U.S. Markets closed

Itron Announces Second Quarter 2019 Financial Results and Increases Full-Year 2019 Guidance

LIBERTY LAKE, Wash.--(BUSINESS WIRE)--

Itron, Inc. (ITRI) announced today financial results for its second quarter ended June 30, 2019. Key results for the quarter include (compared with the second quarter of 2018):

  • Revenue of $635 million, compared with $586 million;
  • Gross margin was flat at 30.1%;
  • GAAP net income of $19 million, compared with $3 million;
  • GAAP earnings per share of $0.49, compared with $0.07;
  • Non-GAAP diluted EPS of $0.87, compared with $0.51;
  • Adjusted EBITDA of $73 million, compared with $57 million; and
  • Total backlog was flat at $3.1 billion.

"Our second quarter financial performance contributed to a very strong first half of the year," said Philip Mezey, Itron's president and chief executive officer.

"Second quarter results were driven by strong customer demand, particularly in our Networked Solutions segment," continued Mezey. "We are very pleased with our performance in the first half of the year, which enabled us to raise our revenue and non-GAAP EPS guidance for full year 2019."

Summary of Second Quarter Consolidated Financial Results

(All comparisons made are against the prior year period unless otherwise noted)

Revenue

Total second quarter revenue increased 8% to $635 million, or 11%, excluding the impact of changes in foreign currency exchange rates.

Networked Solutions revenue increased 20%, and Outcomes revenue increased 15% driven by strong customer deliveries in North America. Device Solutions revenue decreased 8% due to lower revenue from Europe, Middle East and Africa (EMEA) region and the impact of changes in foreign currency exchange rates.

Gross Margin

Consolidated company gross margin of 30.1% was flat compared with the prior year as improved product mix was offset by higher component costs and other one-time items.

Operating Expenses and Operating Income

GAAP operating expenses of $148 million decreased $8 million from the prior year and non-GAAP operating expenses of $128 million decreased $4 million from the prior year. The decreases were primarily driven by benefits from restructuring and integration initiatives and the timing of product development spending.

GAAP operating income of $44 million and non-GAAP operating income of $63 million increased compared with the prior year due to higher gross profit and lower operating expenses.

Net Income (loss) and Earnings per Share

The net income attributable to Itron for the quarter was $19 million, or $0.49 per share, an increase from net income of $3 million, or $0.07 per share, in 2018. The increase was driven by higher operating income and a lower effective tax rate.

Non-GAAP net income, which excludes certain charges including restructuring, acquisition and integration related expenses, corporate transition cost, amortization of intangible assets, amortization of debt placement fees and the income tax effect of those adjustments, was $35 million, or $0.87 per diluted share, compared with $20 million, or $0.51 per diluted share, in 2018. The increase in non-GAAP EPS was due to higher non-GAAP operating income and a lower effective tax rate.

Cash Flow

Net cash provided by operating activities was $53 million in the second quarter compared with $41 million in the same quarter of 2018. Free cash flow was $38 million in the second quarter compared with $29 million in the prior year. Improved profitability was a major contributor to higher year over year cash flow.

Other Measures

Total backlog was $3.1 billion and 12-month backlog was $1.4 billion, which are both consistent with the prior year. Bookings in the quarter totaled $702 million.

Financial Guidance Update

Itron's guidance for the full year 2019 is as follows:

  • Revenue between $2.45 - $2.50 billion vs. previous guidance of $2.35 to $2.45 billion
  • Non-GAAP diluted EPS between $2.80 - $3.00 vs. previous guidance of $2.35 - $2.75

The guidance assumes a Euro to U.S. dollar foreign currency exchange rate of 1.12 on average in the second half of 2019, average fully diluted shares outstanding of approximately 40.2 million for the full year, non-GAAP effective tax rate for the full year of approximately 31% and total non-GAAP interest expense of approximately $50 million for the full year. A reconciliation of forward-looking non-GAAP diluted EPS to the GAAP diluted EPS has not been provided because we are unable to predict with reasonable certainty the potential amount or timing of restructuring and acquisition and integration-related expenses and their related tax effects without unreasonable effort. These items are uncertain, depend on various factors and could have a material impact on GAAP results for the guidance period.

Earnings Conference Call

Itron will host a conference call to discuss the financial results and guidance contained in this release at 5 p.m. EDT on Aug. 5, 2019. 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 made available at http://investors.itron.com/events.cfm. A telephone replay of the conference call will be available through Aug. 10, 2019. To access the telephone replay, dial 888-203-1112 or 719-457-0820 and enter passcode 7922157.

About Itron

Itron enables utilities and cities to safely, securely and reliably deliver critical infrastructure services to communities in more than 100 countries. Our portfolio of smart networks, software, services, meters and sensors helps our customers better manage electricity, gas and water resources for the people they serve. By working with our customers to ensure their success, we help improve the quality of life, ensure the safety and promote the well-being of millions of people around the globe. Itron is dedicated to creating a more resourceful world. Join us: www.itron.com.

Itron® is registered trademarks of Itron, Inc. All third-party trademarks are property of their respective owners and any usage herein does not suggest or imply any relationship between Itron and the third party unless expressly stated.

Cautionary Note Regarding Forward Looking Statements

This release contains "forward-looking statements" within in the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical factors nor assurances of future performance. These statements relate to our expectations about, among others, revenues, operations, financial performance, earnings, earnings per share and cash flows. Although we believe the estimates and assumptions upon which these forward-looking statements are based are reasonable, any of these estimates or assumptions could prove to be inaccurate and the forward-looking statements based on these estimates and assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors. Therefore, you should not rely on any of these forward-looking statements. Some of the factors that we believe could affect our results include our ability to achieve estimated cost savings, the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, adverse impacts of litigation, 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 Dec. 31, 2018 and other reports on file with the Securities and Exchange Commission. Itron undertakes no obligation to update or revise any information in this press release.

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, adjusted EBITDA margin, constant currency 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. We exclude certain costs in our non-GAAP financial measures as we believe the net result is a measure of our core business. The company believes these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. 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.

ITRON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

(Unaudited, in thousands, except per share data)

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

2018

 

2019

2018

Revenues

 

 

 

 

 

Product revenues

$

566,047

 

$

515,914

 

 

$

1,110,897

 

$

1,053,024

 

Service revenues

68,990

 

69,976

 

 

138,716

 

140,087

 

Total revenues

635,037

 

585,890

 

 

1,249,613

 

1,193,111

 

Cost of revenues

 

 

 

 

 

Product cost of revenues

401,033

 

366,542

 

 

787,135

 

749,392

 

Service cost of revenues

42,790

 

42,771

 

 

84,001

 

87,287

 

Total cost of revenues

443,823

 

409,313

 

 

871,136

 

836,679

 

Gross profit

191,214

 

176,577

 

 

378,477

 

356,432

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

Sales, general and administrative

88,259

 

88,863

 

 

180,974

 

243,277

 

Research and development

49,449

 

54,775

 

 

99,939

 

115,059

 

Amortization of intangible assets

16,117

 

17,999

 

 

32,090

 

35,739

 

Restructuring

(6,169

)

(5,623

)

 

1,093

 

82,242

 

Total operating expenses

147,656

 

156,014

 

 

314,096

 

476,317

 

 

 

 

 

 

 

Operating income (loss)

43,558

 

20,563

 

 

64,381

 

(119,885

)

Other income (expense)

 

 

 

 

 

Interest income

534

 

633

 

 

862

 

1,294

 

Interest expense

(13,496

)

(14,645

)

 

(27,031

)

(30,149

)

Other income (expense), net

(2,060

)

1,003

 

 

(3,704

)

(164

)

Total other income (expense)

(15,022

)

(13,009

)

 

(29,873

)

(29,019

)

 

 

 

 

 

 

Income (loss) before income taxes

28,536

 

7,554

 

 

34,508

 

(148,904

)

Income tax benefit (provision)

(8,419

)

(3,781

)

 

(14,540

)

7,407

 

Net Income (loss)

20,117

 

3,773

 

 

19,968

 

(141,497

)

Net income attributable to noncontrolling interests

671

 

1,116

 

 

2,429

 

1,512

 

Net income (loss) attributable to Itron, Inc.

$

19,446

 

$

2,657

 

 

$

17,539

 

$

(143,009

)

 

 

 

 

 

 

Net income (loss) per common share - Basic

$

0.49

 

$

0.07

 

 

$

0.44

 

$

(3.66

)

Net income (loss) per common share - Diluted

$

0.49

 

$

0.07

 

 

$

0.44

 

$

(3.66

)

 

 

 

 

 

 

Weighted average common shares outstanding - Basic

39,389

 

39,243

 

 

39,523

 

39,095

 

Weighted average common shares outstanding - Diluted

39,686

 

39,789

 

 

39,875

 

39,095

  

ITRON, INC.

SEGMENT INFORMATION

 

 

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

2018

 

2019

2018

Product revenues

 

 

 

 

 

Device Solutions

$

214,589

 

$

231,750

 

 

$

433,158

 

$

477,173

 

Networked Solutions

333,422

 

275,298

 

 

647,772

 

555,093

 

Outcomes

18,036

 

8,866

 

 

29,967

 

20,758

 

Total Company

$

566,047

 

$

515,914

 

 

$

1,110,897

 

$

1,053,024

 

 

 

 

 

 

 

Service revenues

 

 

 

 

 

Device Solutions

$

3,134

 

$

4,396

 

 

$

6,320

 

$

8,340

 

Networked Solutions

22,494

 

20,868

 

 

44,571

 

43,411

 

Outcomes

43,362

 

44,712

 

 

87,825

 

88,336

 

Total Company

$

68,990

 

$

69,976

 

 

$

138,716

 

$

140,087

 

 

 

 

 

 

 

Total revenues

 

 

 

 

 

Device Solutions

$

217,723

 

$

236,146

 

 

$

439,478

 

$

485,513

 

Networked Solutions

355,916

 

296,166

 

 

692,343

 

598,504

 

Outcomes

61,398

 

53,578

 

 

117,792

 

109,094

 

Total Company

$

635,037

 

$

585,890

 

 

$

1,249,613

 

$

1,193,111

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

Device Solutions

$

41,590

 

$

48,743

 

 

$

81,506

 

$

102,347

 

Networked Solutions

126,243

 

112,290

 

 

253,311

 

226,531

 

Outcomes

23,381

 

15,544

 

 

43,660

 

27,554

 

Total Company

$

191,214

 

$

176,577

 

 

$

378,477

 

$

356,432

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

Device Solutions

$

28,355

 

$

34,510

 

 

$

53,812

 

$

72,702

 

Networked Solutions

98,035

 

81,941

 

 

193,357

 

161,884

 

Outcomes

14,367

 

4,249

 

 

24,777

 

3,594

 

Corporate unallocated

(97,199

)

(100,137

)

 

(207,565

)

(358,065

)

Total Company

$

43,558

 

$

20,563

 

 

$

64,381

 

$

(119,885

)

METER AND MODULE SUMMARY

 

 

 

 

 

 

(Unaudited, Units in thousands)

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

2018

 

2019

2018

Itron Endpoints

 

 

 

 

 

Standard endpoints (1)

5,570

5,860

 

11,040

11,640

Networked endpoints (1)

4,260

3,570

 

8,240

7,470

Total endpoints

9,830

9,430

 

19,280

19,110

(1)

As of the second quarter of 2019, we have refined the definition of a standard endpoint to more closely align to the segment performance of Device Solution and Networked Solutions as reported in the Operating Segment Results section below. The quantities presented for the three and six months ended June 30, 2018 and for the three months ended March 31, 2019, as included in the six-month period for 2019, have been recast to align with the refined definitions of standard and networked endpoints. The total endpoints shipped for each period is unchanged.

ITRON, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

June 30, 2019

 

December 31, 2018

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

135,736

 

 

$

120,221

 

Accounts receivable, net

466,366

 

 

437,161

 

Inventories

229,910

 

 

220,674

 

Other current assets

130,584

 

 

118,085

 

Total current assets

962,596

 

 

896,141

 

 

 

 

 

Property, plant, and equipment, net

228,513

 

 

226,551

 

Deferred tax assets, net

60,977

 

 

64,830

 

Restricted cash

2,066

 

 

2,056

 

Other long-term assets

40,918

 

 

45,288

 

Operating lease right-of-use assets, net

79,456

 

 

 

Intangible assets, net

221,767

 

 

257,583

 

Goodwill

1,110,061

 

 

1,116,533

 

Total assets

$

2,706,354

 

 

$

2,608,982

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities

 

 

 

Accounts payable

$

320,582

 

 

$

309,951

 

Other current liabilities

69,139

 

 

70,136

 

Wages and benefits payable

102,577

 

 

88,603

 

Taxes payable

17,115

 

 

14,753

 

Current portion of debt

26,563

 

 

28,438

 

Current portion of warranty

38,987

 

 

47,205

 

Unearned revenue

95,197

 

 

93,621

 

Total current liabilities

670,160

 

 

652,707

 

 

 

 

 

Long-term debt

969,710

 

 

988,185

 

Long-term warranty

18,125

 

 

13,238

 

Pension benefit obligation

92,073

 

 

91,522

 

Deferred tax liabilities, net

1,514

 

 

1,543

 

Operating lease liabilities

68,387

 

 

 

Other long-term obligations

139,786

 

 

127,739

 

Total liabilities

1,959,755

 

 

1,874,934

 

 

 

 

 

Equity

 

 

 

Common stock

1,325,508

 

 

1,334,364

 

Accumulated other comprehensive loss, net

(194,349

)

 

(196,305

)

Accumulated deficit

(407,857

)

 

(425,396

)

Total Itron, Inc. shareholders' equity

723,302

 

 

712,663

 

Non-controlling interests

23,297

 

 

21,385

 

Total equity

746,599

 

 

734,048

 

Total liabilities and equity

$

2,706,354

 

$

2,608,982

  

ITRON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

(Unaudited, in thousands)

 

 

 

 

Six Months Ended June 30,

 

2019

 

2018

Operating activities

 

 

 

Net income (loss)

$

19,968

 

 

$

(141,497

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Depreciation and amortization of intangible assets

57,068

 

 

61,979

 

Amortization of operating lease right-of-use assets

9,481

 

 

 

Stock-based compensation

13,783

 

 

16,619

 

Amortization of prepaid debt fees

2,402

 

 

4,602

 

Deferred taxes, net

2,076

 

 

(15,319

)

Restructuring, non-cash

(5,295

)

 

624

 

Other adjustments, net

(3,471

)

 

1,205

 

Changes in operating assets and liabilities, net of acquisitions

 

 

 

Accounts receivable

(29,121

)

 

12,804

 

Inventories

(9,202

)

 

3,385

 

Other current assets

(14,413

)

 

(1,921

)

Other long-term assets

6,616

 

 

4,514

 

Accounts payable, other current liabilities, and taxes payable

(2,801

)

 

(16,994

)

Wages and benefits payable

13,484

 

 

762

 

Unearned revenue

14,961

 

 

31,156

 

Warranty

(3,270

)

 

3,756

 

Other operating, net

5,797

 

 

51,204

 

Net cash provided by operating activities

78,063

 

 

16,879

 

 

 

 

 

Investing activities

 

 

 

Acquisitions of property, plant, and equipment

(26,511

)

 

(29,309

)

Business acquisitions, net of cash equivalents acquired

 

 

(802,488

)

Other investing, net

9,773

 

 

(543

)

Net cash used in investing activities

(16,738

)

 

(832,340

)

 

 

 

 

Financing activities

 

 

 

Proceeds from borrowings

50,000

 

 

761,938

 

Payments on debt

(72,188

)

 

(242,234

)

Issuance of common stock

4,001

 

 

4,927

 

Repurchase of common stock

(25,000

)

 

 

Prepaid debt fees

(175

)

 

(24,042

)

Other financing, net

(3,165

)

 

(2,580

)

Net cash provided by (used in) financing activities

(46,527

)

 

498,009

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

727

 

 

(4,841

)

Increase (decrease) in cash, cash equivalents, and restricted cash

15,525

 

 

(322,293

)

Cash, cash equivalents, and restricted cash at beginning of period

122,328

 

 

487,335

 

Cash, cash equivalents, and restricted cash at end of period

$

137,853

 

 

$

165,042

 

About Non-GAAP Financial Measures

The accompanying press release contains non-GAAP financial measures. To supplement our consolidated financial statements, which are prepared 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, constant currency 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, and other companies may define such measures differently. For more information on these non-GAAP financial measures please see the table captioned “Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures.”

We use these non-GAAP financial measures for financial and operational decision making and/or 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 and certain discrete cash and non-cash charges such as acquisition and integration related expenses, 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 expenses and non-GAAP operating income - We define non-GAAP operating expenses as operating expenses excluding certain expenses related to the amortization of intangible assets, restructuring, acquisition and integration, corporate transition costs, and goodwill impairment. We define non-GAAP operating income as operating income excluding the expenses related to the amortization of intangible assets, restructuring, acquisition and integration, corporate transition costs, and goodwill impairment. Acquisition and integration related expenses include costs which are incurred to affect and integrate business combinations, such as professional fees, certain employee retention and salaries related to integration, severances, contract terminations, travel costs related to knowledge transfer, system conversion costs, and asset impairment charges. 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 acquisitions and restructuring projects. 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 expenses and non-GAAP operating income versus operating expenses and operating income calculated in accordance with GAAP. We compensate for these limitations by providing specific information about the GAAP amounts excluded from 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 attributable to Itron, Inc. excluding the expenses associated with amortization of intangible assets, restructuring, acquisition and integration, goodwill impairment, amortization of debt placement fees, corporate transition costs, and the tax effect of excluding these expenses. 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 attributable to Itron, Inc. and GAAP diluted EPS.

For interim periods, beginning the first quarter of 2019, the budgeted annual effective tax rate (AETR) is used, adjusted for any discrete items, as defined in ASC 740 - Income Taxes. The budgeted AETR is determined at the beginning of the fiscal year. The AETR is revised throughout the year based on changes to our full-year forecast. If the revised AETR increases or decreases by 200 basis points or more from the budgeted AETR due to changes in the full-year forecast during the year, the revised AETR is used in place of the budgeted AETR beginning with the quarter the 200 basis point threshold is exceeded and going forward for all subsequent interim quarters in the year. We continue to assess the AETR based on latest forecast throughout the year and use the most recent AETR anytime it increases or decreases by 200 basis points or more from the prior interim period.

Adjusted EBITDA - We define adjusted EBITDA as net income (a) minus interest income, (b) plus interest expense, depreciation and amortization, restructuring, acquisition and integration related expense, corporate transition costs, goodwill impairment and (c) excluding income tax provision or benefit. 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 (used in) 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.

Constant currency - We refer to the impact of foreign currency exchange rate fluctuations in our discussions of financial results, which references the differences between the foreign currency exchange rates used to translate operating results from local currencies into U.S. dollars for financial reporting purposes. We also use the term “constant currency,” which represents financial results adjusted to exclude changes in foreign currency exchange rates as compared with the rates in the comparable prior year period. We calculate the constant currency change as the difference between the current period results and the comparable prior period’s results restated using current period foreign currency exchange rates.

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 MEASURES

TO 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,

 

2019

2018

 

2019

2018

NON-GAAP NET INCOME & DILUTED EPS

 

 

 

 

 

GAAP income (loss) attributable to Itron, Inc.

$

19,446

 

$

2,657

 

 

$

17,539

 

$

(143,009

)

Amortization of intangible assets

16,117

 

17,999

 

 

32,090

 

35,739

 

Amortization of debt placement fees

1,159

 

1,172

 

 

2,315

 

4,515

 

Restructuring

(6,169

)

(5,623

)

 

1,093

 

82,242

 

Corporate transition cost

473

 

 

 

1,556

 

 

Acquisition and integration related expense

9,194

 

11,148

 

 

20,759

 

73,795

 

Income tax effect of non-GAAP adjustments (1)

(5,620

)

(6,897

)

 

(12,862

)

(27,732

)

Non-GAAP net income attributable to Itron, Inc. (1)

$

34,600

 

$

20,456

 

 

$

62,490

 

$

25,550

 

 

 

 

 

 

 

Non-GAAP diluted EPS (1)

$

0.87

 

$

0.51

 

 

$

1.57

 

$

0.64

 

 

 

 

 

 

 

Weighted average common shares outstanding - Diluted

39,686

 

39,789

 

 

39,875

 

39,782

 

 

 

 

 

 

 

ADJUSTED EBITDA

 

 

 

 

 

GAAP income (loss) attributable to Itron, Inc.

$

19,446

 

$

2,657

 

 

$

17,539

 

$

(143,009

)

Interest income

(534

)

(633

)

 

(862

)

(1,294

)

Interest expense

13,496

 

14,645

 

 

27,031

 

30,149

 

Income tax provision (benefit)

8,419

 

3,781

 

 

14,540

 

(7,407

)

Depreciation and amortization of intangible assets

28,641

 

30,907

 

 

57,068

 

61,979

 

Restructuring

(6,169

)

(5,623

)

 

1,093

 

82,242

 

Corporate transition cost

473

 

 

 

1,556

 

 

Acquisition and integration related expense

9,194

 

11,148

 

 

20,759

 

73,795

 

Adjusted EBITDA

$

72,966

 

$

56,882

 

 

$

138,724

 

$

96,455

 

 

 

 

 

 

 

FREE CASH FLOW

 

 

 

 

 

Net cash provided by operating activities

$

53,139

 

$

41,327

 

 

$

78,063

 

$

16,879

 

Acquisitions of property, plant, and equipment

(15,096

)

(11,876

)

 

(26,511

)

(29,309

)

Free Cash Flow

$

38,043

 

$

29,451

 

 

$

51,552

 

$

(12,430

)

 

 

 

 

 

 

NON-GAAP OPERATING INCOME

 

 

 

 

 

GAAP operating income (loss)

$

43,558

 

$

20,563

 

 

$

64,381

 

$

(119,885

)

Amortization of intangible assets

16,117

 

17,999

 

 

32,090

 

35,739

 

Restructuring

(6,169

)

(5,623

)

 

1,093

 

82,242

 

Corporate transition cost

473

 

 

 

1,556

 

 

Acquisition and integration related expense

9,194

 

11,148

 

 

20,759

 

73,795

 

Non-GAAP operating income

$

63,173

 

$

44,087

 

 

$

119,879

 

$

71,891

 

 

 

 

 

 

 

NON-GAAP OPERATING EXPENSES

 

 

 

 

 

GAAP operating expenses

$

147,656

 

$

156,014

 

 

$

314,096

 

$

476,317

 

Amortization of intangible assets

(16,117

)

(17,999

)

 

(32,090

)

(35,739

)

Restructuring

6,169

 

5,623

 

 

(1,093

)

(82,242

)

Corporate transition cost

(473

)

 

 

(1,556

)

 

Acquisition and integration related expense

(9,194

)

(11,148

)

 

(20,759

)

(73,795

)

Non-GAAP operating expenses

$

128,041

 

$

132,490

 

 

$

258,598

 

$

284,541

 

(1)

 

The income tax effect of non-GAAP adjustments is calculated using the statutory tax rates for the relevant jurisdictions, provided no valuation allowance exists. If a valuation allowance exists, there is no tax impact to the non-GAAP adjustment. Effective for the first quarter of 2019, we use the budgeted annual effective tax rate (AETR) for interim periods, with adjustments for discrete items, as defined in ASC 740 - Income Taxes. This method impacts interim periods only and does not impact full year tax results, as any difference between the budgeted or revised AETR and the actual AETR for non-GAAP adjustments would be recognized in the fourth quarter of the year. If the revised methodology had been applied in the second quarter of 2018, non-GAAP net income would have increased by $1.7 million to $22.2 million, and diluted non-GAAP EPS would have increased by $0.05 to $0.56. If the methodology had been applied in the six months ended of 2018. non-GAAP net income would have increased by $5.8 million to $31.3 million, and diluted non-GAAP EPS would have increased by $0.15 to $0.79.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190805005560/en/