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"Both
operating segments continue to perform as expected, and in
some cases exceed expectations," said LeRoy Nosbaum,
chairman and CEO. "With the promotion of Malcolm Unsworth
to the role of president and COO, we should now be in a position
to concentrate on improving the operations between the segments,
increasing revenue and moderating expenses through operational
focus."
Operations
Highlights:
Revenues — Total revenues of $478 million
for the first quarter of 2008 were $331 million, or 223%,
higher than 2007 first quarter revenues of $148 million. Itron
North America (INA) revenues of $150 million for the first
quarter of 2008 were $8.5 million, or 6%, higher than the
first quarter of 2007. Actaris revenues were $328 million
for the first quarter of 2008. Shipments of products to electric,
gas and water utilities comprised approximately 38%, 30% and
32% of total Actaris revenue.
Gross
Margin — Gross margin for the first quarter of
2008 was 34%. This compares with 41% in the first quarter
of 2007. First quarter 2008 INA gross margin of 39% was lower
than 2007 gross margin of 43% in the first quarter of 2007
due to a lower proportion of standalone automated meter reading
(AMR) module shipments and increased services costs. Actaris
gross margin of 32% was higher than full year 2007 gross margin
primarily due to product mix and a greater percentage of meters
shipped with AMR.
Operating
Expenses — Total operating expenses for the first
quarter of 2008 were $135 million. INA operating expenses
were $41 million, which was comparable with the first quarter
of 2007. INA operating expenses as a percentage of revenue
were 27%, which was lower than the 30% in 2007, due to the
increased revenue. Actaris operating expenses of $84 million
were 26% of revenue. Corporate unallocated expenses of $9.8
million for the first quarter of 2008 were $2.3 million higher
than the first quarter of 2007 due to increased compensation
expense and Actaris-related integration expenses for implementation
of internal controls for financial reporting and tax consulting.
Interest
and Other Income — Net interest expense of $24
million in the first quarter of 2008 was substantially higher
than the $592,000 in the comparable period in 2007, primarily
due to the placement of $1.2 billion in senior secured bank
debt for the Actaris acquisition in the second quarter of
2007. Debt fee amortization expense, which is included in
net interest expense, was $1.8 million in the first quarter
of 2008 compared with $742,000 in the comparable period of
2007. Other income was $188,000 in 2008 compared with $1.5
million in 2007. The first quarter of 2007 included a foreign
exchange gain of $1.6 million due to an increase in fair value
for foreign exchange transactions executed in conjunction
with the acquisition of Actaris.
Income
Taxes — Our GAAP tax rate was 19% for the first
quarter of 2008, which was substantially lower than the rate
of 37% in the same quarter of 2007. The lower rate in 2008
is primarily due to lower tax rates for Actaris as well as
a one-time net tax benefit in the first quarter related to
subsidiary interest expense.
GAAP
Net Income/Loss and EPS — Our GAAP net income
and fully diluted EPS for the first quarter of 2008 was $3.0
million, or 9 cents per share, compared with net income of
$7.2 million, or 26 cents per share, in the same period in
2007.
Non-GAAP
Operating Income, Net Income and Diluted EPS —
Non-GAAP operating income, which excludes amortization expense
related to intangible assets, was $58.5 million, or 12.2%
of revenues, in the first quarter of 2008, compared with $16.3
million, or 11.0% of revenues, in the first quarter of 2007.
Non-GAAP net income, which also excludes amortization of debt
fees, was $26.9 million in 2008 compared with $12.0 million
in the 2007 period. Non-GAAP diluted EPS was 82 cents in the
2008 period compared with 43 cents in 2007. Fully diluted
shares outstanding in the first quarter of 2008 were approximately
5 million higher than the same period in 2007 due to the equity
offering of 4.1 million shares in the first quarter of 2007
and the dilutive effect of our convertible debt. Non-GAAP
net income and diluted EPS were higher in the first quarter
of 2008 primarily due to the Actaris acquisition. Our non-GAAP
tax rates were 26.7% and 37.5% for the first quarter of 2008
and 2007. The lower 2008 rate is due to lower tax rates for
Actaris.
Other
Financial Highlights:
New Order Bookings and Backlog — New order
bookings for the first quarter of 2008 were $484 million,
compared with $118 million in the first quarter of 2007. Our
first quarter 2008 book-to-bill ratio was 1.02 to 1. Total
backlog was $683 million at March 31, 2008 compared with $376
million at March 31, 2007. Twelve month backlog of $552 million
at March 31, 2008 was higher than twelve month backlog at
March 31, 2007 of $225 million and higher than twelve month
backlog at December 31, 2007 of $501 million. We have approximately
$470 million related to a contract that we signed with Southern
California Edison in December 2007 that is not included in
our reported backlog. We will include new order bookings related
to this contract as firm purchase orders are received.
Cash
Flows from Operations — Net cash provided by
operating activities during the first quarter of 2008 was
$56 million, which is a new record. This compares with $9
million in the same period in 2007. Adjusted earnings before
interest, taxes, depreciation and amortization (Adjusted EBITDA)
in the first quarter of 2008 was $72 million compared with
$22 million for the same period in 2007.
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. They 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, changes in foreign exchange rates,
foreign business risks and other factors which are more fully
described in our Annual Report on Form 10-K for the year ended
December 31, 2007 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.
Business
Outlook:
The outlook information provided below and elsewhere in this
release is based on information available today. Itron assumes
no obligation to publicly update or revise our business outlook.
Our future performance involves risks and uncertainties.
For the
full year 2008, we expect
- Revenues
between $1.88 billion and $1.93 billion;
- Diluted
non-GAAP EPS of between $3.25 and $3.45; and
- Adjusted
EBITDA in excess of $280 million.
- Second
quarter 2008 revenue between $470 million and $490 million.
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 income, non-GAAP net
income and diluted EPS and Adjusted EBITDA. 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 associated with acquisitions.
We exclude these expenses in our non-GAAP financial measures
as we believe that they are a measure of our core business
that is not subject to the variations of expenses associated
with these infrequently occurring items. 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.
Related
Documents:
Itron
Q1 2008 Earnings Statement
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