Itron Management Discusses Q4 2011 Results - Earnings Call Transcript

Itron (ITRI)

Q4 2011 Earnings Call

February 15, 2012 5:00 pm ET

Executives

Barbara J. Doyle - Vice President of Investor Relations

LeRoy D. Nosbaum - Chief Executive officer, President and Director

Steven M. Helmbrecht - Chief Financial Officer and Senior Vice President

Analysts

Paul Coster - JP Morgan Chase & Co, Research Division

Sean K.F. Hannan - Needham & Company, LLC, Research Division

Stephen Sanders - Stephens Inc., Research Division

Sanjay Shrestha - Lazard Capital Markets LLC, Research Division

Patrick Jobin - Crédit Suisse AG, Research Division

Craig E. Irwin - Wedbush Securities Inc., Research Division

John Quealy - Canaccord Genuity, Research Division

Steven Milunovich - BofA Merrill Lynch, Research Division

Presentation

Operator

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Thanks very much for standing by, everyone, and welcome to the Itron, Inc. Q4 and Year-End 2011 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn things over to Ms. Barbara Doyle, Vice President, Investor Relations.

Barbara J. Doyle

Thank you, Abe. And good afternoon to everyone on the call. Today we have LeRoy Nosbaum, our President and Chief Executive Officer; and Steve Helmbrecht, our Senior Vice President and Chief Financial Office on the call. Also joining us are Marcel Regnier, President and Chief Operating Officer of Itron's Water business; and John Holleran, Senior Vice President and Corporate Secretary.

We issued a press release earlier announcing our results. The press release includes replay information about today's call. We also have prepared slides to accompany our remarks on this call, and the slides are available through the webcast and through our corporate website under the Investor Relations tab.

Before I turn the call over to LeRoy, please let me cover our Safe Harbor Statement. Please note that our earnings release and financial presentation include non-GAAP financial information which we believe enhances the overall understanding of our current and future performance. We have included all the reconciliations of differences between GAAP and non-GAAP in our financial measures and in our earnings release and financial presentation.

Regarding our Safe Harbor, please know that we will be making statements during the call that are forward-looking. These statements are based on our current expectations and assumptions and they are subject to risks and uncertainties. Actual results could differ materially from these expectations because of factors discussed in today's earnings release and the comments made during this conference call and in the Risk Factors section on our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any update -- any duty to update our forward-looking statements.

Now please let me introduce LeRoy Nosbaum, Itron's President and Chief Executive Officer.

LeRoy D. Nosbaum

Thank you, Barbara. Good afternoon, everyone. Thanks for joining the call. We've got a lot to talk about today, most importantly, the acquisition of SmartSynch which I think really strengthens our solutions portfolio and go-to-market strategy. But before I go there, let me begin with some highlights of our business results, including an update on our restructuring project. Steve will cover the quarter's results in more detail and provide our financial guidance for 2012. I will close the call with my observations about '12 and what I've learned in my first 6 months back at Itron. Then we'll open up for questions.

So let's begin. Overall, Q4 was a solid end to fiscal Q11 -- or 2011 and I'm pleased with our results. It was a good end to a tough year in our industry, and let's be honest, a rather tumultuous year for Itron. We ended the year with $2.4 billion of revenue, the top end of our guidance, and non-GAAP EPS of $4.29, above our guidance range of $4 to $4.20. On a full-year basis, our global revenues grew by 8%. You can see on Slide 4 that we had 13% revenue growth in Water, 8% revenue growth in Gas and 13% growth in non-OpenWay electric business. As we forecast, our North American OpenWay sales declined slightly by 2%. But as the graph nicely shows, the 2% loss was more than offset by growth in what we would call our base business represented by the different shades of glue -- blue on the graph. The graph is key to understanding Itron. While we have exciting opportunities beyond our traditional business, OpenWay being one, our strong, steady and profitable base business is significant, and I believe, too often overlooked and undervalued. I'd also point out that our FY '11 revenue and non-GAAP EPS represented record high results for Itron.

Equally important, we are nicely moving forward with our operational plans including the pace of our restructuring project. As we announced in October, several of our manufacturing facilities will be closed or scaled back. The goal is simple, more volume and fewer manufacturing facilities, which in turn, eliminates redundancies, streamlines and allows automation of remaining operations and reduces costs. We are on track with all our plans. Action taken to date include: successful negotiations with work counsels at affected locations which will allow reductions in workforce; we are negotiating the sale of several smaller businesses which we hope to close in Q2; we have closed 2 facilities, one in Canada, one in Portugal with the reduction in headcount of 140 people; as well, our downsizing plans are being finalized in several other locations.

Given our solid Q4 results and progress on our operational initiatives, I feel confident that our focus is appropriate and that we are moving forward aggressively in the right direction.

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