Itron Announces Fourth Quarter and Fiscal 2010 Results

Record Full Year Revenue of $2.26 Billion

Record Full Year Non-GAAP Diluted EPS of $3.89

Restatement of Fiscal 2010 Quarterly Results to Reflect Revenue Deferral

LIBERTY LAKE, Wash.--(BUSINESS WIRE)--Itron, Inc. (NASDAQ:ITRI) today reported financial results for its fourth quarter and full year ended December 31, 2010. Highlights include:

• Record quarterly and full year revenues of $620.7 million and $2.26 billion;
• Quarterly and record full year GAAP diluted EPS of 65 cents and $2.56, respectively;
• Quarterly non-GAAP diluted EPS of 95 cents;
• Record full year non-GAAP diluted EPS of $3.89;
• Non-GAAP tax rate for the quarter of 20.6% reflecting benefits from the retroactive extension of the U.S. research and development tax credit passed in the fourth quarter and lower than forecasted income in higher tax jurisdictions;
• Twelve-month backlog of $913 million and total backlog of $1.6 billion; and
• Quarterly bookings of $581 million.

In addition, Itron announced that it has restated financial results for the quarters ended March 31, June 30, and September 30, 2010 which will be set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010. These revisions were made primarily to defer revenue that had been incorrectly recognized on one contract due to a misinterpretation of an extended warranty obligation. The effect was to reduce revenue and earnings in each of the first three quarters of the year. For the first nine months of 2010, total revenue was reduced by $6.1 million and both GAAP and non-GAAP diluted EPS were reduced by 11 cents. All comparative information within this release is on a restated basis.

“Our record results for the year resulted from our continued commitment to technological innovation as well as our balanced and diversified portfolio of products and solutions for the electric, gas and water industries,” said Malcolm Unsworth, president and CEO. “Our main objectives in 2010 were to successfully deploy our smart metering solutions for our large contracts in North America, prepare for developing opportunities in Europe and other regions of the world, and grow our gas and water businesses. We met those objectives and more and are positioned for continued growth in 2011.”

Operations Highlights:

Revenues increased $143.8 million, or 30.2%, for the quarter and $571.8 million, or 33.9%, for the year compared to the same periods last year. The increase in revenues was primarily driven by higher shipments of smart meters and modules in North America. During the fourth quarter we shipped 1.4 million OpenWay units. The increase in fourth quarter revenue included an $11.5 million unfavorable effect from changes in foreign currency exchange rates. The unfavorable foreign exchange effect on revenues for the year was $5.3 million.

Gross margin for the quarter was 29.9% which was lower than the prior year fourth quarter margin of 30.5%. Both segments contributed to the decline from the prior year. Itron North America declined 130 basis points from fourth quarter 2009 primarily due to a higher mix of OpenWay revenue which, including installation services, currently has a lower margin than non-OpenWay revenue. Itron International gross margin declined 120 basis points from fourth quarter 2009 primarily due to special charges. International gross margins were also impacted by higher material costs which were offset by higher volumes and a more favorable product mix.

Operating expenses, excluding amortization of intangibles, were $124.1 million, or 20.0% of revenue, for the quarter compared to $104.1 million, or 21.8% of revenue, in the prior year. The increase was due primarily to higher compensation expenses as well as research and development costs for new and enhanced products.

Net income and diluted EPS for the fourth quarter and year were $26.6 million, or 65 cents per share, and $104.8 million, or $2.56 per share. This compares with net income of $5.2 million, or 13 cents per share, and a loss of $2.2 million, or 6 cents per share, in the same periods in 2009. The increase in 2010 net income was primarily due to higher operating income in our North America segment.

Forward Looking Statements:

This release contains forward-looking statements concerning our expectations about operations, financial performance, sales, earnings and cash flows. These statements reflect our current plans and expectations and are based on information currently available. The statements rely on a number of assumptions and estimates, which could be inaccurate, and which are subject to risks and uncertainties that could cause our actual results to vary materially from those anticipated. Risks and uncertainties include the rate and timing of customer demand for our products, rescheduling of current customer orders, changes in estimated liabilities for product warranties, 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 which are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2009 and other reports on file with the Securities and Exchange Commission. Itron undertakes no obligation to update publicly or revise any forward-looking statements, including our business outlook.

2011 Guidance:

Itron’s guidance for 2011 is as follows:

• Revenue between $2.15 billion and $2.30 billion
• Non-GAAP diluted EPS between $3.95 and $4.40

Our guidance assumes a Euro to U.S. dollar exchange rate of $1.35, average shares outstanding of approximately 41.4 million and a non-GAAP effective tax rate between 27% and 29%.

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, 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. Specifically, these non-GAAP financial measures are provided to enhance investors’ overall understanding of our current financial performance and our future anticipated performance by excluding infrequent costs, particularly those associated with acquisitions. We exclude certain infrequent costs, particularly those associated with acquisitions, in our non-GAAP financial measures as we believe the net result is a measure of our core business. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. Finally, 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.

Earnings Conference Call:

Itron will host a conference call to discuss the financial results contained in this release at 2:00 p.m. (PST) on February 16, 2011. The call will be webcast in a listen only mode. Webcast information and conference call materials will be made available in the “Investors/Investor Events” section of Itron’s website (www.itron.com) prior to the start of the call. The webcast replay will begin after the conclusion of the live call and will be available for two weeks. A telephone replay of the call will also be available approximately one hour after the conclusion of the live call, for 48 hours, and is accessible by dialing [phone] (Domestic) or [phone] (International), entering passcode #4354205.

About Itron:

At Itron, we’re dedicated to delivering end-to-end smart grid and smart distribution solutions to electric, gas and water utilities around the globe. Our company is the world’s leading provider of smart metering, data collection and utility software systems, with nearly 8,000 utilities worldwide relying on our technology to optimize the delivery and use of energy and water. Our offerings include electricity, gas, water and heat meters; network communication technology; collection systems and related software applications; and professional services. To realize your smarter energy and water future, start here: www.itron.com.

Statements of operations, segment information, balance sheets, cash flow statements and reconciliations of non-GAAP financial measures to the most directly comparable financial measures follow.

ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
	Three Months Ended December 31,						Twelve Months Ended December 31,
		2010			2009			2010			2009
Revenues	$	620,658		$	476,823		$	2,259,271		$	1,687,447
Cost of revenues		435,302			331,539			1,561,032			1,149,991
Gross profit		185,356			145,284			698,239			537,456
Gross margin		29.9	%		30.5	%		30.9	%		31.9	%
Operating expenses
Sales and marketing		47,968			39,836			171,676			152,405
Product development		40,129			29,270			140,229			122,314
General and administrative		36,034			35,040			133,086			119,137
Amortization of intangible assets		17,592			25,785			69,051			98,573
Total operating expenses		141,723			129,931			514,042			492,429
Operating income		43,633			15,353			184,197			45,027
Other income (expense)
Interest income		148			215			592			1,186
Interest expense		(12,688	)		(16,992	)		(54,904	)		(70,311	)
Loss on extinguishment of debt, net		-			-			-			(12,800	)
Other income (expense), net		(3,701	)		269			(9,141	)		(9,176	)
Total other income (expense)		(16,241	)		(16,508	)		(63,453	)		(91,101	)
Income (loss) before income taxes		27,392			(1,155	)		120,744			(46,074	)
Income tax benefit (provision)		(822	)		6,308			(15,974	)		43,825
Net income (loss)	$	26,570		$	5,153		$	104,770		$	(2,249	)
Earnings (loss) per common share-Basic	$	0.66		$	0.13		$	2.60		$	(0.06	)
Earnings (loss) per common share-Diluted	$	0.65		$	0.13		$	2.56		$	(0.06	)
Weighted average common shares outstanding-Basic		40,424			40,129			40,337			38,539
Weighted average common shares outstanding-Diluted		40,938			40,607			40,947			38,539

ITRON, INC.
SEGMENT INFORMATION
(Unaudited, in thousands)
	Three Months Ended December 31,						Twelve Months Ended December 31,
		2010			2009			2010			2009
Revenues
Itron North America	$	321,534		$	196,073		$	1,177,391		$	615,731
Itron International		299,124			280,750			1,081,880			1,071,716
Total Company	$	620,658		$	476,823		$	2,259,271		$	1,687,447
Gross profit
Itron North America	$	105,565		$	66,945		$	394,247		$	211,682
Itron International		79,791			78,339			303,992			325,774
Total Company	$	185,356		$	145,284		$	698,239		$	537,456
Operating income (loss)
Itron North America	$	51,716		$	24,472		$	201,410		$	36,931
Itron International		3,394			(2,404	)		26,363			37,614
Corporate unallocated		(11,477	)		(6,715	)		(43,576	)		(29,518	)
Total Company	$	43,633		$	15,353		$	184,197		$	45,027
METER AND MODULE SUMMARY
(Units in thousands)
	Three Months Ended December 31,						Twelve Months Ended December 31,
		2010			2009			2010			2009
Total meters (standard, advanced, and smart)
Itron North America
Electricity		1,950			1,140			6,940			3,480
Gas		90			90			510			350
Itron International
Electricity		2,280			2,120			7,870			7,790
Gas		1,080			1,100			4,020			4,980
Water		2,150			1,890			9,110			8,430
Total meters		7,550			6,340			28,450			25,030
Additional meter information (Total Company)
Advanced meters		1,150			910			3,980			3,110
Smart meters		1,470			490			4,460			710
Standalone advanced and smart communication modules		1,550			970			5,960			3,830
Advanced and smart meters and communication modules		4,170			2,370			14,400			7,650
Meters with other vendors' advanced or smart communication modules		120			160			510			630

ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
	December 31,
		2010			2009
ASSETS
Current assets
Cash and cash equivalents	$	169,477		$	121,893
Accounts receivable, net		371,662			337,948
Inventories		208,157			170,084
Deferred tax assets current, net		55,351			20,762
Other current assets		77,570			75,229
Total current assets		882,217			725,916
Property, plant, and equipment, net		299,242			318,217
Prepaid debt fees		4,483			8,628
Deferred tax assets noncurrent, net		35,050			89,932
Other noncurrent assets		23,759			18,117
Intangible assets, net		291,670			388,212
Goodwill		1,209,376			1,305,599
Total assets	$	2,745,797		$	2,854,621
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	241,949		$	219,255
Other current liabilities		49,243			64,583
Wages and benefits payable		110,479			71,592
Taxes payable		19,725			14,377
Current portion of debt		228,721			10,871
Current portion of warranty		24,912			20,941
Unearned revenue		28,258			40,140
Deferred tax liabilities current, net		447			1,625
Total current liabilities		703,734			443,384
Long-term debt		382,220			770,893
Long-term warranty		26,371			12,932
Pension plan benefit liability		61,450			63,040
Deferred tax liabilities noncurrent, net		54,412			80,695
Other long-term obligations		89,315			83,163
Total liabilities		1,317,502			1,454,107
Commitments and contingencies
Shareholders' equity
Preferred stock		-			-
Common stock		1,328,249			1,299,134
Accumulated other comprehensive income (loss), net		(34,974	)		71,130
Retained earnings		135,020			30,250
Total shareholders' equity		1,428,295			1,400,514
Total liabilities and shareholders' equity	$	2,745,797		$	2,854,621

ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
	Twelve Months Ended December 31,
		2010			2009
Operating activities
Net income (loss)	$	104,770		$	(2,249	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		131,205			155,737
Stock-based compensation		19,107			16,982
Excess tax benefits from stock-based compensation		(1,232	)		-
Amortization of prepaid debt fees		5,492			8,258
Amortization of convertible debt discount		10,099			9,673
Loss on extinguishment of debt, net		-			9,960
Deferred taxes, net		(17,992	)		(64,216	)
Other adjustments, net		6,797			3,102
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(45,612	)		(2,962	)
Inventories		(41,417	)		3,535
Accounts payables, other current liabilities, and taxes payable		40,884			9,873
Wages and benefits payable		42,245			(8,261	)
Unearned revenue		(2,356	)		14,836
Warranty		14,656			(5,273	)
Other operating, net		(12,055	)		(8,208	)
Net cash provided by operating activities		254,591			140,787
Investing activities
Acquisitions of property, plant, and equipment		(62,822	)		(52,906	)
Business acquisitions & contingent consideration, net of cash equivalents acquired		-			(4,317	)
Other investing, net		6,548			3,229
Net cash used in investing activities		(56,274	)		(53,994	)
Financing activities
Payments on debt		(155,163	)		(275,796	)
Issuance of common stock		8,776			166,372
Prepaid debt fees		(1,347	)		(3,936	)
Excess tax benefits from stock-based compensation		1,232			-
Other financing, net		(2,135	)		(761	)
Net cash used in financing activities		(148,637	)		(114,121	)
Effect of foreign exchange rate changes on cash and cash equivalents		(2,096	)		4,831
Increase (decrease) in cash and cash equivalents		47,584			(22,497	)
Cash and cash equivalents at beginning of period		121,893			144,390
Cash and cash equivalents at end of period	$	169,477		$	121,893

ITRON, INC.
RESTATED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR FISCAL PERIODS IN 2010
(Unaudited, in thousands, except per share data)
	RESTATED
	Three			Three			Six			Three			Nine
	Months Ended			Months Ended			Months Ended			Months Ended			Months Ended
	March 31			June 30						September 30
Revenues	$	497,623		$	567,339		$	1,064,962		$	573,651		$	1,638,613
Cost of revenues		340,559			393,283			733,842			391,888			1,125,730
Gross profit		157,064			174,056			331,120			181,763			512,883
Operating expenses
Sales and marketing		41,537			40,974			82,511			41,197			123,708
Product development		33,040			33,022			66,062			34,038			100,100
General and administrative		33,057			33,285			66,342			30,710			97,052
Amortization of intangible assets		17,811			16,766			34,577			16,882			51,459
Total operating expenses		125,445			124,047			249,492			122,827			372,319
Operating income		31,619			50,009			81,628			58,936			140,564
Other income (expense)
Interest income		167			111			278			166			444
Interest expense		(14,923	)		(13,965	)		(28,888	)		(13,328	)		(42,216	)
Other income (expense), net		(592	)		(425	)		(1,017	)		(4,423	)		(5,440	)
Total other income (expense)		(15,348	)		(14,279	)		(29,627	)		(17,585	)		(47,212	)
Income before income taxes		16,271			35,730			52,001			41,351			93,352
Income tax benefit (provision)		8,979			(10,419	)		(1,440	)		(13,712	)		(15,152	)
Net income	$	25,250		$	25,311		$	50,561		$	27,639		$	78,200
Earnings per common share-Basic	$	0.63		$	0.63		$	1.26		$	0.68		$	1.94
Earnings per common share-Diluted	$	0.62		$	0.61		$	1.23		$	0.68		$	1.91
Weighted average common shares outstanding-Basic		40,191			40,329			40,261			40,400			40,307
Weighted average common shares outstanding-Diluted		40,862			41,161			41,011			40,828			40,950
The unaudited quarterly financial information for the first three quarters of 2010 has been restated. The restatement was made primarily to defer revenue previously recognized on one contract due to a misinterpretation of an extended warranty provision. While the restatement was not deemed material to the first three quarters of 2010, we concluded that the aggregate correction of such amounts would be material to the fourth quarter of 2010.
Accordingly, the restatement impacted the consolidated financial statements in the previously filed Quarterly Reports on Form 10-Q for each of the first three quarters of 2010. While certain captions within cash provided by operating activities in the consolidated statements of cash flows were impacted by the correction, total cash provided by operating activities did not change from amounts previously reported. The consolidated statements of operations have been restated, as above.

ITRON, INC.
RESTATED CONSOLIDATED SEGMENT INFORMATION
FOR FISCAL PERIODS IN 2010
(Unaudited, in thousands)
	RESTATED
	Three			Three			Six			Three			Nine
	Months Ended			Months Ended			Months Ended			Months Ended			Months Ended
	March 31			June 30						September 30
Revenues
Itron North America	$	241,559		$	301,143		$	542,702		$	313,155		$	855,857
Itron International		256,064			266,196			522,260			260,496			782,756
Total Company	$	497,623		$	567,339		$	1,064,962		$	573,651		$	1,638,613
Gross profit
Itron North America	$	78,159		$	100,972		$	179,131		$	109,551		$	288,682
Itron International		78,905			73,084			151,989			72,212			224,201
Total Company	$	157,064		$	174,056		$	331,120		$	181,763		$	512,883
Operating income (loss)
Itron North America	$	32,036		$	55,384		$	87,420		$	62,274		$	149,694
Itron International		10,437			5,017			15,454			7,515			22,969
Corporate unallocated		(10,854	)		(10,392	)		(21,246	)		(10,853	)		(32,099	)
Total Company	$	31,619		$	50,009		$	81,628		$	58,936		$	140,564

Itron, Inc.

About Non-GAAP Financial Measures

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

We use these non-GAAP financial measures for financial and operational decision making and 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 non-recurring discrete cash and non-cash charges that are infrequent in nature such as purchase accounting adjustments or extinguishment of debt gains and losses. 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 help them analyze the health of our business.

Non-GAAP operating expense and non-GAAP operating income – We define non-GAAP operating expense as operating expense excluding the expense related to the amortization of intangible assets. We define non-GAAP operating income as operating income excluding the expense related to the amortization of intangible assets. 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 previous acquisitions. 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, expenses related to amortization of intangible assets are now decreasing, which is improving 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 expense and non-GAAP operating income versus operating expense and operating income calculated in accordance with GAAP. Non-GAAP operating expense and non-GAAP operating income exclude some costs that are recurring. Additionally, the expenses that we exclude in our calculation of non-GAAP operating expense and non-GAAP operating income may differ from the expenses that our peer companies exclude when they report the results of their operations. We compensate for these limitations by providing specific information about the GAAP amounts we have excluded from our 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 excluding the expenses associated with amortization of intangible assets, amortization of debt placement fees, amortization of convertible debt discount, and the non-cash net loss on the extinguishment of debt. 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 and GAAP diluted EPS.

Adjusted EBITDA – We define adjusted EBITDA as net income (a) minus interest income, (b) plus interest expense, depreciation and amortization of intangible asset expenses, and the non-cash net loss on the extinguishment of debt, and (c) exclude the tax expense or benefit. We believe that providing this financial measure is important for management and investors to understand our ability to service our debt as it is a measure of the cash generated by our core business. 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. Management compensates for this limitation by providing a reconciliation of this measure to GAAP net income.

Free cash flow – We define free cash flow as net cash provided by 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 non-GAAP operating income 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.

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 MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
(Unaudited, in thousands, except per share data)
	Three Months Ended December 31,						Twelve Months Ended December 31,
		2010			2009			2010			2009
Non-GAAP operating expense:
GAAP operating expense	$	141,723		$	129,931		$	514,042		$	492,429
Amortization of intangible assets		(17,592	)		(25,785	)		(69,051	)		(98,573	)
Non-GAAP operating expense	$	124,131		$	104,146		$	444,991		$	393,856
Non-GAAP operating income:
GAAP operating income	$	43,633		$	15,353		$	184,197		$	45,027
Amortization of intangible assets		17,592			25,785			69,051			98,573
Non-GAAP operating income	$	61,225		$	41,138		$	253,248		$	143,600
Non-GAAP net income:
GAAP net income (loss)	$	26,570		$	5,153		$	104,770		$	(2,249	)
Amortization of intangible assets		17,592			25,785			69,051			98,573
Amortization of debt placement fees		1,222			1,823			5,285			8,037
Amortization of convertible debt discount		2,595			2,411			10,099			9,673
Loss on extinguishment of debt, net		-			-			-			9,960
Income tax effect of non-GAAP adjustments		(9,232	)		(1,694	)		(29,752	)		(41,525	)
Non-GAAP net income	$	38,747		$	33,478		$	159,453		$	82,469
Non-GAAP diluted EPS	$	0.95		$	0.82		$	3.89		$	2.12
Weighted average common shares outstanding - Diluted		40,938			40,607			40,947			38,946
Adjusted EBITDA:
GAAP net income (loss)	$	26,570		$	5,153		$	104,770		$	(2,249	)
Interest income		(148	)		(215	)		(592	)		(1,186	)
Interest expense		12,688			16,992			54,904			70,311
Income tax (benefit) provision		822			(6,308	)		15,974			(43,825	)
Depreciation and amortization		34,021			41,925			131,205			155,737
Loss on extinguishment of debt, net		-			-			-			9,960
Adjusted EBITDA	$	73,953		$	57,547		$	306,261		$	188,748
Free Cash Flow:
Net cash provided by operating activities	$	87,475		$	53,700		$	254,591		$	140,787
Acquisitions of property, plant, and equipment		(17,315	)		(14,883	)		(62,822	)		(52,906	)
Free Cash Flow	$	70,160		$	38,817		$	191,769		$	87,881

ITRON, INC.
RESTATED RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
FOR FISCAL PERIODS IN 2010
(Unaudited, in thousands, except per share data)
	RESTATED
	Three			Three			Six			Three			Nine
	Months Ended			Months Ended			Months Ended			Months Ended			Months Ended
	March 31			June 30						September 30
Non-GAAP operating income:
GAAP operating income	$	31,619		$	50,009		$	81,628		$	58,936		$	140,564
Amortization of intangible assets		17,811			16,766			34,577			16,882			51,459
Non-GAAP operating income	$	49,430		$	66,775		$	116,205		$	75,818		$	192,023
Non-GAAP net income:
GAAP net income (loss)	$	25,250		$	25,311		$	50,561		$	27,639		$	78,200
Amortization of intangible assets		17,811			16,766			34,577			16,882			51,459
Amortization of debt placement fees		1,201			1,458			2,659			1,404			4,063
Amortization of convertible debt discount		2,456			2,501			4,957			2,547			7,504
Income tax effect of non-GAAP adjustments		(6,789	)		(7,184	)		(13,973	)		(6,547	)		(20,520	)
Non-GAAP net income	$	39,929		$	38,852		$	78,781		$	41,925		$	120,706
Non-GAAP diluted EPS	$	0.98		$	0.94		$	1.92		$	1.03		$	2.95
Weighted average common shares outstanding - Diluted		40,862			41,161			41,011			40,828			40,950
Adjusted EBITDA:
GAAP net income (loss)	$	25,250		$	25,311		$	50,561		$	27,639		$	78,200
Interest income		(167	)		(111	)		(278	)		(166	)		(444	)
Interest expense		14,923			13,965			28,888			13,328			42,216
Income tax (benefit) provision		(8,979	)		10,419			1,440			13,712			15,152
Depreciation and amortization		33,277			31,794			65,071			32,113			97,184
Adjusted EBITDA	$	64,304		$	81,378		$	145,682		$	86,626		$	232,308
Free Cash Flow:
Net cash provided by operating activities	$	65,779		$	51,307		$	117,086		$	50,030		$	167,116
Acquisitions of property, plant, and equipment		(16,151	)		(11,565	)		(27,716	)		(17,791	)		(45,507	)
Free Cash Flow	$	49,628		$	39,742		$	89,370		$	32,239		$	121,609