Itron Announces First Quarter Financial Results (See press release dated February 16, 2011 regarding restatement)

LIBERTY LAKE, WA. — April 28, 2010 — Itron, Inc. (NASDAQ:ITRI) today reported financial results for its first quarter ended March 31, 2010. Highlights of the quarter include:

• Quarterly revenues of $499 million with record North America revenues of $243 million;
• Quarterly non-GAAP diluted EPS of $1.01 (inclusive of $0.26 of discrete tax benefits);
• Record cash flow from operations and free cash flow of $66 million and $50 million;
• Quarterly adjusted EBITDA of $66 million; and
• Record twelve-month backlog of $981 million; total backlog of $1.5 billion.

"The positive momentum that started in North America in the fourth quarter of last year continues to accelerate and broaden," said Malcolm Unsworth, president and CEO. "We shipped over 1 million OpenWay meters and modules during the quarter which is equivalent to the total shipped all of last year, and we are seeing strong demand for our gas and water solutions."

Operations Highlights:

Revenues – Total revenues of $499 million for the first quarter of 2010 were $111 million, or 29%, higher than 2009 first quarter revenues of $389 million. North America revenues of $243 million for the first quarter of 2010 were $104 million, or 74%, higher than the comparable 2009 period revenues of $139 million. The increase in revenue was primarily driven by higher shipments of OpenWay meters and modules. International revenues of $256 million for the first quarter of 2010 were $7 million, or 3%, higher than the comparable 2009 period revenues of $249 million. The increase in International revenues was due to foreign exchange rates which was somewhat offset by a decrease from soft demand and economic conditions in certain markets.

Gross Margin – Gross margin for the first quarter of 2010 was 32% compared with 33% in the first quarter of 2009. First quarter 2010 North America gross margin of 33% was lower than the 2009 gross margin of 38%. The decline in margin in North America was primarily due to increased shipments of our higher cost first generation OpenWay meters and increased service revenues, which have lower margin. In addition, compensation costs were higher due to reinstating annual incentive plans in 2010. International gross margin was 31% for the first quarter of 2010 and 2009.

Operating Expenses – Total operating expenses for the first quarter of 2010 were $125 million compared with $121 million in the same period of 2009. North America operating expenses were $46 million compared with $44 million in the same period of 2009. The increase in North America operating expenses was primarily due to expenses in the current period associated with the reinstatement of annual incentive compensation plans in 2010. This expense was somewhat offset by decreased amortization of intangibles expense. International operating expenses were $68 million in the first quarter of both 2010 and 2009. Increases in International operating expenses in the 2010 period from foreign exchange rates were offset by decreased amortization of intangibles expense. Corporate unallocated expenses of $11 million for the first quarter of 2010 were $2 million higher than the first quarter of 2009 primarily due to higher compensation expense.

Net Interest Expense – Net interest expense of $15 million in the first quarter of 2010 compared with $16 million in the same period of 2009. Amortization of debt placement fees, which is included in net interest expense, was $1.2 million and $1.8 million in the first quarter of 2010 and 2009, respectively. Amortization of debt placement fees varies depending on the amount of debt repayments made in a given period. During the first quarter of 2010, we made approximately $53 million in debt repayments.

Loss on Extinguishment of Debt – The first quarter of 2009 included a $10.3 million net loss on the extinguishment of debt related to a convertible debt for common stock exchange. The difference in the value of the shares of Itron's common stock issued under the exchange agreement and the value of the shares used to derive the amount payable under the original conversion agreement resulted in the net loss on extinguishment of debt.

Other Expense – Other expense was $592,000 in the first quarter of 2010 compared with $2 million in 2009. The decrease in the 2010 period was primarily due to the recognition of a foreign exchange gain, compared with a loss in the 2009 period, caused by fluctuations in exchange rates for material purchases and related product sales denominated in different currencies. Additionally, the 2009 period included consulting and legal fees associated with an amendment to our senior debt agreement.

GAAP Income Taxes – We had a tax benefit of $8.7 million in the first quarter of 2010 compared with a minimal benefit in the same period of 2009. The first quarter 2010 tax benefit is due primarily to the receipt of a clean energy manufacturing tax credit awarded as part of the American Recovery and Reinvestment Act and a benefit related to the reduction of tax reserves for certain foreign subsidiaries.

GAAP Net Income and Diluted EPS – Our GAAP net income and diluted EPS for the first quarter of 2010 was $26.8 million, or 66 cents per share, compared with a net loss of $19.7 million, or 55 cents per share, in the same period in 2009.

Non-GAAP Operating Income – Non-GAAP operating income, which excludes amortization expense related to intangible assets, was $51 million, or 10.3% of revenues, in the first quarter of 2010, compared with $32 million, or 8.3% of revenues, in the same period in 2009. The increased operating income was primarily due to increased contribution from North America.

Non-GAAP Income Taxes – We had a non-GAAP tax benefit of 4% in the first quarter of 2010 compared with an expense of 32% in the same period of 2009. The non-GAAP tax benefit in 2010 is due primarily to the receipt of a clean energy manufacturing tax credit awarded as part of the American Recovery and Reinvestment Act and a benefit related to the reduction of tax reserves for certain foreign subsidiaries.

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 amortization of convertible debt discount, and the non-cash net loss associated with the convertible debt for stock exchange, was $41.3 million in the first quarter of 2010, compared with $12.2 million in the 2009 period. Non-GAAP diluted EPS was $1.01 in the first quarter 2010 compared with 33 cents in the 2009 period. Fully diluted shares outstanding in the first quarter of 2010 were 4.3 million shares higher than the same period in 2009 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. Concluded Unsworth, "Global interest in advanced metering applications, not only for electric but also for gas and water utilities, continues to be high. Itron is well positioned to take advantage of the momentum worldwide due to our global footprint and leading market positions."

Other Financial Highlights:

Backlog and New Order Bookings – Total backlog was $1.5 billion at March 31, 2010 compared with $1.5 billion at March 31, 2009. Twelve month backlog of $981 million at March 31, 2010 was higher than the $471 million at March 31, 2009 due to the inclusion of a substantial amount of OpenWay contract shipments in the current twelve month backlog. New order bookings for the first quarter of 2010 were $481 million, compared with $625 million in the first quarter of 2009. New order bookings in the first quarter of 2009 included $260 million related to our OpenWay contract with San Diego Gas and Electric while the first quarter of 2010 did not include any significant OpenWay contract bookings. Our book-to-bill ratios were .96 to 1 and 1.6 to 1 for the first quarter of 2010 and 2009, respectively.

Cash Flows from Operations and Financial Condition – Net cash provided by operating activities during the first quarter 2010 was $66 million, compared with $43 million in the same period in 2009. Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) in the first quarter of 2010 was $66 million compared with $43 million for the same period in 2009. Free cash flow for the first quarter of 2010 was $50 million compared with $29 million for the same period in 2009. Cash and equivalents were $123 million at March 31, 2010 compared with $122 million at December 31, 2009.

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 April 28, 2010. The call will be webcast in a listen only mode and can be accessed online at "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 #4641152. You may also view presentation materials related to the earnings call on Itron's website under Investors / Presentations.