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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 000-22418
ITRON, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1011792
(State of Incorporation) (I.R.S. Employer Identification No.)
2111 N Molter Road, Liberty Lake, Washington 99019
(509) 924-9900
(Address and telephone number of registrant's principal executive offices) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valueITRINASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of August 1, 2022, there were outstanding 45,138,651 shares of the registrant's common stock, no par value, which is the only class of common stock of the registrant.



Itron, Inc.
Table of Contents



PART I: FINANCIAL INFORMATION
Item 1:    Financial Statements (Unaudited)
ITRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,Six Months Ended June 30,
In thousands, except per share data2022202120222021
Revenues
Product revenues$359,898 $411,719 $759,708 $854,523 
Service revenues71,984 77,693 147,505 154,463 
Total revenues431,882 489,412 907,213 1,008,986 
Cost of revenues
Product cost of revenues265,278 295,064 560,098 602,755 
Service cost of revenues40,499 44,473 85,786 89,312 
Total cost of revenues305,777 339,537 645,884 692,067 
Gross profit126,105 149,875 261,329 316,919 
Operating expenses
Sales, general and administrative72,877 74,144 149,278 150,136 
Research and development45,055 48,763 94,651 100,490 
Amortization of intangible assets6,485 8,997 13,038 17,970 
Restructuring(3,459)192 (9,825)(1,788)
Loss on sale of business194 24,711 2,415 26,103 
Goodwill impairment38,480  38,480  
Total operating expenses159,632 156,807 288,037 292,911 
Operating income (loss)(33,527)(6,932)(26,708)24,008 
Other income (expense)
Interest income349 432 566 974 
Interest expense(1,660)(14,004)(3,252)(24,479)
Other income (expense), net(1,386)(12,157)(2,075)(14,923)
Total other income (expense)(2,697)(25,729)(4,761)(38,428)
Loss before income taxes(36,224)(32,661)(31,469)(14,420)
Income tax benefit (provision)(641)216 (4,500)(4,445)
Net loss(36,865)(32,445)(35,969)(18,865)
Net income attributable to noncontrolling interests102 678 92 1,655 
Net loss attributable to Itron, Inc.$(36,967)$(33,123)$(36,061)$(20,520)
Net loss per common share - Basic$(0.82)$(0.73)$(0.80)$(0.47)
Net loss per common share - Diluted$(0.82)$(0.73)$(0.80)$(0.47)
Weighted average common shares outstanding - Basic45,066 45,142 45,042 43,344 
Weighted average common shares outstanding - Diluted45,066 45,142 45,042 43,344 
The accompanying notes are an integral part of these consolidated financial statements.
1

ITRON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Three Months Ended June 30,Six Months Ended June 30,
In thousands2022202120222021
Net loss$(36,865)$(32,445)$(35,969)$(18,865)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
(20,628)5,658 (27,519)(9,354)
Foreign currency translation adjustment reclassified to net income for sale of business  55,436  
Net unrealized gain (loss) on derivative instruments, designated as cash flow hedges
 (1,220) 1,308 
Pension benefit obligation adjustment
206 699 4,476 1,400 
Total other comprehensive income (loss), net of tax(20,422)5,137 32,393 (6,646)
Total comprehensive income (loss), net of tax(57,287)(27,308)(3,576)(25,511)
Comprehensive income attributable to noncontrolling interests, net of tax102 678 92 1,655 
Comprehensive income (loss) attributable to Itron, Inc.$(57,389)$(27,986)$(3,668)$(27,166)
The accompanying notes are an integral part of these consolidated financial statements.
2

ITRON, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
In thousandsJune 30, 2022December 31, 2021
ASSETS
Current assets
Cash and cash equivalents$208,500 $162,579 
Accounts receivable, net259,657 298,459 
Inventories174,522 165,799 
Other current assets113,409 123,092 
Total current assets756,088 749,929 
Property, plant, and equipment, net150,663 163,184 
Deferred tax assets, net187,178 181,472 
Other long-term assets41,395 42,178 
Operating lease right-of-use assets, net58,083 65,523 
Intangible assets, net78,030 92,529 
Goodwill1,036,160 1,098,975 
Total assets$2,307,597 $2,393,790 
LIABILITIES AND EQUITY
Current liabilities
Accounts payable$169,368 $193,129 
Other current liabilities52,102 81,253 
Wages and benefits payable88,933 113,532 
Taxes payable13,371 12,208 
Current portion of warranty17,378 18,406 
Unearned revenue120,038 82,816 
Total current liabilities461,190 501,344 
Long-term debt, net451,369 450,228 
Long-term warranty11,331 13,616 
Pension benefit obligation77,396 87,863 
Deferred tax liabilities, net1,849 2,000 
Operating lease liabilities50,082 57,314 
Other long-term obligations121,280 138,666 
Total liabilities1,174,497 1,251,031 
Equity
Preferred stock, no par value, 10,000 shares authorized, no shares issued or outstanding
  
Common stock, no par value, 75,000 shares authorized, 45,070 and 45,152 shares issued and outstanding
1,777,476 1,779,775 
Accumulated other comprehensive loss, net(115,705)(148,098)
Accumulated deficit(551,661)(515,600)
Total Itron, Inc. shareholders' equity1,110,110 1,116,077 
Noncontrolling interests22,990 26,682 
Total equity1,133,100 1,142,759 
Total liabilities and equity$2,307,597 $2,393,790 
The accompanying notes are an integral part of these consolidated financial statements.
3

ITRON, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
Common StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Itron, Inc. Shareholders' EquityNoncontrolling InterestsTotal Equity
In thousandsSharesAmount
Balances at January 1, 202245,152 $1,779,775 $(148,098)$(515,600)$1,116,077 $26,682 $1,142,759 
Net income (loss)906 906 (10)896 
Other comprehensive income (loss), net of tax52,815 52,815 52,815 
Net stock issued and repurchased165 784 784 784 
Stock-based compensation expense6,127 6,127 6,127 
Stock repurchased program(280)(16,629)(16,629)(16,629)
Balances at March 31, 202245,0371,770,057 (95,283)(514,694)1,160,080 26,672 1,186,752 
Net income (loss)(36,967)(36,967)102 (36,865)
Other comprehensive income (loss), net of tax(20,422)(20,422)(20,422)
Distributions to noncontrolling interests(3,784)(3,784)
Net stock issued and repurchased33 1,014 1,014 1,014 
Stock-based compensation expense6,405 6,405 6,405 
Balances at June 30, 202245,070 $1,777,476 $(115,705)$(551,661)$1,110,110 $22,990 $1,133,100 

Common StockAccumulated Other Comprehensive LossAccumulated DeficitTotal Itron, Inc. Shareholders' EquityNoncontrolling InterestsTotal Equity
In thousandsSharesAmount
Balances at January 1, 202140,444 $1,389,419 $(138,526)$(434,345)$816,548 $23,725 $840,273 
Net income12,603 12,603 977 13,580 
Other comprehensive income (loss), net of tax(11,783)(11,783)(11,783)
Net stock issued and repurchased206 2,009 2,009 2,009 
Stock-based compensation expense6,270 6,270 6,270 
Stock issued related to equity offering4,472 389,419 389,419 389,419 
Proceeds from sale of warrants45,349 45,349 45,349 
Purchases of convertible note hedge contracts, net of tax(63,576)(63,576)(63,576)
Registration fee(373)(373)(373)
Balances at March 31, 202145,1221,768,517 (150,309)(421,742)1,196,466 24,702 1,221,168 
Net income (loss)(33,123)(33,123)678 (32,445)
Other comprehensive income (loss), net of tax5,137 5,137 5,137 
Net stock issued and repurchased28 458 458 458 
Stock-based compensation expense6,316 6,316 6,316 
Registration fee24 24 24 
Balances at June 30, 202145,150 $1,775,315 $(145,172)$(454,865)$1,175,278 $25,380 $1,200,658 
The accompanying notes are an integral part of these consolidated financial statements.
4

ITRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
In thousands20222021
Operating activities
Net loss$(35,969)$(18,865)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of intangible assets33,251 42,919 
Non-cash operating lease expense8,234 8,647 
Stock-based compensation12,532 12,586 
Amortization of prepaid debt fees1,720 4,315 
Deferred taxes, net(4,061)(2,942)
Loss on sale of business2,415 26,103 
Loss on extinguishment of debt, net 10,000 
Goodwill impairment38,480  
Restructuring, non-cash(817)878 
Other adjustments, net194 13,913 
Changes in operating assets and liabilities, net of acquisition and sale of business:
Accounts receivable28,924 29,549 
Inventories(13,592)70 
Other current assets(10,688)22,164 
Other long-term assets(3,134)6,207 
Accounts payable, other current liabilities, and taxes payable(24,604)(43,115)
Wages and benefits payable(22,264)17,815 
Unearned revenue36,093 17,106 
Warranty(2,501)(4,744)
Other operating, net(21,557)(19,926)
Net cash provided by operating activities22,656 122,680 
Investing activities
Net proceeds related to the sale of business55,933 3,142 
Acquisitions of property, plant, and equipment(10,663)(20,476)
Business acquisitions, net of cash and cash equivalents acquired23  
Other investing, net1,722 2,819 
Net cash provided by (used in) investing activities47,015 (14,515)
Financing activities
Proceeds from borrowings 460,000 
Payments on debt (915,000)
Issuance of common stock1,797 3,255 
Proceeds from common stock offering 389,419 
Proceeds from sale of warrants 45,349 
Purchases of convertible note hedge contracts (84,139)
Repurchase of common stock(16,972) 
Prepaid debt fees(695)(12,021)
Other financing, net(4,206)4,993 
Net cash used in financing activities(20,076)(108,144)
Effect of foreign exchange rate changes on cash and cash equivalents(3,674)177 
Increase in cash and cash equivalents45,921 198 
Cash and cash equivalents at beginning of period162,579 206,933 
Cash and cash equivalents at end of period$208,500 $207,131 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes, net$7,062 $3,033 
Interest717 7,845 
The accompanying notes are an integral part of these consolidated financial statements.
5

ITRON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(UNAUDITED)
In this Quarterly Report on Form 10-Q, the terms "we", "us", "our", "Itron", and the "Company" refer to Itron, Inc. and its subsidiaries.

Note 1:    Summary of Significant Accounting Policies

Financial Statement Preparation
The consolidated financial statements presented in this Quarterly Report on Form 10-Q are unaudited and reflect entries necessary for the fair presentation of the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021, Consolidated Statements of Equity for the three months ended June 30, 2022 and 2021 and March 31, 2022 and 2021, the Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021, and the Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021, of Itron, Inc. and its subsidiaries. All entries required for the fair presentation of the financial statements are of a normal recurring nature, except as disclosed. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year or for any other period.

Certain information and notes normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been partially or completely omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) regarding interim results. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2021 filed with the SEC in our Annual Report on Form 10-K on February 28, 2022 (2021 Annual Report). There have been no significant changes in financial statement preparation or significant accounting policies since December 31, 2021.

Risks and Uncertainties
The COVID-19 pandemic has had global economic impacts including disrupting customer demand and global supply chains, resulting in market volatility. The extent of the recent pandemic and its ongoing impact on our operations is volatile, but is being monitored closely by our management. During the initial months of the pandemic our European factories were closed due to government actions and local conditions, and any further closures that may be imposed on us could impact our results for 2022. New variants of the virus may cause previously lifted restrictions to be reinstated, which could result in more disruptions. Incremental costs we have incurred related to COVID-19, such as personal protective equipment, increased cleaning and sanitizing of our facilities, and other such items, have not been material to date. As economies have reopened, global supply chains have struggled to keep pace with rapidly changing demand. The resulting supply constraints have manifested across a variety of areas including mechanical, electrical, and logistics portions of the supply chain, which has impacted our ability to ship products in a timely manner. In particular, our ability to obtain adequate supply of semiconductor components has impacted our ability to service recovering customer demand. While we believe the current imbalance in supply and demand is temporal, the timeline to recovery is uncertain. Efforts are ongoing with suppliers to increase supply, including the approval of alternate sources. Recently, inflation in our raw materials and component costs, freight charges, and labor costs have increased above historical levels, due to, among other things, the continuing impacts of the pandemic and uncertain economic environment. We may or may not be able to fully recover these increased costs through pricing actions with our customers. At this time, we have not identified any significant decrease in long-term customer demand for our products and services. However, certain of our customer projects have experienced delay in deliveries, with revenue originally forecasted in prior periods shifting to future periods.

While we have limited direct business exposure in Russia, Belarus and Ukraine, the Russian military actions and the resulting sanctions could adversely affect the global economy, as well as further disrupt the supply chain. A major disruption in the global economy and supply chain could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows. The extent and duration of the military action, sanctions, and resulting market and/or supply disruptions are impossible to predict, but could be substantial.
6

Recently Adopted Accounting Standards
In May 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-04 amending Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). The amendment affects entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. We adopted this amendment as of the effective date of January 1, 2022. The adoption of this amendment did not have a material impact on our financial statements.

In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments. The amendments in this Update modify the lease classification requirements for lessors to align them with practice under Topic 840, particularly in the area of day-one loss accounting. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if certain criteria are met. The effective date for this amendment was January 1, 2022. The adoption of this amendment did not have a material impact on our financial statements.

In November 2021, the FASB issued ASU 2021-10 amending Government Assistance: (Topic 832). The FASB issued this Update to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements. The effective date for this amendment was January 1, 2022. The adoption of this amendment did not have a material impact on our financial statements.

Recent Accounting Standards Not Yet Adopted
In October 2021, the FASB issued ASU 2021-08 amending Business Combination: (Topic 805), which was necessary due to 2014-09, Revenue from Contracts with Customers (Topic 606). The FASB issued this Update to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to (1) recognition of an acquired contract liability and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The effective date for this amendment is January 1, 2023 and all interim periods thereafter. These amendments are to be applied prospectively to business combinations occurring on or after the effective date of the amendments. We currently plan to apply the practical expedients as needed for any future acquisitions. The practical expedients cover contracts that were modified prior to acquisition date as well as determining which date an acquirer would have to determine the standalone selling price of each performance obligation in an acquired contract.

Note 2:    Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (EPS):
Three Months Ended June 30,Six Months Ended June 30,
In thousands, except per share data2022202120222021
Net loss available to common shareholders$(36,967)$(33,123)$(36,061)$(20,520)
Weighted average common shares outstanding - Basic45,066 45,142 45,042 43,344 
Dilutive effect of stock-based awards    
Dilutive effect of convertible notes    
Weighted average common shares outstanding - Diluted45,066 45,142 45,042 43,344 
Net loss per common share - Basic$(0.82)$(0.73)$(0.80)$(0.47)
Net loss per common share - Diluted$(0.82)$(0.73)$(0.80)$(0.47)

7

Stock-based Awards
For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related proceeds were used to repurchase our common stock at the average market price during the period. Related proceeds include the amount the employee must pay upon exercise and the future compensation cost associated with the stock award. Approximately 0.9 million and 0.8 million stock-based awards were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2022 because they were anti-dilutive. Approximately 0.4 million and 0.5 million stock-based awards were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2021 because they were anti-dilutive. These stock-based awards could be dilutive in future periods.

Convertible Notes and Warrants
For our Convertible Notes issued in March 2021, the dilutive effect is calculated using the if-converted method. We are required, pursuant to the indenture governing our Convertible Notes, to settle the principal amount of the Convertible Notes in cash and may elect to settle the remaining conversion obligation (stock price in excess of conversion price) in cash, shares, or a combination thereof. Under the if-converted method, we include the number of shares required to satisfy the remaining conversion obligation, assuming all the Convertible Notes were converted. The average closing prices of our common stock for the quarter ended June 30, 2022 were used as the basis for determining the dilutive effect on EPS. The quarterly average closing prices for our common stock did not exceed the conversion price of $126.00, and therefore all associated shares were anti-dilutive.

In conjunction with the issuance of the Convertible Notes, we sold warrants to purchase 3.7 million shares of Itron common stock. The warrants have a strike price of $180.00 per share. For calculating the dilutive effect of the warrants, we use the treasury stock method. With this method, we assume exercise of the warrants at the beginning of the period, or at time of issuance if later, and the issuance of common stock upon exercise. Proceeds from the exercise of the warrants are assumed to be used to repurchase shares of our stock at the average market price during the period. The incremental shares, representing the number of shares assumed to be exercised with the warrants less the number of shares repurchased, are included in diluted weighted average common shares outstanding. For periods where the warrants strike price of $180.00 per share is greater than the average share price of Itron stock for the period, the warrants would be anti-dilutive. For the three and six months ended June 30, 2022, the quarterly average closing prices of our common stock did not exceed the warrant strike price and therefore 3.7 million shares were considered anti-dilutive.

Convertible Note Hedge Transactions
In connection with the issuance of the Convertible Notes, we entered into privately negotiated call option contracts on our common stock (the Convertible Note Hedge Transactions) with certain commercial banks (the Counterparties). The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the Convertible Notes, approximately 3.7 million shares of our common stock, the same number of shares initially underlying the Convertible Notes, at a strike price of approximately $126.00, subject to customary adjustments. The Convertible Note Hedge Transactions will expire upon the maturity of the Convertible Notes, subject to earlier exercise or termination. Exercise of the Convertible Note Hedge Transactions would reduce the number of shares of our common stock outstanding and therefore would be anti-dilutive.

8

Note 3:    Certain Balance Sheet Components

A summary of accounts receivable from contracts with customers is as follows:
Accounts receivable, net
In thousandsJune 30, 2022December 31, 2021
Trade receivables (net of allowance of $5,630 and $5,730)
$222,537 $261,124 
Unbilled receivables37,120 37,335 
Total accounts receivable, net$259,657 $298,459 
Allowance for credit losses account activityThree Months Ended June 30,Six Months Ended June 30,
In thousands2022202120222021
Beginning balance$5,598 $1,136 $5,730 $1,312 
Provision for (release of) doubtful accounts, net619 25 518 (42)
Accounts recovered (written-off), net(322)(63)(244)(142)
Effect of change in exchange rates(265)9 (374)(21)
Ending balance$5,630 $1,107 $5,630 $1,107 
Inventories
In thousandsJune 30, 2022December 31, 2021
Raw materials$138,519 $122,434 
Work in process6,272 7,856 
Finished goods29,731 35,509 
Total inventories$174,522 $165,799 
Property, plant, and equipment, net
In thousandsJune 30, 2022December 31, 2021
Machinery and equipment$299,761 $314,502 
Computers and software112,470 111,540 
Buildings, furniture, and improvements134,272 131,764 
Land10,270 8,952 
Construction in progress, including purchased equipment29,832 39,527 
Total cost586,605 606,285 
Accumulated depreciation(435,942)(443,101)
Property, plant, and equipment, net$150,663 $163,184 
Depreciation expenseThree Months Ended June 30,Six Months Ended June 30,
In thousands2022202120222021
Depreciation expense$9,929 $12,112 $20,213 $24,949 

9

Note 4:    Intangible Assets and Liabilities

The gross carrying amount and accumulated amortization (accretion) of our intangible assets and liabilities, other than goodwill, were as follows:
June 30, 2022December 31, 2021
In thousandsGrossAccumulated
(Amortization) Accretion
NetGrossAccumulated
(Amortization) Accretion
Net
Intangible Assets
Core-developed technology$499,042 $(489,108)$9,934 $505,429 $(491,047)$14,382 
Customer contracts and relationships322,882 (257,302)65,580 336,421 (261,043)75,378 
Trademarks and trade names72,175 (69,938)2,237 74,551 (72,133)2,418 
Other12,017 (11,738)279 12,021 (11,670)351 
Total intangible assets
$906,116 $(828,086)$78,030 $928,422 $(835,893)$92,529 
Intangible Liabilities
Customer contracts and relationships$(23,900)$23,670 $(230)$(23,900)$23,441 $(459)

A summary of intangible assets and liabilities activity is as follows:
Six Months Ended June 30,
In thousands20222021
Intangible assets, gross beginning balance$928,422 $1,000,037 
Effect of change in exchange rates(22,306)(9,082)
Intangible assets, gross ending balance$906,116 $990,955 
Intangible liabilities, gross beginning balance$(23,900)$(23,900)
Effect of change in exchange rates  
Intangible liabilities, gross ending balance$(23,900)$(23,900)

Assumed intangible liabilities reflect the present value of the projected cash outflows for an existing contract where remaining costs are expected to exceed projected revenues.

Estimated future annual amortization (accretion) is as follows:
Year Ending December 31,AmortizationAccretionEstimated Annual Amortization, net
In thousands
2022 (amount remaining at June 30, 2022)$13,140 $(230)$12,910 
202318,967  18,967 
202415,032  15,032 
202514,300  14,300 
202610,303  10,303 
Thereafter