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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
 
For the transition period from                          to                         
 
Commission file number 0-22418
 
 
ITRON, INC.
(Exact name of registrant as specified in its charter)
 
Washington
  
91-1011792
(State of Incorporation)
  
(I.R.S. Employer Identification Number)
 
2818 North Sullivan Road
Spokane, Washington 99216-1897
(509) 924-9900
(Address and telephone number of registrant’s principal executive offices)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  ¨
 
The number of shares outstanding of the registrant’s common stock as of October 31, 2002 was 20,172,777.
 

Table of Contents
Itron, Inc.
 
Table of Contents
 
        
Page
Part 1:  FINANCIAL INFORMATION
     
Item 1:
  
FINANCIAL STATEMENTS (UNAUDITED)
     
      
1
      
2
      
3
      
4
Item 2:
     
11
Item 3:
     
17
Item 4:
     
18
Part 2:  OTHER INFORMATION
     
Item 1:
     
19
Item 4:
     
19
Item 6:
     
19
  
20
  
21

Table of Contents
 
Certain Forward-Looking Statements
 
This discussion contains information about future operating results and other forward-looking statements. When included in this discussion, the words “expects,” “intends,” “anticipates,” “believes,” “plans,” “projects,” “estimates,” “future” and similar expressions are intended to identify forward-looking statements. However, these words are not the exclusive means of identifying such statements. Forward looking statements are inherently subject to a variety of risks and uncertainties that could cause our actual results to differ materially from those reflected in such forward-looking statements. Risks and uncertainties include, among many others, the rate of customer demand for our products, estimations of future revenues and costs on long-term contracts, changes in law and regulation (including FCC licensing actions), changes in the utility regulatory environment, delays or difficulties in introducing new products and acceptance of those products, increased competition, our ability to continue making substantial progress in the development and commercialization of acquired technologies and the significant assumptions underlying the valuation related to IPR&D and other intangible assets, fluctuations in market or general economic conditions, and various other matters, many of which are beyond our control. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-Q.
 
We expect that company representatives will meet privately during the quarter with investors, analysts and others. At these meetings we may reiterate the Business Outlook published in this document. We do not have any obligation to update or revise forward-looking statements contained in this document to reflect any changes in events, conditions or circumstances on which any such statement is based. However, we have from time to time, published updated guidance through the issuance of a press release and may do so in the future. For a more complete description of risks and other factors that can affect future results, see “Certain Risk Factors” included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2002.

Table of Contents
Part 1:  FINANCIAL INFORMATION
 
Item 1:  FINANCIAL STATEMENTS (UNAUDITED)
 
ITRON, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
    
Three months ended September 30,
     
Nine months ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
    
(Unaudited, In thousands, Except per share data)
  
Revenues
                                    
Sales
   
$
62,403
 
   
$
50,424
 
   
$
174,447
 
   
$
130,060
 
Service
   
 
10,654
 
   
 
10,431
 
   
 
33,124
 
   
 
31,280
 
    
  
  
  
Total revenues
   
 
73,057
 
   
 
60,855
 
   
 
207,571
 
   
 
161,340
 
    
  
  
  
Cost of revenues
                                    
Sales
   
 
31,359
 
   
 
27,127
 
   
 
88,482
 
   
 
72,232
 
Service
   
 
7,349
 
   
 
6,675
 
   
 
23,602
 
   
 
20,232
 
    
  
  
  
Total cost of revenues
   
 
38,708
 
   
 
33,802
 
   
 
112,084
 
   
 
92,464
 
    
  
  
  
Gross profit
   
 
34,349
 
   
 
27,053
 
   
 
95,487
 
   
 
68,876
 
Operating expenses
                                    
Sales and marketing
   
 
8,159
 
   
 
7,390
 
   
 
23,436
 
   
 
19,461
 
Product development
   
 
9,963
 
   
 
8,210
 
   
 
27,858
 
   
 
21,591
 
General and administrative
   
 
6,186
 
   
 
3,778
 
   
 
16,272
 
   
 
10,656
 
Amortization of intangibles
   
 
642
 
   
 
377
 
   
 
1,552
 
   
 
1,109
 
Restructurings
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(807
)
In-process research and development
   
 
—  
 
   
 
—  
 
   
 
7,200
 
   
 
—  
 
    
  
  
  
Total operating expenses
   
 
24,950
 
   
 
19,755
 
   
 
76,318
 
   
 
52,010
 
    
  
  
  
Operating income
   
 
9,399
 
   
 
7,298
 
   
 
19,169
 
   
 
16,866
 
Other income (expense)
                                    
Equity in affiliates
   
 
51
 
   
 
(74
)
   
 
97
 
   
 
(115
)
Interest and other, net
   
 
99
 
   
 
(911
)
   
 
(29
)
   
 
(2,942
)
    
  
  
  
Total other income (expense)
   
 
150
 
   
 
(985
)
   
 
68
 
   
 
(3,057
)
    
  
  
  
Income before income taxes
   
 
9,549
 
   
 
6,313
 
   
 
19,237
 
   
 
13,809
 
Income tax provision
   
 
(3,581
)
   
 
(2,409
)
   
 
(9,914
)
   
 
(5,258
)
    
  
  
  
Net income
   
$
5,968
 
   
$
3,904
 
   
$
9,323
 
   
$
8,551
 
    
  
  
  
Earnings per share
                                    
Basic net income per share
   
$
0.29
 
   
$
0.25
 
   
$
0.49
 
   
$
0.55
 
    
  
  
  
Diluted net income per share
   
$
0.27
 
   
$
0.21
 
   
$
0.45
 
   
$
0.49
 
    
  
  
  
Average number of shares outstanding
                                    
Basic
   
 
20,479
 
   
 
15,667
 
   
 
18,955
 
   
 
15,522
 
Diluted
   
 
21,728
 
   
 
19,071
 
   
 
21,247
 
   
 
18,414
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents
 
ITRON, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    
September 30, 2002
     
December 31, 2001
  
    
(Unaudited, In thousands)
  
ASSETS
Current assets
                  
Cash and cash equivalents
   
$
38,383
 
   
$
20,582
 
Short-term investments, available for sale
   
 
—  
 
   
 
22,199
 
Accounts receivable, net
   
 
47,581
 
   
 
52,345
 
Inventories, net
   
 
19,334
 
   
 
16,281
 
Deferred income taxes, net
   
 
4,353
 
   
 
4,134
 
Other
   
 
3,250
 
   
 
1,192
 
    
  
Total current assets
   
 
112,901
 
   
 
116,733
 
Property, plant and equipment, net
   
 
28,945
 
   
 
25,918
 
Equipment used in outsourcing, net
   
 
11,908
 
   
 
12,918
 
Intangible assets, net
   
 
10,281
 
   
 
4,419
 
Goodwill
   
 
32,870
 
   
 
6,616
 
Restricted cash
   
 
—  
 
   
 
5,100
 
Deferred income taxes, net
   
 
24,972
 
   
 
24,952
 
Other
   
 
7,929
 
   
 
6,035
 
    
  
Total assets
   
$
229,806
 
   
$
202,691
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
                  
Accounts payable and accrued expenses
   
$
23,195
 
   
$
24,689
 
Wages and benefits payable
   
 
13,424
 
   
 
11,611
 
Current portion of long-term debt
   
 
672
 
   
 
229
 
Deferred revenue
   
 
11,068
 
   
 
13,558
 
    
  
Total current liabilities
   
 
48,359
 
   
 
50,087
 
    
  
Convertible subordinated debt
   
 
—  
 
   
 
53,313
 
Mortgage notes and leases payable
   
 
—  
 
   
 
4,860
 
Project financing
   
 
4,939
 
   
 
6,082
 
Warranty and other obligations
   
 
16,798
 
   
 
12,297
 
    
  
Total liabilities
   
 
70,096
 
   
 
126,639
 
    
  
Contingencies (Note 8)
                  
Shareholders’ equity
                  
Common stock
   
 
194,193
 
   
 
120,316
 
Accumulated other comprehensive loss
   
 
(1,458
)