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
|
October
28, 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 October
28, 2009, Itron, Inc. issued a press release announcing their financial
results for the three and nine months ending September 30,
2009. 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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Press
Release dated October 28, 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: October 28,
2009 By: /s/ Steven M.
Helmbrecht
Steven M. Helmbrecht
Sr. Vice President and Chief Financial
Officer
EXHIBIT
INDEX
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Exhibit
Number
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Description
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99.1
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Press
release dated October 28,
2009.
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FOR IMMEDIATE
RELEASE
ITRON
ANNOUNCES THIRD QUARTER RESULTS
LIBERTY
LAKE, WA. — October 28, 2009 — Itron, Inc. (NASDAQ:ITRI) today reported
financial results for the three and nine month periods ended September 30,
2009. Financial results include:
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·
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Quarterly
and nine-month revenues of $408 million and $1.2
billion;
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·
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Quarterly
and nine-month non-GAAP diluted EPS of $0.45 and
$1.28;
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|
·
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Quarterly
and nine-month adjusted EBITDA of $41 million and $131 million;
and
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·
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Record
twelve-month backlog of $749 million and total backlog of $1.6
billion.
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“As we
expected, third quarter results reflect continued softness in the market,” said
Malcolm Unsworth, president and CEO. “We are still being negatively
affected by the economy, foreign currency exchange rates and lower order volumes
as our customers await stimulus fund award announcements. On the positive side,
we have now shipped more than 400,000 OpenWay units, our AMI deployments are
gaining momentum and stimulus awards have been announced. We are
confident and excited about the opportunities for growth next
year.”
Revenues:
Total
Company - Revenues of $408 million for the third quarter and $1.21
billion for the first nine months of 2009 were 16% and 18% lower than respective
2008 revenues of $485 million and $1.48 billion.
North
America - Revenues of $137 million for the third quarter and $420 million
for the first nine months of 2009 were 22% and 21% lower than respective 2008
revenue of $176 million and $528 million. The lower North America
revenues in the 2009 periods were primarily driven by the substantial completion
of a number of AMR contracts in 2008 and fewer shipments of electric meters and
AMR modules due to the economic downturn and uncertainty surrounding stimulus
funds announcements.
International
- - Revenues of $271 million for the third quarter and $791 million for the first
nine months of 2009 were 12% and 17% lower than respective 2008 revenue of $309
million and $949 million. Approximately 65% of the quarterly and 80%
of the year-to-date decrease was due to foreign exchange rates while the
remainder was primarily due to completion of a smart metering/AMI project in
2008, softening of demand in some markets and economic conditions in certain
countries.
Gross Margins:
Total
Company - Gross margins of 31.7% for the third quarter and 32.4% for the
first nine months of 2009 were lower than 2008 gross margins of 33.6% and
34%.
North
America - Gross margins of 31% for the quarter and 34.5% for the first
nine months of 2009 were lower than 2008 gross margins of 37.8% and
38%. The decline in gross margins in 2009 was primarily driven by
shipments of our first generation AMI meters, which currently have higher costs,
fewer AMR meter and module shipments and reduced overhead absorption resulting
from lower overall production levels.
International
- Gross margins of 32.1% for the quarter and 31.3% for the first nine
months compared with 2008 gross margins of 31.2% and 31.7%. The
increased margins in the current quarter were primarily due to lower material
costs and product mix.
Operating
Expenses:
Total
Company - Operating expenses of $120 million for the third quarter and
$362 million for the first nine months of 2009 were lower than 2008 third
quarter and year-to-date operating expenses of $138 million and $413
million.
North
America - Operating expenses were $44 million in the third quarter and
$132 million in the first nine months of 2009 compared with $49 million and $145
million in the same periods of 2008. The decrease in 2009 was
primarily due to lower sales expenses and lower general and administrative
expenses.
International
- Operating expenses of $70 million in the third quarter and $207 million
in the first nine months of 2009 compared with $78 million and $238 million in
the same periods of 2008. Decreased amortization of intangibles
expense in the 2009 periods and foreign exchange rates accounted for the
majority of the decrease.
Corporate
Unallocated – Operating expenses were $7 million for the third quarter
and $23 million in the first nine months of 2009 compared with $11 million and
$31 million in the respective periods of 2008. The decrease in 2009
is due to reductions in compensation expenses and consulting fees related to
financial integration and Sarbanes-Oxley compliance.
Interest and Other
Income:
Interest -
Net interest expense of $20 million in the third quarter and $52 million in the
first nine months of 2009 compared with $19 million and $71 million in the same
periods of 2008. Amortization of debt placement fees, which is
included in net interest expense, of $4.0 million in the third quarter and $6.2
million in the first nine months of 2009 compared with $1.7 million and $7.5
million in the same periods in 2008. Amortization of debt placement fees varies
ratably depending on the amount of debt repayments in each
period. During the last twelve months, we reduced our debt by
approximately $360 million.
Other
Expense – Other
expense was $4.5 million in the third quarter and $9.4 million in the first nine
months of 2009 compared with $281,000 and $1.9 million in the same periods of
2008. Other expense for both periods in 2009 includes foreign
exchange losses caused by fluctuations in exchange rates driven by material
purchases and associated product sales in differing
currencies. Year-to-date 2009 expense includes legal and advisory
fees associated with an amendment to our senior debt agreement which was
completed in the second quarter.
Loss on
Extinguishment - On July 17, 2009, we paid $113.2 million to redeem our
7¾% senior subordinated notes which had a remaining principal value of $109.6
million. We redeemed the notes at 101.938% of the principal
amount. This redemption resulted in a net loss on extinguishment of
$2.5 million. In the first nine months of 2009, we incurred a total
net loss on extinguishment of debt of $12.8 million due to a convertible debt
for common stock exchange in January and the redemption of our senior
subordinated notes in July. The debt for stock exchange resulted in a
net loss of $10.3 million as the value of the shares of Itron’s common stock
issued under the exchange agreement differed from the value of the shares used
to derive the amount payable under the original conversion
agreement.
GAAP
Measures:
GAAP Income
Taxes – We had a tax benefit of $15.1 million in the third quarter and
$37.5 million in the first nine months of 2009 compared with a tax expense of
$377,000 in the third quarter and a tax benefit of $1.3 million in the first
nine months of 2008. The 2009 tax benefits are primarily due to
pre-tax losses, the benefit for claiming foreign taxes as credits rather than
deductions and expected lower income in higher tax jurisdictions.
GAAP Net
Income/Loss and Diluted EPS – Our GAAP net loss and diluted EPS for the
third quarter and first nine months of 2009 was $3.0 million, or 7 cents per
share, and $7.4 million, or 19 cents per share. This compares with
net income of $5.6 million, or 15 cents per share and $17.6 million, or 50 cents
per share, in the same periods in 2008. The net loss in 2009 was due
to lower revenue, contraction of gross margins and foreign exchange
losses.
Non-GAAP
Measures:
Non-GAAP
Operating Income - Non-GAAP operating income excludes amortization
expense related to intangible assets and was $34 million, or 8.4% of revenues,
in the third quarter and $102 million, or 8.5% of revenues in the first nine
months of 2009. This compares with $56 million, or 11.5% of revenues
and $182 million, or 12.3% of revenues, in the third quarter and first nine
months of 2008. The decreased operating income and margin was
primarily due to the combination of lower revenues and gross margins in
2009.
Non-GAAP Income
Taxes - We had a non-GAAP tax benefit in the third quarter of 2009 and
our year-to-date 2009 non-GAAP tax rate was 4.5%. This compares with
28% for the third quarter and 27% for the first nine months of
2008. The lower non-GAAP tax rate in 2009 is due to projected lower
income in higher tax jurisdictions, and the benefit for claiming foreign taxes
as credits rather than deductions.
Non-GAAP Net
Income and Diluted EPS – Non-GAAP net income, which excludes amortization
expenses related to intangibles assets, amortization of debt placement fees, the
additional non-cash interest expense related to the adoption of FSP 14-1 and the
non-cash net loss associated with the convertible debt for stock exchange, was
$18 million for the third quarter and $49 million for the first nine months of
2009. This compares with $30 million and $93 million in the same
periods in 2008. Non-GAAP diluted EPS was 45 cents and $1.28 in the
third quarter and first nine months of 2009 compared with 81 cents and $2.65 in
the same periods of 2008. The lower net income and diluted EPS was primarily due
to lower revenues and a decline in gross margin in 2009. Diluted weighted
average shares outstanding in 2009 were approximately 3.6 million and 3.4
million shares higher than the same periods in 2008 primarily due to the
convertible debt for stock exchange in the first quarter of 2009 and the equity
offering in the second quarter of 2009.
Other
Financial Highlights:
Backlog and New
Order Bookings – Total backlog was $1.6 billion at September 30, 2009
compared with $1 billion at September 30, 2008. Twelve month backlog
of $749 million at September 30, 2009 was higher than the $436 million at
September 30, 2008 due to the inclusion of Q3 2010 AMI shipments in the current
twelve month backlog. New order bookings for the third quarter of
2009 were $400 million, compared with $894 million in the third quarter of
2008. Our book-to-bill ratios were .98 to 1 and 1.9 to 1 for the
third quarter of 2009 and 2008, respectively. New order bookings for
the first nine months of 2009 were $1.5 billion compared with $1.8 billion in
the same nine months of 2008. New order bookings for the three and
nine month periods of 2008 included $470 million related to an AMI contract with
Southern California Edison (SCE).
Cash Flows
– Net cash provided by operating activities during the first nine months
of 2009 was $87 million, compared with $156 million in the same period in
2008. Adjusted earnings before interest, taxes, depreciation and
amortization and the non-cash net loss on extinguishment of debt (adjusted
EBITDA) in the third quarter of 2009 was $41 million compared with $69 million
for the same period in 2008. Adjusted EBITDA for the first nine
months of 2009 was $131 million compared with $220 million in the first nine
months of 2008. Free cash flow in the first nine months of 2009 was
$49 million compared with $115 million in the same period of 2008.
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,
particularly those associated with acquisitions. We exclude these
expenses in our non-GAAP financial measures as we believe the net result is 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 October 28, 2009. The call will be
webcast in a listen only mode and can be accessed online at www.itron.com, “Investors/Investor
Events.” 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 #5642738. You may
also view presentation materials related to the earnings call on Itron’s
website, www.itron.com
/ Investors / Presentations.
About
Itron:
Itron,
Inc. is a leading technology provider to the global energy and water industries.
Our company is the world’s leading provider of intelligent metering, data
collection and utility software solutions, with nearly 8,000 utilities worldwide
relying on our technology to optimize the delivery and use of energy and water.
Our products include electricity, gas, water and heat meters, data collection
and communication systems, including automated meter reading (AMR) and advanced
metering infrastructure (AMI); meter data management and related software
applications; as well as 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
Marni
Pilcher
Director,
Investor Relations
(509)
891-3847
marni.pilcher@itron.com
Statements
of operations, segment information, balance sheets, cash flow statements and
reconciliations of non-GAAP financial measures to the most directly comparable
financial measures follow.
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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 September 30,
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Nine
Months Ended September 30,
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||||||||||||||
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2009
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2008
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2009
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2008
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||||||||||||
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Revenues
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$ | 408,358 | $ | 484,818 | $ | 1,210,624 | $ | 1,477,225 | |||||||
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Cost
of revenues
|
278,879 | 321,858 | 818,452 | 975,496 | |||||||||||
|
Gross
profit
|
129,479 | 162,960 | 392,172 | 501,729 | |||||||||||
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Operating
expenses
|
|||||||||||||||
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Sales
and marketing
|
37,669 | 41,363 | 112,569 | 127,534 | |||||||||||
|
Product
development
|
31,077 | 31,781 | 93,044 | 92,283 | |||||||||||
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General
and administrative
|
26,606 | 34,088 | 84,097 | 100,000 | |||||||||||
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Amortization
of intangible assets
|
25,121 | 30,395 | 72,788 | 93,114 | |||||||||||
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Total
operating expenses
|
120,473 | 137,627 | 362,498 | 412,931 | |||||||||||
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Operating
income
|
9,006 | 25,333 | 29,674 | 88,798 | |||||||||||
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Other
income (expense)
|
|||||||||||||||
|
Interest
income
|
(45 | ) | 1,962 | 971 | 4,846 | ||||||||||
|
Interest
expense
|
(20,075 | ) | (21,037 | ) | (53,319 | ) | (75,362 | ) | |||||||
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Loss
on extinguishment of debt, net
|
(2,460 | ) | - | (12,800 | ) | - | |||||||||
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Other
income (expense), net
|
(4,534 | ) | (281 | ) | (9,445 | ) | (1,938 | ) | |||||||
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Total
other income (expense)
|
(27,114 | ) | (19,356 | ) | (74,593 | ) | (72,454 | ) | |||||||
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Income
(loss) before income taxes
|
(18,108 | ) | 5,977 | (44,919 | ) | 16,344 | |||||||||
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Income
tax benefit (provision)
|
15,146 | (377 | ) | 37,517 | 1,298 | ||||||||||
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Net
income (loss)
|
$ | (2,962 | ) | $ | 5,600 | $ | (7,402 | ) | $ | 17,642 | |||||
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Earnings
(loss) per common share
|
|||||||||||||||
|
Basic
|
$ | (0.07 | ) | $ | 0.16 | $ | (0.19 | ) | $ | 0.54 | |||||
|
Diluted
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$ | (0.07 | ) | $ | 0.15 | $ | (0.19 | ) | $ | 0.50 | |||||
|
Weighted
average common shares outstanding
|
|||||||||||||||
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Basic
|
40,039 | 34,385 | 38,003 | 32,632 | |||||||||||
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Diluted
|
40,039 | 36,872 | 38,003 | 34,991 | |||||||||||
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SEGMENT
INFORMATION
|
||||||||||||||||
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(Unaudited,
in thousands)
|
||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
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2009
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2008
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2009
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2008
|
|||||||||||||
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Revenues
|
||||||||||||||||
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Itron
North America
|
$ | 137,360 | $ | 176,135 | $ | 419,689 | $ | 527,986 | ||||||||
|
Itron
International
|
270,998 | 308,683 | 790,935 | 949,239 | ||||||||||||
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Total
Company
|
$ | 408,358 | $ | 484,818 | $ | 1,210,624 | $ | 1,477,225 | ||||||||
|
Gross
profit
|
||||||||||||||||
|
Itron
North America
|
$ | 42,553 | $ | 66,500 | $ | 144,849 | $ | 200,847 | ||||||||
|
Itron
International
|
86,926 | 96,460 | 247,323 | 300,882 | ||||||||||||
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Total
Company
|
$ | 129,479 | $ | 162,960 | $ | 392,172 | $ | 501,729 | ||||||||
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Operating
income (loss)
|
||||||||||||||||
|
Itron
North America
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$ | (1,187 | ) | $ | 17,934 | $ | 12,461 | $ | 56,296 | |||||||
|
Itron
International
|
17,318 | 18,408 | 40,016 | 63,074 | ||||||||||||
|
Corporate
unallocated
|
(7,125 | ) | (11,009 | ) | (22,803 | ) | (30,572 | ) | ||||||||
|
Total
Company
|
$ | 9,006 | $ | 25,333 | $ | 29,674 | $ | 88,798 | ||||||||
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METER
AND MODULE SUMMARY
|
||||||||||||||||
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(Units
in thousands)
|
||||||||||||||||
|
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
|
Total
meters (with and without AMR/AMI)
|
||||||||||||||||
|
Itron
North America
|
||||||||||||||||
|
Electricity
|
740 | 1,250 | 2,340 | 3,870 | ||||||||||||
|
Gas
|
90 | 100 | 260 | 290 | ||||||||||||
|
Itron
International
|
||||||||||||||||
|
Electricity
|
1,890 | 2,060 | 5,670 | 5,760 | ||||||||||||
|
Gas
|
1,160 | 1,490 | 3,880 | 4,040 | ||||||||||||
|
Water
|
1,960 | 2,090 | 6,540 | 7,080 | ||||||||||||
|
Total
meters with and without AMR/AMI
|
5,840 | 6,990 | 18,690 | 21,040 | ||||||||||||
|
Additional
meter information (Total Company)
|
||||||||||||||||
|
Meters
with AMR
|
670 | 1,150 | 2,200 | 3,860 | ||||||||||||
|
Meters
with AMI
|
120 | 10 | 220 | 20 | ||||||||||||
|
Standalone
AMR/AMI modules
|
850 | 1,250 | 2,860 | 3,550 | ||||||||||||
|
Meters
with AMR/AMI and modules
|
1,640 | 2,410 | 5,280 | 7,430 | ||||||||||||
|
Meters
with other vendors' AMR/AMI
|
160 | 220 | 470 | 620 | ||||||||||||
|
As
part of the integration of the 2007 Actaris acquisition, we made
refinements to our two operating segments on January 1, 2009. The
information presented for the three and nine months ended September 30,
2008 reflects the restatement of our segment operating results based on
this refinement.
|
||||||||||||||||
|
CONSOLIDATED
BALANCE SHEETS
|
|||||||||
|
(Unaudited,
in thousands)
|
|||||||||
|
September
30, 2009
|
December
31, 2008
|
||||||||
| ASSETS | |||||||||
|
Current
assets
|
|||||||||
|
Cash
and cash equivalents
|
$ | 124,721 | $ | 144,390 | |||||
|
Accounts
receivable, net
|
325,119 | 321,278 | |||||||
|
Inventories
|
177,766 | 164,210 | |||||||
|
Deferred
income taxes, net
|
28,993 | 31,807 | |||||||
|
Other
|
69,583 | 56,032 | |||||||
|
Total
current assets
|
726,182 | 717,717 | |||||||
|
Property,
plant, and equipment, net
|
315,967 | 307,717 | |||||||
|
Prepaid
debt fees
|
10,450 | 12,943 | |||||||
|
Deferred
income taxes, net
|
68,934 | 30,917 | |||||||
|
Other
|
18,831 | 19,315 | |||||||
|
Intangible
assets, net
|
419,136 | 481,886 | |||||||
|
Goodwill
|
1,323,932 | 1,285,853 | |||||||
|
Total
assets
|
$ | 2,883,432 | $ | 2,856,348 | |||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||||
|
Current
liabilities
|
|||||||||
|
Accounts
payable
|
$ | 193,867 | $ | 200,725 | |||||
|
Other
current liabilities
|
59,687 | 66,365 | |||||||
|
Wages
and benefits payable
|
70,559 | 78,336 | |||||||
|
Taxes
payable
|
34,309 | 18,595 | |||||||
|
Current
portion of long-term debt
|
10,953 | 10,769 | |||||||
|
Current
portion of warranty
|
20,751 | 23,375 | |||||||
|
Unearned
revenue
|
34,731 | 24,329 | |||||||
|
Deferred
income taxes, net
|
1,927 | 1,927 | |||||||
|
Total
current liabilities
|
426,784 | 424,421 | |||||||
|
Long-term
debt
|
812,991 | 1,140,998 | |||||||
|
Warranty
|
12,764 | 14,880 | |||||||
|
Pension
plan benefits
|
59,026 | 55,810 | |||||||
|
Deferred
income taxes, net
|
83,745 | 102,720 | |||||||
|
Other
obligations
|
77,280 | 58,743 | |||||||
|
Total
liabilities
|
1,472,590 | 1,797,572 | |||||||
|
Commitments
and contingencies
|
|||||||||
|
Shareholders'
equity
|
|||||||||
|
Preferred
stock
|
- | - | |||||||
|
Common
stock
|
1,294,425 | 992,184 | |||||||
|
Accumulated
other comprehensive income, net
|
91,320 | 34,093 | |||||||
|
Retained
earnings
|
25,097 | 50,291 | |||||||
|
Cumulative
effect of change in accounting principle
|
- | (17,792 | ) | ||||||
|
Total
shareholders' equity
|
1,410,842 | 1,058,776 | |||||||
|
Total
liabilities and shareholders' equity
|
$ | 2,883,432 | $ | 2,856,348 | |||||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
|
(Unaudited,
in thousands)
|
||||||||
|
Nine
Months Ended September 30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Operating
activities
|
||||||||
|
Net
income (loss)
|
$ | (7,402 | ) | $ | 17,642 | |||
|
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
113,812 | 133,295 | ||||||
|
Stock-based
compensation
|
13,467 | 12,560 | ||||||
|
Amortization
of prepaid debt fees
|
6,384 | 7,665 | ||||||
|
Amortization
of convertible debt discount
|
7,262 | 9,995 | ||||||
|
Loss
on extinguishment of debt, net
|
9,960 | - | ||||||
|
Deferred
income taxes, net
|
(51,341 | ) | (31,357 | ) | ||||
|
Other,
net
|
1,768 | 236 | ||||||
|
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||
|
Accounts
receivable
|
11,608 | 1,834 | ||||||
|
Inventories
|
(4,211 | ) | (19,100 | ) | ||||
|
Accounts
payables, other current liabilities, and taxes payable
|
(2,473 | ) | 15,373 | |||||
|
Wages
and benefits payable
|
(10,404 | ) | 15,549 | |||||
|
Unearned
revenue
|
9,272 | 5,339 | ||||||
|
Warranty
|
(5,735 | ) | 103 | |||||
|
Other,
net
|
(4,880 | ) | (12,910 | ) | ||||
|
Net
cash provided by operating activities
|
87,087 | 156,224 | ||||||
|
Investing
activities
|
||||||||
|
Acquisitions
of property, plant, and equipment
|
(38,023 | ) | (41,422 | ) | ||||
|
Business
acquisitions & contingent consideration, net of cash equivalents
acquired
|
(1,317 | ) | (95 | ) | ||||
|
Other,
net
|
4,101 | 1,380 | ||||||
|
Net
cash used in investing activities
|
(35,239 | ) | (40,137 | ) | ||||
|
Financing
activities
|
||||||||
|
Payments
on debt
|
(236,495 | ) | (384,426 | ) | ||||
|
Issuance
of common stock
|
165,235 | 323,424 | ||||||
|
Prepaid
debt fees
|
(3,936 | ) | (207 | ) | ||||
|
Other,
net
|
(1,309 | ) | (44 | ) | ||||
|
Net
cash used in financing activities
|
(76,505 | ) | (61,253 | ) | ||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
4,988 | 569 | ||||||
|
Increase
(decrease) in cash and cash equivalents
|
(19,669 | ) | 55,403 | |||||
|
Cash
and cash equivalents at beginning of period
|
144,390 | 91,988 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 124,721 | $ | 147,391 | ||||
Itron,
Inc.
About
Non-GAAP Financial Measures
The
accompanying press release dated October 28, 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,
non-GAAP diluted 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. These non-GAAP financial measures facilitate management’s
internal comparisons to our historical performance as well as comparisons to our
competitor’s 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), purchase accounting
adjustments or extinguishment of debt gains and losses. 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. We believe these non-GAAP financial
measures are useful to investors because they provide 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 excluding the expense
related to the amortization of intangible assets. We consider this
non-GAAP financial measure to be a useful metric for management and investors
because it excludes the effect of expenses that are related to previous
acquisitions. By excluding these expenses we believe that it is
easier for management and investors to compare our financial results over
multiple periods and analyze trends in our operations. For example,
expenses related to amortization of intangible assets are now decreasing, which
is improving GAAP operating margins, yet the improvement in GAAP operating
margins due to this lower expense is not necessarily reflective of an
improvement in our core business. 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
diluted EPS – We define non-GAAP net income as net income excluding the
expenses associated with amortization of intangible assets, amortization of debt
placement fees, non-cash interest expense from the adoption of FSB APB 14-1 and
the non-cash net loss on the extinguishment of debt. We define
non-GAAP diluted EPS as non-GAAP net income divided by the weighted average
shares, on a 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
diluted EPS. We compensate for these limitations by providing
specific information regarding the GAAP amounts excluded from these non-GAAP
measures and evaluating non-GAAP net income and non-GAAP diluted EPS together
with GAAP net income and GAAP diluted EPS.
Adjusted EBITDA – We define
adjusted EBITDA as net income (a) minus interest income, (b) plus interest
expense, depreciation and amortization of intangible asset expenses and the
non-cash net loss on the extinguishment of debt, and (c) exclude the tax expense
or benefit. We believe 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 items that we exclude in our
calculation of adjusted EBITDA may differ from the items 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 cash used for
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 reconciling 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 September 30,
|
Nine
Months Ended September 30,
|
||||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
||||||||||||||
|
Non-GAAP
operating income:
|
|||||||||||||||||
|
GAAP
operating income
|
$ | 9,006 | $ | 25,333 | $ | 29,674 | $ | 88,798 | |||||||||
|
Amortization
of intangible assets
|
25,121 | 30,395 | 72,788 | 93,114 | |||||||||||||
|
Non-GAAP
operating income
|
$ | 34,127 | $ | 55,728 | $ | 102,462 | $ | 181,912 | |||||||||
|
Non-GAAP
net income:
|
|||||||||||||||||
|
GAAP
net income (loss)
|
$ | (2,962 | ) | $ | 5,600 | $ | (7,402 | ) | $ | 17,642 | |||||||
|
Amortization
of intangible assets
|
25,121 | 30,395 | 72,788 | 93,114 | |||||||||||||
|
Amortization
of debt placement fees
|
4,053 | 1,726 | 6,214 | 7,475 | |||||||||||||
| (1) |
FSP
APB 14-1 interest expense
|
2,367 | 3,393 | 7,262 | 9,995 | ||||||||||||
|
Loss
on extinguishment of debt, net
|
- | - | 9,960 | - | |||||||||||||
|
Income
tax effect of non-GAAP adjustments
|
(10,378 | ) | (11,245 | ) | (39,831 | ) | (35,492 | ) | |||||||||
|
Non-GAAP
net income
|
$ | 18,201 | $ | 29,869 | $ | 48,991 | $ | 92,734 | |||||||||
|
Non-GAAP
diluted EPS
|
$ | 0.45 | $ | 0.81 | $ | 1.28 | $ | 2.65 | |||||||||
|
Weighted
average common shares outstanding - Diluted
|
40,456 | 36,872 | 38,387 | 34,991 | |||||||||||||
|
Adjusted
EBITDA:
|
|||||||||||||||||
|
GAAP
net income (loss)
|
$ | (2,962 | ) | $ | 5,600 | $ | (7,402 | ) | $ | 17,642 | |||||||
|
Interest
income
|
45 | (1,962 | ) | (971 | ) | (4,846 | ) | ||||||||||
|
Interest
expense
|
20,075 | 21,037 | 53,319 | 75,362 | |||||||||||||
|
Income
tax (benefit) provision
|
(15,146 | ) | 377 | (37,517 | ) | (1,298 | ) | ||||||||||
|
Depreciation
and amortization
|
39,405 | 43,829 | 113,812 | 133,295 | |||||||||||||
|
Loss
on extinguishment of debt, net
|
- | - | 9,960 | - | |||||||||||||
|
Adjusted
EBITDA
|
$ | 41,417 | $ | 68,881 | $ | 131,201 | $ | 220,155 | |||||||||
|
Free
Cash Flow:
|
|||||||||||||||||
|
Net
cash provided by operating activities
|
$ | 19,734 | $ | 35,775 | $ | 87,087 | $ | 156,224 | |||||||||
|
Acquisitions
of property, plant, and equipment
|
(10,219 | ) | (12,456 | ) | (38,023 | ) | (41,422 | ) | |||||||||
|
Free
Cash Flow
|
$ | 9,515 | $ | 23,319 | $ | 49,064 | $ | 114,802 | |||||||||
|
(1)
|
On
January 1, 2009, we adopted FSP APB 14-1, Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement) (FSP 14-1), and applied FSP 14-1
retrospectively to all periods for which our convertible debt was
outstanding. We have excluded the additional interest expense associated
with FSP 14-1 as detailed in our discussion of our use of non-GAAP
financial measures. (The guidance in FSP 14-1 is now located within ASC
470)
|
||||||||||||||||