Press Release

Itron Announces Second Quarter 2011 Financial Results

LIBERTY LAKE, WA.—July 27, 2011—Itron, Inc. (NASDAQ:ITRI) today reported financial results for its second quarter and six months ended June 30, 2011. Highlights include:

• Quarterly and six month revenues of $612 million and $1.2 billion;
• Quarterly and six month non-GAAP diluted EPS of $1.20 and $2.18, including discrete tax benefits of 19 cents for the quarter;
• Six month cash flow from operations and free cash flow of $88 million and $59 million;
• Quarterly and six month adjusted EBITDA of $80 million and $160 million;
• Twelve-month backlog of $1.0 billion and total backlog of $1.6 billion; and
• Quarterly bookings of $483 million.

"I am very pleased with the performance of Itron International. We had record gas and water revenue in the quarter further demonstrating the strength of our global footprint and balanced portfolio," said Malcolm Unsworth, president and CEO. "Our smart metering projects in North America are continuing to drive revenue, but one of the keys to our future growth is to continue to introduce innovative technologies in other parts of the world and to streamline our operations to improve profitability and our time to market."

Operations Highlights:

Revenues increased $45 million, or 8%, for the quarter and $111 million, or 10%, for the six month period compared to the respective periods last year. Excluding a $36 million favorable effect from changes in foreign currency exchange rates, revenue for the quarter grew 2% over the prior year's quarter. Record quarterly revenue in International's gas and water business lines was the primary driver of the increase. The increase in revenues for the six month period was primarily due to higher shipments of smart gas modules in North America and increased gas and water smart metering projects in International. The favorable foreign exchange effect on revenues for the six month period was $40 million.

Gross margin for the quarter was 31.2% which was slightly higher than the prior year second quarter margin of 30.7%. For the first six months of 2011, gross margin was 31.9% compared with 31.1% in 2010. The improvement in margin for both periods was primarily due to decreased warranty expense in our International segment.

Operating expenses, excluding amortization of intangibles of $16.2 million and restructuring charges of $1.9 million, were $124.9 million, or 20.4% of revenue, for the quarter compared to $107.3 million, or 18.9% of revenue, in the prior year. Investments in product research and development for new and enhanced products as well as increased global marketing activity were the primary driver of the increase. In addition, approximately $6.9 million of the increase was due to changes in foreign exchange rates.

Net income and diluted EPS for the second quarter and six month period were $34.4 million, or 84 cents per share, and $61.6 million, or $1.50 per share. This compares with net income of $25.3 million, or 61 cents per share, and $50.6 million, or $1.23 per share, in the same periods in 2010. The increase in 2011 net income for the quarter was primarily due to $8 million, or 19 cents, of discrete tax benefits recognized during the quarter. The increase in net income for the six month period was primarily due to higher operating income in our International segment.

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 which are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2010 and other reports on file with the Securities and Exchange Commission. Itron undertakes no obligation to update publicly or revise any forward-looking statements, including our business outlook.

2011 Guidance:

Itron's guidance for 2011 is as follows:
• Revenue between $2.3 billion and $2.4 billion
• Non-GAAP diluted EPS between $4.20 and $4.60

Our guidance assumes a Euro to U.S. dollar exchange rate of $1.40, average shares outstanding of approximately 41.2 million and a non-GAAP effective tax rate between 22% and 25% (inclusive of the discrete tax benefits recognized through June 30, 2011). In addition, the guidance excludes any charges or benefits related to our current restructuring activities.

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 costs, particularly those associated with acquisitions. We exclude certain infrequent costs, particularly those associated with acquisitions, 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. 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.

About Itron

Itron enables utilities and cities to safely, securely and reliably deliver critical infrastructure solutions to communities in more than 100 countries. Our portfolio of smart networks, software, services, meters and sensors helps our customers better manage electricity, gas and water resources for the people they serve. By working with our customers to ensure their success, we help improve the quality of life, ensure the safety and promote the well-being of millions of people around the globe. Itron is dedicated to creating a more resourceful world. Join us:

PR Contact

Alison Mallahan

Senior Manager, Corporate Communications

(509) 891-3802