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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
October 16, 2003
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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 October 16, 2003
Item 12. Results of Operations and Financial Condition.
On October 16, 2003, Itron, Inc. issued a press release announcing Q3 2003
earnings. 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: October 16, 2003 By: /s/ DAVID G. REMINGTON
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David G. Remington
Vice President and Chief Financial Officer
EXHIBIT 99.1
Itron Reports Increased Revenues and EPS for the Third Quarter
SPOKANE, Wash.--(BUSINESS WIRE)--Oct. 16, 2003--Itron, Inc.
(Nasdaq:ITRI), today reported its financial results for the quarter
ended Sept. 30, 2003.
Third quarter revenues in 2003 increased 12% over third quarter
2002 to $82.1 million. On a GAAP basis, we earned 23 cents per diluted
share for the quarter, compared to 27 cents in 2002. Pro forma diluted
earnings per share for the third quarter were 30 cents in 2003
compared with 29 cents last year. A schedule reconciling income
between GAAP and pro forma is attached to this release.
Year-to-date, revenues of $237.0 million, reflect a 14% increase
over the first nine months of 2002. Year-to-date GAAP diluted earnings
per share were 56 cents compared with 45 cents in 2002. Pro forma
diluted earnings per share were 88 cents for the first nine months of
2003, up from 82 cents for the first nine months of 2002.
Comparing the quarter and year-to-date periods in 2003 with 2002,
higher revenues for automatic meter reading (AMR) modules were
partially offset by lower revenues for meter reading software and
system installations. Additional revenue and gross margin highlights
for the quarter and year-to-date periods include:
-- We shipped 1.0 million AMR meter modules in the third quarter
of 2003, 12% more than in the third quarter of 2002.
Year-to-date AMR meter module shipments are up 10% to 3.1
million.
-- Acquisitions since Oct. 1, 2002, contributed $5.5 million to
revenues during the quarter and $13.0 million to revenues in
the first nine months of 2003.
-- Gross margin for the quarter was 48%, compared with 47% in the
third quarter of last year. Year-to-date gross margin has
increased to 49% in 2003 compared with 46% in 2002. The higher
gross margin in 2003 results principally from higher
manufacturing volumes, lower component prices and changes in
product mix.
Sales and marketing, product development and general and
administrative expenses were 35% of revenues for the quarter and first
nine months of 2003, compared with 33% of revenues for the 2002
periods. The increase is largely due to four acquisitions completed
since March 2002, where in the near-term, spending was higher as a
percentage of revenues than in our meter reading systems businesses.
On Oct. 14, 2003, we reached a final settlement of all outstanding
issues in the Benghiat patent litigation and operating expenses in the
third quarter of 2003 reflect a $500,000 charge related to that
settlement. The total settlement of $7.9 million was paid to Benghiat
on Oct. 14, 2003.
We had net interest expense of $764,000 for the third quarter of
2003 compared with $89,000 of net interest income in the third quarter
of 2002. Interest expense in 2003 includes interest on a term loan
related to the Silicon Energy acquisition in March 2003, along with
amortization of related loan origination fees. Year-to-date net
interest expense in 2002 results from interest on approximately $53
million in subordinated debt, which was converted to common stock
during the second quarter of 2002.
Operating cash flow for the third quarter was $7.0 million in 2003
compared with $11.1 million in 2002. Year-to-date cash flow from
operations was $16.2 million in 2003 compared with $32.8 million in
2002. The primary reason for the lower cash flow in 2003 is an
increase in accounts receivable due to the timing of large contract
payments and customers taking slightly longer to pay in 2003. DSOs in
the third quarter of 2003 were 66 compared with 58 in 2002.
Year-to-date operating cash flow in 2003 is also lower due to a $4
million payment in the second quarter to a utility for a modification
to a long-term contract.
New order bookings during the quarter were $67 million, up from
$41 million in the prior quarter, but down from $87 million in the
third quarter last year. Third quarter bookings in 2002 included a $29
million order with one utility for an initial AMR deployment.
Year-to-date, new order bookings are $168 million compared with $170
million in the first nine months of 2002.
Total backlog, which represents the value of undelivered
contractual orders, excluding annual maintenance and certain services
contracts, was $169 million at Sept. 30, 2003, compared with $173
million at June 30, 2003. Twelve-month backlog represents the portion
of backlog that will be earned over the next twelve months and was $69
million at Sept. 30, 2003, compared with $79 million last quarter.
SEM Acquisition Update:
In July 2003, we announced an agreement to acquire Schlumberger
Electricity Metering, Inc. ("SEM") for a purchase price of $255
million. The acquisition combines the industry leader in automatic
meter reading technology ("AMR") and meter data management solutions
with the industry leader in electric metering and expands Itron's
business into the North American electric meter market.
In late August 2003, we received a second request for information
from the FTC in connection with Itron and Schlumberger's filing under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR"). We
expect to have substantially complied with the request for additional
information within the next 30 to 45 days, to receive HSR clearance by
year-end, and anticipate a transaction close early in 2004.
Business Outlook:
The following statements are based on management's current
expectations and do not include the impact of the acquisition of SEM,
which will likely close in early 2004. That acquisition is expected to
be accretive and we will provide more detail on the expected financial
impact of SEM at closing. These forward-looking statements are made as
of the date of this press release. Actual results may differ
materially due to a number of risks and uncertainties. Itron
undertakes no obligation to update publicly or revise any
forward-looking statements.
We expect revenues for 2003 to be approximately $320 million and
pro forma EPS to be approximately $1.20. Pro forma results exclude
restructurings, intangible asset amortization, in-process R&D, and the
Benghiat litigation settlement.
"We had several customers push out large AMR orders in the third
quarter as they were dealing with effects of the hurricane and
blackout," commented LeRoy Nosbaum, chairman and CEO. "This resulted
in lower third quarter bookings than we expected and in our
expectations for 2003 coming in at the low end of our previous
guidance. However, those utilities are getting back to business and as
we look to 2004, we are encouraged by our healthy pipeline of hardware
and software and by improving utility industry fundamentals.
"In addition, we have made progress on our acquisition of SEM in
terms of integration planning and moving the HSR process along at the
FTC and expect SEM to contribute positively to our financial
performance in 2004."
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.
Forward Looking Statements:
This release contains forward-looking statements concerning
Itron's operations, economic performance, sales, earnings growth and
cost reduction programs. 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 1) the timing of the SEM
acquisition closing or the failure to finalize satisfactory credit
arrangements for that acquisition, 2) the rate and timing of customer
demand for the Company's products, 3) rescheduling of current customer
orders, 4) changes in law and regulation (including FCC licensing
actions), 5) and other factors which are more fully described in our
Annual Report on Form 10-K for the year ended December 31, 2002 and
2003 Form 10-Qs on file with the Securities and Exchange Commission.
Itron undertakes no obligation to update publicly or revise any
forward-looking statements.
Investor Conference Call:
Itron will host a teleconference with institutional investors and
analysts at 1:45 p.m. Pacific time (4:45 p.m. Eastern time), on
Thursday, Oct. 16, 2003, to discuss financial results for the quarter.
Internet users can hear a simultaneous live webcast of the
teleconference at www.itron.com, "About Itron -- Investor Relations --
Investor Events." Webcast replays will begin shortly after the
conclusion of the call and will be available through Nov. 30, 2003. 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 800-428-6051 (Domestic) or 973-709-2089
(International), passcode 307430.
About Itron:
Itron is a leading technology provider and critical source of
knowledge to the global energy and water industries. More than 2,800
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 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.
Statements of operations, reconciliation between reported and pro
forma income and EPS, balance sheets and segment information follow.
ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) Sept. 30, Dec. 31,
2003 2002
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ASSETS
Current assets
Cash and cash equivalents $ 10,549 $ 32,564
Accounts receivable, net 61,271 57,571
Inventories 16,031 15,660
Deferred income taxes 8,989 5,927
Other 4,823 2,770
-------- --------
Total current assets 101,663 114,492
Property, plant and equipment, net 32,373 30,168
Equipment used in outsourcing, net 10,713 11,589
Intangible assets, net 26,183 18,305
Goodwill 88,040 44,187
Deferred income taxes, net 33,100 24,050
Other 6,687 4,455
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Total assets $298,759 $247,246
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 30,123 $ 25,526
Wages and benefits payable 14,498 18,259
Accrued litigation 7,900 7,400
Current portion of debt 17,401 691
Unearned revenue 8,030 11,580
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Total current liabilities 77,952 63,456
Long-term debt 25,000 -
Project financing debt 4,213 4,762
Warranty and other obligations 12,757 17,427
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Total liabilities 119,922 85,645
Shareholders' equity
Common stock 199,567 195,546
Preferred stock - -
Accumulated other comprehensive income (loss) 818 (280)
Accumulated deficit (21,548) (33,665)
-------- --------
Total shareholders' equity 178,837 161,601
-------- --------
Total liabilities and shareholders' equity $298,759 $247,246
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, Three Months Ended Nine Months Ended
except per share data)
September 30, September 30,
Revenues 2003 2002 2003 2002
-------- -------- -------- --------
Sales $ 70,672 $ 62,403 $204,530 $174,447
Service 11,407 10,654 32,458 33,124
-------- -------- -------- --------
Total revenues 82,079 73,057 236,988 207,571
-------- -------- -------- --------
Cost of revenues
Sales 33,810 31,359 97,300 88,482
Service 8,741 7,349 23,944 23,602
-------- -------- -------- --------
Total cost of revenues 42,551 38,708 121,244 112,084
-------- -------- -------- --------
Gross profit 39,528 34,349 115,744 95,487
Operating expenses
Sales and marketing 9,474 7,683 27,697 22,011
Product development 11,278 9,963 32,895 27,858
General and administrative 7,627 6,662 22,886 17,697
Amortization of intangibles 2,391 642 7,044 1,552
Restructurings - - 2,208 -
In-process research and
development - - 900 7,200
Litigation accrual 500 - 500 -
-------- -------- -------- --------
Total operating expenses 31,270 24,950 94,130 76,318
-------- -------- -------- --------
Operating income 8,258 9,399 21,614 19,169
Other income (expense)
Equity in affiliates 110 51 162 97
Interest income 68 339 265 1,004
Interest expense (832) (250) (2,217) (2,252)
Other income, net 458 10 422 1,219
-------- -------- -------- --------
Total other income
(expense) (196) 150 (1,368) 68
-------- -------- -------- --------
Income before income taxes 8,062 9,549 20,246 19,237
Income tax provision (3,034) (3,581) (8,129) (9,914)
-------- -------- -------- --------
Net income $ 5,028 $ 5,968 $ 12,117 $ 9,323
-------- -------- -------- --------
Earnings per share
Basic net income per share $ 0.25 $ 0.29 $ 0.60 $ 0.49
-------- -------- -------- --------
Diluted net income per
share $ 0.23 $ 0.27 $ 0.56 $ 0.45
-------- -------- -------- --------
Weighted average number of
shares outstanding
Basic 20,478 20,479 20,364 18,955
Diluted 21,880 21,728 21,699 21,247
ITRON, INC.
RECONCILIATION BETWEEN GAAP AND PRO FORMA INCOME AND EPS
(Unaudited, in thousands,
except per share data) Three Months Ended Nine Months Ended
September 30, September 30,
PRO FORMA NET INCOME 2003 2002 2003 2002
-------- -------- -------- --------
GAAP basis income before income
taxes $ 8,062 $ 9,549 $ 20,246 $ 19,237
Adjustments to net income
Amortization of intangibles 2,391 642 7,044 1,552
Litigation accrual 500 - 500 -
Restructurings - - 2,208 -
In-process research and
development - - 900 7,200
-------- -------- -------- --------
Total adjustments 2,891 642 10,652 8,752
Adjusted income before income
taxes 10,953 10,191 30,898 27,989
Income tax provision (4,326) (3,822) (11,893) (10,496)
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Pro forma net income $ 6,627 $ 6,369 $ 19,005 $ 17,493
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PRO FORMA EARNINGS PER SHARE
Basic
Weighted average number of
basic shares outstanding 20,478 20,479 20,364 18,955
Basic pro forma net income per
share $ 0.32 $ 0.31 $ 0.93 $ 0.92
-------- -------- -------- --------
Diluted
Weighted average number of
basic shares outstanding 20,478 20,479 20,364 18,955
Employee stock option shares 1,402 1,249 1,335 1,720
Convertible debt shares - - - 1,390
-------- -------- -------- --------
Weighted average number of
diluted shares outstanding 21,880 21,728 21,699 22,065
Pro forma net income $ 6,627 $ 6,369 $ 19,005 $ 17,493
Interest on convertible debt,
net of taxes - - - 650
-------- -------- -------- --------
Adjusted pro forma net income $ 6,627 $ 6,369 $ 19,005 $ 18,143
-------- -------- -------- --------
Diluted pro forma net income
per share $ 0.30 $ 0.29 $ 0.88 $ 0.82
-------- -------- -------- --------
ITRON, INC.
SEGMENT INFORMATION
(Unaudited, in thousands) Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
-------- -------- -------- --------
Revenues
Electric $ 37,224 $ 32,985 $114,942 $100,286
Natural Gas 13,660 14,458 41,975 37,920
Water and Public Power 27,631 23,685 69,921 60,347
International 2,963 1,929 8,929 9,018
End User Solutions 601 - 1,221 -
-------- -------- -------- --------
Total revenues $ 82,079 $ 73,057 $236,988 $207,571
-------- -------- -------- --------
Gross profit
Electric $ 16,373 $ 14,741 $ 55,220 $ 46,360
Natural Gas 8,095 8,271 25,174 21,653
Water and Public Power 12,410 10,279 29,774 25,290
International 1,160 1,020 1,908 3,691
End User Solutions 224 - 377 -
Corporate 1,266 38 3,291 (1,507)
-------- -------- -------- --------
Total gross profit $ 39,528 $ 34,349 $115,744 $ 95,487
-------- -------- -------- --------
Operating income (loss)
Electric $ 13,513 $ 12,597 $ 46,679 $ 40,451
Natural Gas 7,317 7,568 22,837 19,861
Water and Public Power 10,751 9,059 25,441 22,153
International (349) (553) (2,774) (1,724)
End User Solutions (328) - (968) -
Corporate (22,646) (19,272) (69,601) (61,572)
-------- -------- -------- --------
Total operating income $ 8,258 $ 9,399 $ 21,614 $ 19,169
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CONTACT: Itron, Inc.
Mima Scarpelli, 509-891-3565
mima.scarpelli@itron.com