Itron, Inc. · NASDAQ:ITRI
Itron — Merger or Acquisition (February 2007)
43 slides from Itron's merger presentation, Feb 26, 2007
Slide 1: Acquisition Announcement: Itron Actaris
LeRoy Nosbaum Chairman and CEO Steve Helmbrecht Sr. VP and CFO Deloris Duquette VP, Investor Relations Acquisition Announcement February 25, 2007 Itron Actaris
Slide 2: Safe Harbor
Safe Harbor Certain matters being discussed today that are not statements of historical fact constitute forward-looking statements relating to current or future financial performance, management's plans and objectives for future operations, product plans and performance, management's assessment of m
Slide 3: Transaction Summary
Transaction Summary LeRoy Nosbaum Chairman and CEO
Slide 4: Actaris and Itron: Worldwide Utility Solutions Provider
Actaris Itron Worldwide Utility Solutions Provider 2006 Revenue1: $1,015 million 2006 EBITDA1: $159 million > Leading global supplier of utility meters and metering systems > Reunites two former Schlumberger divisions and provides Itron with immediate scale and presence in the global meter market >
Slide 5: Acquisition Opportunity
Acquisition Opportunity
Slide 6: Key Transaction Terms
Key Transaction Terms Purchase Price Purchase Price Purchase Price > $1.6 billion enterprise value Timing Timing Timing > Anticipated to close in Q2 2007 Closing Conditions Closing Conditions Closing Conditions > Regulatory/government approvals > No HSR approval necessary Management Retention Manage
Slide 7: Transaction Sources and Uses
Transaction Sources and Uses (1) (1) Assumes constant USD/EUR rate of 1.30x (2) Includes preliminary transaction fees and expenses (in millions) Consideration (2) Sources Purchase Price 1,040 $ Equity Issuance 225 $ Refinance Actaris Debt 574 $ Cash on Hand 325 $ Fees 43 $ Committed Term Loan From U
Slide 8: Debt Management
$0 $50 $100 $150 $200 $250 $300 $350 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2006 2005 2004 ($’s in Millions) Debt Management - SEM Acquisition Electric Metering Acquisition Equity Offering Fixed Rate Debt Variable Rate Debt
Slide 9: 2006 Combined Company Highlights
Itron Actaris 2006 Combined Company Highlights(1) + = Proforma Expected Addition of $0.20 - $0.30 to 2007 Non-GAAP Fully Diluted EPS(4) (1) Assumes constant USD/EUR rate of 1.30x (2) Pro forma does not equal sum due to rounding (3) Excludes amortization of intangibles and stock-based compensation (4
Slide 10: Overview of Actaris
Overview of Actaris
Slide 11: Overview of Actaris
Overview of Actaris • Actaris is a leading supplier of utility meters and metering systems • Actaris traces its origin in metering to the 1850’s • Large, diversified base of more than 5,000 customers globally with an installed base of over 300 million meters • Leading market share for each of its 3
Slide 12: Actaris Worldwide Footprint
Electricity Manufacturing Gas Manufacturing Water Manufacturing Heat Manufacturing Other Operations Research & Engineering Key Locations Felixstowe Hameln Barcelona Massy Greenwood Owenton Buenos Aires Chongqing Gödöllö Kiev Argenteuil Karlsruhe Stretford Reims Chasseneuil Naples Oldenburg Adelaide
Slide 13: Actaris Market Presence
Actaris Market Presence Products/Services >Residential, commercial, industrial, transmission and distribution metering products and services to utility clients Position > #2 globally Growth > AMR breakthrough > Prepayment market > Electronic technology Electricity Electricity Electricity >Gas produc
Slide 14: Actaris Strategy—Products and Systems Adapt to a Changing Market
Actaris Strategy—Products and Systems Adapt to a Changing Market Adapt to a Adapt to a Changing Changing Market Market > Lead the change to static technology for electricity > Development of systems and services for changing markets due to rising energy costs, conservation, desire to reduce peak dem
Slide 15: A Compelling Transaction
A Compelling Transaction
Slide 16: Compelling Strategic Rationale
Compelling Strategic Rationale Geographic Expansion with Established Sales and Distribution Geographic Expansion with Established Sales and Distribution Geographic Expansion with Established Sales and Distribution Complementary Product Portfolios Allow Synergies in Future Complementary Product Portf
Slide 17: The Global Opportunity
The Global Opportunity Global AMR Market (millions of meters) 34% 66% 6% 94% Source: The Scott Report: AMR Deployments in North America, Q3 06 Edition; ABS Energy Research 2006 & Management Estimates 300 Million Electric, Gas & Water Meters 2.46 Billion Electric, Gas & Water Meters For meters, autom
Slide 18: Continued Global Leadership
Continued Global Leadership Global Meter Market Shares Global Meter Market Shares AMR—US and Canada Electric Gas Water Elster 4% Hunt 5% ESCO 8% Cellnet 13% Itron 55% Others 15% Source: Scott Report on AMR Deployments, ABS Energy Research, A.T. Kearney, Management Estimates 18 55% #1 #1 #2 #2 #4 #4
Slide 19: Diverse Revenue Base
Diverse Revenue Base Itron Combined Itron and Actaris U.S. 38% Euro-Zone 31% U.K. 15% Other 16% U.S. and Canada 94% Other 6% 2006 Revenue: $1.6 billion 2006 Revenue: $1.6 billion 2006 Revenue: $644 million 2006 Revenue: $644 million The acquisition provides Itron with immediate global scale and more
Slide 20: The Global Metering Market Opportunity
The Global Metering Market Opportunity Source: ABS Energy Research 107 25 71 125 32 101 0 50 100 150 200 250 300 2006 2011 Electric Gas Water Annual Meter Shipments by Type (millions) 258 203 • Potential growth is greatly enhanced with AMR/AMI • Scale and platform to lead market 2006-11 CAGR 7.3% 4.
Slide 21: Growth Drivers for Meters and Advanced Functionality
Growth Drivers for Meters and Advanced Functionality Advanced Metering Infrastructure New and Replacement Meters ⑀⍽ Limited innovation ⑀⍽ New housing starts ⑀⍽ Replacement cycles ⑀⍽ Electromechanical upgrade to solid state ⑀⍽ Steady predictable growth Automated Meter Reading ⑀⍽ Driven by improving o
Slide 22: Complementary Product Portfolios and Geographic Fit
Complementary Product Portfolios and Geographic Fit Electricity meters Electricity meters Gas meters Gas meters Water meters Water meters Common Heritage - Common Vision Metering businesses were formerly all part of Schlumberger Metering Electricity meters Electricity meters Electricity meters AMR t
Slide 23: Prominent Global Customer Base
Prominent Global Customer Base Itron Actaris Dominion Energy Duke Energy Progress Energy AEP AQUA Piedmon Natural Gas Con Edison Pacific Gas and Electric Company Constellation Energy Southern Company Xcel Energy DTE Energy Southwest Gas TEPCO cp GDI National Grid Iberdrola Veolia Water EDP Electricd
Slide 24: Transforming Itron: Enhanced Competitive Positioning
Transforming Itron(1) Enhanced Competitive Positioning Enhanced Competitive Positioning Enhanced Competitive Positioning Source: Public filings, Company materials (1) Assumes constant USD/EUR rate of 1.30x (2) Figure for CY2004 (3) Figure represents Industrial Technology segment only #1 #1 #1 #1 #1
Slide 25: Ensuring a Successful Transaction
Ensuring a Successful Transaction ⑀⍽ Itron and Actaris have a common heritage > Metering businesses were former divisions of Schlumberger > Itron acquired the Schlumberger electricity metering division in 2004 > Cultural and operational fit ⑀⍽ Experienced management teams with significant transactio
Slide 26: The Time is Right in a Changing Marketplace
The Time is Right in a Changing Marketplace > Deregulation > Privatisations & mergers > New technology > New competition > Energy market trading > Globalization Change & Turmoil 1994-2005 > Focus on conservation/environment > Increased demand of AMR/AMI > Complex products > Consolidation of utilitie
Slide 27: Appendix/Reconciliations
Appendix/Reconciliations
Slide 28: Overview of Itron
Overview of Itron
Slide 29: Itron Customers
Itron Customers > More than 2,200 handheld meter reading customers in over 60 countries • Hardware and meter data collection software > Electricity meter customers in U.S. and Canada • Nearly every IOU, Muni and Co-Op > More than 1,500 AMR customers • > 55 million endpoints shipped (electric, gas an
Slide 30: Products and Solutions at a Glance
Products and Solutions at a Glance Software & Services 9% Meter Data Collection 40% Electricity Metering 51% HARDWARE SOLUTIONS HARDWARE SOLUTIONS SOFTWARE SOLUTIONS SOFTWARE SOLUTIONS ⑀⍽ Meter Data Collection > Handheld computer based meter data collection systems since 1977 > Automatic Meter Readi
Slide 31: Design and Manufacturing Operations: Low Cost, High Volume
Oconee Facility (Electric Meters) ⑀⍽ 106,000 sq.ft. in Waseca, MN > 4.5 million AMR units produced in 2006 6+ million unit capacity ⑀⍽ 317,000 sq.ft. in Oconee, SC > 6.5 million meters produced in 2006 7+ million unit capacity ⑀⍽ Both Facilities: > Highly automated, flexible and scalable > History o
Slide 32: Software Solutions
Software Solutions Approximate Revenue Breakdown in 2006: Licenses = 29%, Services = 32%, Maintenance = 39% >Complex Billing >Residential Energy Mgmt. >C&I Energy Mgt. >Distribution Asset Optimization >Revenue Assurance & Tamper Analytics >Distribution Asset Design & Optimization >Engineering Calcul
Slide 33: Itron's Customer Solutions
Itron’s Customer Solutions VALUE Data Creation Data Collection Data Management Rev. Assurance Customer Care Demand Response Dist. Asset Analysis Load Research Outage & Restore Forecasting (CIS-Billing) Data Utilization Central Repository Validation, Editing and Estimation Calculations Settlement Ana
Slide 34: Itron Electricity Meters U.S. & Canada Annual Shipments
4.7 4.2 4.6 3.0 3.1 2.5 0 1 2 3 4 5 6 7 8 9 2000 2001 2002 2003 2004 2005 Solid State Electromechanical Itron Meters U.S. & Canada Annual Shipments (mm) Key Highlights As a pure-play solid-state meter provider, Itron is set to benefit from the shift from electromechanical technology to electronic te
Slide 35: AMR Market: Itron Shipments
7.5 5.5 6.3 4.7 3.4 2.7 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2000 2001 2002 2003 2004 2005 Electric Gas Water Itron E, G, W Shipments Source: The Scott Report: AMR Deployments in North America, 10th Edition U.S. and Canada Annual Shipments (mm) Key Highlights 6.2 8.1 9.7 11.7 10.8 13.6’00-’05 CAGR:
Slide 36: Itron is the AMR Market Leader
Itron is the AMR Market Leader 53% 19% 16% 9% 3% 0% 10% 20% 30% 40% 50% 60% Itron Cellnet ESCO Hunt All Others 80% 12% 6% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% Itron CellNet AMCO/Elster All Others Electric Gas Water 30% 17% 16% 11% 4% 4% 4% 14% 0% 5% 10% 15% 20% 25% 30% Itron Neptune Sensus Amco/Els
Slide 37: Experienced Management Team
Experienced Management Team LeRoy Nosbaum Chairman and CEO LeRoy Nosbaum has more than 30 years of leadership and management experience in the utility industry. Mr. Nosbaum joined Itron in 1996 and has been a director and chief executive officer of Itron since March 2000. Before joining Itron, Mr. N
Slide 38: Financial Details and Reconciliation
Financial Details and Reconciliation
Slide 39: Itron Non-GAAP Reconciliation
Itron Non-GAAP Reconciliation (US$mm) 2003 2004 2005 2006(1) Itron US GAAP Net Income 10.5 (5.3) 33.1 33.8 Income Tax Provision 7.4 (4.1) (5.5) 18.5 Interest Income (0.2) (0.2) (0.3) (9.5) Interest Expense 2.6 13.1 18.9 17.8 Other Income 1.3 0.4 0.1 1.2 Itron US GAAP Operating Income 21.7 4.0 46.2 6
Slide 40: 2006 Pro Forma Reconciliation
2006 Pro Forma Reconciliation Actaris EUR Actaris USD Itron Pro Forma Revenue € 780,737 1,014,958 $ 644,042 $ 1,659,000 $ Adjusted EBITDA: GAAP net income € 39,629 51,518 $ 33,759 $ 85,277$ Interest income (303) (394) (9,497) (9,891) Interest expense 36,129 46,968 17,785 64,753 Income tax provision
Slide 41: Strong Pro Forma Financial Performance
Strong Pro Forma Financial Performance (1) 1,138 1,245 1,442 1,659 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2003 2004 2005 2006 ($mm) Revenue Gross Profit Source: Itron and Actaris Company Reports (1) Assumes constant USD/EUR rate of 1.30x 570499 424391 34.3 34.0 34.6 34.4 0 200 400 600 2003
Slide 42: Trended Pro Forma Revenue
Trended Pro Forma Revenue 2003 2004 2005 2006 Itron 317$ $ 399 $ 553 $ 644 Actaris 821 846 889 1,015 Combined 1,138$ $ 1,245 $ 1,442 $ 1,659 Gross Profit Itron 144$ $ 171 $ 234 $ 267 Actaris 247 253 265 303 Combined 391$ $ 424 $ 499 $ 570 % 34% 34% 35% 34% Adjusted EBITDA Itron 43$ $ 56 $ 98 $ 115 A
Slide 43: Actaris Accounting Differences from US GAAP
ƒ Actaris accounting methods differ from US GAAP in the following ways: > Accounting (2004): Actaris has applied a 100% fair value application rather than a 97% fair value according to US GAAP standards. If US GAAP had been used, the goodwill and paid-in-capital would decrease by approximately €7.6m