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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
April 25, 2006
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Date of Report (Date of Earliest Event Reported)
ITRON, INC.
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(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 Valley, WA 99216
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(Address of Principal Executive Offices, 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)
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 April 25, 2006, Itron, Inc. issued a press release announcing
the financial results for the three months ending March 31, 2006.
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 exhibit is filed as part of this report:
Exhibit
Number Description
- ------- ----------------------------------------------------------------
99.1 Press Release dated April 25, 2006.
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
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: April 25, 2006 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 April 25, 2006.
Exhibit 99.1
Itron Announces Record First Quarter Revenue and Earnings; GAAP EPS of 27 cents
and Pro Forma EPS of 58 cents on Revenues of $155.6 Million; $206 Million in New
Orders Signed During the Quarter
SPOKANE, Wash.--(BUSINESS WIRE)--April 25, 2006--Itron, Inc.
(NASDAQ:ITRI), today reported financial results for its first quarter
ended March 31, 2006. Revenues for the first quarter 2006 were $155.6
million, 34% higher than first quarter 2005 revenues of $116.5
million. The increased revenues were mainly due to higher shipments of
Itron Automatic Meter Reading (AMR) technology.
-- Itron AMR technology includes standalone AMR modules for
electricity, gas or water meters and electricity meters with
embedded Itron AMR. We shipped 2.4 million units of Itron AMR
technology during the quarter compared with 1.3 million during
the same period in 2005, an 81% increase.
-- Meter Data Collection (MDC) segment revenues of $61.8 million
in the quarter increased 24% from $49.7 million in the first
quarter of 2005. The increased revenue was primarily due to
higher shipments of gas AMR modules.
-- Electricity Metering segment revenues were $80.4 million in
the quarter compared with $54.1 million in the first quarter
of 2005. The 49% increase in revenues was primarily related to
shipments of electricity meters with AMR to Progress Energy.
The Progress Energy contract, which calls for delivery of 2.7
million electricity meters with embedded AMR over
approximately 15 months, was signed in the third quarter of
2005. Progress Energy represented 22% of total company
revenues, and 42% of Electricity Metering segment revenues
during the quarter.
-- Software revenues were $13.4 million during the quarter, 6%
higher than $12.7 million in the first quarter of 2005.
Increased software revenues reflect increased software license
sales for a number of products.
GAAP net income was $7.1 million, or 27 cents per diluted share,
for the quarter, compared with net income of $817,000, or 4 cents per
diluted share, for the first quarter of 2005. On January 1, 2006, the
Company adopted Statement of Financial Accounting Standard No. 123(R),
Share-Based Payment (SFAS 123 (R)), which requires the expensing of
share-based compensation. Total stock-based compensation in the
quarter was $2.1 million, of which $1.9 million was due to the
adoption of SFAS 123(R) and had a 4 cent effect on GAAP earnings per
share during the quarter.
Pro forma net income was $15.1 million or 58 cents per diluted
share for the quarter, compared with $7.3 million, or 32 cents per
diluted share, in the first quarter of 2005. Pro forma net income
excludes intangible asset and debt fee amortization expenses in 2005
and 2006, restructuring charges in 2005 and SFAS 123(R) stock option
compensation expenses in 2006.
New order bookings for the three months ended March 31, 2006 were
$206 million, compared with $117 million in the first quarter of 2005,
and were the second highest level of quarterly new order bookings in
the company's history. Twelve month backlog, which represents the
portion of backlog that will be earned over the next twelve months,
was $241 million at March 31, 2006, compared with $188 million at
December 31, 2005 and $116 million one year ago. Total backlog was
$387 million at March 31, 2006, up from $324 million at December 31,
2005, and $190 million at March 31, 2005.
"We are very pleased with our financial results for the first
quarter," said LeRoy Nosbaum, chairman and CEO. "Revenue, earnings and
cash flow are all up compared with the first quarter of last year. Our
strength in new order bookings this quarter helps solidify our
expectations for 2006 and, since a number of new orders signed this
quarter represent multi-year contracts, it also begins to build a base
of business beyond 2006."
Gross margins were 43% for the quarter compared with 44% in the
first quarter of 2005 and 41% in the fourth quarter of 2005.
Highlights of gross margin by segment are as follows:
-- MDC gross margin was 46% in the quarter compared to 42% in the
first quarter of 2005. The higher margin in 2006 results from
increased shipments of gas AMR modules in 2006.
-- Electricity Metering gross margin was 40% during the quarter
compared with 45% during the first quarter of 2005. Most of
the decrease from 2005 to 2006 was driven by lower margin
meter installation revenue associated with the Progress Energy
contract.
-- Software Solutions gross margin was 46% for the first quarter
of 2006, comparable with the 45% gross margin in the same
period last year.
Pro forma operating income, which excludes intangible asset
amortization expenses in both 2006 and 2005, minor restructuring
charges in 2005 and SFAS 123(R) stock option compensation expense in
2006, was $28.1 million, or 18.1 % of revenues for the quarter,
compared with $15.9 million, or 13.6%, in the first quarter of 2005.
The improved operating margin in 2006 reflects lower operating
expenses as a percentage of revenues in all operating expense areas.
Total interest expense for the three months ended March 31, 2006
was $1.2 million higher than the same period in 2005. The increase was
due to accelerated amortization expense of debt placement fees caused
by prepaying the variable-rate term loan. Interest expense without
amortization was $882,000 lower in 2006 than 2005.
We generated $37.4 million of cash from operations during the
quarter compared with $23.7 million during the first quarter of 2005.
Capital expenditures were $6.3 million in the quarter compared to $1.7
million in the first quarter of last year, with the increase this year
related to our enterprise software upgrade.
EBITDA (earnings before interest, income taxes, depreciation and
amortization) was $29.5 million in the first three months of 2006,
compared with $18.9 million in the same period in 2005. Adjusted
EBITDA, which excludes the effect of non-cash stock option
compensation expense, was $31.3 million.
During the quarter we prepaid in full our variable-rate term loan,
which had a remaining balance at December 31, 2005 of $24.7 million
and also prepaid $10.0 million of our variable-rate real estate term
loan. Subsequent to March 31, 2006 we prepaid the remaining $4.8
million in real estate term debt and also prepaid in full $3.0 million
in project financing debt.
Forward-Looking Statements:
This release contains forward-looking statements concerning our
expectations about our 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, our dependence on new
product development and intellectual property, future acquisitions,
changes in estimates for stock based compensation and other factors
which are more fully described in our Annual Report on Form 10-K for
the year ended December 31, 2005 on file with the Securities and
Exchange Commission. Itron undertakes no obligation to update publicly
or revise any forward-looking statements, including our business
outlook.
Business Outlook:
The outlook information provided below and elsewhere in this
release is based on information available today and Itron assumes no
obligation to update it. Our future performance involves risks and
uncertainties.
For the full year 2006, we expect:
-- Revenues between $610 and $620 million.
-- GAAP net income between $29 and $31 million.
-- Pro forma net income between $57 and $59 million, excluding
approximately $9 million of pre-tax stock option compensation
expenses and approximately $33 million of pre-tax intangible
asset and debt fee amortization expenses.
-- Pro forma EPS between $2.17 and $2.23 per diluted share, which
is based on an estimated 26.4 million in diluted shares.
-- Adjusted EBITDA, which excludes $9 million of stock option
compensation expenses, between $116 and $120 million.
We expect revenue for the second quarter to be between $150 and
$155 million.
Use of Non-GAAP Financial Information:
To supplement our consolidated financial statements presented in
accordance with GAAP, we use certain non-GAAP financial measures,
including pro forma operating income, pro forma net income and EPS,
and EBITDA and Adjusted EBITDA. Management believes these non-GAAP
financial measures provide useful information to both management and
investors by excluding certain expenses, gains and losses that may not
be indicative of our core results and provides for consistency in our
financial reporting. We provide these non-GAAP financial measures
because we believe they provide greater transparency with respect to
supplemental information used by management in its financial and
operational decision making. Specifically, these non-GAAP financial
measures are provided to enhance investors' overall understanding of
our current financial performance and our future anticipated
performance. Non-GAAP performance measures should be considered in
addition to, and not as a substitute for, results prepared in
accordance with GAAP. Finally, our non-GAAP financial measures may be
different from those reported by other companies. Reconciliations
between GAAP and non-GAAP financial measures are included in this
press release.
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 April 25, 2006. The
call will be webcast in a listen only mode and can be accessed online
at www.itron.com, "About Itron - Investor Events." The live webcast
will begin at 1:45 p.m. (PST). The webcast replay 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), entering passcode # 9425890.
About Itron:
Itron is a leading technology provider and critical source of
knowledge to the global energy and water industries. Nearly 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, reconciliations between GAAP and
non-GAAP results, segment information, balance sheets and cash flows
follow.
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Revenues
Sales $142,934 $104,202
Service 12,619 12,268
--------- ---------
Total revenues 155,553 116,470
Cost of revenues
Sales 81,842 59,199
Service 6,937 6,273
--------- ---------
Total cost of revenues 88,779 65,472
--------- ---------
Gross profit 66,774 50,998
Operating expenses
Sales and marketing 15,481 13,239
Product development 12,870 11,914
General and administrative 12,122 9,966
Amortization of intangible assets 7,313 9,716
Restructurings - 390
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Total operating expenses 47,786 45,225
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Operating income 18,988 5,773
Other income (expense)
Interest income 362 4
Interest expense (5,746) (4,567)
Other income (expense), net (448) 101
--------- ---------
Total other income (expense) (5,832) (4,462)
--------- ---------
Income before income taxes 13,156 1,311
Income tax provision (6,087) (494)
--------- ---------
Net income $7,069 $817
========= =========
Earnings per share
Basic net income per share $0.28 $0.04
========= =========
Diluted net income per share $0.27 $0.04
========= =========
Weighted average number of shares outstanding
Basic 25,057 21,451
Diluted 26,071 22,737
ITRON, INC.
RECONCILIATIONS BETWEEN GAAP AND PRO FORMA
(Unaudited, in thousands, except per share data)
Three Months Ended March 31, 2006
---------------------------------
Pro Forma
Reported Entries Pro Forma
-----------------------------
Revenues $155,553 $- $155,553
Cost of revenues 88,779 (252)(a) 88,527
----------------- ---------
Gross profit 66,774 252 67,026
Operating
expenses 47,786 (1,564)(a) 38,909
(7,313)(b)
Operating income 18,988 9,129 28,117
Other income
(expense) (5,832) 2,735 (d) (3,097)
----------------- ---------
Income before
income taxes 13,156 11,864 25,020
Income tax
provision (6,087) (3,848)(e) (9,935)
----------------- ---------
Net income $7,069 $8,016 $15,085
================= =========
Earnings per share
Basic net income
per share $0.28 $0.60
========= =========
Diluted net
income per
share $0.27 $0.58
========= =========
Weighted average number of
shares outstanding
Basic 25,057 25,057
Diluted 26,071 26,071
Three Months Ended March 31, 2005
---------------------------------
Pro Forma
Reported Entries Pro Forma
-----------------------------
Revenues $116,470 $- $116,470
Cost of revenues 65,472 - 65,472
----------------- ---------
Gross profit 50,998 - 50,998
Operating
expenses 45,225 (9,716)(b) 35,119
(390)(c)
Operating income 5,773 10,106 15,879
Other income
(expense) (4,462) 676(d) (3,786)
----------------- ---------
Income before
income taxes 1,311 10,782 12,093
Income tax
provision (494) (4,309)(e) (4,803)
----------------- ---------
Net income $817 $6,473 $7,290
================= =========
Earnings per share
Basic net income
per share $0.04 $0.34
========= =========
Diluted net
income per
share $0.04 $0.32
========= =========
Weighted average number of
shares outstanding
Basic 21,451 21,451
Diluted 22,737 22,737
Pro Forma Adjustments
- ---------------------
(a) Non-cash stock option compensation expense.
(b) Amortization of intangible assets.
(c) Restructurings.
(d) Debt fee amortization.
(e) Income taxes associated with pro forma entries.
ITRON, INC.
SEGMENT INFORMATION
(Unaudited, in thousands)
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Revenues
Hardware Solutions
Meter Data Collection $61,751 $49,676
Electricity Metering 80,378 54,106
--------- ---------
Total Hardware Solutions 142,129 103,782
Software Solutions 13,424 12,688
--------- ---------
Total Company $155,553 $116,470
========= =========
Gross profit
Hardware Solutions
Meter Data Collection $28,703 $21,044
Electricity Metering 31,909 24,277
--------- ---------
Total Hardware Solutions 60,612 45,321
Software Solutions 6,162 5,677
--------- ---------
Total Company $66,774 $50,998
========= =========
Operating income (loss)
Hardware Solutions
Meter Data Collection $23,133 $16,028
Electricity Metering 28,575 19,889
Other unallocated costs (8,727) (6,021)
--------- ---------
Total Hardware Solutions 42,981 29,896
Software Solutions (2,489) (2,652)
Corporate unallocated (21,504) (21,471)
--------- ---------
Total Company $18,988 $5,773
========= =========
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Supplemental Information
Unit Shipments by Segment
Meter Data Collection
AMR standalone modules 1,075 775
Licensed AMR (other vendors' meters) 125 175
Electricity Metering
Total meters 1,725 1,050
With Itron AMR 1,200 375
With other AMR 150 200
(1)Total units Itron AMR 2,400 1,325
Growth in total Itron AMR shipments 81%
(1) Includes Itron AMR standalone modules, Itron meters with Itron
AMR and other vendors' electronic electricity meters with Itron AMR.
ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) March 31, Dec. 31,
2006 2005
--------- ---------
ASSETS
Current assets
Cash and cash equivalents $40,661 $33,638
Accounts receivable, net 83,637 104,428
Inventories 52,514 49,456
Deferred income taxes, net 20,659 23,194
Other 23,260 10,941
--------- ---------
Total current assets 220,731 221,657
Property, plant and equipment, net 69,651 77,623
Intangible assets, net 115,980 123,293
Goodwill 116,037 116,032
Deferred income taxes, net 51,262 48,955
Other 7,920 11,324
--------- ---------
Total assets $581,581 $598,884
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $46,990 $46,215
Wages and benefits payable 18,634 23,732
Current portion of debt 3,836 4,376
Current portion of warranty 7,162 8,497
Unearned revenue 24,140 22,758
--------- ---------
Total current liabilities 100,762 105,578
Long-term debt 126,090 160,186
Project financing debt 2,142 2,367
Warranty 7,949 6,779
Other obligations 6,048 6,440
--------- ---------
Total liabilities 242,991 281,350
Shareholders' equity
Preferred stock - -
Common stock 326,143 312,046
Accumulated other comprehensive income, net 761 871
Retained earnings 11,686 4,617
--------- ---------
Total shareholders' equity 338,590 317,534
--------- ---------
Total liabilities and shareholders'
equity $581,581 $598,884
========= =========
ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands) Three Months
Ended March 31,
-----------------
2006 2005
-------- --------
Operating activities
Net income $7,069 $817
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 10,938 12,980
Employee stock plans income tax benefits 5,366 1,129
Excess tax benefits from stock-based
compensation (4,280) -
Stock-based compensation 2,053 149
Amortization of prepaid debt fees 2,772 710
Deferred income tax provision (benefit) 236 (1,618)
Impairment of investments 242 -
Realized currency translation gains - (195)
Other, net 182 (223)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable 20,791 16,196
Inventories (3,058) 2,638
Accounts payable and accrued expenses 2,644 (4,963)
Wages and benefits payable (4,612) 1,566
Unearned revenue 1,452 (3,065)
Warranty (165) (288)
Other long-term obligations (470) (200)
Other, net (3,768) (1,895)
-------- --------
Cash provided by operating activities 37,392 23,738
Investing activities
Acquisition of property, plant and equipment (6,251) (1,720)
Proceeds from the sale of an investment in
affiliate 1,000 -
Business acquisitions, net of cash and cash
equivalents acquired - 33
Other, net (705) 86
-------- --------
Cash used by investing activities (5,956) (1,601)
Financing activities
Payments on debt (34,885) (20,657)
Issuance of common stock 6,192 2,609
Excess tax benefits from stock-based compensation 4,280 -
Prepaid debt fees - (73)
Other, net - (12)
-------- --------
Cash used by financing activities (24,413) (18,133)
Increase in cash and cash equivalents 7,023 4,004
Cash and cash equivalents at beginning of period 33,638 11,624
-------- --------
Cash and cash equivalents at end of period $40,661 $15,628
======== ========
Non-cash transactions:
Fixed assets purchased but not yet paid $2,531 $-
ITRON, INC.
RECONCILIATIONS BETWEEN GAAP NET INCOME AND EBITDA
(Unaudited, in thousands)
Three Months
Ended March 31,
-----------------
2006 2005
-------- --------
GAAP net income $7,069 $817
Adjustments to GAAP net income
Interest income (362) (4)
Interest expense 5,746 4,567
Income tax provision 6,087 494
Depreciation and amortization 10,938 12,980
-------- --------
Total adjustments 22,409 18,037
EBITDA $29,478 $18,854
======== ========
Non-cash stock option compensation expense 1,816 -
-------- --------
ADJUSTED EBITDA $31,294 $18,854
======== ========
CONTACT: Itron, Inc.
Mima Scarpelli, Vice President, Investor Relations
and Corporate Communications
509-891-3565
mima.scarpelli@itron.com