compared with $12.4 million, or 57 cents per
diluted share in 2003. Pro forma earnings exclude intangible amortization
expenses, restructuring charges and in-process R&D charges. A schedule
reconciling income between GAAP and pro forma is attached to this release.
Gross margin for the quarter and year-to-date period in 2004 was 46%
compared with 49% in the second quarter and year-to-date period in 2003. The
decrease in gross margin in 2004 primarily reflects a mix shift in hardware,
including the mix of AMR units, sales through indirect channels and handheld
systems. Revenues through indirect channels were approximately 22% of
year-to-date revenues in 2004 compared with 18% in 2003.
Cash used by operations was $6.8 million for the quarter. Accounts
receivable increased $14.3 million in the quarter due to the timing of sales
late in June and was the primary use of cash. Year-to-date cash flow from
operations was $7.2 million in 2004 compared with $9.3 million in 2003.
Short-term borrowings were $21 million at June 30, 2004, up from $5 million
at March 31, 2004. Approximately $8.8 million of quarter-end borrowings were
related to pre-funding of various items for the SEM acquisition and
pre-acquisition costs. At June 30, 2004 we had approximately $128.3 million of
restricted cash and had outstanding $124.1 million of discounted senior
subordinated notes related to the SEM acquisition which closed the next day.
"We close the first half of the year delighted to have finally completed
the acquisition of Schlumberger Electricity Metering," said LeRoy Nosbaum,
chairman and CEO. "On the other hand, we are not pleased with our financial
results in the first two quarters. The utility industry in general and large
electric and gas utilities specifically, continue to be in the doldrums. Despite
the presence of justifiable business cases, larger AMR projects have not moved
forward at the pace we had expected due to numerous other issues at our
customers ranging from financial to organizational.
"Accordingly, we have lowered our outlook for AMR revenues for the
remainder of the year to reflect further delays in large orders from some of the
investor-owned utilities with whom we are working. Fortunately, the acquisition
of our new electricity metering business provides nice revenue and earnings
growth on top of what appears to be a relatively flat year for our historic
business."
Business Outlook:
For the last six months of 2004, we expect revenues to be between $265 and
$270 million, compared with $162 million in revenues for Itron in the last six
months of 2003. We expect pro forma net income for the last six months of 2004
to be between $15.5 and $16.5 million, or 70 to 75 cents per diluted share,
compared with $6.8 million, or 31 cents per diluted share for Itron in the last
six months of 2003.
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, expenses and expense reversals 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 the pro forma results
provide useful information to investors in terms of enhancing their overall
understanding of our current financial performance as well as our future
prospects. We have historically provided pro forma results and believe the
inclusion of them provides investors with consistency in our financial
reporting. 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 for the
quarter at 1:45 p.m. PT on July 19, 2004. 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 #351152.
Forward Looking Statements:
This release contains forward-looking statements concerning Itron's
operations, economic 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, potential disruptions in operations
associated with integrating the SEM acquisition, 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 for the year ended December 31, 2003
and Form 10-Q for the quarter ended March 31, 2004 on file with the Securities
and Exchange Commission. 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, transmission and
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 Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenues -------- ------- -------- --------
Sales $ 68,015 $69,941 $123,031 $133,858
Service 11,627 10,323 22,213 21,051
-------- ------- -------- --------
Total revenues 79,642 80,264 145,244 154,909
-------- ------- -------- --------
Cost of revenues
Sales 36,608 33,629 65,831 63,490
Service 6,776 7,281 13,283 15,203
-------- ------- -------- --------
Total cost of revenues 43,384 40,910 79,114 78,693
-------- ------- -------- --------
Gross profit 36,258 39,354 66,130 76,216
Operating expenses
Sales and marketing 10,272 10,959 19,926 20,289
Product development 10,554 11,042 20,776 20,933
General and administrative 8,652 6,730 15,278 13,877
Amortization of intangibles 2,027 2,765 4,054 4,653
Restructurings 52 43 2,434 2,208
In-process research and
development - - - 900
-------- ------- -------- --------
Total operating expenses 31,557 31,539 62,468 62,860
-------- ------- -------- --------
Operating income 4,701 7,815 3,662 13,356
Other income (expense)
Equity in affiliates 8 30 - 52
Interest income 111 28 128 197
Interest expense (2,261) (929) (3,015) (1,385)
Other income (expense), net (1,009) (61) (735) (36)
-------- ------- -------- --------
Total other income (expense) (3,151) (932) (3,622) (1,172)
-------- ------- -------- --------
Income before income taxes 1,550 6,883 40 12,184
Income tax benefit (provision) (732) (2,710) 40 (5,095)
-------- ------- -------- --------
Net income $ 818 $ 4,173 $ 80 $ 7,089
-------- ------- -------- --------
Earnings per share
Basic net income per share $ 0.04 $ 0.20 $ 0.00 $ 0.35
-------- ------- -------- --------
Diluted net income per share $ 0.04 $ 0.19 $ 0.00 $ 0.33
-------- ------- -------- --------
Weighted average number of
shares outstanding
Basic 20,845 20,372 20,750 20,306
Diluted 22,111 21,765 21,987 21,603
ITRON, INC.
RECONCILIATION BETWEEN GAAP AND PRO FORMA INCOME AND EPS
(Unaudited, in thousands, except
per share data) Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
PRO FORMA NET INCOME ------- ------- ------- -------
GAAP basis income before income
taxes $ 1,550 $ 6,883 $ 40 $12,184
Adjustments to net income
Amortization of intangibles 2,027 2,765 4,054 4,653
Restructurings 52 43 2,434 2,208
In-process research and
development - - - 900
------- ------- ------- -------
Total adjustments 2,079 2,808 6,488 7,761
Adjusted income before income taxes 3,629 9,691 6,528 19,945
Income tax provision (1,510) (3,623) (2,432) (7,567)
------- ------- ------- -------
Pro forma net income $ 2,119 $ 6,068 $ 4,096 $12,378
------- ------- ------- -------
PRO FORMA EARNINGS PER SHARE
Basic
Weighted average number of basic
shares outstanding 20,845 20,372 20,750 20,306
Basic pro forma net income per
share $ 0.10 $ 0.30 $ 0.20 $ 0.61
------- ------- ------- -------
Diluted
Weighted average number of basic
shares outstanding 20,845 20,372 20,750 20,306
Employee stock option shares 1,266 1,393 1,237 1,297
------- ------- ------- -------
Weighted average number of diluted
shares outstanding 22,111 21,765 21,987 21,603
Pro forma net income $ 2,119 $ 6,068 $ 4,096 $12,378
------- ------- ------- -------
Diluted pro forma net income per
share $ 0.10 $ 0.28 $ 0.19 $ 0.57
------- ------- ------- -------
ITRON, INC.
SEGMENT INFORMATION
(Unaudited, in thousands) Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
-------- -------- -------- --------
Revenues
Hardware Solutions $ 70,177 $ 72,069 $128,466 $137,865
Software Solutions 9,465 8,195 16,778 17,044
-------- -------- -------- --------
Total Company $ 79,642 $ 80,264 $145,244 $154,909
-------- -------- -------- --------
Gross profit
Hardware Solutions $ 32,484 $ 37,101 $ 60,495 $ 71,058
Software Solutions 3,774 2,253 5,635 5,158
-------- -------- -------- --------
Total Company $ 36,258 $ 39,354 $ 66,130 $ 76,216
-------- -------- -------- --------
Operating income (loss)
Hardware Solutions $ 24,033 $ 28,344 $ 44,310 $ 54,410
Software Solutions (1,737) (3,591) (5,984) (8,792)
Corporate unallocated (17,595) (16,938) (34,664) (32,262)
-------- -------- -------- --------
Total Company $ 4,701 $ 7,815 $ 3,662 $ 13,356
-------- -------- -------- --------
ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) June 30, December 31,
2004 2003
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ASSETS
Current assets
Cash and cash equivalents $ 2,227 $ 6,240
Accounts receivable, net 61,716 70,782
Inventories 20,357 16,037
Deferred income taxes, net 5,266 11,673
Other 3,854 4,557
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Total current assets 93,420 109,289
Property, plant and equipment, net 44,427 42,818
Intangible assets, net 18,925 22,979
Goodwill 90,440 90,385
Restricted cash 128,310 -
Deferred income taxes, net 39,345 31,755
Other 9,988 6,263
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Total assets $ 424,855 $ 303,489
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 22,824 $ 26,236
Wages and benefits payable 10,920 10,711
Short-term borrowings 21,000 10,000
Current portion of debt 17,435 38,245
Current portion of warranty 7,995 13,939
Unearned revenue 11,240 12,004
---------- ----------
Total current liabilities 91,414 111,135
Long-term debt 136,593 -
Project financing debt 3,632 4,024
Warranty 3,768 3,536
Other obligations 7,259 7,550
---------- ----------
Total liabilities 242,666 126,245
Shareholders' equity
Preferred stock - -
Common stock 205,760 200,567
Accumulated other comprehensive loss (464) (136)
Accumulated deficit (23,107) (23,187)
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Total shareholders' equity 182,189 177,244
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Total liabilities and shareholders'
equity $ 424,855 $ 303,489
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CONTACT: Itron, Inc.
Mima Scarpelli, 509-891-3565
mima.scarpelli@itron.com