Delays in customer buying decisions helped produce a decline in Itron Inc.’s income during the second quarter, despite a 23 percent increase in sales over the second quarter of 1995.
Tuesday, the company reported net income for the quarter of $2.35 million, or 17 cents per share, on sales of $48.2 million. That compares with net income of $2.8 million, or 20 cents per share, on revenues of $39.1 million during the second quarter of 1995.
The performance was “about what we expected,” Mima Scarpelli, Itron’s treasurer, said following the release of the company’s earnings report Tuesday.
For the first half of 1996, the company earned $5.4 million, or 38 cents per share, on sales of $96.2 million. That compares with net income of $6 million, or 44 cents per share, on sales of $77.3 million during the first half of 1995.
Johnny Humphreys, Itron’s president and chief executive officer, said in a news release that the company is well-positioned for future revenue and earnings growth. But, “We expect that the bottom-line results of the company in the immediate future will continue to be affected by the timing of large automatic meter reading orders,” and the “substantial investments” the company is making in that business.
Itron manufactures computer equipment used by utilities to read gas and electric meters. Its revenues are split between sales of automatic meter reading systems, and handheld systems.
Scarpelli explained that many of Itron’s deals with automatic meter reading customers represent very large orders, meaning that the timing of individual deals can have a profound impact on a given quarter’s financial performance.
“We have a lot of large automatic meter reading decisions pending out there,” Scarpelli said. “And we gear up to the level of staffing we think we will need to support the business that we expect.”
So if a customer delays a buying decision for a couple of months, Itron must absorb the costs of staffing increases until the expected deal starts producing revenue.
As of June 30, Itron had shipped automatic meter reading products to 234 utilities, representing an increase of 53 utilities since the start of the year. Also as of June 30, though, the company’s backlog of unfilled orders and services expected to be delivered within the next 12 months was $78 million.
A statement issued May 31, detailing Itron officials’ expectation that the second- and third-quarter earnings for the company would be flat or below first-quarter performance, caused Itron’s stock to plummet.
The stock dropped from $50 to $34 in a single day in early June, and has hovered in the $30 range ever since.
The stock closed Tuesday at $28.125, up 87.5 cents, but down from $31 on July 1.
Scarpelli believes that the drop since July 1 was part of the general declines suffered by technical stocks on the Nasdaq exchange in recent days rather than any issues specific to Itron.
Itron has systems installed at more than 1,300 customers in more than 40 countries. Headquartered in Spokane, the company has engineering, design and manufacturing facilities throughout the United States, as well as subsidiaries in the United Kingdom, France and Australia.
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