Itron, Inc. (NASDAQ:ITRI) announced today financial results for
its second quarter and six months ended June 30, 2015. The
financial results include:
- Quarterly and six month revenues of
$470 million and $918 million;
- Quarterly and six month Electricity
segment revenues increased 11 percent and 9 percent;
- Quarterly and six month GAAP net loss
per share of 37 cents and 24 cents;
- Quarterly and six month non-GAAP net
loss per share of 38 cents and 18 cents;
- A previously announced warranty charge
of $23.6 million in the quarter and $26.7 million in the six month
period impacted per share results by 38 cents and 43 cents,
respectively;
- An unfavorable tax adjustment due to
losses in countries with full valuation allowances impacted per
share results by approximately 18 cents in the quarter, and 21
cents in the six month period;
- Quarterly and six month adjusted EBITDA
of $4 million and $33 million;
- Twelve-month backlog of $791 million
and total backlog of $1.4 billion;
- Quarterly bookings of $398
million.
“Revenues for the quarter increased by six percent excluding the
impact of foreign currency, however, our earnings were
unacceptable,” said Philip Mezey, Itron’s president and chief
executive officer. “Strong improvement in the Electricity business
was offset by the previously announced warranty cost in the Water
segment, as well as weaker than expected Gas gross margin in the
EMEA region. In addition, tax expense contributed to the
unfavorable earnings. The higher tax rate in the quarter was due to
operating losses in countries where deferred tax assets have been
impaired. Improved profitability in these countries should
result in a lower tax rate for the balance of the year.”
“We are taking aggressive steps to strengthen our quality
processes and improve operational performance, including immediate
cost control measures to strengthen earnings in the second half of
the year,” continued Mr. Mezey. “Itron has a strong competitive
position in a growing industry. We are also on track with our
restructuring initiatives, which will deliver long-term sustainable
cost savings. We are confident that we are taking the right steps
to create increased value for shareholders in 2016 and beyond.”
Financial Results - Quarter
Revenues were $470 million for the quarter compared with $489
million in 2014. Changes in foreign currency exchange rates
unfavorably impacted revenues by approximately $50 million for the
quarter. Excluding the impact from foreign currency, revenues
increased $31 million, or 6 percent, compared with the 2014
quarter. The increase in revenues was driven by the Electricity
segment, which grew 19 percent year-over-year, on a constant
currency basis.
Gross margin for the quarter was 25.2 percent compared with the
prior year period margin of 33.3 percent. Increased warranty
expense, primarily due to $23.6 million recorded in the Water
segment, negatively impacted gross margin by approximately 570
basis points. In addition, lower volumes and an unfavorable product
mix in the Gas segment negatively impacted gross margin.
GAAP operating expenses in the quarter were $123 million
compared with $131 million in same period of 2014. Changes in
foreign currency exchange rates favorably impacted GAAP expenses by
approximately $13 million in the quarter. Excluding the impact from
foreign currency, expenses in the quarter increased $4 million
compared with the prior year quarter. The increase was driven by
restructuring, higher sales and marketing expenses in Electricity
and increased product development investments in Gas and Water.
These increases were partially offset by lower general and
administrative costs driven by a recovery of $4.6 million from a
litigation matter associated with the 2012 SmartSynch acquisition
and lower intangible asset amortization expense.
GAAP operating loss for the quarter was $4 million compared with
operating income of $32 million in the same period of 2014. GAAP
net loss for the quarter was $14 million, or 37 cents per share,
compared with net income of $19 million, or 49 cents per diluted
share. The operating and net losses for the quarter were primarily
attributable to the Water segment warranty charge and decreased
contribution from the Gas segment. Interest expense in the quarter
increased $1 million compared with the prior year due to the
write-off of unamortized debt fees associated with the refinancing
of a previous debt agreement. In addition, despite having a pre-tax
net loss, tax expense was recorded due to valuation allowances
applied to deferred tax assets in certain jurisdictions. These
valuation allowances currently restrict the ability to recognize a
tax benefit on losses in these jurisdictions.
Non-GAAP operating expenses, which exclude amortization of
intangibles, restructuring charges, acquisition related expenses
and goodwill impairment, were $123 million for the quarter compared
with $128 million in the prior year quarter. Changes in foreign
currency exchange rates favorably impacted Non-GAAP expenses by
approximately $13 million in the quarter. Excluding the foreign
currency impact, expenses increased by $8 million driven by higher
sales and marketing costs in Electricity, increased product
development investments in Gas and Water and higher general and
administrative expenses due to employee related benefits and
information technology support.
Non-GAAP operating loss was $5 million for the quarter compared
with operating income of $35 million in the same period in 2014.
Non-GAAP net loss for the quarter was $15 million, or 38 cents per
share, compared with net income of $21 million, or 54 cents per
diluted share in the prior year quarter. The Non-GAAP operating and
net loss for the quarter were primarily attributable to the Water
segment warranty charge and decreased contribution from the Gas
segment. In addition, despite having a pre-tax net loss, tax
expense was recorded due to valuation allowances applied to
deferred tax assets in certain jurisdictions. These valuation
allowances currently restrict the ability to recognize a tax
benefit on losses in these jurisdictions.
Free cash flow was $10 million for the quarter compared with
negative $10 million in the prior year quarter. Free cash flow for
the quarter was positively impacted by timing of accounts payable
disbursements, offset by increased inventory to support future
production requirements.
During the quarter, the company repurchased 188,775 shares of
Itron common stock at an average price of $36.25 per share pursuant
to Board authorization to repurchase up to $50 million of Itron
common stock during a 12-month period beginning February 2015. As
of June 30, 2015, the company had repurchased 272,775 shares of
Itron common stock at an average price of $36.30 per share, since
the inception of the plan.
The company recently concluded discussions with several work
councils in Europe regarding its restructuring plans and expects
the pace of activities to accelerate. Adjustments to restructuring
expense were made during the quarter to reflect changes in
estimates and assumptions following labor negotiations. The company
continues to expect annualized savings of approximately $40 million
upon completion of the restructuring activities by the end of
2016.
Financial Results – Six Months
Revenues were $918 million for the first six months of 2015,
compared with $964 million in the 2014 period. Changes in foreign
currency exchange rates unfavorably impacted revenues by $94
million for the first six months. Excluding the impact from foreign
currency, revenues increased $48 million, or 5 percent, compared
with the 2014 period. The increase in revenues was driven by the
Electricity segment, which grew nearly 17 percent year-over-year,
on a constant currency basis.
Gross margin for the first six months of 2015 was 28.0 percent
compared with 32.9 percent in 2014. Increased warranty expenses,
primarily due to $26.7 million recorded in the Water segment,
negatively impacted gross margin by approximately 320 basis points.
In addition, lower volumes and an unfavorable product mix in the
Gas segment negatively impacted gross margin.
GAAP operating expenses for the six month period were $247
million compared with $281 million in the prior year period.
Changes in foreign currency exchange rates favorably impacted GAAP
expenses by approximately $28 million for the six month period.
Excluding the impact from foreign currency, expenses in the six
month period decreased $6 million compared with the 2014 period.
The decrease was driven by lower intangible asset amortization
expense and adjustments to restructuring reserves.
GAAP operating income for the six month period was $10 million
compared with $36 million in the 2014 period. GAAP net loss in the
first six months was $9 million, or 24 cents per share, compared
with net income of $19 million, or 48 cents per share, in the 2014
period. The decrease in GAAP net earnings compared with the prior
year period was driven by lower gross profit in the Water and Gas
segments and an increased effective tax rate and expense as a
result of valuation allowances applied to deferred tax assets in
certain jurisdictions. These valuation allowances currently
restrict the ability to recognize a tax benefit on losses in these
jurisdictions.
Non-GAAP operating expenses, which exclude amortization of
intangibles, restructuring charges, acquisition related expenses
and goodwill impairment, for the six month period were $243 million
compared with $260 million in the prior year period. Changes in
foreign currency exchange rates favorably impacted Non-GAAP
expenses by approximately $25 million in the six month period.
Excluding the foreign currency impact, expenses increased due to
higher sales and marketing expenses in both the Electricity and
Water segments, increased product development investments in Gas
and Water and higher general and administrative expenses due to
employee related benefits and professional services.
Non-GAAP operating income for the first six months of 2015 was
$13 million compared with $58 million in 2014. Non-GAAP net loss
for the first six months of 2015 was $7 million, or 18 cents per
share, compared with non-GAAP net income of $34 million, or 85
cents per diluted share, in 2014. The decrease in non-GAAP
operating income for the six month period was attributable to lower
gross profit. Non-GAAP net income for the year was negatively
impacted by a higher effective tax rate driven primarily by the
valuation allowances applied to deferred tax assets in certain
jurisdictions. These valuation allowances currently restrict the
ability to recognize a tax benefit on losses in these
jurisdictions.
During the first six months of 2015, free cash flow was negative
$3 million compared with positive $48 million in 2014. The decrease
over the prior year was primarily due to lower earnings and
increased inventory levels.
Financial Guidance
Itron’s guidance for the full year 2015 is as follows:
- Revenue between $1.85 and $1.95
billion
- Non-GAAP diluted earnings per share
between $1.00 and $1.30
The company’s guidance includes the effect of the $26.7 million
Water warranty charge recorded in the first half of the year,
accounting for 43 cents of decreased earnings per share. The
guidance assumes a Euro to U.S. dollar average exchange rate of
$1.12 in 2015 compared with an average rate of $1.33 in 2014, a
gross margin of approximately 30 percent and average shares
outstanding of approximately 38.5 million for the year. The company
also anticipates modest upward pressure on its previously provided
guidance of 37 percent non-GAAP effective tax rate for the full
year.
The guidance reflects the company’s expectation for improvement
in results in the second half of 2015 when compared with the first
half. Earnings are expected to improve due to increased revenue
supported by contracted backlog; higher gross margin reflecting
additional volumes across all segments, product cost reductions and
factory efficiencies in Gas in the fourth quarter; immediate cost
reductions in all categories of discretionary spending; and a lower
effective tax rate than realized in the first half of the year.
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
Daylight Time (EDT) on Aug. 5, 2015. 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
will be accessible on Itron’s website at
http://investors.itron.com/events.cfm. A replay of the audio
webcast will be available within 90 minutes of the conclusion of
the live call and available for one year at
http://investors.itron.com/events.cfm. A telephone replay of the
conference call will be available through Aug. 10, 2015. To access
the telephone replay, dial (888) 203-1112 (Domestic) or (719)
457-0820 (International) and enter passcode 5299205.
About Itron
Itron is a world-leading technology and services company
dedicated to the resourceful use of energy and water. We provide
comprehensive solutions that measure, manage and analyze energy and
water. Our broad product portfolio includes electricity, gas, water
and thermal energy measurement devices and control technology;
communications systems; software; as well as managed and consulting
services. With thousands of employees supporting nearly 8,000
customers in more than 100 countries, Itron applies knowledge and
technology to better manage energy and water resources. Together,
we can create a more resourceful world. Join us: www.itron.com.
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, 2014 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, INC.CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited, in thousands, except per share
data)
Three Months Ended June
30, Six Months Ended June 30, 2015
2014 2015 2014 Revenues $ 470,103 $
489,353 $ 918,350 $ 964,148 Cost of revenues 351,532
326,312 661,580
646,572 Gross profit 118,571 163,041 256,770 317,576
Operating expenses Sales and marketing 43,058 46,119 84,085 93,728
Product development 43,318 43,999 84,840 88,408 General and
administrative 32,492 37,680 72,077 78,087 Amortization of business
acquisition-related intangible assets 7,888 11,109 15,861 22,179
Restructuring expense (4,234 ) (7,793 ) (9,681 ) (2,269 ) Goodwill
impairment - - -
977 Total operating expenses 122,522
131,114 247,182
281,110 Operating income (loss) (3,951 )
31,927 9,588 36,466 Other income (expense) Interest income 213 53
260 150 Interest expense (3,855 ) (2,913 ) (6,537 ) (5,822 ) Other
income (expense), net (1,907 ) (1,375 )
(1,883 ) (3,873 ) Total other income (expense)
(5,549 ) (4,235 ) (8,160 )
(9,545 ) Income (loss) before income taxes (9,500 ) 27,692
1,428 26,921 Income tax benefit (provision) (3,966 )
(7,848 ) (9,529 ) (7,195 ) Net income
(loss) (13,466 ) 19,844 (8,101 ) 19,726 Net income attributable to
non-controlling interests 732 585
1,187 721 Net income
(loss) attributable to Itron, Inc. $ (14,198 ) $ 19,259
$ (9,288 ) $ 19,005 Earnings
(loss) per common share - Basic $ (0.37 ) $ 0.49 $
(0.24 ) $ 0.48 Earnings (loss) per common share -
Diluted $ (0.37 ) $ 0.49 $ (0.24 ) $ 0.48
Weighted average common shares outstanding -
Basic 38,434 39,356 38,438 39,296 Weighted average common shares
outstanding - Diluted 38,434 39,544 38,438 39,528
ITRON, INC.SEGMENT INFORMATION (Unaudited, in
thousands)
Three Months Ended June
30, Six Months Ended June 30, 2015
2014 2015 2014 Revenues
Electricity $ 203,410 $ 183,755 $ 397,262 $ 363,973 Gas 139,386
154,322 264,475 300,431 Water 127,307 151,276
256,613 299,744 Total Company $
470,103 $ 489,353 $ 918,350 $
964,148
Gross profit Electricity $ 52,622 $
52,976 $ 107,742 $ 95,716 Gas 44,109 56,711 87,625 115,117 Water
21,840 53,354 61,403
106,743 Total Company $ 118,571
$ 163,041 $ 256,770 $ 317,576
Operating income (loss) Electricity $ 3,904 $ (1,247
) $ 6,300 $ (24,216 ) Gas 14,742 24,329 28,334 50,053 Water (11,511
) 20,519 (3,414 ) 41,162 Corporate unallocated (11,086 )
(11,674 ) (21,632 ) (30,533 )
Total Company $ (3,951 ) $ 31,927 $ 9,588
$ 36,466
METER AND MODULE
SUMMARY (Units in thousands)
Three Months Ended June
30, Six Months Ended June 30, 2015
2014 2015 2014 Meters Standard
4,700 4,480 9,440 9,330 Advanced and Smart 1,860
1,360 3,400 2,880
Total meters 6,560 5,840
12,840 12,210
Stand-alone communication modules Advanced and Smart
1,410 1,580 2,720
2,930
ITRON, INC.CONSOLIDATED
BALANCE SHEETS (Unaudited, in thousands)
June
30, 2015 December 31, 2014 ASSETS Current
assets Cash and cash equivalents $ 128,814 $ 112,371 Accounts
receivable, net 338,196 348,389 Inventories 195,394 154,504
Deferred tax assets current, net 38,121 39,115 Other current assets
111,248 104,307 Total current
assets 811,773 758,686 Property, plant, and equipment, net
195,510 207,789 Deferred tax assets noncurrent, net 73,861 74,598
Other long-term assets 28,741 28,503 Intangible assets, net 117,136
139,909 Goodwill 471,648 500,820
Total assets $ 1,698,669 $ 1,710,305
LIABILITIES AND EQUITY Current liabilities Accounts payable
$ 226,512 $ 184,132 Other current liabilities 60,634 100,945 Wages
and benefits payable 84,944 95,248 Taxes payable 16,435 21,951
Current portion of debt 11,250 30,000 Current portion of warranty
35,589 21,063 Unearned revenue 50,255
43,436 Total current liabilities 485,619 496,775
Long-term debt 361,708 293,969 Long-term warranty 22,550 15,403
Pension plan benefit liability 93,918 101,432 Deferred tax
liabilities noncurrent, net 3,247 3,808 Other long-term obligations
86,366 84,437 Total liabilities
1,053,408 995,824 Commitments and contingencies
Equity Preferred stock - - Common stock 1,255,154 1,270,045
Accumulated other comprehensive loss, net (182,742 ) (136,514 )
Accumulated deficit (445,879 ) (436,591 )
Total Itron, Inc. shareholders' equity 626,533 696,940
Non-controlling interests 18,728 17,541
Total equity 645,261 714,481
Total liabilities and equity $ 1,698,669 $
1,710,305
ITRON, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Six Months Ended June 30, 2015
2014 Operating activities Net income (loss) $ (8,101 ) $
19,726 Adjustments to reconcile net income (loss) to net cash
provided by operating activities: Depreciation and amortization
38,760 50,606 Stock-based compensation 7,997 9,454 Amortization of
prepaid debt fees 1,579 808 Deferred taxes, net 1,901 (8,046 )
Goodwill impairment - 977 Restructuring expense, non-cash 267 -
Other adjustments, net 919 85 Changes in operating assets and
liabilities: Accounts receivable (6,849 ) (14,712 ) Inventories
(49,677 ) (16,801 ) Other current assets (9,043 ) (9,103 ) Other
long-term assets 406 312 Accounts payable, other current
liabilities, and taxes payable 23,990 12,360 Wages and benefits
payable (6,276 ) 4,473 Unearned revenue 7,807 16,560 Warranty
23,119 (2,864 ) Other operating, net (9,232 )
3,356 Net cash provided by operating activities 17,567
67,191 Investing activities Acquisitions of property, plant,
and equipment (20,992 ) (19,403 ) Business acquisitions, net of
cash equivalents acquired - - Other investing, net 693
56 Net cash provided by (used in)
investing activities (20,299 ) (19,347 ) Financing
activities Proceeds from borrowings 74,183 - Payments on debt
(22,373 ) (51,250 ) Issuance of common stock 1,864 1,530 Repurchase
of common stock (23,185 ) (7,164 ) Other financing, net
(3,942 ) 1,204 Net cash provided by (used in)
financing activities 26,547 (55,680 ) Effect of foreign
exchange rate changes on cash and cash equivalents (7,372 )
(2,189 ) Increase (decrease) in cash and cash
equivalents 16,443 (10,025 ) Cash and cash equivalents at beginning
of period 112,371 124,805 Cash
and cash equivalents at end of period $ 128,814 $
114,780
Itron, Inc.
About Non-GAAP Financial Measures
The accompanying press release contains non-GAAP financial
measures. To supplement our consolidated financial statements,
which are prepared and 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. The presentation
of this financial information is not intended to be considered in
isolation or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP. For
more information on these non-GAAP financial measures please see
the table captioned “Reconciliations of Non-GAAP Financial Measures
to Most Directly Comparable GAAP Financial Measures.”
We use these non-GAAP financial measures for financial and
operational decision making and as a means for determining
executive compensation. Management believes that these non-GAAP
financial measures provide meaningful supplemental information
regarding our performance and ability to service debt by excluding
certain expenses that may not be indicative of our recurring core
operating results. These non-GAAP financial measures facilitate
management’s internal comparisons to our historical performance as
well as comparisons to our competitors’ operating results. Our
executive compensation plans exclude non-cash charges related to
amortization of intangibles acquired through a business acquisition
and non-recurring discrete cash and non-cash charges that are
infrequent in nature such as purchase accounting adjustments,
restructuring charges or goodwill impairment charges. We believe
that both management and investors benefit from referring to these
non-GAAP financial measures in assessing our performance and when
planning, forecasting and analyzing future periods. We believe
these non-GAAP financial measures are useful to investors because
they provide greater transparency with respect to key metrics used
by management in its financial and operational decision making and
because they are used by our institutional investors and the
analyst community to analyze the health of our business.
Non-GAAP operating expense and non-GAAP operating income – We
define non-GAAP operating expense as operating expense excluding
certain expenses related to the amortization of intangible assets
acquired through a business acquisition, restructuring,
acquisitions and goodwill impairment. We define non-GAAP operating
income as operating income excluding the expenses related to the
amortization of intangible assets acquired through a business
acquisition, restructuring, acquisitions and goodwill impairment.
We consider these non-GAAP financial measures to be useful metrics
for management and investors because they exclude the effect of
expenses that are related to previous acquisitions and
restructurings. By excluding these expenses, we believe that it is
easier for management and investors to compare our financial
results over multiple periods and analyze trends in our operations.
For example, in certain periods expenses related to amortization of
intangible assets may decrease, which would improve GAAP operating
margins, yet the improvement in GAAP operating margins due to this
lower expense is not necessarily reflective of an improvement in
our core business. There are some limitations related to the use of
non-GAAP operating expense and non-GAAP operating income versus
operating expense and operating income calculated in accordance
with GAAP. Non-GAAP operating expense and non-GAAP operating income
exclude some costs that are recurring. Additionally, the expenses
that we exclude in our calculation of non-GAAP operating expense
and non-GAAP operating income may differ from the expenses that our
peer companies exclude when they report the results of their
operations. We compensate for these limitations by providing
specific information about the GAAP amounts we have excluded from
our non-GAAP operating expense and non-GAAP operating income and
evaluating non-GAAP operating expense and non-GAAP operating income
together with GAAP operating expense and GAAP operating income.
Non-GAAP net income and non-GAAP diluted EPS – We define
non-GAAP net income as net income excluding the expenses associated
with amortization of intangible assets acquired through a business
acquisition, restructuring, acquisitions, goodwill impairment and
amortization of debt placement fees. We define non-GAAP diluted EPS
as non-GAAP net income divided by the weighted average shares, on a
diluted basis, outstanding during each period. We consider these
financial measures to be useful metrics for management and
investors for the same reasons that we use non-GAAP operating
income. The same limitations described above regarding our use of
non-GAAP operating income apply to our use of non-GAAP net income
and non-GAAP diluted EPS. We compensate for these limitations by
providing specific information regarding the GAAP amounts excluded
from these non-GAAP measures and evaluating non-GAAP net income and
non-GAAP diluted EPS together with GAAP net income and GAAP diluted
EPS.
Adjusted EBITDA – We define adjusted EBITDA as net income (a)
minus interest income, (b) plus interest expense, depreciation and
amortization of business acquisition related intangible asset
expenses, restructuring expense, acquisition related expense,
goodwill impairment and (c) exclude the tax expense or benefit. We
believe that providing this financial measure is important for
management and investors to understand our ability to service our
debt as it is a measure of the cash generated by our core business.
Management uses adjusted EBITDA as a performance measure for
executive compensation. A limitation to using adjusted EBITDA is
that it does not represent the total increase or decrease in the
cash balance for the period and the measure includes some non-cash
items and excludes other non-cash items. Additionally, the items
that we exclude in our calculation of adjusted EBITDA may differ
from the items that our peer companies exclude when they report
their results. We compensate for these limitations by providing a
reconciliation of this measure to GAAP net income.
Free cash flow – We define free cash flow as net cash provided
by operating activities less cash used for acquisitions of
property, plant and equipment. We believe free cash flow provides
investors with a relevant measure of liquidity and a useful basis
for assessing our ability to fund our operations and repay our
debt. The same limitations described above regarding our use of
adjusted EBITDA apply to our use of free cash flow. We compensate
for these limitations by providing specific information regarding
the GAAP amounts and reconciling to free cash flow.
The accompanying tables have more detail on the GAAP financial
measures that are most directly comparable to the non-GAAP
financial measures and the related reconciliations between these
financial measures.
ITRON, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL
MEASURES (Unaudited, in thousands, except per share
data)
TOTAL COMPANY
RECONCILIATIONS Three Months Ended June 30,
Six Months Ended June 30, 2015 2014
2015 2014 NON-GAAP NET INCOME & DILUTED
EPS GAAP net income (loss) $ (14,198 ) $ 19,259 $ (9,288 ) $
19,005 Amortization of intangible assets 7,888 11,109 15,861 22,179
Amortization of debt placement fees 1,164 379 1,529 758
Restructuring expense (4,234 ) (7,793 ) (9,681 ) (2,269 )
Acquisition related expenses (4,607 ) 89 (2,283 ) 578 Goodwill
impairment - - - 977 Income tax effect of non-GAAP adjustments
(674 ) (1,636 ) (2,988 )
(7,578 ) Non-GAAP net income (loss) $ (14,661 ) $ 21,407
$ (6,850 ) $ 33,650
Non-GAAP diluted EPS $ (0.38 ) $ 0.54
$ (0.18 ) $ 0.85 Weighted average
common shares outstanding - Diluted 38,434
39,544 38,438 39,528
ADJUSTED EBITDA GAAP net income (loss) $
(14,198 ) $ 19,259 $ (9,288 ) $ 19,005 Interest income (213 ) (53 )
(260 ) (150 ) Interest expense 3,855 2,913 6,537 5,822 Income tax
(benefit) provision 3,966 7,848 9,529 7,195 Depreciation and
amortization 19,421 25,014 38,760 50,606 Restructuring expense
(4,234 ) (7,793 ) (9,681 ) (2,269 ) Acquisition related expenses
(4,607 ) 89 (2,283 ) 578 Goodwill impairment -
- - 977 Adjusted
EBITDA $ 3,990 $ 47,277 $ 33,314
$ 81,764
FREE CASH FLOW Net cash provided by
operating activities $ 21,522 $ 430 $ 17,567 $ 67,191 Acquisitions
of property, plant, and equipment (11,520 )
(10,839 ) (20,992 ) (19,403 ) Free Cash Flow $
10,002 $ (10,409 ) $ (3,425 ) $ 47,788
NON-GAAP OPERATING INCOME GAAP operating income
(loss) $ (3,951 ) $ 31,927 $ 9,588 $ 36,466 Amortization of
intangible assets 7,888 11,109 15,861 22,179 Restructuring expense
(4,234 ) (7,793 ) (9,681 ) (2,269 ) Acquisition related expenses
(4,607 ) 89 (2,283 ) 578 Goodwill impairment -
- - 977 Non-GAAP
operating income (loss) $ (4,904 ) $ 35,332 $ 13,485
$ 57,931
NON-GAAP OPERATING
EXPENSE GAAP operating expense $ 122,522 $ 131,114 $ 247,182 $
281,110 Amortization of intangible assets (7,888 ) (11,109 )
(15,861 ) (22,179 ) Restructuring expense 4,234 7,793 9,681 2,269
Acquisition related expenses 4,607 (89 ) 2,283 (578 ) Goodwill
impairment - - -
(977 ) Non-GAAP operating expense $ 123,475
$ 127,709 $ 243,285 $ 259,645
ITRON, INC.RECONCILIATIONS OF NON-GAAP
FINANCIAL MEASURESTO THE MOST DIRECTLY COMPARABLE GAAP
FINANCIAL MEASURES
(Unaudited, in thousands)
SEGMENT
RECONCILIATIONS Three Months Ended June 30,
Six Months Ended June 30, 2015 2014
2015 2014 NON-GAAP OPERATING INCOME -
ELECTRICITY Electricity - GAAP operating income (loss) $ 3,904
$ (1,247 ) $ 6,300 $ (24,216 ) Amortization of intangible assets
4,428 6,189 8,883 12,344 Restructuring expense (2,703 ) (7,925 )
(5,830 ) (8,455 ) Acquisition related expenses (4,607 ) 89 (2,283 )
531 Goodwill impairment - -
- 977 Electricity - Non-GAAP
operating income (loss) $ 1,022 $ (2,894 ) $ 7,070
$ (18,819 )
NON-GAAP OPERATING INCOME -
GAS Gas - GAAP operating income $ 14,742 $ 24,329 $ 28,334 $
50,053 Amortization of intangible assets 1,945 2,681 3,915 5,370
Restructuring expense (1,186 ) 517
(684 ) 214 Gas - Non-GAAP operating
income $ 15,501 $ 27,527 $ 31,565
$ 55,637
NON-GAAP OPERATING INCOME -
WATER Water - GAAP operating income (loss) $ (11,511 ) $ 20,519
$ (3,414 ) $ 41,162 Amortization of intangible assets 1,515 2,239
3,063 4,465 Restructuring expense 156
453 273 1,010 Water -
Non-GAAP operating income (loss) $ (9,840 ) $ 23,211
$ (78 ) $ 46,637
NON-GAAP OPERATING INCOME
- CORPORATE UNALLOCATED Corporate unallocated - GAAP operating
loss $ (11,086 ) $ (11,674 ) $ (21,632 ) $ (30,533 ) Restructuring
expense (501 ) (838 ) (3,440 ) 4,962 Acquisition related expenses
- - -
47 Corporate unallocated - Non-GAAP operating loss $
(11,587 ) $ (12,512 ) $ (25,072 ) $ (25,524 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150805006531/en/
Itron, Inc.Barbara Doyle, 509-891-3443Vice President,
Investor RelationsorMarni Pilcher, 509-891-3847Director, Investor
Relations
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