Itron’s early ‘04 income in a slump

Itron’s earnings dropped off sharply in the second quarter of 2004, with the company attributing the decline to costs from an acquisition, compliance with government regulations and a utility industry that’s in the “doldrums.”

The Spokane-based company, which makes automatic meter-reading equipment and software for the utility industry, just completed a $248 million acquisition of one of the biggest meter manufacturers in the country. The acquisition of Schlumberger’s electricity metering products division closed July 1.

“The utility industry in general and large electric and gas utilities specifically continue to be in the doldrums,” CEO LeRoy Nosbaum said in a news release. “Larger AMR (automatic meter reading) projects have not moved forward at the pace we had expected.”

For the second quarter, Itron reported net income of $818,000, or 4 cents per share, down from $4.2 million, or 19 cents per share, in the second quarter of 2003. Revenues for the second quarter of 2004 were $79.6 million, down from $80.2 million in the second quarter of 2003.

The news release said second-quarter results were affected by “unusual non-operating expenses,” including a $1.3 million interest expense associated with debt financing for the acquisition of Schlumberger. Second-quarter earnings also took a hit from a $775,000 write-off of the company’s remaining investment in Lanthorn Technologies, a Boston firm.

Revenues from sales of products such as handheld meter reading equipment declined in the second quarter, but were offset by sales of software. In addition, said Mima Scarpelli, vice president of investor relations, the company has experienced increased costs related to compliance with the 2002 Sarbanes-Oxley Act, which requires publicly held companies to improve the quality of financial reporting by auditors.

Revenues for the first half of 2004 were $145 million, with net income of $80,000 or zero cents per share, down from $155 million after the first six months of 2003, with a net income of $7 million, or 33 cents a share.

“No one was really expecting Itron to have a blockbuster first half,” Scarpelli said. “We’ve projected a much better second half of the year.”

New orders booked in the quarter were $66 million compared with $41 million in the second quarter of 2003. New orders in the first half of 2004 were 30 percent higher than the same time period last year.

The company’s third-quarter report will be the first to include operating results from the acquisition of Schlumberger.

Following that acquisition, Itron has about 2,500 employees worldwide, with more than 500 of them in Spokane.