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
18, 2009
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||
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Date
of Report (Date of Earliest Event
Reported)
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ITRON,
INC.
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(Exact
Name of Registrant as Specified in its
Charter)
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Washington
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000-22418
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91-1011792
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||
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File No.)
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(IRS
Employer
Identification
No.)
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2111
N. Molter Road, Liberty Lake, WA 99019
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(Address
of Principal Executive Offices, Zip
Code)
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(509)
924-9900
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(Registrant’s
Telephone Number, Including Area
Code)
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(Former
Name or Former Address, if Changed Since Last
Report)
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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:
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[ ]
Written communications pursuant to Rule 425 under Securities Act (17 CFR
230.425)
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[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
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[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item
2.02
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Results
of Operations and Financial
Condition.
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On
February 18, 2009, Itron, Inc. issued a press release announcing the financial
results for the fourth quarter and year ended December 31, 2008. A
copy of this press release and accompanying financial statements are attached as
Exhibit 99.1.
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Item
9.01
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Financial
Statements and Exhibits.
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(d)
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Exhibits.
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Exhibit
Number
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Description
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99.1
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Press
Release dated February 18, 2009.
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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: February 18,
2009 By: /s/ Steven M.
Helmbrecht
Steven M. Helmbrecht
Sr. Vice President and Chief Financial
Officer
FOR IMMEDIATE
RELEASE
ITRON
ANNOUNCES FOURTH QUARTER AND FULL YEAR RESULTS
Record
Full Year Revenue of $1.91 Billion
Record
Full Year Bookings of $2.5 Billion
Record
Full Year Non-GAAP Diluted EPS of $3.36
LIBERTY
LAKE, Wash. — February 18, 2009 — Itron, Inc. (NASDAQ:ITRI) today reported
financial results for its fourth quarter and full year ended December 31,
2008. Financial results for the full year ended December 31, 2008
include Actaris operations for twelve months while results for the same period
in 2007 only include Actaris operations from April 18, 2007. Highlights of the
quarter and full year ended December 31, 2008 include:
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·
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Quarterly
and full year revenues of $432 million and $1.91
billion;
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·
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Quarterly
and full year non-GAAP diluted EPS of 71 cents and
$3.36;
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·
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Full
year cash flow from operations and free cash flow of $193 million and $130
million;
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·
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Quarterly
and full year Adjusted EBITDA of $60 million and $281 million;
and
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·
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Quarterly
and full year bookings of $733 million and $2.5
billion.
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“As we
communicated in January, our fourth quarter revenues and earnings were not as
strong as they were in the first nine months,” said LeRoy Nosbaum, chairman and
CEO. “Although year-end spending from our customers was lower in the fourth
quarter than we had hoped, we still had a very strong 2008 and set records for
revenue, non-GAAP EPS and bookings.”
Operations
Highlights – Fourth Quarter:
Revenues – Total revenues of
$432 million for the fourth quarter of 2008 were $48 million, or 10%, lower than
2007 fourth quarter revenues of $481 million. Itron North America (INA) revenues
of $153 million for the fourth quarter of 2008 were $14 million, or 8%, lower
than the fourth quarter of 2007, primarily due to lower year-end spending in the
US. Actaris revenues of $279 million for the fourth quarter of 2008 were $34
million, or 11%, lower than the fourth quarter of 2007. 2008 Actaris
revenue was negatively affected by foreign exchange rates which accounted for
the entire decrease. Revenues for the electric, gas and water
business units were approximately 38%, 35% and 27% of total Actaris
revenue.
Gross
Margin – Gross margin for the fourth quarter of 2008 was 34%, which is
higher than the 33% in the fourth quarter of 2007. Fourth quarter 2008 INA gross
margin of 39% was lower than 2007 gross margin of 40% due primarily to product
mix. Actaris gross margin of 30% was higher than the fourth quarter 2007 gross
margin of 28% due primarily to increased revenue in regions with higher
margins.
Operating
Expenses – Total operating expenses for the fourth quarter of 2008 were
$124 million, which was comparable with the fourth quarter of 2007. INA
operating expenses were $41 million, or 27% of revenue, compared with $44
million, or 26% of revenue, in the fourth quarter of 2007. Actaris operating
expenses of $76 million were 27% of revenue, compared with $73 million, or 23%
of revenue, in 2007. Actaris operating expenses were higher in all areas due to:
increased sales expense; higher spending on product development; higher
amortization of intangibles assets; increased personnel costs; and expenses
related to Sarbanes-Oxley compliance. Corporate unallocated expenses of $7
million for the fourth quarter of 2008 were $1 million lower than the fourth
quarter of 2007 due primarily to decreased compensation expenses.
Interest and
Other Income (Loss) – Net interest expense of $14 million in the fourth
quarter of 2008 was substantially lower than $25 million of net interest expense
in the fourth quarter of 2007 due to lower average debt balances and lower
average interest rates. Debt fee amortization expense, which is
included in net interest expense, of $1.3 million in the fourth quarter of 2008
was lower than the fourth quarter of 2007. Other expense of $1
million in 2008 compares with $5.6 million in 2007. Other expense in
2007 was comprised primarily of unrealized foreign exchange losses on working
capital accounts including intercompany interest balances.
Income
Taxes – Our GAAP tax rate was 25% for the fourth quarter of 2008. The
fourth quarter of 2007 included a $3.2 million GAAP income tax
benefit. The benefit in 2007 was primarily driven by a one-time
benefit for acquisition-related tax planning for Actaris and a tax benefit
related to our investment in Brazilian operations.
GAAP Net
Income/Loss and EPS – Our GAAP net income and fully diluted EPS for the
fourth quarter of 2008 was $4.3 million, or 12 cents per share, compared with
$4.0 million, or 12 cents per share, in the same period in 2007.
Non-GAAP
Operating Income, Net Income and Diluted EPS – Non-GAAP operating income,
which excludes amortization expense related to intangible assets, was $48
million, or 11.2% of revenues, in the fourth quarter of 2008, compared with $58
million, or 12.0% of revenues, in the fourth quarter of 2007. Non-GAAP net
income, which also excludes amortization of debt fees, was $25 million in 2008,
compared with $26 million in the 2007 period. Non-GAAP diluted EPS was 71 cents
in the 2008 period compared with 81 cents in 2007. Fully diluted shares
outstanding in the fourth quarter of 2008 were 2 million shares higher than the
same period in 2007 due primarily to the equity offering of 3.4 million shares
in the second quarter of 2008. Our non-GAAP tax rates were 27% and 6% for the
fourth quarters of 2008 and 2007. The lower 2007 rate was primarily
due to the tax benefit related to our investment in Brazilian
operations.
Operations
Highlights – Full Year:
Revenues – Total revenues of
$1.9 billion for the full year ended December 31, 2008 were $446 million, or
30%, higher than 2007 full year revenues of $1.5 billion. INA
revenues of $628 million for full year 2008 were $35 million, or 6%, higher than
the comparable period in 2007. Actaris revenues were $1.3 billion for the full
year 2008 compared with $871 million in the same period of 2007. Actaris
revenues for 2008 benefitted from favorable foreign exchange rates as well as
including a full twelve months of revenue. Revenues for the electric, gas and
water business units were approximately 38%, 33% and 29% of total Actaris
revenue for 2008.
Gross
Margin – Gross margin for the full year 2008 was 34%, which was
comparable with 33% gross margin in 2007. INA gross margin of 39% for the full
year 2008 was less than 2007 gross margin of 42% due to product mix and
increased services costs. Actaris gross margin of 31% was higher than the full
year 2007 gross margin of 28%. Actaris gross margin in 2007 was
negatively affected by acquisition related charges.
Operating
Expenses – Total operating expenses for the full year 2008 were $537
million, compared with $441 million, for the full year 2007. INA operating
expenses of $171 million in 2008 were somewhat lower than full year 2007
operating expenses of $173 million. As a percentage of revenue, 2008
INA operating expenses were 27% compared with 29% in 2007. Actaris operating
expenses of $329 million were 26% of revenue, compared with $236 million, or 27%
of revenue, for the full year 2007. The increased Actaris 2008 operating
expenses were affected by foreign currency exchange rates and the inclusion of a
full year expense as 2007 only included expenses from the date of the
acquisition. Corporate unallocated expenses of $38 million for the full year
2008 were $5.6 million higher than 2007 due in part to increased compensation,
financial integration and consulting expenses.
Interest and
Other Income (Loss) – Net interest expense was $75 million for the full
year 2008 compared to $79 million in the same period of 2007. The decrease in
net interest expense was due to lower average interest rates. Debt fee
amortization expense, which is included in net interest expense, was $8.9
million for the full year 2008 compared with $13.5 million in
2007. 2008 included other losses of $3 million compared with other
income of $435,000 in 2007.
Income
Taxes – Our GAAP tax rate was 12.5% for the full year 2008. Full year
2007 included a $16.4 million GAAP income tax benefit due to a pre-tax GAAP
loss, legislative reductions in tax rates in France, Germany and the United
Kingdom and tax benefits for acquisition-related tax planning for Actaris and
the investment in our Brazilian operations.
GAAP Net
Income/Loss and EPS – Our GAAP net income and fully diluted EPS for the
full year 2008 was $28.1 million, or 80 cents per share, compared with a net
loss of $16.1 million, or 55 cents per share, in the same period in
2007.
Non-GAAP
Operating Income, Net Income and Diluted EPS – Non-GAAP operating income,
which excludes amortization expense related to intangible assets, was $230
million, or 12.1% of revenues, for the full year 2008, compared with $182
million, or 12.5% of revenues, for the full year 2007. Non-GAAP operating income
in 2007 excluded acquisition related charges for In Process Research &
Development (IPR&D) and inventory of $52 million in addition to amortization
of intangible assets. Non-GAAP net income, which also excludes amortization of
debt fees, was $117.6 million in 2008 compared with $87.3 million in the 2007
period. Non-GAAP diluted EPS was $3.36 in the 2008 period compared with $2.81 in
2007. Diluted shares outstanding for the full year 2008 were almost 4 million
higher than the same period in 2007 due primarily to the equity offering of 3.4
million shares in the second quarter of 2008. Non-GAAP net income and diluted
EPS in 2008 benefitted from results for the entire year for Actaris rather than
a partial year in 2007. Our non-GAAP tax rates were 27% and 25% for 2008 and
2007.
Other
Financial Highlights:
New Order
Bookings and Backlog - New order bookings for the full year 2008 were
$2.5 billion, compared with $1.4 billion in 2007, reflecting book-to-bill ratios
of 1.3 to 1 and .97 to 1 respectively. New order bookings for 2008 included $480
million related to our Advanced Metering Infrastructure (AMI) contract with
Southern California Edison (SCE) and $334 million related to our contract with
CenterPoint Energy. The California Public Utility Commission and the Public
Utility Commission of Texas approved the respective projects in 2008, which
allowed us to book the contract values in our backlog. Total backlog was $1.3
billion at December 31, 2008 compared with $659 million at December 31, 2007.
Twelve month backlog of $507 million at December 31, 2008 compares with twelve
month backlog at December 31, 2007 of $501 million.
Cash Flows from
Operations and Financial Condition – Net cash provided by operating
activities during the full year 2008 was $193 million. This compares with $133
million in the same period in 2007. Adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) in the fourth quarter of 2008
was $60 million compared with $67 million for the same period in
2007. Adjusted EBITDA for the full year 2008 was $281 million
compared with $225 million for the full year 2007. Free cash flow for
the full year 2008 was $130 million compared with $93 million for the same
period in 2007. Cash and equivalents were $144 million at December 31, 2008
compared with $92 million at December 31, 2007.
Forward
Looking Statements:
This
release contains forward-looking statements concerning our expectations about
operations, financial performance, sales, earnings and cash flows. These
statements reflect our current plans and expectations and are based on
information currently available. The statements 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 our 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 and bonus
compensation, increasing volatility in foreign exchange rates, international
business risks and other factors which are more fully described in our Annual
Report on Form 10-K for the year ended December 31, 2007 and other reports 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. Itron assumes no obligation to publicly
update or revise our business outlook. Our future performance
involves risks and uncertainties.
For the
full year 2009, we expect:
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·
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Revenues
between $1.78 billion and $1.88
billion;
|
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·
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Diluted
non-GAAP EPS of between $3.35 and
$3.75;
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·
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Adjusted
EBITDA between $270 million and $290 million;
and
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·
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First
quarter revenue between $385 million and $415
million.
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Non-GAAP
Financial Information:
To
supplement our consolidated financial statements presented in accordance with
GAAP, we use certain non-GAAP financial measures, including non-GAAP operating
income, non-GAAP net income and diluted EPS, Adjusted EBITDA, and free cash
flow. We provide these non-GAAP financial measures because we believe they
provide greater transparency and represent 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 by excluding infrequent costs associated
with acquisitions. We exclude these expenses in our non-GAAP financial measures
as we believe that they are a measure of our core business that is not subject
to the variations of expenses associated with these infrequently occurring
items. 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. A more detailed discussion of why we use non-GAAP
financial measures, the limitations of using such measures and reconciliations
between non-GAAP and the nearest 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 2:00 p.m. (PDT) on February 18, 2009. The call will be webcast in a
listen only mode and can be accessed online at www.itron.com, “Investors – Presentations.”
The live webcast will begin at 2:00 p.m. (PDT). The webcast replay will begin
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 #5350842. You may also view
presentation materials related to the earnings call on Itron’s website, www.itron.com /
Investors / Presentations.
About
Itron:
Itron is
a leading technology provider and critical source of knowledge to the global
energy and water industries. Itron operates in two divisions: as Itron in North
America and as Actaris outside of North America. Our company is the world’s
leading provider of metering, data collection and software solutions, with
nearly 8,000 utilities worldwide relying on our technology to optimize the
delivery and use of energy and water. Itron delivers industry leading solutions
for electric, gas and water utilities by offering meters; data collection and
communication systems, including automated meter reading (AMR) and advanced
metering infrastructure (AMI); meter data management and utility software
applications; as well as comprehensive project management, installation and
consulting services. To know more, start here: www.itron.com.
For
additional information, contact:
Deloris
Duquette
Vice
President, Investor Relations and Corporate Communications
(509)
891-3523
deloris.duquette@itron.com
Statements
of operations, segment information, balance sheets, cash flow statements and
reconciliations of non-GAAP financial measures to the most directly comparable
GAAP financial measures follow.
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ITRON,
INC.
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||||||||||||||||
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CONSOLIDATED
STATEMENTS OF OPERATIONS
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||||||||||||||||
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(Unaudited,
in thousands, except per share data)
|
||||||||||||||||
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Three
Months Ended December 31,
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Twelve
Months Ended December 31,
|
|||||||||||||||
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2008
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2007
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2008
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2007
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|||||||||||||
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Revenues
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$ | 432,388 | $ | 480,544 | $ | 1,909,613 | $ | 1,464,048 | ||||||||
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Cost
of revenues
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287,260 | 324,106 | 1,262,756 | 976,761 | ||||||||||||
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Gross
profit
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145,128 | 156,438 | 646,857 | 487,287 | ||||||||||||
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Operating
expenses
|
||||||||||||||||
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Sales
and marketing
|
39,923 | 40,852 | 167,457 | 125,842 | ||||||||||||
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Product
development
|
28,416 | 27,089 | 120,699 | 94,926 | ||||||||||||
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General
and administrative
|
28,515 | 30,937 | 128,515 | 100,071 | ||||||||||||
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Amortization
of intangible assets
|
27,250 | 25,873 | 120,364 | 84,000 | ||||||||||||
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In-process
research and development
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- | 155 | - | 35,975 | ||||||||||||
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Total
operating expenses
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124,104 | 124,906 | 537,035 | 440,814 | ||||||||||||
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Operating
income
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21,024 | 31,532 | 109,822 | 46,473 | ||||||||||||
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Other
income (expense)
|
||||||||||||||||
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Interest
income
|
1,124 | 1,587 | 5,970 | 10,477 | ||||||||||||
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Interest
expense
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(15,368 | ) | (26,689 | ) | (80,735 | ) | (89,965 | ) | ||||||||
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Other
income (expense), net
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(1,046 | ) | (5,633 | ) | (2,984 | ) | 435 | |||||||||
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Total
other income (expense)
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(15,290 | ) | (30,735 | ) | (77,749 | ) | (79,053 | ) | ||||||||
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Income
(loss) before income taxes
|
5,734 | 797 | 32,073 | (32,580 | ) | |||||||||||
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Income
tax (provision) benefit
|
(1,428 | ) | 3,205 | (4,014 | ) | 16,436 | ||||||||||
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Net
income (loss)
|
$ | 4,306 | $ | 4,002 | $ | 28,059 | $ | (16,144 | ) | |||||||
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Earnings
(loss) per common share
|
||||||||||||||||
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Basic
|
$ | 0.12 | $ | 0.13 | $ | 0.85 | $ | (0.55 | ) | |||||||
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Diluted
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$ | 0.12 | $ | 0.12 | $ | 0.80 | $ | (0.55 | ) | |||||||
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Weighted
average common shares outstanding
|
||||||||||||||||
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Basic
|
34,478 | 30,608 | 33,096 | 29,584 | ||||||||||||
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Diluted
|
34,823 | 32,725 | 34,951 | 29,584 | ||||||||||||
|
ITRON,
INC.
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||||||||||||||||
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SEGMENT
INFORMATION
|
||||||||||||||||
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(Unaudited,
in thousands)
|
||||||||||||||||
|
Three
Months Ended December 31,
|
Twelve
Months Ended December 31,
|
|||||||||||||||
|
2008
|
2007
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2008
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2007
|
|||||||||||||
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Revenues
|
||||||||||||||||
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Itron
North America
|
$ | 153,291 | $ | 167,152 | $ | 628,247 | $ | 593,526 | ||||||||
|
Actaris
|
279,097 | 313,392 | 1,281,366 | 870,522 | ||||||||||||
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Total
Company
|
$ | 432,388 | $ | 480,544 | $ | 1,909,613 | $ | 1,464,048 | ||||||||
|
Gross
profit
|
||||||||||||||||
|
Itron
North America
|
$ | 60,244 | $ | 67,582 | $ | 247,755 | $ | 247,250 | ||||||||
|
Actaris
|
84,884 | 88,856 | 399,102 | 240,037 | ||||||||||||
|
Total
Company
|
$ | 145,128 | $ | 156,438 | $ | 646,857 | $ | 487,287 | ||||||||
|
Operating
income (loss)
|
||||||||||||||||
|
Itron
North America
|
$ | 19,387 | $ | 23,676 | $ | 77,074 | $ | 74,394 | ||||||||
|
Actaris
|
8,748 | 16,134 | 70,430 | 4,115 | ||||||||||||
|
Corporate
unallocated
|
(7,111 | ) | (8,278 | ) | (37,682 | ) | (32,036 | ) | ||||||||
|
Total
Company
|
$ | 21,024 | $ | 31,532 | $ | 109,822 | $ | 46,473 | ||||||||
|
Three
Months Ended December 31,
|
Twelve
Months Ended December 31,
|
||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||
|
Unit
Shipments
|
(units
in thousands)
|
||||||||||
|
Total
meters (with or without AMR)
|
|||||||||||
|
Electricity
- Itron North America
|
930
|
1,600
|
4,800
|
5,075
|
|||||||
|
Electricity
- Actaris
|
2,080
|
1,950
|
7,840
|
5,400
|
|||||||
|
Gas
|
1,060
|
925
|
4,080
|
2,600
|
|||||||
|
Water
|
1,880
|
1,950
|
8,440
|
5,575
|
|||||||
|
Total
meters
|
5,950
|
6,425
|
25,160
|
18,650
|
|||||||
|
AMR
units (Itron North America and Actaris)
|
|||||||||||
|
Meters
with AMR
|
830
|
1,350
|
4,700
|
3,600
|
|||||||
|
AMR
modules
|
1,340
|
1,175
|
4,890
|
4,675
|
|||||||
|
Total
AMR units
|
2,170
|
2,525
|
9,590
|
8,275
|
|||||||
|
Meters
with other vendors' AMR
|
220
|
275
|
840
|
925
|
|||||||
|
We
changed our management structure with the acquisition of Actaris on April
18, 2007 to reflect two operating segments. On January 1, 2008, we made
additional refinements to these two operating segments as we continue to
integrate the Actaris acquisition and realign our operations. The
information presented for the three and twelve month periods ended
December 31, 2007 reflects the restatement of our segment operating
results based on this
realignment.
|
|||||||||||
|
ITRON,
INC.
|
|||||||||
|
CONSOLIDATED
BALANCE SHEETS
|
|||||||||
|
(Unaudited,
in thousands)
|
|||||||||
|
At
December 31,
|
|||||||||
|
2008
|
2007
|
||||||||
| ASSETS | |||||||||
|
Current
assets
|
|||||||||
|
Cash
and cash equivalents
|
$ | 144,390 | $ | 91,988 | |||||
|
Accounts
receivable, net
|
321,278 | 339,018 | |||||||
|
Inventories
|
164,210 | 169,238 | |||||||
|
Deferred
income taxes, net
|
31,807 | 10,733 | |||||||
|
Other
|
56,032 | 42,459 | |||||||
|
Total
current assets
|
717,717 | 653,436 | |||||||
|
Property,
plant and equipment, net
|
307,717 | 323,003 | |||||||
|
Prepaid
debt fees
|
12,943 | 21,616 | |||||||
|
Deferred
income taxes, net
|
45,783 | 75,243 | |||||||
|
Other
|
19,315 | 15,235 | |||||||
|
Intangible
assets, net
|
481,886 | 695,900 | |||||||
|
Goodwill
|
1,285,853 | 1,266,133 | |||||||
|
Total
assets
|
$ | 2,871,214 | $ | 3,050,566 | |||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||||
|
Current
liabilities
|
|||||||||
|
Accounts
payable
|
$ | 200,725 | $ | 198,997 | |||||
|
Other
current liabilities
|
66,365 | 57,275 | |||||||
|
Wages
and benefits payable
|
78,336 | 70,486 | |||||||
|
Taxes
payable
|
18,595 | 17,493 | |||||||
|
Current
portion of long-term debt
|
10,769 | 11,980 | |||||||
|
Current
portion of warranty
|
23,375 | 21,277 | |||||||
|
Unearned
revenue
|
24,329 | 20,912 | |||||||
|
Deferred
income taxes, net
|
1,927 | 5,437 | |||||||
|
Total
current liabilities
|
424,421 | 403,857 | |||||||
|
Long-term
debt
|
1,179,249 | 1,578,561 | |||||||
|
Warranty
|
14,880 | 11,564 | |||||||
|
Pension
plan benefits
|
55,810 | 60,623 | |||||||
|
Deferred
income taxes, net
|
102,720 | 173,500 | |||||||
|
Other
obligations
|
58,743 | 63,659 | |||||||
|
Total
liabilities
|
1,835,823 | 2,291,764 | |||||||
|
Commitments
and contingencies
|
|||||||||
|
Shareholders'
equity
|
|||||||||
|
Preferred
stock
|
- | - | |||||||
|
Common
stock
|
951,007 | 609,902 | |||||||
|
Accumulated
other comprehensive income, net
|
34,093 | 126,668 | |||||||
|
Retained
earnings
|
50,291 | 22,232 | |||||||
|
Total
shareholders' equity
|
1,035,391 | 758,802 | |||||||
|
Total
liabilities and shareholders' equity
|
$ | 2,871,214 | $ | 3,050,566 | |||||
|
ITRON,
INC.
|
||||||||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
|
(Unaudited,
in thousands)
|
||||||||
|
Twelve
Months Ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Operating
activities
|
||||||||
|
Net
income (loss)
|
$ | 28,059 | $ | (16,144 | ) | |||
|
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
173,673 | 126,440 | ||||||
|
In-process
research and development
|
- | 35,975 | ||||||
|
Employee
stock plans income tax provision
|
- | (389 | ) | |||||
|
Stock-based
compensation
|
16,582 | 11,656 | ||||||
|
Amortization
of prepaid debt fees
|
8,917 | 13,526 | ||||||
|
Deferred
income taxes, net
|
(38,074 | ) | (36,373 | ) | ||||
|
Other,
net
|
(2,226 | ) | 1,326 | |||||
|
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||
|
Accounts
receivable
|
19,864 | (40,718 | ) | |||||
|
Inventories
|
4,914 | 19,419 | ||||||
|
Accounts
payables, other current liabilities and taxes payable
|
(6,549 | ) | 10,033 | |||||
|
Wages
and benefits payable
|
7,708 | 198 | ||||||
|
Unearned
revenue
|
3,936 | 2,660 | ||||||
|
Warranty
|
(2,242 | ) | 1,761 | |||||
|
Effect
of foreign exchange rate changes
|
(9,688 | ) | 4,168 | |||||
|
Other,
net
|
(11,728 | ) | (211 | ) | ||||
|
Net
cash provided by operating activities
|
193,146 | 133,327 | ||||||
|
Investing
activities
|
||||||||
|
Proceeds
from the maturities of investments, held to maturity
|
- | 35,000 | ||||||
|
Acquisitions
of property, plant and equipment
|
(63,430 | ) | (40,602 | ) | ||||
|
Business
acquisitions & contingent consideration, net of cash & cash
equivalents acquired
|
(6,897 | ) | (1,716,253 | ) | ||||
|
Other,
net
|
3,252 | 7,439 | ||||||
|
Net
cash used in investing activities
|
(67,075 | ) | (1,714,416 | ) | ||||
|
Financing
activities
|
||||||||
|
Proceeds
from borrowings
|
- | 1,159,023 | ||||||
|
Payments
on debt
|
(388,371 | ) | (76,099 | ) | ||||
|
Issuance
of common stock
|
324,494 | 247,617 | ||||||
|
Prepaid
debt fees
|
(214 | ) | (22,083 | ) | ||||
|
Other,
net
|
715 | 1,902 | ||||||
|
Net
cash (used in) provided by financing activities
|
(63,376 | ) | 1,310,360 | |||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(10,293 | ) | 1,312 | |||||
|
Increase
(decrease) in cash and cash equivalents
|
52,402 | (269,417 | ) | |||||
|
Cash
and cash equivalents at beginning of period
|
91,988 | 361,405 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 144,390 | $ | 91,988 | ||||
Itron,
Inc.
About
Non-GAAP Financial Measures
The
accompanying press release dated February 18, 2009 contains non-GAAP financial
measures. To supplement our consolidated financial statements, which
are prepared and presented in accordance with GAAP, we use certain non-GAAP
financial measures, including non-GAAP operating income, non-GAAP net income and
EPS, Adjusted EBITDA and free cash flow. The presentation of this
financial information is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared and presented
in accordance with GAAP. For more information on these non-GAAP
financial measures please see the table captioned “Reconciliations of Non-GAAP
Financial Measures to Most Directly Comparable GAAP Financial
Measures”.
We use
these non-GAAP financial measures for financial and operational decision making
and as a means for determining executive compensation. Management
believes that these non-GAAP financial measures provide meaningful supplemental
information regarding our performance and ability to service debt by excluding
certain expenses that may not be indicative of our recurring core operating
results. Our executive compensation plans exclude non-cash charges
related to amortization of intangibles and non-recurring discrete cash and
non-cash charges that are infrequent in nature such as in-process research and
development (IPR&D) or purchase accounting adjustments. We
believe that both management and investors benefit from referring to these
non-GAAP financial measures in assessing our performance and when planning,
forecasting and analyzing future periods. These non-GAAP financial
measures also facilitate management’s internal comparisons to our historical
performance and ability to service debt as well as comparisons to our
competitor’s operating results. We believe these non-GAAP financial
measures are useful to investors because they allow for greater transparency
with respect to key metrics used by management in its financial and operational
decision making and because they are used by our institutional investors and the
analyst community to help them analyze the health of our business.
Non-GAAP operating income –
We define non-GAAP operating income as operating income minus amortization of
intangible assets, business combination accounting for inventory revaluation and
IPR&D. We consider this non-GAAP financial measure to be a useful
metric for management and investors because it excludes the effects of expenses
that are related to current and previous acquisitions. By excluding
these expenses we believe that it is easier for management and investors to
compare our financial results over multiple periods. We believe that
excluding amortization of intangible assets enables management and investors to
analyze trends in our operations. For example, expenses related to
amortization of intangible assets were decreasing prior to the Actaris
acquisition, which was improving GAAP operating margins, yet the improvement in
GAAP operating margins due to this lower expense was not reflective of an
improvement in our core business. Additionally we exclude the effects
of inventory revaluation and IPR&D to provide investors gross and operating
margins that are not impacted by purchase accounting
adjustments. There are some limitations related to the use of
non-GAAP operating income versus operating income calculated in accordance with
GAAP. Non-GAAP operating income excludes some costs that are
recurring. Additionally, the expenses that we exclude in our
calculation of non-GAAP operating income may differ from the expenses that our
peer companies exclude when they report the results of their
operations. We compensate for these limitations by providing specific
information about the GAAP amounts we have excluded from our non-GAAP operating
income and evaluating non-GAAP operating income together with GAAP operating
income.
Non-GAAP net income and non-GAAP
EPS – We define non-GAAP net income as net income minus the expenses
associated with amortization of intangible assets and amortization of debt fees,
expenses related to business combination accounting for inventory revaluation
and expenses for IPR&D as well as the tax effects of each
item. We define non-GAAP EPS as non-GAAP net income divided by the
weighted average shares, on a fully diluted basis, outstanding during each
period. We consider these financial measures to be useful metrics for
management and investors for the same reasons that we use non-GAAP operating
income. The same limitations described above regarding our use of
non-GAAP operating income apply to our use of non-GAAP net income and non-GAAP
EPS. We compensate for these limitations by providing specific
information regarding the GAAP amounts excluded from non-GAAP net income and
non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with
GAAP net income and EPS.
Adjusted EBITDA – We define
Adjusted EBITDA as net income minus interest income, plus interest expense, tax
expense and depreciation and amortization of intangible asset expenses plus
non-cash expenses for business combination accounting for inventory revaluation
and IPR&D. We feel that providing this financial measure is
important for management and investors to understand our ability to service our
debt as it is a measure of the cash generated by our core
business. Management uses Adjusted EBITDA as a performance measure
for executive compensation. A limitation to using Adjusted EBITDA is
that it does not represent the total increase or decrease in the cash balance
for the period and the measure includes some non-cash items and excludes other
non-cash items. Additionally, the expenses that we exclude in our
calculation of Adjusted EBITDA may differ from the expenses that our peer
companies exclude when they report their results. Management compensates for
this limitation by providing a reconciliation of this measure to GAAP net
income.
Free Cash Flow – We define
free cash flow as net cash provided by operating activities less acquisitions of
property, plant and equipment. We believe free cash flow provides
investors with a relevant measure of liquidity and a useful basis for assessing
our ability to fund our operations and repay our debt. The same
limitations described above regarding our use of non-GAAP operating income apply
to our use of free cash flow. We compensate for these limitations by
providing specific information regarding the GAAP amounts and a reconciliation
to free cash flow.
The
accompanying tables have more detail on the GAAP financial measures that are
most directly comparable to the non-GAAP financial measures and the related
reconciliations between these financial measures.
|
ITRON,
INC.
|
||||||||||||||||
|
RECONCILIATIONS
OF NON-GAAP FINANCIAL MEASURES
|
||||||||||||||||
|
TO
MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
|
||||||||||||||||
|
(Unaudited,
in thousands, except per share data)
|
||||||||||||||||
|
Three
Months Ended December 31,
|
Twelve
Months Ended December 31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Non-GAAP
operating income:
|
||||||||||||||||
|
GAAP
operating income
|
$ | 21,024 | $ | 31,532 | $ | 109,822 | $ | 46,473 | ||||||||
|
Amortization
of intangible assets
|
27,250 | 25,873 | 120,364 | 84,000 | ||||||||||||
|
In-process
research and development
|
- | 155 | - | 35,975 | ||||||||||||
|
Purchase
accounting adjustment - inventory
|
- | - | - | 16,023 | ||||||||||||
|
Non-GAAP
operating income
|
$ | 48,274 | $ | 57,560 | $ | 230,186 | $ | 182,471 | ||||||||
|
Non-GAAP
net income:
|
||||||||||||||||
|
GAAP
net income (loss)
|
$ | 4,306 | $ | 4,002 | $ | 28,059 | $ | (16,144 | ) | |||||||
|
Amortization
of intangible assets
|
27,250 | 25,873 | 120,364 | 84,000 | ||||||||||||
|
Amortization
of debt placement fees
|
1,199 | 1,412 | 8,674 | 13,262 | ||||||||||||
|
In-process
research and development
|
- | 155 | - | 35,975 | ||||||||||||
|
Purchase
accounting adjustment - inventory
|
- | - | - | 16,023 | ||||||||||||
|
Income
tax effect of non-GAAP adjustments
|
(7,910 | ) | (4,952 | ) | (39,518 | ) | (45,804 | ) | ||||||||
|
Non-GAAP
net income
|
$ | 24,845 | $ | 26,490 | $ | 117,579 | $ | 87,312 | ||||||||
|
Non-GAAP
diluted EPS
|
$ | 0.71 | $ | 0.81 | $ | 3.36 | $ | 2.81 | ||||||||
|
Weighted
average common shares outstanding - Diluted
|
34,823 | 32,725 | 34,951 | 31,093 | ||||||||||||
|
Adjusted
EBITDA:
|
||||||||||||||||
|
GAAP
net income (loss)
|
$ | 4,306 | $ | 4,002 | $ | 28,059 | $ | (16,144 | ) | |||||||
|
Interest
income
|
(1,124 | ) | (1,587 | ) | (5,970 | ) | (10,477 | ) | ||||||||
|
Interest
expense
|
15,368 | 26,689 | 80,735 | 89,965 | ||||||||||||
|
Income
tax provision (benefit)
|
1,428 | (3,205 | ) | 4,014 | (16,436 | ) | ||||||||||
|
Depreciation
and amortization
|
40,378 | 41,111 | 173,673 | 126,440 | ||||||||||||
|
In-process
research and development
|
- | 155 | - | 35,975 | ||||||||||||
|
Purchase
accounting adjustment - inventory
|
- | - | - | 16,023 | ||||||||||||
|
Adjusted
EBITDA
|
$ | 60,356 | $ | 67,165 | $ | 280,511 | $ | 225,346 | ||||||||
|
Twelve
Months Ended December 31,
|
||||||||||||||||
|
2008
|
2007
|
|||||||||||||||
|
Free
Cash Flow:
|
||||||||||||||||
|
Net
cash provided by operating activities
|
$ | 193,146 | $ | 133,327 | ||||||||||||
|
Acquisitions
of property, plant and equipment
|
(63,430 | ) | (40,602 | ) | ||||||||||||
|
Free
Cash Flow
|
$ | 129,716 | $ | 92,725 | ||||||||||||