-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TCtUWswPxUC2T8dOAlzpFGXzhodj3m4GgkHVUz08PnH7hiRFn72KAqb0cNQT59Of /wfRGwk6YwumeXQkEru5qQ== 0001157523-04-001057.txt : 20040205 0001157523-04-001057.hdr.sgml : 20040205 20040205161649 ACCESSION NUMBER: 0001157523-04-001057 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040205 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ITRON INC /WA/ CENTRAL INDEX KEY: 0000780571 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 911011792 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22418 FILM NUMBER: 04570348 BUSINESS ADDRESS: STREET 1: 2818 N SULLIVAN RD CITY: SPOKANE STATE: WA ZIP: 99216 BUSINESS PHONE: 5099249900 MAIL ADDRESS: STREET 1: 2818 NORTH SULLIVAN ROAD CITY: SPOKANE STATE: WA ZIP: 99216 FORMER COMPANY: FORMER CONFORMED NAME: ITRON INC DATE OF NAME CHANGE: 19920724 8-K 1 a4566529.txt ITRON 8-K 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 5, 2004 -------------------------------------- (Date of Report) ITRON, INC. ---------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Washington 000-22418 91-1011792 - --------------------------------- ----------------------------- -------------- (State or Other Jurisdiction (Commission File No.) (IRS Employer of Incorporation) Identification No.) 2818 N. Sullivan Road, Spokane, WA 99216 ------------------------------------------------------------------------------- (Address of Principal Executive Offices, including Zip Code) (509) 924-9900 ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) None ------------------------------------------------------------------------------- (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 February 5, 2004 Item 12. Results of Operations and Financial Condition. On February 5, 2004, Itron, Inc. issued a press release announcing the financial results for the quarter and year ending December 31, 2003. 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: February 5, 2004 By: /s/ DAVID G. REMINGTON ---------------------- David G. Remington Vice President and Chief Financial Officer EX-99 3 a4566529ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Itron Reports Q4 2003 and Full Year 2003 Results SPOKANE, Wash.--(BUSINESS WIRE)--Feb. 5, 2004--Itron, Inc. (Nasdaq:ITRI), today reported its financial results for the quarter and full year ended December 31, 2003. Fourth quarter revenues were $80 million, 3% higher than fourth quarter 2002 revenues. Full year 2003 revenues were $317 million, up 11% over 2002. -- AMR unit shipments increased 10% to 4.1 million in 2003. Gas unit shipments increased 26% and water unit shipments increased 44%, offset by a 12% decrease in electric unit shipments. Several large electric customers delayed AMR orders in 2003 as a result of ice storms, the electrical power blackout in the eastern U.S., a hurricane and other utility-specific delays in capital spending. -- Most of the fourth quarter revenue growth and approximately half of the year-over-year revenue growth came from acquisitions. -- Remaining 2003 revenue growth was driven by higher automatic meter reading (AMR) hardware revenues offset by lower revenues for installations related to meter reading systems. On a GAAP basis, the company reported a loss of $1.6 million, or 8 cents per share for the fourth quarter, compared with a loss of $640,000, or 3 cents per share in the fourth quarter of 2002. Full year GAAP net income was $10.5 million, or 48 cents per diluted share in 2003, compared with $8.7 million, or 41 cents per diluted share in 2002. Fourth quarter and full year 2003 earnings were impacted by a number of unusual items that netted to approximately $9.5 million in pre-tax expenses, or approximately 26 cents per share pro forma after-tax. The fourth quarter items include the following: -- $8.6 million in increases to previous warranty estimates for higher than expected electric meter module product failures resulting from a defective component provided by a supplier. -- $2.2 million of costs in excess of revenues on an AMR installation contract with one large utility, resulting from considerably lower than expected productivity of third-party contractors. -- $2.4 million associated with the impairments of minority investments in two companies. -- The above charges were partially offset by a reversal of approximately $3.7 million in previously accrued management bonus and employee profit sharing for 2003. The net impact of these items exceeds the Company's previous guidance issued in January of $5.5 million pre-tax, primarily due to increases in estimated field labor charges to replace the failed electric meter modules. Pro forma net income for the fourth quarter of 2003 was $138,000, or 1 cent per diluted share, compared with $6.5 million, or 30 cents per diluted share, in the fourth quarter of 2002. Full year 2003 pro forma net income was $18.9 million, compared with $24.0 million in 2002. Pro forma diluted earnings per share for the full year were 87 cents in 2003 compared with $1.12 in 2002. A schedule reconciling GAAP basis income to pro forma income is attached to this release. "While we managed to produce double digit revenue growth in a difficult economic year for utilities, we are far from satisfied with our results," commented LeRoy Nosbaum, Itron's chairman and CEO. "The emergence of a major problem with a product component supplier late in the year caused us to fall significantly short of our earnings expectations. While very disappointing, the problem encountered is highly unusual." Gross margin was 34.8% for the fourth quarter of 2003, while full year gross margin for 2003 was 45.3%. In comparison, gross margin was 47.6% in the fourth quarter of 2002, and 46.4% for the full year 2002. Gross margin benefited in 2003 from higher manufacturing volumes, lower component prices and changes in product mix. However, those benefits were offset by the higher warranty estimates and installation costs mentioned earlier in the release. The higher warranty and installation costs, net of the $1.0 million in bonus reversal related to cost of sales, had the effect of decreasing gross margin by 12.3% and 3.1% for the fourth quarter and full year 2003. Sales and marketing, product development and general and administrative expenses were $25.2 million in the fourth quarter of 2003 compared with $26.5 million in 2002. Included in the fourth quarter 2003 amount is $2.7 million of the $3.7 million bonus and profit sharing reversal. For the full year in 2003 these expenses were $108.6 million compared with $94.0 million in 2002, with the higher spending in 2003 resulting primarily from acquisitions. Operating cash flow was a negative $6.0 million for the quarter compared with a positive cash generation of $16.4 million in the fourth quarter of 2002. Operating cash flow in the fourth quarter of 2003 was negatively impacted by a $7.9 million payment to settle a patent infringement suit the majority of which had been accrued in 2002. Full year operating cash flow was $10.3 million compared to $49.2 million in 2002. In addition to the patent litigation payment, full year 2003 operating cash flow was reduced by a $4 million payment to a customer in connection with an amendment to a long-term warranty and maintenance agreement. Also driving lower operating cash flow in 2003 were payments of bonus and profit sharing accrued in 2002 and a large increase in accounts receivable at the end of 2003 as almost half of fourth quarter 2003 sales occurred in December. New order bookings were $45 million for the quarter and $214 million for the full year 2003, compared with $61 million and $231 million for the fourth quarter and full year 2002. Total backlog at December 31, 2003 was $145 million, compared with $197 million at the end of last year. Twelve-month backlog at December 31, 2003 was $62 million, down from $100 million at the end of last year, but down only $7 million from the end of the prior quarter. Backlog at the end of 2003 is lower primarily as a result of fewer bookings in 2003 in our electric market due to large order push outs from several utilities. In early January 2004, we received a large order from one electric utility worth approximately $21 million. New order bookings in our gas market were relatively flat in 2003. Water and public power market new order bookings increased 18%, and international market new order bookings were up almost 60%. Sales through meter manufacturers and business associates, which often book and ship within a quarter and are generally not included in quarter-end backlog, grew 45% in 2003 and were approximately 19% of 2003 revenues, compared with 15% of revenues in 2002. SEM Acquisition Update: In July 2003, we announced an agreement to acquire Schlumberger Electricity Metering, Inc. ("SEM") for a purchase price of $255 million. Both Itron and Schlumberger have certified to the FTC that we are in substantial compliance with the FTC's second request for information in connection with our filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR"). We anticipate a transaction close around the end of the first quarter of 2004. 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, excluding the acquisition of SEM, the Company's 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. "The first quarter of 2004 will be challenging as the electric utility order delays from Q4 03 will affect us in Q1 04 as well," said Nosbaum. "We have recently taken some actions to eliminate unprofitable activities and reduce manpower in some areas. We expect order activity to begin to rebound in the second quarter." 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 February 5, 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 #329306. 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. 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), 6) and other factors which are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2002 and 2003 Form 10-Qs on file with the Securities and Exchange Commission. Itron undertakes no obligation to update publicly or revise any forward-looking statements. 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 Twelve Months Ended December 31, December 31, Revenues 2003 2002 2003 2002 ------- ------- -------- -------- Sales $69,253 $66,711 $273,783 $241,158 Service 10,724 10,560 43,182 43,684 ------- ------- -------- -------- Total revenues 79,977 77,271 316,965 284,842 ------- ------- -------- -------- Cost of revenues Sales 38,640 33,707 135,940 122,189 Service 13,527 6,782 37,471 30,384 ------- ------- -------- -------- Total cost of revenues 52,167 40,489 173,411 152,573 ------- ------- -------- -------- Gross profit 27,810 36,782 143,554 132,269 Operating expenses Sales and marketing 8,976 8,592 36,673 30,603 Product development 10,122 8,922 43,017 36,780 General and administrative 6,058 8,956 28,944 26,653 Amortization of intangibles 2,574 804 9,618 2,356 Restructurings - 3,135 2,208 3,135 In-process research and development - - 900 7,200 Litigation accrual - 7,400 500 7,400 ------- ------- -------- -------- Total operating expenses 27,730 37,809 121,860 114,127 ------- ------- -------- -------- Operating income (loss) 80 (1,027) 21,694 18,142 Other income (expense) Equity in affiliates (82) 29 80 126 Interest income (106) 183 159 1,187 Interest expense (421) 191 (2,638) (2,061) Other income (expense), net (1,818) 246 (1,396) 1,465 ------- ------- -------- -------- Total other income (expense) (2,427) 649 (3,795) 717 ------- ------- -------- -------- Income (loss) before income taxes (2,347) (378) 17,899 18,859 Income tax benefit (provision) 708 (262) (7,421) (10,176) ------- ------- -------- -------- Net income (loss) $(1,639) $ (640) $ 10,478 $ 8,683 ------- ------- -------- -------- Earnings per share Basic net income (loss) per share $ (0.08) $ (0.03) $ 0.51 $ 0.45 ------- ------- -------- -------- Diluted net income (loss) per share $ (0.08) $ (0.03) $ 0.48 $ 0.41 ------- ------- -------- -------- Weighted average number of shares outstanding Basic 20,556 20,177 20,413 19,262 Diluted 20,556 20,177 21,740 21,380 ITRON, INC. RECONCILIATION BETWEEN GAAP AND PRO FORMA INCOME AND EPS (Unaudited, in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, PRO FORMA NET INCOME 2003 2002 2003 2002 ------- ------- -------- -------- GAAP basis income (loss) before income taxes $(2,347) $ (378) $ 17,899 $ 18,859 Adjustments to net income (loss) Amortization of intangibles 2,574 804 9,618 2,356 Restructurings - 3,135 2,208 3,135 In-process research and development - - 900 7,200 Litigation accrual - 7,400 500 7,400 ------- ------- -------- -------- Total adjustments 2,574 11,339 13,226 20,091 Adjusted income before income taxes 227 10,961 31,125 38,950 Income tax provision (89) (4,461) (12,213) (14,957) ------- ------- -------- -------- Pro forma net income $ 138 $ 6,500 $ 18,912 $ 23,993 ------- ------- -------- -------- PRO FORMA EARNINGS PER SHARE Basic Weighted average number of basic shares outstanding 20,556 20,177 20,413 19,262 . Basic pro forma net income per share $ 0.01 $ 0.32 $ 0.93 $ 1.25 ------- ------- -------- -------- Diluted Weighted average number of basic shares outstanding 20,556 20,177 20,413 19,262 Employee stock option shares 1,304 1,560 1,327 1,690 Convertible debt shares - - - 1,042 ------- ------- -------- -------- Weighted average number of diluted shares outstanding 21,860 21,737 21,740 21,994 Pro forma net income $ 138 $ 6,500 $ 18,912 $ 23,993 Interest on convertible debt, net of taxes - - - 641 ------- ------- -------- -------- Adjusted pro forma net income $ 138 $ 6,500 $ 18,912 $ 24,634 ------- ------- -------- -------- Diluted pro forma net income per share $ 0.01 $ 0.30 $ 0.87 $ 1.12 ------- ------- -------- -------- ITRON, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) December 31, December 31, 2003 2002 ----------- ------------ ASSETS Current assets Cash and cash equivalents $ 6,240 $ 32,564 Accounts receivable, net 70,782 57,571 Inventories 16,037 15,660 Deferred income taxes 11,673 5,927 Other 4,557 2,770 ----------- ------------ Total current assets 109,289 114,492 Property, plant and equipment, net 32,414 30,168 Equipment used in outsourcing, net 10,404 11,589 Intangible assets, net 22,979 18,305 Goodwill 90,385 44,187 Deferred income taxes, net 31,755 24,050 Other 6,263 4,455 ----------- ------------ Total assets $ 303,489 $ 247,246 ----------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 40,175 $ 25,526 Wages and benefits payable 10,711 18,259 Accrued litigation - 7,400 Short-term borrowings 10,000 - Current portion of debt 17,412 691 Unearned revenue 12,004 11,580 ----------- ------------ Total current liabilities 90,302 63,456 Long-term debt 20,833 - Project financing debt 4,024 4,762 Warranty and other obligations 11,086 17,427 ----------- ------------ Total liabilities 126,245 85,645 Shareholders' equity Common stock 200,567 195,546 Preferred stock - - Accumulated other comprehensive loss (136) (280) Accumulated deficit (23,187) (33,665) ----------- ------------ Total shareholders' equity 177,244 161,601 ----------- ------------ Total liabilities and shareholders' equity $ 303,489 $ 247,246 ----------- ------------ ITRON, INC. SEGMENT INFORMATION (Unaudited, in thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2003 2002 2003 2002 -------- -------- -------- -------- Revenues Electric $ 35,615 $ 36,496 $150,557 $136,782 Natural Gas 14,061 12,433 56,036 50,353 Water and Public Power 23,688 23,722 93,609 84,069 International 5,440 4,620 14,369 13,638 End User Solutions 1,173 - 2,394 - -------- -------- -------- -------- Total revenues $ 79,977 $ 77,271 $316,965 $284,842 -------- -------- -------- -------- Gross profit Electric $ 6,535 $ 16,608 $ 61,755 $ 62,968 Natural Gas 8,855 7,165 34,029 28,818 Water and Public Power 7,885 10,481 37,659 35,771 International 1,946 1,403 3,854 5,094 End User Solutions 784 - 1,161 - Corporate 1,805 1,125 5,096 (382) -------- -------- -------- -------- Total gross profit $ 27,810 $ 36,782 $143,554 $132,269 -------- -------- -------- -------- Operating income (loss) Electric $ 3,533 $ 14,247 $ 50,212 $ 54,698 Natural Gas 8,115 6,422 30,952 26,283 Water and Public Power 6,375 9,075 31,816 31,228 International 266 (3,518) (2,508) (5,242) End User Solutions 216 - (752) - Corporate (18,425) (27,253) (88,026) (88,825) -------- -------- -------- -------- Total operating income (loss) $ 80 $ (1,027) $ 21,694 $ 18,142 -------- -------- -------- -------- CONTACT: Itron, Inc. Mima Scarpelli, 509-891-3565 mima.scarpelli@itron.com -----END PRIVACY-ENHANCED MESSAGE-----