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Itron, Inc.’s (ITRI - Analyst Report) first-quarter 2013 adjusted earnings declined 66% to 31 cents per share compared with 91 cents in the year-earlier quarter, driven by lower revenue resulting in lower gross profit. Adjusted earnings fell short of the Zacks Consensus Estimate of 46 cents per share.

Including one time items, earnings in the quarter came at 6 cents per share compared with the year-ago quarter’s earnings of 63 cents per share.

Operational Update

Total revenue during the quarter fell 22% to $448 million, missing the Zacks Consensus Estimate of $572 million. The decline in revenues was mainly due to an unfavorable impact from foreign currency translation of $5 million and lower revenue in the Energy segment due to the completion of several OpenWay projects in North America.

Cost of goods sold declined 21% to $307 million in the reported quarter. Gross profit also dropped 23.5% to $140 million. Consequently, gross margin contracted 70 basis points (bps) to 31.3%. The year-over-year decline was driven by lower volumes.

Adjusted operating expenses decreased 3% to $125.3 million in the quarter. The decline was driven by lower global sales and marketing, general and administrative costs.

Adjusted operating profit declined 73% to $14.7 million. The decline was attributable to higher operating expenses, driven by investment in product development, sales and marketing for future global smart metering projects. Including one-time items, operating income was $2.3 million in the reported quarter compared with $40 million in the year-ago quarter.

Segment Performance

Energy Segment: Net sales at the Energy Segment dropped 28.5% to $312.6 million. Gross profit for the segment reduced 29% to $95.5 million. Gross margin also declined slightly over the prior year to 30.5% as benefits from efficiencies and lower warranty costs were offset by lower volumes.

Water Segment: The Water Segment reported sales of $134.9 million in the quarter, up 1% compared with $133.8 million in the year-ago quarter. The improvement was driven by an increase in professional services. Gross profit for the segment dropped 29% to $95.5 million. Gross margin decreased 300 bps to 33% due to an increase in professional services which have lower margins.

Financial Position

As of Mar 31, 2013, cash and cash equivalents amounted to $101.5 million versus $136 million as of Dec 31, 2012. Cash flow from operating activities was $595 thousands in the reported quarter compared with $54 million in the prior-year quarter. The debt-to-capitalization ratio declined to 28.8% as of Mar 31, 2013 from 29.2% as of Dec 31, 2012.

Bookings and Backlog

Bookings in the reported quarter were $447 million, while total backlog at the end of the quarter was $1 billion.

Liberty Lake, Wash-based Itron Inc., along with its subsidiaries, is one of the principal technology providers to the energy and water industries worldwide. It produces electricity, gas, water, and heat meters, data collection and utility software solutions along with various other associated metering products for residential, commercial and industrial, and transmission and distribution customers.

Itron belongs to the electrical equipment industry along with Agilent Technologies Inc. (A - Analyst Report), National Instruments Corp (NATI - Snapshot Report) and Teradyne Inc. (TER - Analyst Report). Itron currently has a short-term Zacks #4 Rank (Sell).

 

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