LIBERTY LAKE, Wash. — Feb. 13, 2013 — Itron, Inc. (NASDAQ:ITRI) announced today financial results for its fourth quarter and full year ended December 31, 2012. Highlights include:
- Quarterly and full year revenues of $523 million and $2.2 billion;
- Quarterly and full year GAAP diluted net earnings per share of 40 cents and $2.71;
- Quarterly and full year non-GAAP diluted net earnings per share of 58 cents and $3.62;
- Full year cash flow from operations and free cash flow of $205 million and $155 million;
- Quarterly and full year adjusted EBITDA of $44 million and $260 million;
- Twelve-month backlog of $568 million and total backlog of $1.0 billion; and
- Quarterly bookings of $467 million.
"Our fourth quarter results reflect transition in Itron's business as we successfully complete more than $1.5 billion of OpenWay projects in North America and begin new electricity, gas and water smart system pilots and deployments around the world," said Philip Mezey, Itron's president and chief executive officer. "While total revenues declined in the quarter compared to last year, our base business revenues excluding these large OpenWay contracts grew six percent. Non-GAAP earnings for the quarter were impacted by higher product development, sales and marketing expenses as we prepare for new projects developing in nearly every major geographic region. "
"Itron has a solid, profitable financial foundation," continued Mr. Mezey. "With our financial strength, large customer base and next-generation technologies for electricity, gas and water applications, Itron is well-positioned to lead a transformation in the utility sector. In 2013, we will accelerate our commitment to innovation and we will continue to invest in new solutions to help our customers build the smart cities of the next decade. I am excited to lead our company at a time when we can truly make a difference in our industry."
Revenues were $523 million for the quarter and $2.2 billion for the full year, compared with $642 million and $2.4 billion in the same periods in 2011. Changes in foreign currency exchange rates unfavorably impacted revenue by $9 million for the quarter and $92 million for the year. Excluding the impact from foreign currency, revenues for the quarter and year decreased $110 million and $164 million compared with the same periods in 2011. Higher revenue in the Water segment was offset by lower revenue in the Energy segment due to the completion of several OpenWay projects in North America. Itron Cellular Solutions, which was acquired in May 2012, added $10 million and $22 million in revenue in the fourth quarter and full year 2012, respectively.
Gross margin for the quarter was 31.2 percent compared with the prior year period margin of 30.0 percent. Gross margin for the Energy segment improved due to lower warranty costs and manufacturing efficiencies, partially offset by the impact of lower volumes and product mix. The gross margin for the Water segment decreased primarily due to higher service costs. For the year, gross margin was 32.8 percent compared with 30.7 percent in 2011. Gross margin improvement over the prior year was driven by lower warranty costs in both the Energy and Water segments, which positively impacted gross margin by 1.7 percentage points. Additionally, benefits from our restructuring actions and manufacturing efficiencies offset the impact of
GAAP operating expenses were $144 million in the quarter compared with $253 million in the same period last
year. The decrease in expenses was primarily due to lower restructuring and goodwill impairment charges.
For the year, operating expenses were $565 million compared with $1.2 billion in 2011. The decrease was due
to a favorable impact of $25 million from changes in foreign currency rates, lower restructuring expenses,
goodwill impairment and intangible asset amortization costs partially offset by increased sales and marketing
activity and product development efforts to position us for upcoming global smart grid opportunities. GAAP
operating income for the quarter and year was $19 million and $151 million, compared with an operating loss
of $60 million and $459 million in the respective 2011 periods. Itron Cellular Solutions negatively impacted
GAAP operating income by $2.3 million and $12.4 million in the fourth quarter and full year 2012, respectively.
Net interest expense was $2.2 million for the quarter and $9.2 million for the year compared with $2.2 million
and $35.9 million in the same periods last year. The decrease in net interest expense in the year was due to a
reduced principal balance and lower effective interest rates due to a refinancing of bank debt in August 2011.
GAAP net income and diluted EPS for the fourth quarter and year were $16 million, or 40 cents per share, and
$108 million, or $2.71 per share, respectively. This compares to a net loss of $55 million, or $1.35 per share, and
$510 million, or $12.56 per share in the same periods in 2011, respectively. The 2012 net income for the
quarter was positively impacted by a tax benefit. The net income for the year was positively impacted by
decreased interest expense which was partially offset by an increase in tax expense driven by discrete tax
benefits recognized in the prior year.
Non-GAAP operating expenses exclude amortization of intangibles, restructuring charges, acquisition related
expenses and the impairment of goodwill. Non-GAAP operating expenses for the quarter and year increased $6
million and $20 million over the 2011 respective periods. Foreign currency favorably impacted non-GAAP
operating expenses by $2 million in the quarter and $19 million in the year. Excluding the impact of foreign
currency, non-GAAP operating expenses increased for both periods due to increased global sales and marketing
activity and product development. Non-GAAP operating income was $30 million and $206 million for the
quarter and year, compared with $65 million and $257 million in the same periods in 2011. Itron Cellular
Solutions negatively impacted non-GAAP operating income by $1.4 million and $8.3 million in the fourth
quarter and full year 2012, respectively.
Non-GAAP net income and diluted EPS for the quarter and year were $23 million, or 58 cents per share, and
$145 million, or $3.62 per share, respectively. This compares with $49 million, or $1.19 cents per share, and
$176 million, or $4.29 per share, respectively, in the same periods in 2011. The decrease in non-GAAP net
income for the quarter was due to lower gross profit and increased operating expenses, partially offset by
decreased tax expense. The decrease in non-GAAP net income for the year was due to lower gross profit, higher
operating expenses and increased tax expense, partially offset by decreased interest expense.
The company repurchased 157,772 shares of Itron common stock during the quarter at an average price of $42.73 per share pursuant to Board authorization to repurchase up to $100 million of Itron common stock beginning October 2011 through the expiration date of February 15, 2013. As of December 31, 2012 the company had repurchased approximately 2 million shares of Itron common stock at an average price of $37.96 per share since inception of the program, representing approximately 5.0 percent of total shares outstanding as of October 2011.
Itron's guidance for the full-year 2013 is as follows:
- Revenue between $2.0 billion and $2.1 billion
- Non-GAAP diluted EPS between $3.00 and $3.25
The company's guidance assumes a gross margin of approximately 33.5 percent, a Euro to U.S. dollar average exchange rate of $1.34, average shares outstanding of approximately 40 million for the year and a non-GAAP effective tax rate for the year of 25 percent.
Earnings Conference Call
Itron will host a conference call to discuss the financial results and guidance contained in this release at 5:00 p.m. Eastern Time (ET) on February 13, 2013. The call will be webcast in a listen-only mode. Webcast information and conference call materials will be made available 15 minutes before the start of the call and are accessible on Itron's website at www.itron.com under the Investors page. 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 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 4441088.
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, 2011 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.
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.
Statements of operations, segment information, balance sheets, cash flow statements and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures follow.
Itron Q4 2012 Earnings Statement.