Itron Announces First Quarter 2014 Financial Results

LIBERTY LAKE, Wash. — April 24, 2014 — Itron, Inc. (NASDAQ:ITRI) announced today financial results for its first quarter ended March 31, 2014. Highlights include:

• Quarterly revenues of $475 million;
• Quarterly GAAP net loss of 1 cent per share;
• Quarterly non-GAAP diluted earnings per share of 31 cents;
• Quarterly adjusted EBITDA of $34 million;
• Twelve-month backlog of $614 million and total backlog of $1.3 billion; and
• Quarterly bookings of $745 million, including a $279 million booking for a significant contract in our electricity segment

"Growth in revenues, bookings and backlog drove strong operating performance in the quarter compared with last year," said Philip Mezey, Itron's president and chief executive officer. "Our gas and water businesses continued to grow in revenues and in profitability. Electricity revenues and backlog grew year-over-year as customers pursue increased value from grid modernization programs. We continue to invest in the long term growth potential across all three businesses, and we are making progress on our top priority of improving the performance of the electricity segment as a key step to enhancing the overall company profitability."

Financial Results

Revenues for the quarter were $475 million compared with $448 million in the same period in 2013. Excluding an unfavorable impact of $4 million from changes in foreign currency exchange rates, revenues for the quarter increased $32 million, or 7 percent, compared with the prior year period. This increase was driven by product mix and higher volumes. On a constant currency basis, revenues in the Electricity segment grew 5 percent, Gas revenues grew nearly 7 percent and Water revenues grew 10 percent.

Gross margin for the quarter was 32.5 percent compared with the prior year period margin of 31.3 percent due to the favorable impact of product mix and increased volumes particularly in the Gas and Water segments, offsetting a decline in the Electricity segment gross margin.

GAAP operating expenses were $150 million in the quarter compared with $138 million in the same period last year. The increase was driven by higher restructuring expenses, and general and administrative costs related to professional fees, legal and other reserves. In addition, an adjustment of $977,000 was made during the quarter to finalize the goodwill impairment recorded in the fourth quarter of last year.

GAAP operating income for the quarter was $4.5 million compared with $2.3 million in the respective 2013 period. The increase was driven by higher revenues and gross profit partially offset by increased operating expenses. GAAP net loss for the quarter was $254,000, or 1 cent per share, compared with net income of $2.6 million, or 6 cents per diluted share, during the same period in 2013. The GAAP net loss for the quarter was driven by higher net interest, a loss related to the significant devaluation of currencies in certain markets and an increased tax rate.

Non-GAAP operating expenses for the quarter, which excludes amortization of intangibles, restructuring charges, acquisition related expenses and goodwill impairment, were $132 million compared with $125 million in the prior year quarter. The increase was driven by higher general and administrative costs associated with professional fees, and legal and other reserves.

Non-GAAP operating income was $23 million compared with $15 million in the same period in 2013. The increase was attributable to higher revenues and gross profit. Non-GAAP net income and diluted earnings per share for the quarter were $12 million, or 31 cents per share, which is consistent with results for the same period in 2013. The non-GAAP net income was impacted by higher net interest, a loss related to the significant devaluation of currencies in certain markets and an increased tax rate.

Free cash flow for the quarter was $58 million compared with negative $14 million in the first quarter of 2013. The increase over the prior year was due to improved operating income and decreased working capital primarily related to accounts payable and the timing of payments, as well as lower capital expenditures.

The company repurchased 75,203 shares of common stock during the quarter at an average price of $39.20 per share pursuant to Board authorization to repurchase up to $50 million of Itron common stock through March 7, 2014. On a cumulative basis, the company repurchased approximately 720,000 shares under this program for a total of $30 million. Itron's board of directors authorized a new share repurchase program of up to $50 million of the company's common stock over a 12-month period commencing March 8, 2014. No repurchases were made under this new program during the quarter.

Earnings Conference Call

Itron will host a conference call to discuss the financial results contained in this release at 5:00 p.m. Eastern Daylight Time (EDT) on April 24, 2014. The call will be webcast in a listen-only mode. Webcast information and conference call materials will be made available 10 minutes before the start of the call and are accessible on Itron's website at http://investors.itron.com/events.cfm. The webcast replay will be available within 90 minutes of the conclusion of the live call and will be available for two weeks. A telephone replay of the conference call will be available at 10:00 p.m. EDT on April 24, 2014 through 10:00 p.m. EDT on April 29, 2014. To access the telephone replay, dial(888) 203-1112 (Domestic) or(719) 457-0820 (International) and enter passcode 5900636.

Forward Looking Statements

This release contains forward-looking statements concerning our expectations about operations, financial performance, sales, earnings and cash flows. These statements reflect our current plans and expectations and are based on information currently available. The statements 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 the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, changes in laws and regulations, our dependence on new product development and intellectual property, future acquisitions, changes in estimates for stock-based and bonus compensation, increasing volatility in foreign exchange rates, international business risks and other factors that are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2013 and other reports on file with the Securities and Exchange Commission. Itron undertakes no obligation to update publicly or revise any forwardlooking statements, including our business outlook.

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 expense, non-GAAP operating income, non-GAAP net income, non-GAAP 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 or non-cash costs, particularly those associated with acquisitions. We exclude certain costs in our non-GAAP financial measures as we believe the net result is a measure of our core business. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. 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.

Related Documents:

Itron Q1 2014 Earnings Statement.