UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-22418
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)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common stock, no par value
Preferred share purchase rights
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of July 30, 2004, there were outstanding 20,976,761 shares of the registrant’s common stock, no par value, which is the only class of common stock of the registrant.
Table of Contents
| Page | ||||
| PART I: FINANCIAL INFORMATION |
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| ITEM 1: FINANCIAL STATEMENTS (UNAUDITED) |
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| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
25 | |||
| ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
37 | |||
| ITEM 4: CONTROLS AND PROCEDURES |
39 | |||
| PART II: OTHER INFORMATION |
||||
| ITEM 1: LEGAL PROCEEDINGS |
40 | |||
| 40 | ||||
| ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K |
40 | |||
| 41 | ||||
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Revenues |
||||||||||||||||
| Sales |
$ | 68,015 | $ | 69,941 | $ | 123,031 | $ | 133,858 | ||||||||
| Service |
11,627 | 10,323 | 22,213 | 21,051 | ||||||||||||
| Total revenues |
79,642 | 80,264 | 145,244 | 154,909 | ||||||||||||
| Cost of revenues |
||||||||||||||||
| Sales |
36,608 | 33,629 | 65,831 | 63,490 | ||||||||||||
| Service |
6,776 | 7,281 | 13,283 | 15,203 | ||||||||||||
| Total cost of revenues |
43,384 | 40,910 | 79,114 | 78,693 | ||||||||||||
| Gross profit |
36,258 | 39,354 | 66,130 | 76,216 | ||||||||||||
| Operating expenses |
||||||||||||||||
| Sales and marketing |
10,272 | 10,959 | 19,926 | 20,289 | ||||||||||||
| Product development |
10,554 | 11,042 | 20,776 | 20,933 | ||||||||||||
| General and administrative |
8,652 | 6,730 | 15,278 | 13,877 | ||||||||||||
| Amortization of intangibles |
2,027 | 2,765 | 4,054 | 4,653 | ||||||||||||
| Restructurings |
52 | 43 | 2,434 | 2,208 | ||||||||||||
| In-process research and development |
— | — | — | 900 | ||||||||||||
| Total operating expenses |
31,557 | 31,539 | 62,468 | 62,860 | ||||||||||||
| Operating income |
4,701 | 7,815 | 3,662 | 13,356 | ||||||||||||
| Other income (expense) |
||||||||||||||||
| Equity in affiliates |
8 | 30 | — | 52 | ||||||||||||
| Interest income |
111 | 28 | 128 | 197 | ||||||||||||
| Interest expense |
(2,261 | ) | (929 | ) | (3,015 | ) | (1,385 | ) | ||||||||
| Other income (expense), net |
(1,009 | ) | (61 | ) | (735 | ) | (36 | ) | ||||||||
| Total other income (expense) |
(3,151 | ) | (932 | ) | (3,622 | ) | (1,172 | ) | ||||||||
| Income before income taxes |
1,550 | 6,883 | 40 | 12,184 | ||||||||||||
| Income tax (provision) benefit |
(732 | ) | (2,710 | ) | 40 | (5,095 | ) | |||||||||
| Net income |
$ | 818 | $ | 4,173 | $ | 80 | $ | 7,089 | ||||||||
| Earnings per share |
||||||||||||||||
| Basic net income per share |
$ | 0.04 | $ | 0.20 | $ | — | $ | 0.35 | ||||||||
| Diluted net income per share |
$ | 0.04 | $ | 0.19 | $ | — | $ | 0.33 | ||||||||
| Weighted average number of shares outstanding |
||||||||||||||||
| Basic |
20,845 | 20,372 | 20,750 | 20,306 | ||||||||||||
| Diluted |
22,111 | 21,765 | 21,987 | 21,603 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| At June 30, 2004 |
At December 31, |
|||||||
| (in thousands) | ||||||||
| ASSETS | ||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 2,227 | $ | 6,240 | ||||
| Accounts receivable, net |
61,716 | 70,782 | ||||||
| Inventories |
20,357 | 16,037 | ||||||
| Deferred income taxes, net |
5,266 | 11,673 | ||||||
| Other |
3,854 | 4,557 | ||||||
| Total current assets |
93,420 | 109,289 | ||||||
| Property, plant and equipment, net |
44,427 | 42,818 | ||||||
| Intangible assets, net |
18,925 | 22,979 | ||||||
| Goodwill |
90,440 | 90,385 | ||||||
| Restricted cash |
128,310 | — | ||||||
| Deferred income taxes, net |
39,345 | 31,755 | ||||||
| Other |
9,988 | 6,263 | ||||||
| Total assets |
$ | 424,855 | $ | 303,489 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities |
||||||||
| Accounts payable and accrued expenses |
$ | 22,824 | $ | 26,236 | ||||
| Wages and benefits payable |
10,920 | 10,711 | ||||||
| Short-term borrowings |
21,000 | 10,000 | ||||||
| Current portion of debt |
17,435 | 38,245 | ||||||
| Current portion of warranty |
7,995 | 13,939 | ||||||
| Unearned revenue |
11,240 | 12,004 | ||||||
| Total current liabilities |
91,414 | 111,135 | ||||||
| Long-term debt |
136,593 | — | ||||||
| Project financing debt |
3,632 | 4,024 | ||||||
| Warranty |
3,768 | 3,536 | ||||||
| Other obligations |
7,259 | 7,550 | ||||||
| Total liabilities |
242,666 | 126,245 | ||||||
| Commitments and contingencies (Notes 7 and 12) |
||||||||
| Shareholders’ equity |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
205,760 | 200,567 | ||||||
| Accumulated other comprehensive loss |
(464 | ) | (136 | ) | ||||
| Accumulated deficit |
(23,107 | ) | (23,187 | ) | ||||
| Total shareholders’ equity |
182,189 | 177,244 | ||||||
| Total liabilities and shareholders’ equity |
$ | 424,855 | $ | 303,489 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| (in thousands) | ||||||||
| Operating activities |
||||||||
| Net income |
$ | 80 | $ | 7,089 | ||||
| Non-cash charges (credits) to income: |
||||||||
| Depreciation and amortization |
8,830 | 9,274 | ||||||
| Stock option and employee stock purchase plan income tax benefits |
1,121 | 727 | ||||||
| Impairment of investments |
775 | — | ||||||
| Equity in affiliates |
— | (52 | ) | |||||
| Acquired in-process research and development |
— | 900 | ||||||
| Realized currency translation gain |
(279 | ) | — | |||||
| Deferred income tax provision (benefit) |
(1,393 | ) | 4,769 | |||||
| Other, net |
532 | 644 | ||||||
| Changes in operating assets and liabilities, net of acquisitions: |
||||||||
| Accounts receivable |
9,066 | 2,436 | ||||||
| Inventories |
(4,320 | ) | (358 | ) | ||||
| Accounts payable, accrued expenses and current portion of warranty |
(7,512 | ) | (266 | ) | ||||
| Wages and benefits payable |
209 | (7,069 | ) | |||||
| Unearned revenue |
(847 | ) | (4,058 | ) | ||||
| Long-term warranty and other obligations |
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