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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 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 April 19, 2004
Item 12. Results of Operations and Financial Condition.
On April 19, 2004, Itron, Inc. issued a press release announcing
the financial results for the first quarter ending March 31, 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: April 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 First Quarter 2004
SPOKANE, Wash.--(BUSINESS WIRE)--April 19, 2004--Itron, Inc. (Nasdaq:ITRI),
today reported its financial results for the quarter ended March 31, 2004.
First quarter revenues were $65.6 million compared with $74.6 million in
the first quarter of 2003, with most of the decline in 2004 coming from lower
sales of automatic and handheld meter reading systems to electric market
customers. Electric market revenues for the quarter were $24.3 million, compared
to $39.2 million in the first quarter of 2003.
-- Across all markets, we shipped approximately 830,000 AMR endpoints in
the first quarter of 2004 compared with 940,000 in 2003.
-- Handheld systems were $6 million lower in 2004 compared with 2003 due
to fewer handheld system upgrades in the current quarter.
"As expected, first quarter revenues are down primarily due to order push
outs during 2003 by several large customers in our electric market," commented
LeRoy Nosbaum, Itron's chairman and CEO. "However, we are encouraged that order
activity in this market is beginning to increase as those utilities get past the
issues that overwhelmed them in 2003. Our bookings and backlog were both up this
quarter and we continue to look for a good second half performance in 2004."
On a GAAP basis, we had a net loss of $738,000 for the first quarter, or 4
cents per diluted share, compared to net income of $2.9 million, or 14 cents per
diluted share, in the first quarter of 2003.
Pro forma net income for the first quarter was $2.0 million, or 9 cents per
diluted share, compared to $6.3 million, or 29 cents per diluted share in the
first quarter of 2003. Pro forma results exclude intangible amortization
expenses, restructuring charges and in-process R&D charges. A reconciliation
between GAAP and pro forma income and earnings per share is attached to this
release.
Gross margin for the quarter was 46% compared to 49% in the first quarter
of 2003. Changes in hardware product mix as well as a decrease in software
license sales in 2004 contributed to lower gross margin in 2004, while lower
warranty costs in 2004 had a favorable impact on gross margin.
Increased sales and marketing expenses and product development expenses in
2004 compared to 2003 result primarily from the acquisition of Silicon Energy on
March 4, 2003. General and administrative expenses in the quarter decreased
$859,000 from the first quarter of 2003 as increased expenses in 2004 related to
the Silicon Energy acquisition were offset by lower legal fees and no incentive
compensation accruals in 2004.
In January 2004, we implemented a new organizational structure. In order to
better align expenses with revenues, and in connection with our new
organizational structure, we reduced our workforce by approximately 5% resulting
in a restructuring charge during the quarter of $2.4 million. In the first
quarter of 2003, we had $2.2 million in restructuring charges primarily related
to a reorganization of our Energy Information Solutions (EIS) product group in
Raleigh, NC.
Net interest expense for the first quarter of 2004 was $737,000 compared
with $287,000 in the first quarter of 2003. Interest expense in both periods
results primarily from the $50.0 million in term bank debt issued in March 2003
to fund the acquisition of Silicon Energy, of which $33.3 million was
outstanding at March 31, 2004.
Additional highlights for the first quarter include:
-- Operating cash flow for the quarter was $14.0 million compared with
$7.8 million in the first quarter of 2003, with the increase resulting
primarily from higher accounts receivable collections in 2004.
-- New order bookings were $66 million during the quarter compared to $45
million in the previous quarter and $60 million in the first quarter
of last year.
-- Total backlog increased by $10 million during the quarter, after
declining for the three previous quarters, and was $155 million at
March 31, 2004.
-- Twelve-month backlog, which represents the portion of backlog that
will be earned over the next twelve months, was $79 million at March
31, 2004, up from $62 million at December 31, 2003.
SEM Acquisition Update:
In July 2003, we announced an agreement to acquire Schlumberger Electricity
Metering, Inc. (SEM) for a purchase price of $255 million, and filed a
notification with the Federal Trade Commission (FTC) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (HSR) regarding our intent to acquire SEM. We
have been negotiating a consent decree with the FTC and believe there are no
material issues remaining with respect to completing negotiations and a related
license of certain AMR technology to a third party. We expect that both of these
documents will be executed or approved shortly and that the FTC staff will make
a favorable recommendation to the Commission soon thereafter. The formal
Commission approval process typically takes 2 to 3 weeks from the time they
receive the staff recommendation.
As a result of several issues that have recently developed concerning the
sale of certain other assets of Schlumberger, we are currently working to amend
certain terms and conditions related to the acquisition, none of which we expect
to materially alter the terms of the acquisition. However, the documentation and
other work necessary may extend the closing of the acquisition beyond FTC
clearance.
"While our acquisition of SEM has taken significantly more time and FTC
scrutiny than we had anticipated, we believe we are close to the end of the
process," said Nosbaum. "The acquisition of SEM enhances our ability to execute
on our growth strategies, deliver valuable knowledge to our customers and
improves both our net income and earnings per share. We look forward to having
them be a part of Itron."
Business Outlook:
The following statements are based on management's current expectations.
These statements are forward-looking and 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.
For 2004, our guidance remains unchanged. Excluding the acquisition of SEM,
our outlook is for revenue growth of 8% to 10% and pro forma EPS in the range of
$1.25 to $1.30. The SEM acquisition is expected to be accretive to 2004 revenues
and earnings.
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. Pacific Time on April 19, 2004. The call will be webcast
live in a listen only mode, and later archived. The call will be hosted by CCBN.
The webcast will be accessible online at www.itron.com, "About Itron - Investor
Events." Investors may also listen to the call through CCBN's investor centers
at www.companyboardroom.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 call and will be available for approximately 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 800-428-6051
(Domestic) or 973-709-2089 (International) and entering passcode #348888.
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) FTC clearance and the timing of
the SEM acquisition, including completion of, or 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 estimated liabilities for product warranties, 5) changes in law and
regulation (including FCC licensing actions) and 6) other factors which are more
fully described in our Annual Report on Form 10-K for the year ended December
31, 2003 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 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. 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
March 31,
Revenues 2004 2003
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Sales $ 55,016 $ 63,917
Service 10,586 10,728
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Total revenues 65,602 74,645
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Cost of revenues
Sales 29,223 29,861
Service 6,507 7,922
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Total cost of revenues 35,730 37,783
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Gross profit 29,872 36,862
Operating expenses
Sales and marketing 9,073 8,437
Product development 10,515 10,158
General and administrative 6,914 7,773
Amortization of intangibles 2,027 1,888
Restructurings 2,382 2,165
In-process research and development - 900
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Total operating expenses 30,911 31,321
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Operating income (loss) (1,039) 5,541
Other income (expense)
Equity in affiliates (8) 22
Interest income 17 169
Interest expense (754) (456)
Other income (expense), net 274 25
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Total other income (expense) (471) (240)
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Income (loss) before income taxes (1,510) 5,301
Income tax benefit (provision) 772 (2,385)
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Net income (loss) $ (738) $ 2,916
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Earnings per share
Basic net income (loss) per share $ (0.04) $ 0.14
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Diluted net income (loss) per share $ (0.04) $ 0.14
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Weighted average number of shares outstanding
Basic 20,656 20,239
Diluted 20,656 21,428
ITRON, INC.
RECONCILIATION BETWEEN GAAP AND PRO FORMA INCOME AND EPS
(Unaudited, in thousands, except per share data)
Three Months Ended
March 31,
PRO FORMA NET INCOME 2004 2003
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GAAP basis income (loss) before income taxes $ (1,510) $ 5,301
Adjustments to net income (loss)
Amortization of intangibles 2,027 1,888
Restructurings 2,382 2,165
In-process research and development - 900
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Total adjustments 4,409 4,953
Adjusted income before income taxes 2,899 10,254
Income tax provision (922) (3,944)
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Pro forma net income $ 1,977 $ 6,310
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PRO FORMA EARNINGS PER SHARE
Basic
Weighted average number of basic shares
outstanding 20,656 20,239
Basic pro forma net income per share $ 0.10 $ 0.31
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Diluted
Weighted average number of basic shares
outstanding 20,656 20,239
Employee stock option shares 1,184 1,189
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Weighted average number of diluted shares
outstanding 21,840 21,428
Pro forma net income $ 1,977 $ 6,310
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Diluted pro forma net income per share $ 0.09 $ 0.29
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ITRON, INC.
SEGMENT INFORMATION
(Unaudited, in thousands) Three Months Ended
March 31,
2004 2003
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Revenues
Electric $ 24,344 $ 39,203
Natural Gas 14,360 14,505
Water and Public Power 22,053 18,103
International 3,779 2,716
End User Solutions 1,066 118
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Total revenues $ 65,602 $ 74,645
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Gross profit
Electric $ 8,767 $ 20,595
Natural Gas 9,102 9,141
Water and Public Power 9,782 7,766
International 1,804 (93)
End User Solutions 569 17
Corporate (152) (564)
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Total gross profit $ 29,872 $ 36,862
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Operating income (loss)
Electric $ 6,381 $ 17,994
Natural Gas 8,595 8,386
Water and Public Power 8,347 6,529
International 155 (1,787)
End User Solutions (32) (185)
Corporate (24,485) (25,396)
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Total operating income (loss) $ (1,039) $ 5,541
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ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) March 31, December 31,
2004 2003
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ASSETS
Current assets
Cash and cash equivalents $ 5,289 $ 6,240
Accounts receivable, net 47,417 70,782
Inventories 19,416 16,037
Deferred income taxes, net 11,920 11,673
Other 4,493 4,557
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Total current assets 88,535 109,289
Property, plant and equipment, net 44,684 42,818
Intangible assets, net 20,952 22,979
Goodwill 90,626 90,385
Deferred income taxes, net 32,586 31,755
Other 7,818 6,263
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Total assets $ 285,201 $ 303,489
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 21,823 $ 26,236
Wages and benefits payable 10,179 10,711
Short-term borrowings 5,000 10,000
Current portion of debt 34,088 38,245
Current portion of warranty 10,442 13,939
Unearned revenue 10,558 12,004
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Total current liabilities 92,090 111,135
Project financing debt 3,830 4,024
Warranty 3,733 3,536
Other obligations 7,335 7,550
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Total liabilities 106,988 126,245
Shareholders' equity
Preferred stock - -
Common stock 202,502 200,567
Accumulated other comprehensive loss (364) (136)
Accumulated deficit (23,925) (23,187)
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Total shareholders' equity 178,213 177,244
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Total liabilities and shareholders'
equity $ 285,201 $ 303,489
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CONTACT: Itron, Inc.
Mima Scarpelli, 509-891-3565
mima.scarpelli@itron.com