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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 17, 2003
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(Date of Report)
ITRON, INC.
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(Exact Name of Registrant as Specified in Charter)
Washington 000-22418 91-1011792
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
2818 N. Sullivan Road, Spokane, WA 99216
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(Address of Principal Executive Offices, including Zip Code)
(509) 924-9900
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(Registrant's Telephone Number, Including Area Code)
None
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(Former Name or Former Address, if Changed Since Last Report)
Item 7. Financial Statements and Exhibits. The following item is
attached as an exhibit hereto:
(c) Exhibits.
Exhibit No. 99.1 Press Release dated April 17, 2003
Item 9. Regulation FD Disclosure (Information provided pursuant to Item 12)
On April 17, 2003, Itron, Inc. issued a press release regarding
its financial results for its fiscal 2003 first quarter, ended March 31, 2003. A
copy of this press release is 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, thereunto duly authorized.
ITRON, INC.
Dated: April 17, 2003 By: /s/ DAVID G. REMINGTON
----------------------
David G. Remington
Vice President and Chief Financial Officer
Exhibit 99.1
Itron Posts Strong First Quarter 2003 Results;
Q1 Revenues Up 20% From 2002 To $74.6 Million
SPOKANE, Wash.--(BUSINESS WIRE)--April 17, 2003--Itron, Inc.
(Nasdaq:ITRI), today reported its financial results for the quarter
ended March 31, 2003.
First quarter revenues of $74.6 million were 20% higher than first
quarter 2002 revenues. Approximately half of the year over year growth
came from four acquisitions completed in the last twelve months. First
quarter 2003 results include approximately 27 days worth of operations
for Silicon Energy, which Itron acquired on March 4, 2003, as well as
certain costs related to the acquisition. Also included are the
results of three other acquisitions in the past year, two of which
closed on October 1, 2002, and one that closed March 12, 2002.
-- Hardware sales were approximately 72% of first quarter 2003
revenues compared with 66% in 2002.
-- Software license sales were slightly higher in the first
quarter of 2003 compared with 2002, due primarily to two
installations of Itron's transmission and distribution
software, which Itron began selling with the acquisition of
LineSoft in March 2002.
-- In addition, consulting services revenue increased slightly in
the 2003 quarter while installation and service revenues were
lower.
On a GAAP basis, Itron had net income of $2.9 million in the first
quarter of 2003, or 14 cents per diluted share, compared with a net
loss of $3.0 million in the first quarter of 2002, or (18) cents per
diluted share.
Pro forma net income for the first quarter of 2003 was $6.3
million, or 29 cents per diluted share, compared with $4.6 million, or
24 cents per diluted share, in the first quarter of 2002. A schedule
reconciling income between GAAP and pro forma is attached to this
release. Pro forma results in 2003 exclude intangible amortization
expenses of $1.9 million, restructuring charges of $2.2 million and
in-process R&D charges of $900,000. Pro forma results in 2002 exclude
intangible asset amortization expenses of $337,000 and in-process R&D
charges of $7.4 million.
"With strong first quarter results like these, we are off to a
good start in 2003," commented LeRoy Nosbaum, chairman and CEO. "Our
results for the first quarter were better than we had expected coming
into the quarter, partially as a result of two new orders during the
quarter from large utilities for AMR deployments. In addition,
distributor sales in our Water and Public Power business unit were
stronger than we had forecast."
Gross margin for the first quarter of 2003 was 49%, slightly
higher than fourth quarter 2002 gross margin of 48% and represents a
new quarterly high. On a comparative basis, gross margin was 44% in
the first quarter of 2002. Gross margin improved from the prior
quarter due to a more favorable mix of hardware product and higher
software license sales. Those same factors, along with less
installation revenues in the first quarter of this year, resulted in
the improvement in first quarter gross margin in 2003 compared with
2002.
Sales and marketing, product development and general and
administrative expenses combined were $26.4 million in the first
quarter of 2003, or 35% of revenues compared with $19.0 million, or
31% of revenues in the first quarter of 2002. Increases in sales and
marketing, product development and general and administrative expenses
were primarily driven by the four acquisitions completed in the last
twelve months as well as increased headcount. In addition, general and
administrative expenses in 2003 reflect higher defense costs related
to the Benghiat patent litigation, and increased IT spending.
We recorded a restructuring charge of $2.2 million in the first
quarter of 2003, primarily related to a reorganization of our Energy
Information Solutions (EIS) product group in Raleigh, NC to enable
more of a focus on the utility and large energy user sector, with a
reduced focus on custom data collection software for regional
transmission organizations and other wholesale energy market
participants. By comparison, there were no restructuring related
charges in the first quarter of 2002.
We completed the acquisition of Silicon Energy, a provider of
enterprise energy management software and services to utilities and
large energy users, on March 4, 2003 for approximately $71.2 million.
Itron financed a portion of the purchase price with a $50 million term
bank loan, with a current floating interest rate of approximately 3.8%
per year, payable over three years. In connection with the
acquisition, we recorded approximately $41.3 million of goodwill and
$16.3 million of intangible assets, after the write-off of
approximately $900,000 of in-process R&D. The majority of the acquired
intangible assets will be amortized within approximately three years.
These amounts are preliminary estimates based on independent
valuations, which are being finalized, and which are subject to
adjustments based on review by our outside auditors.
Intangible asset amortization expense was $1.9 million in the
first quarter of 2003, compared with $337,000 in the first quarter of
2002, the increase resulting from amortization of acquisition related
intangible assets. In-process R&D charges were $900,000 in the first
quarter of 2003, related to the Silicon Energy acquisition, compared
with $7.4 million in the first quarter of 2002 related to an
acquisition in that quarter.
Net interest expense for the first quarter of 2003 of $287,000
included approximately one month of interest expense for the term bank
debt related to the Silicon Energy acquisition. First quarter 2002 net
interest expense of $971,000 included interest expense for $53.2
million in subordinated debt, which was converted to common stock
during the second quarter of 2002.
Additional highlights for the first quarter include:
-- Operating cash flow for the first quarter was $6.4 million in
2003, compared with $6.7 million in 2002.
-- New order bookings were $60 million during the quarter
compared with $38 million in the first quarter of 2002.
-- Included in 2003 bookings was an order from one of the
largest electric and gas utilities in the U.S. for an
initial AMR deployment of approximately 100,000 endpoints.
-- Also included in 2003 bookings is an order from an
existing AMR customer, another large electric and gas
utility, to deploy Itron's AMR technology on an additional
500,000 endpoints, approximately half of which will be
supplied directly by Itron.
-- Total backlog, which represents the value of undelivered
contractual orders, excluding annual maintenance, joint pole
use and engineering services contracts, was $203 million at
March 31, 2003, up from $197 million at December 31, 2002.
Twelve-month backlog represents the portion of backlog that
will be earned over the next twelve months and was $102
million at March 31, 2003, compared with $100 million last
quarter.
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.
The Company's guidance for the full year 2003 remains unchanged,
with revenues expected to be between $330 to $340 million, and pro
forma EPS expected to be between $1.20 and $1.25. Second quarter
expectations are for revenues between $75 and $80 million, with
proforma EPS of 24 to 28 cents. Pro forma results for the year and
quarter exclude restructuring charges, intangible asset amortization,
and in-process R&D.
Nosbaum commented that, despite such a strong first quarter, the
Company was leaving its guidance for the year unchanged. "While it is
a rare event, we did have one large order get rescheduled late in the
quarter from a 12 month to an 18 month installation, which will push
about $8 million in revenues out of 2003 to 2004. However, we are
still on track for a good year in 2003, despite a weak overall economy
and a tough environment for many of our customers."
Use of Pro Forma Financial Information:
To supplement our consolidated financial statements presented in
accordance with GAAP, Itron uses pro forma measures of operating
results, net income and earnings per share. Pro forma results are
adjusted from GAAP-based results to exclude certain costs, expenses
and expense reversals that we believe are not indicative of our core
operating results. Pro forma results are one of the primary indicators
management uses for evaluating historical results and for planning and
forecasting future periods. We believe the pro forma results provide
useful information to investors in terms of enhancing their overall
understanding of our current financial performance as well as our
future prospects. We have historically provided pro forma results and
believe the inclusion of them provides investors with consistency in
our financial reporting. Pro forma results should be viewed in
addition to, and not in lieu of, GAAP results.
Forward Looking Statements:
This release contains forward-looking statements concerning
Itron's operations, economic performance, sales, earnings growth and
cost reduction programs. These statements reflect the Company's
current plans and expectations and are based on information currently
available to it. They rely on a number of assumptions and estimates,
which could be inaccurate, and which are subject to risks and
uncertainties that could cause the Company's actual results to vary
materially from those anticipated. Risks and uncertainties include the
rate and timing of customer demand and signing of orders for the
Company's products, rescheduling of current customer orders, the
ability of the Company to effectuate additional initiatives for
improving growth and profitability, the inability to predict the
outcome of appeals or any negotiation efforts associated with the
Benghiat litigation including the uncertainty as to whether the court
will award enhanced damages or future royalties, estimating costs
associated with litigation defense, changes in law and regulation
(including FCC licensing actions), and other factors which are more
fully described in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002 on file with the Securities and Exchange
Commission. Itron undertakes no obligation to update publicly or
revise any forward-looking statements.
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 17, 2003. 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
#289508.
About Itron:
Itron is a leading technology provider and critical source of
knowledge to the global energy and water industries. More than 2,800
utilities worldwide rely on Itron technology to deliver the knowledge
they require to optimize the delivery and use of energy and water.
Itron delivers value to its clients by providing industry-leading
solutions for meter data collection, energy information management,
demand side management and response, load forecasting, analysis and
consulting services, transmission and distribution system design and
optimization, Web-based workforce automation, commercial and
industrial customer care and residential energy management.
Statements of operations, reconciliation between reported and pro
forma income and EPS, balance sheets and segment information follow.
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, $ in thousands, except per share data)
Three Months Ended
March 31,
Revenues 2003 2002
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Sales $63,917 $50,186
Service 10,728 11,889
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Total revenues 74,645 62,075
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Cost of revenues
Sales 29,861 25,543
Service 7,922 9,245
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Total cost of revenues 37,783 34,788
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Gross profit 36,862 27,287
Operating expenses
Sales and marketing 8,437 6,659
Product development 10,158 7,507
General and administrative 7,773 4,859
Amortization of intangibles 1,888 337
Restructurings 2,165 -
In-process research and development 900 7,400
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Total operating expenses 31,321 26,762
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Operating income 5,541 525
Other income (expense)
Equity in affiliates 22 (4)
Interest income 169 321
Interest expense (456) (1,292)
Other income 25 138
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Total other expense (240) (837)
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Income (loss) before income taxes 5,301 (312)
Income tax provision (2,385) (2,658)
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Net income (loss) $2,916 $(2,970)
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Earnings per share
Basic net income (loss) per share $0.14 $(0.18)
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Diluted net income (loss) per share $0.14 $(0.18)
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Weighted average number of shares outstanding
Basic 20,239 16,510
Diluted 21,428 16,510
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 2003 2002
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GAAP Income (loss) before income taxes $5,301 $(312)
Adjustments to net income
Amortization of intangible assets 1,888 337
Restructuring 2,165 -
In-process research and development 900 7,400
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Total adjustments 4,953 7,737
Adjusted income before income taxes 10,254 7,425
Income tax provision (3,944) (2,785)
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Pro forma net income $6,310 $4,640
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PRO FORMA EARNINGS PER SHARE
Basic
Weighted average number of basic shares
outstanding 20,239 16,510
Basic pro forma net income per share $0.31 $0.28
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Diluted
Weighted average number of basic shares
outstanding 20,239 16,510
Employee stock option shares 1,189 1,892
Convertible debt shares 0 3,166
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Weighted average number of diluted shares
outstanding 21,428 21,568
Pro forma net income $6,310 $4,640
Interest on convertible debt, net of taxes - 562
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Adjusted pro forma net income $6,310 $5,202
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Diluted pro forma net income per share $0.29 $0.24
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ITRON, INC.
SEGMENT INFORMATION
(Unaudited, $ in thousands) Three Months Ended
March 31,
2003 2002
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Revenues
Electric $39,203 $30,773
Natural Gas 14,505 10,374
Water and Public Power 18,103 17,429
International 2,716 3,499
C&I End User 118 -
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Total revenues $74,645 $62,075
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Gross profit
Electric $20,595 $14,191
Natural Gas 9,141 5,685
Water and Public Power 7,766 6,869
International (93) 1,411
C&I End User 17 -
Corporate (564) (869)
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Total gross profit $36,862 $27,287
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Operating income (loss)
Electric $17,994 $12,375
Natural Gas 8,386 5,186
Water and Public Power 6,529 5,916
International (1,787) (401)
C&I End User (185) -
Corporate (25,396) (22,551)
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Total operating income $5,541 $525
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ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, $ in thousands) March 31, Dec. 31,
2003 2002
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ASSETS
Current assets
Cash and cash equivalents $12,863 $32,564
Accounts receivable, net 49,795 57,571
Inventories 16,015 15,660
Deferred income taxes 5,248 5,927
Other 5,741 2,770
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Total current assets 89,662 114,492
Property, plant and equipment, net 31,824 30,168
Equipment used in outsourcing, net 11,345 11,589
Intangible assets, net 32,998 18,305
Goodwill 85,920 44,187
Deferred income taxes, net 40,678 24,050
Other 4,771 4,455
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Total assets $297,198 $247,246
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $26,531 $25,526
Wages and benefits payable 12,117 18,259
Accrued litigation 7,400 7,400
Current portion of long-term debt 17,376 691
Deferred revenue 12,056 11,580
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Total current liabilities 75,480 63,456
Long-term debt 33,333 -
Project financing 4,583 4,762
Warranty and other obligations 18,014 17,427
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Total liabilities 131,410 85,645
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Shareholders' equity
Common stock 196,415 195,546
Preferred stock - -
Accumulated other comprehensive income (loss) 122 (280)
Accumulated deficit (30,749) (33,665)
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Total shareholders' equity 165,788 161,601
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Total liabilities and shareholders' equity $297,198 $247,246
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CONTACT: Itron
Mima Scarpelli, 509/891-3565
mima.scarpelli@itron.com