May 7, 2008
Executives
Patricia Moore – Director of Investor Relations Victor Richey Jr. - Chairman, President and Chief Executive Officer Gary Muenster - Chief Financial Officer
Analysts
Steve Sanders - Stephens Inc John Quealy - Canaccord Adams Carter Shoop - Deutsche Bank Securities Paul Coster - J.P. Morgan Patrick Forkin - Tejas Securities Group, Inc.
Kevin R. Maczka – BB&T Capital Market Zack Shafran - Waddell & Reed
Operator
Good day and welcome to the ESCO second quarter conference call. Today’s call is being recorded.
With us today are Vic Richey, Chairman and CEO and Gary Muenster, Executive Vice President and CFO and now to present the forward-looking statement and for introductions, I would like to turn the call over to Ms. Patricia Moore, Director of Investor Relations, please go ahead ma’am.
Pat Moore
Thank you. Statements made during this call regarding the timing and amounts to fiscal 2008 and subsequent years expected results, cash flow or net debt, future developments including timing and amounts of expected RF AMI sales in connection with the company’s PG&E contracts, the success of AMI pilots, the success in international markets and other statements which are not strictly historical, are forward-looking statements within the meaning of the Safe Harbor provisions of the Federal Securities Laws.
These statements are based on current expectations and assumptions and actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company’s operations and business environment, but not limited to the risk factors referenced in the Company’s two press release issued today, which are exhibit to the Company’s Form 8K, also filed today. We undertake no duty to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
In addition, during this call, the Company may discuss some non-GAAP financial measures in describing the company’s operating results. A reconciliation of these measures to their most comparable GAAP measures can be found in the second quarter results press release, issued today and found on the Company’s website at escotechnologies.com under the links Investor Relations, Financial Reports and SEC filings.
Now I will turn the call over to Vic.
Victor Richey Jr..
Thanks, Pat. As I’m sure you all have noticed, we issued two press releases this afternoon.
Our earnings release and an update on the orders received on the PG&E contract. I want to provide some insight on the decision to issue separate releases.
The order for the 100,000 RF electric modules was not received until late last week. Since the earnings release was scheduled today, I felt uncomfortable issuing the PG&E release prior to our earnings, but given the significance of the additional orders I felt this should be give a prominence commensurate with its importance and not buried in the earnings release.
The timing of the orders and the release were awkward this quarter and I don’t expect this to be on regular terms. Now I’ll turn it over to Gary to review the financials, before I provide my prospective on the quarter.
Gary Muenster
Thank you Vic. As noted in the release we reported EPS from continuing operations of $0.23 a share including $3.5 million or $0.08 a share of amortization expense related to TWACS NG software and purchase accounting related assets.
Excluding these items, EPS from continuing operations generated $0.31 per share. Prior years second quarter EPS from continuing operations with $0.34 was favorably impacted by the 18% effective tax rate in 2007, which resulted from the research tax credits recognized in that quarter.
When looking at the second quarter from an operational perspective, I am very pleased with our year-over-year results which are detailed in the release. The primary highlights from operations included the following.
Sales increased over 24%, EBIT dollars increased over 19%, EBITDA dollars increased nearly 32%, we generated $22 million of cash, which was used to pay down debt and we entered over $164 million in orders resulting in a book to bill of 121%. Finally on March 31, we sold the vacant Filtertek property in Puerto Rico, which we exited several years ago.
The net cash of $1.3 million was received after quarter end in April. For the comparable fixed month periods from continuing operations I will touch on a few highlights.
Sales increased over 42%, EBIT dollars increased 270%, EBITDA dollars increased 163% and EPS was $0.53 or $0.73 adjusted compared to $0.29 in the prior year. Our only minor disappointment in the quarter was related to the Test business where a few large chamber projects slipped to the second half of the fiscal year and while we successfully completed the consolidation into the new building addition in Cedar Park.
The cost of the move and certain production inefficiencies cost us a few points of margin within the segment during the quarter. On the segment basis utility solutions group realize the most significant year-over-year growth as sales increased over 50% and EBIT dollars increased nearly 75%.
The main sales driver was the addition of Doble, which continues to exceed our expectations on both the top and bottom line. RF AMI sales increased significantly in the second quarter driven by additional gas products sales to PG&E.
The PLS side of Aclara continues to be the market leader in product deliveries to the COOP community markets as we deliver $29 million worth of TWACS products to continually growing customer base. This alteration segment again had a very strong quarter led by the commercial aerospace business of PTI which had a 12% increase in sales and resulted in an EBIT margin for PTI of nearly 20%.
Test segment sales decreased slightly as I mentioned earlier. Addressing the balance sheet, I remained very comfortable with our current capital structure and I am pleased that we continue to reduce our net debt outstanding, which currently stands at less than $220 million resulting in a 2.7 times leverage ratio.
Obviously, this net debt will continue to decrease as we generate cash in the next six months and we expect to end the year with net debt well below $200 million equating to a leverage ratio of approximately 1.8 times. Regarding cash flow during the first six months, net cash provided by operating activities on a continuing ops basis, was over $37 million.
Ended orders continued to be a bright spot with their book-to-bill bring well over 100% for both the quarter and the year-to-date bringing our total backlog at $282 million at March 31. Of particular interest was the receipt of nearly $58 million of AMI orders received from PG&E through today with our expectation of a meaningful increase in that amount over the next 90-days, based on their current product requirement.
Additionally year-to-date, we booked $11million of the $27 million PREPA contract that we signed in December. Moving onto our guidance for the balance of '08 GAAP earnings per share from continuing operations remained between $1.80 and $1.90 per share, which at the mid point of 185 represents a 45% increase over the $1.28 GAAP amount reported in 2007.
We continue to expect EPS adjusted for certain intangible assets and purchase accounting item to be in the range of 222 to 232 a share. As noted in the outlook section of the release approximately $0.42 a share of TWACS NG amortization and purchase accounting related expenses are included in 2008 along with $0.25 a share of interest expense and $0.10 a share related to stock options.
On a segment basis, the utility solutions group continues leading the EPS growth outlook in 2008 by projecting over 75% top line growth and EBIT margins around 19% as all product offerings are experiencing year-over-year growth. RF AMI sales driven by additional product deliveries to PG&E are expected to increase significantly and Comtrak is expected to deliver $12 million worth of products in 2008.
Filtration and test are both on track to deliver another solid year in ’08 and with that I will be happy to address any specific financial questions during the Q-and-A and now I will turn it back over to Vic.
Victor Richey Jr..
Thanks Gary. As you saw in our press release, our second quarter was slightly above our plan and most importantly our outlook for the year remains in tact; if not slight but more solid.
I am encouraged by our orders today and our outlook for additional strong order input in the second half which further solidifies our ’08 outlook and sets us up for significant improvement in the after years. We were encouraged by the follow on RF electric order we received from PG&E this month and we are happy to let you know both the PLC and our after play technologies are performing well.
In fact using our AMI technology PG&E plans to begin offering enterable pricing to selected customers this month. We have talked a good bit about the International opportunities for our AMI products, but we don’t talk about specific opportunities.
I will say that we continue to be encouraged by the level of activity in the favorable progress we are making in this market. We have assembled an efficient and highly effective international team to pursue and execute on these opportunities.
Additionally our COOP community business remains strong and the domestic value market activity appears to be picking up. The two strategic moves we made earlier this year, the acquisition of Doble and the divestiture of Filtertech continue to reward us.
Doble’s perform as anticipated and we will see excellent growth opportunities for them, particularly on the international front. Let me give you a few specifics on each of the segments.
Our Filtration segment, which is now focused on aerospace and space applications had a solid quarter and is well positioned for significant organic growth. We’re seeing an increase in orders from domestic airlines, for Filtration modules is strapped and proved fuel efficiency and are making good progress in our drive to establish ourselves in the international markets.
During the quarter we continue the integration of the recently acquired Wintec, so that operations are performed in our VACCO facility. Our Test segment completed their facility consolidation during the quarter where we have combined the operations of our Filtertek’s Test business into our segment headquarters in Cedar Park, Texas.
Although the move had a slightly negative impact on the performance during the quarter we expect to see both margin improvement and operational efficiencies going forward. The International market continues to be the driver in the segment.
They were a few large chamber projects that slipped in a quarter; we anticipate a more active International market in the second half. We have very active quarter in our Utility Solutions Group as both the Aclara and Doble engineering hosted user conferences for their respective customers.
I participated in both of those conferences and I am pleased to report that Elster was very well attended by a pleasant group of Utility clients. There were approximately 450 customer’s representatives at the Aclara conference and over 1000 customers at the Doble conference.
To clarify these conferences were hosted by the company but the sessions were run by our customers to expense all the aspects of the given technologies; the benefits, the issues, necessary training, suggested enhancements etc. These conferences bring us closer to our customers by offering them an opportunity to influence the functionality of our products.
Further the conference itself has been outlet for industry experts to shares ideas and present white papers and studies on the relevant industry topics. I was encouraged by the enthusiasm of the customers in each of the conferences.
It’s truly good to hear it directly from the users, that our products are doing a great job for them. So, as I look at our business today, we have a stable Test business with good upside opportunity, a focused and very profitable Filtration business and a Utilities Solutions Group, which is very well positioned to deliver significant growth in the future.
I’ll now be glad to answer any questions.
Operator
(Operator Instructions) And we will take our first question from Steve Sanders, with Stephens Incorporate.
Steve Sanders - Stephens Inc.
First a question on PG&E; I think 1.7 million units in total when you gave us the break down. What have you delivered and what do you think has been installed beyond the 300,000 that mentioned in the release here?
Gary Muenster
Steve Sanders - Stephens Inc.
Okay and then in term of installations could you give me that?
Gary Muenster
It’s roughly 400,000 to 425,000 and PG&E has a number out there about 430, so 425 is probably a good point.
Steve Sanders - Stephens Inc.
Okay and then you indicated that you expect additional orders; I think you said something along the lines of over the next 90 days; how should we think about the mix of orders over the balance of 2008?
Victor Richey Jr.
I will say good for the mix -- it really depends Steve on how they choose to deploy additional products, but I would hazard a guess and say that it's probably going to be roughly 50/50 gas and electric
Steve Sanders - Stephens Inc.
Okay and then all RF
Victor Richey Jr.
On the electric side, I would say in the near-term, yes.
Steve Sanders - Stephens Inc.
Okay and then as we think about the -- on the electric side the RF versus the power line, the relative performance of your RF versus your power line and then relative to the expectations for PG&E would you draw significant distinctions between the two technologies, kind of outline some of the pros and cons whatever you think would be relevant there.
Victor Richey Jr.
The only issue -- the only reason this was reopened I guess a year ago, this was last June, was this concern about whether there are going to be things that there were going to be required and future beyond and what had been committed to on the original contract. So, the functionality that’ll be present in the RF products certainly would be equal to what we have in the PLC product, but with additional band width, so that they do choose to do something in the future beyond what was in a regional requirement there would be more capability to do that.
The other thing is I think we are in a good spot and that the infrastructure that will go in place for the gas modules will also support the electric RF modules, so it’s not a matter going in and putting in an additional infrastructure to support that product.
Steve Sanders - Stephens Inc.
Okay, alright and then in terms of the domestic AMI activity, can you just provide some additional detail on your commentary about -- I think it was picking up and whether you are seeing an equivalent amount of interest in the power line versus the RF and whether things are shifting more towards the RF?
Victor Richey Jr.
I would say that there still remains interest in both but certainly I think there is more interest today and if you just look at a number of opportunities and the way people seem to be laying in there is more interest in the RF from the strict numbers capability, but they’re does remain interest in both.
Steve Sanders - Stephens Inc.
Okay and then you seem to feel pretty good about some of the International pilots you have going. Have you added any additional pilots or do you expect to add additional pilots in the back half of the year.
I think last call you talked about several that were installed and running; can you just bring us up today on new pilots?
Victor Richey Jr.
Yeah, we have started a couple more since we last talked and we anticipate at least an additional two more pilots -- at least two more pilots in the second half of the year.
Steve Sanders - Stephens Inc.
Okay, still primarily Central South America or are you branching out?
Victor Richey Jr.
That -- the one that I just spoke about was Central South America. We certainly have some opportunities we’re actively pursuing outside of that areas but those were the nearest terms opportunities that we have.
Steve Sanders - Stephens Inc.
Okay alright and then Gary just a couple of detailed questions. The Test facility consolidations, the step up at Doble, did those have an EPS impact in the quarter and if so can you give us what that was?
Gary Muenster
I would say on the Test side, the non-recurring cost, the absolute cost that you can quantify is about 700,000. The production inefficiency is a bit of a softer number because on certain days of the week the facility was not shutdown, but it was inefficient while we are moving equipment and things like that, so that’s a little softer, but I’d probably put that in the neighborhood of 500,000, so between the two it’s roughly $1 million worth of cost that are obviously non-recurring, all recognized within the second quarter, because that’s when the move was completed and was fully up in running as of about March 1.
So, that’s all behind us and overall it was a great success to move that larger of a facility that far into a brand new place I’d say. We gave them A+ expecting a little downside it just took a little bit longer than we anticipated.
Steve Sanders - Stephens Inc.
Okay and then were there any benefit that flowed through during the quarter from Puerto Rico?
Gary Muenster
No, because we had fully written down the building in the first quarter when we sold Filtertech, so it was a net zero, because we generally have the contract written with the folks in December and that it was really just a matter of 90 days of them processing through the due diligence and all the other staff, the buyer needed to do so. It was basically sold at the contract value that was recorded as of the end, but as I noted the cash -- we closed actually on 3/31, so there is no P&L impact but with it being in Puerto Rico the money wasn’t wired until April 1, so the cash is not reflected in the numbers.
It will be a third quarter cash event; its neutral to the P&L.
Steve Sanders - Stephens Inc.
Okay and then last question, I guess about $0.53 first half, so $1.25 plus in the second half. Can you just help us a little bit directionally with 3Q versus 4Q on that?
Gary Muenster
Yeah, I would say 4Q is a little more heavily weighted. If you look at last year in the fiscal ’07 relationship, the fourth quarter is always our strongest and what your going to there is the filtration side of the business is relatively normalized, the Test business is going to be very heavily weighted in the second half with fourth quarter being probably 25% higher than Q3 and what’s going to drive the big EPS kick in Q4 is a lot of these PG&E orders that we are booking now we will be shipping in the fourth quarter as well as the Comtrak units if you look year-to-date its almost a zero and so the $12 million is going to be in the second half of the year.
So, that’s why we have such a high degree of confidence because we are well on our way, so I would probably put something in Q3 and in the upper 40s to mid 50s somewhere that range?
Operator
And we will now go to our next question from Carter Shoop with Deutsche Bank.
Carter Shoop - Deutsche Bank Securities
I wanted to try to understand the disconnect between talking about exceeding all the internal targets and getting PG&E electric orders which weren’t forecasted into guidance and then not ranging in the full year guidance.
Victor Richey Jr.
The number of the PG or the size of the PG&E order it was not that large and as we go into the year, we don’t have everything clearly identified and so we had some thought on some things that were going to happen and one part of the business that maybe didn’t happen but then we get some these orders and so we’ve had and I will say softness in parts of the business but as we went into the year it wasn't clear where exactly every order was going to come and so the PG&E orders have covered some of the other areas where we hadn’t gotten orders, where we would anticipate getting them as we entered into the year and that's really not unusual for business. I mean as we going into the year we have a forecast and it’s not unusual for there to be a mix change between segments or even within the segment.
Gary Muenster
And Carter one other thing I would add is that's part of the reason we keep a $0.10 range on there. I would say two things have changed, is the confidence factor is certainly at a more reliable level, obviously A with the passage of time, we are sitting here 7 months in and I would say with the new orders and the majority of those will shift in Q3 and Q4 were basically within the range there at a much more confident factor level and then I think within the range if you look at what that $0.10 range does, if we were at the lower end of the range or the higher end of that range, I think we are still within that bandwidth, so I would say the -- you really have to hang your head on the confidence factor of all of this stuff building in there and the fact that as I mentioned with Steve we do have a pretty substantial fourth quarter and from a risk protection prospective I think this does a very good job of covering us on that side, so
Carter Shoop - Deutsche Bank Securities
Okay that’s very helpful thanks and when we think about the PG&E occurrence and the impact to revenue, when would we need to see that orders for you guys to recognize this by at the end of this fiscal year?
Gary Muenster
Yeah, I would say that based on where they are at now on the RF electric product the lead time is probably in the neighborhood of 6 weeks, 6 to 7 weeks.
Victor Richey Jr.
Longer than that. I would say we have the vast -- let me answer it this way.
I think we have the vast majority of the orders that we need to make the forecast that we have today.
Carter Shoop - Deutsche Bank Securities
Al right.
Victor Richey Jr.
We either have the orders or we have very clear insight into when we will get this.
Carter Shoop - Deutsche Bank Securities
I was under the impression that the electric orders for PG&E were not already factored into your guidance…
Victor Richey Jr.
What we did as we took out the PLC electric orders, but again there was some -- there were some orders that as we went into the year that we anticipated getting other customers that we didn’t get and so these RF electric orders of PG&E have helped to cover that.
Carter Shoop - Deutsche Bank Securities
Okay. So just to be clear, when we see PG&E orders probably coming over the next 90 days that would not be incremental to the current full year?
Victor Richey Jr.
That’s correct. I mean unless if it is we’ll let you know.
I mean we would say -- we would change our guidance and tell you that that’s the case.
Gary Muenster
I would say incremental from over our carter can kind of specifically address what you saying. You are absolutely correct; we have baked in zero on the electric side for ’08.
So, these two -- the 88,000 and another 100,000 obviously it’s the plant actually monetize that into revenue over the balance of the year. So, that roughly whatever that is $8 million or so, is now a very high degree of certainty of getting shift and what it is doing is mitigating some of the other thing that may have moved out of the year.
When it was something like the new IOE you might have anticipated a little earlier than expected or maybe a slower delivery schedule like other customers and so there is a lot of moving parts and that’s why I go back to the confidence level here. This $8 million gives us a tremendous amount of protection in the second half of the year.
Victor Richey Jr.
Yes, I think the way that we think about it is -- I mean if look at $8 million of order that’s significant, it’s mostly I think because the customers knows what the product is but if you look at our total orders inputs for the year it’s not a huge percentage of what’s out there. So, again as Gary said and I say we’re just -- basically this is covering some of the things where we had anticipated something, which we might not have gotten over here.
Carter Shoop - Deutsche Bank Securities
Okay. In regards to the gas businesses finally, can you discuss your level of confidence of continuing so remain on that product type for your competitors?
Victor Richey Jr.
Yeah, we do not -- I mean for entirety, I think we can never say that because this is not the way the contract is set up, but I will say they are very happy with the performance of the product it’s going in, it’s working as advertised and we have not been given any indication if they have intention of doing anything different than what we are doing today.
Carter Shoop - Deutsche Bank Securities
Last question on PG&E; are you starting to see the deployment on the electric side help you in regards to marketing other IOU’s. Clearly you are starting to get the first volume at PG&E on a electric side.
I was trying to see IOU’s warm to the idea that it combines RF natural gas solution from Aclara as a very viable and competitive solution?
Victor Richey Jr.
Yes, I would certainly say that we have gotten calls specifically as a result of that. Gotten in the couple of doors specifically because of that, so obviously the decision they have made has given the product a lot of creditability and so that has helped us with number of customers.
Carter Shoop - Deutsche Bank Securities
Lastly, on the international opportunity and I don’t want to discuss a lot of the details regards to utilities etc. Any way to help the investment community in regards to sizing that opportunity on a near-term loan, mid-term basis?
Victor Richey Jr.
It is difficult. I would say that, we are anticipating to at least one customer going to a larger scale probably in late ’09 or ’10, but we don’t have a huge amount baked into that way we are thinking about our business now, so the good news is we sort of are going to have good growth over the next several years, even without that, but we think that there is really good opportunity to turn some of those into real, sizable opportunities in the second half of next year and some opportunities do that before them.
You know the issue always with the international business as you probably know we -- about 25% of ESCO’s overall businesses is international, so we did have a little bit of experience there and one thing we have learned is it is a little bit more unpredictable than what we have in the US and so rather than getting out ahead of ourselves, we are going to take measure to puts there but we are certainly excited about the international opportunities and they were very sizable. If you look at that way the utility industries are structured particularly in South American or in Central America for that matter, they have fewer utilities, but they are much larger utilities, so think a long-term opportunity; that is excellent.
Operator
The next question will come from John Quealy with Canaccord Adams.
John Quealy - Canaccord Adams
Just doubling back you may have said this; just some more housekeeping stuff. On the debt this quarter, did you pay down $15 million Gary is that what it was or just looking at the balance sheet?
Gary Muenster
Yes.
John Quealy - Canaccord Adams
What’s your outlook for future pay downs or prepayments on that given the cash flow?
Gary Muenster
While we well below $200 million, somewhere in the neighborhood of 175 to 180 of net debt.
John Quealy - Canaccord Adams
Is that also -- did you breakout Doble EBIT or EBITDA contribution this quarter on a percentage basis for that business line?
Gary Muenster
No, we did not, obviously for competitive reasons we would rather not do that other than to say that it’s as expected if not slightly better. So, if you look back at what they were running at when we purchased them, we are not seeing diminishing margins.
John Quealy - Canaccord Adams
And Vic, I think you said you went out to that conference out here in Boston. In terms of the cross selling opportunity or at least the introduction of the Doble customer based to the Aclara brand or the ESCO umbrella; is that sort of a standard rollout or how are you seeing that introduction take place over the coming periods?
Victor Richey Jr.
Yeah. I think it’s going to take some time John, but we had a couple that Aclara guys at that conference meeting with the reps with the Doble’s reps both domestic and International and we have had a couple of leads already that have come as a result of that and I think as a matter everybody kind of getting to know each other and capabilities more, but we certainly plan to take advantage of that.
It is one of the things you can’t really force, I don't think but it is taking place; I would say probably even more so on the International side than the domestic
John Quealy - Canaccord Adams
And final two on AMI; I think there is some commentary on the Texas market, some comparison there year-on-year. I assume that's TXU, Oncor can you give us an update of what exactly is going on from your perspectives down in the Texas market for Aclera opportunity moving forward.
Victor Richey Jr.
Yes, I would say that right now and I think we talked a little bit about it last quarter. I mean it certainly is in the regulators hands right now I guess and that we are not anticipating doing anything down there in the near term.
I think we have to wait till that settles down, so I’m fortunately -- we didn’t have the a lot baked in there any way and some of the other opportunity we have had kind of cover that. We are staying very close to the customer and again I think our customer are happy with the products we have deployed there.
That's certainly not the issue; it’s just that -- I think the customers don't want to put the product out there until they very clearly understand what it is that the regulators are going to want. So, a little bit of a waiting game there, but again we have opportunities to offset that.
John Quealy - Canaccord Adams
And just two more finals; on the Aclara gas and water business, did you comment on opportunities -- obviously a lot of us are focused on electric stuff but, did it focus on the pipeline of opportunities or potential in the -- domestically for the gas and water businesses in terms of RFPs and response and how healthy that market you think is?
Victor Richey Jr.
The gas kind of follows the electric typically, so they aren't that many standalone gas opportunities where you really see the standalone opportunities with water and I’ll see that thing is really solid. I think the fact that other people are trying to get into fixed network kind of shows that there really is a market there and I think a pretty sizable market.
It’s very active now and I think we’ve had some good recent successes and hope to have and I think we’ll have additional successes throughout the year. So that market remains strong and I think its going to get even larger over the next 18 months or so.
John Quealy - Canaccord Adams
And the last question I have. A lot of that names in the Metering Group had some good appreciation in Q1 and certainly private company have had a lot of I’d say higher visibility this quarter.
Can you comment both domestically and offshore what your seeing for valuations in this advanced metering Smart Grid Group and how that would effect any potential investments or acquisitions you consider?
Victor Richey Jr.
The folks that we have been taking to and I think that certainly they are higher than it was several years ago, but it does seem to have settled down a little bit. I think what the timing of the availability of funds and so forth, so I think we have to pay higher multiples maybe then we would have paid three or four years ago.
I think that based on what you saw with Doble for instance I think we paid a full value there, but we are certainly -- that’s turned out to be a very accretive acquisition for us and even more accretive than we thought it was going to be, when we required it, so think there are opportunities out there and it’s a matter of being patient and going for the right things at the right time.
Operator
Yeah we will take our next question from Paul Coster with J.P. Morgan.
Paul Coster - J.P. Morgan
Just a quick question first of all on the Test side of the business. It is sound like there’s a little bit of weakness.
Was it concentrated in any sort of subset of your customer base and what is it that you are seeing that gives you the confidence in the back end ramp at the moment for Test?
Victor Richey Jr.
Mostly it is Paul -- it’s not a matter of the order slipping out; it’s a matter of just getting some of the projects delivered and not that we are holding it up, what’s really happening is a lot of times they won’t take our product till the building is ready or until they have some of the other sub contractors that have done some things. So, it’s just a matter of time with some of the deployments if will, so the order base has been good.
I think the pipeline is there and it’s just a matter of delivering some of the projects and having the customers take those. Not to say that we haven’t seen any weakness.
I would say that the one place we have seen some is more on the domestic side. It appears that the opportunities in the international market are going offset that.
Paul Coster - J.P. Morgan
You are not seeing the communications industry particularly handset guys kind of pulling in some of their investments at all?
Victor Richey Jr.
Well, we haven’t, we haven’t, but we will keep our eye on it.
Paul Coster - J.P. Morgan
And so the book-to-bill which was greater than one; was that a cross over, business I realize it’s highly concentrated on utilities, but is it also true Filtration Test?
Victor Richey Jr.
Yes, Filtration orders in the quarter were about $32 million versus sales at $27 million. The Test was a little bit below 100; it was 32.5 of orders and 33.5 of sales.
So, a little bit below one-to-one and then Utility Solutions was almost $100 million of orders and 75 for sales. So, that Utility Solutions was the big driver in the quarter to get it to the percentage that it’s at and then for the year Test it’s essentially at one-to-one because for the year orders were 65.8 and sales were 65.6, so it’s slightly above a 100.
Paul Coster - J.P. Morgan
Okay. That’s very helpful thank you.
On the International AMI side can I just make sure I understand here that are those primarily RF contracts or are there any PLC contracts, that we should aware of the new contracts.
Victor Richey Jr.
No, currently all of the pilots are PLC.
Paul Coster - J.P. Morgan
Okay. It’s just -- Europe is obviously a huge opportunity It’s seems like a number of programs that are being discussed; are you as optimistic about PLC in Europe as you are with respect to Central and South America?
Victor Richey Jr.
We do not spend as much time in Europe. I will say we have a couple of opportunities there; one of which is PLC, another I believe it is RF and so certainly I think what’s -- what you see more in Europe today is GPRS and so I think they’re more comfortable with the RF and I would say we’re not concentrated as much there as we have in Central and South America.
Paul Coster - J.P. Morgan
Okay and the last question; what percentage of revenue was PG&A, can you share that with us?
Gary Muenster
For the quarter it was between $10 million and $12 million of sales.
Operator
And we will now take our next question from Kevin Maczka with BB&T Capital Market.
Kevin R. Maczka – BB&T Capital Market
Just the question on the top line in general; I guess one of the things I struggle with a little bit this quarter is why the top line didn’t grow faster than it did and when I look at your -- on an apples-to-apples basis you have got about $26 million in revenue growth but $22 million of that came Doble. So, can you just give a little more color -- I know there were some pick up in Test, but give a little bit more color and why is the core business ex-Doble wasn’t growing faster than that?
Gary Muenster
I will touch on the pieces and I will let Vic put some commentary on that. Filteration was $1.4 in the second quarter -- this year versus second quarter of last year.
The Test business was down about $0.5 million and again that’s the timing of the orders. You are right Doble was up, $20 million something and VRF business in Aclara was up about five and so, it’s really -- the PLC business was down about a $1.8 million or so, and that’s really driven by the timing of the IOU business because if you remember last year we were still running pretty well full -- not full tilt but, pretty heavy on TXU, and in this quarter TXU is essentially zero and so that was a big driver of the net delta down.
So, the COOP business is up substantially at PLS and the IOU business is down, $6 million or $7 million, so driven by TXU as John or somebody earlier mentioned on a little bit of the uncertainty in Texas. So, we got pulled down a little bit on TXU trying to -- again the sort of what the regulatory environments is going to be.
So, if we add all those numbers obviously get back to about $26 million net positive.
Kevin R. Maczka – BB&T Capital Market
Okay and the TXU $6 million or $7 million that will continue to be a drag going forward. I guess if you don’t have that business over that will that come back as a regulatory situation works it’s self out?
Victor Richey Jr.
Yeah, we are not projecting that in the back half of the year, but you are really going to see the improvement. I mean you are really going to see across all three segments of the business, because the filtration is certainly strong in the second half, the test business is a good bit stronger in the second half and then as we see deliveries accelerate or some of the deliveries that the PG&E products have been ordered in the first half of the year that will be delivered in the second half, so that’s where we are really getting the growth in the second half over the first.
Gary Muenster
And Kevin from a QoQ specific perspective, we not going to have an unfavorable comp in the second half of the year, because there are slowdown or wind down really started in the second half of ’07. So, the comp of TXU as a standalone IOU, second half of ’07 versus second half of ’08 will not be as awkward as it is right now.
Kevin R. Maczka – BB&T Capital Market
Okay and then switching gears to the Utility Group and incremental margins there look like they are about 17%, if I did the math right and my question is, I thought Doble was running much higher than that and I thought some of your good portion of your core business, was also higher than that. So, is there some particular drag that why those margins aren’t higher than they were?
Gary Muenster
Well the amortization is substantially higher in the second quarter because as we deliver TNG 3.0 in December and we only had a little bit of a hit for the beginning of the amortization on that piece of Trench of the tears of TNG and so for the second quarter, we get a full load of that amortization, that’s part of it. Then the other side of it is again within a Aclara, as Vic said in his commentary we are stepping up the international market place to pursue these relatively large opportunities, so incrementally G&A is up in the business development side of that, some of the new product development cost are little bit higher because we are going to be launching something’s here in the second half and then the amortization is incrementally higher, so those three things in the short-term work against you and when the volumes come back in the second half of the year at the levels that were anticipating those core fixed cost will be absorb much more sufficiently.
Kevin R. Maczka – BB&T Capital Market
Okay and then a more general question on the comparative landscape; are you seeing any notable change there. Everyone is trying to developed the best miles strap and the technologies evolving quickly is there anything notable there that’s changed in terms of your competitors behavior or their product offering?
Victor Richey Jr.
I can’t say that there is anything notable. The folks are still talking about some of the things we are coming out with.
Obviously there has been some trail or some of the products that have taken place that I would say over the last quarter we have not seen anything significantly different than what we seen in the past and as a matter of some of the competitions products getting on the field and seeing if they are going to work. As advertised and if they’re going work in volume which is always the tougher thing to accomplish and also the tougher thing to prove; but nothing major.
Kevin R. Maczka – BB&T Capital Market
Okay and then last question if I could on Doble which you didn’t already mention, what was the growth rate at Doble in the quarter?
Gary Muenster
Compared to
Kevin R. Maczka – BB&T Capital Market
Year-over-year
Gary Muenster
No, we don’t really have the standalone numbers from last -- second quarter. Obviously we have that kind of their pro forma numbers from the due diligence and I would say that relative to that pro forma number they’re up greater than 10%.
Operator
(Operator Instructions) and we will take our next question from Patrick Forkin with Tejas Securities.
Patrick Forkin - Tejas Securities Group, Inc.
Vic, with respect to the increased activity in Central and South America, what are the drivers for the increased activity that the business cases for these projects?
Victor Richey Jr.
The biggest thing Pat is reducing meter reading cost and theft of electricity. I mean they want to get the electricity that’s produced, they want to get paid for and I would say the same thing is going to happen on a water side; not the theft of the water, but more the lead to tax and those type of things.
So, it’s really getting paid for what's being generated. So I would say that the application of the technology that they are looking for is more like you would see in the core out market and some of the small investor utilities.
Kevin R. Maczka – BB&T Capital Market
Okay. And you mentioned water; are you guys involved in any water opportunities down there?
Victor Richey Jr.
We have couple of discussions going on its not as developed as the electric certainly, but we do have a number of discussions underway there.
Kevin R. Maczka – BB&T Capital Market
Okay. So under those scenarios; I mean it seems -- how would that work if you are looking primarily to power line carrier solution on the electric side.
Would some of those opportunities down there be RF based for water?
Victor Richey Jr.
Potentially. I mean for the water, I think they certainly would be and again I think this maybe a good opportunity for hybrid solutions well.
As you know with some of these utilities as large as they are they are going to have a real mix of service territory and so, again its pretty early days and while we know that we have a good opportunity with the PLC certainly we are going to go and see what the opportunity is with the RF, because I think that again there may be some opportunities to sell both to the same customer?
Kevin R. Maczka – BB&T Capital Market
Okay and then on the PLC side; do you get additional leverage from all the work you have done on TNG down there or is it just a less robust product that they are looking for?
Victor Richey Jr.
I mean the reality is anything to we do down there will be using TNG. I mean because primary reason is we need that for the quantities that you are looking at.
I mean we are talking about very large utilities and so you need the horse power that TNG brings to be able to operate the larger systems.
Kevin R. Maczka – BB&T Capital Market
Okay. So I’m glad you brought up the size thing.
Victor Richey Jr.
Yes.
Kevin R. Maczka – BB&T Capital Market
Because I you know you don’t want to talk too much about it but, depending on which locality you’re looking at down there, looks like some of the opportunities maybe in excess of $5 million or $10 million endpoints. Are you involved in opportunities of that size; I mean the ultimate deployment size?
Victor Richey Jr.
It won’t be the ultimate prize with a lot of these. I mean that’s the size of the utilities where the utilities went to a full deployment?
How long it’s going to take into the full deployment is a whole different story, but certainly that’s the size of the utilities down there. As I kind of mentioned early, there is one difference there than here and that they appear as utilities, but they are larger.
Kevin R. Maczka – BB&T Capital Market
Last question on the international, would you have to partner up with anybody to accomplish some of those larger projects either in Central America or South America?
Victor Richey Jr.
I don’t think we have to. We do have a couple of partners that were working with to be -- to do it more efficiently, because it is not in the states and so you need to have people on the ground there and so it’s going to be mixture I think of folks that we will put in place for project implementation, as well as some long established relationships we’ve had with other companies down there.
Operator
(Operator Instructions), we will take our next question from Zack Shafran with Waddell & Reed.
Zack Shafran - Waddell & Reed
Two questions actually; one, you eluded PG&E beginning on a selective basis to do some integral pricing, could you talk a bit about, as a supplier to them, how you see that unfolding and what applications that’s most conducive towards and then; two with respect to the book-to-bill, approximately, what portion of the book to bill or the backlog is comprised to PG&E
Victor Richey Jr.
Okay. I’ll handle the first half Gary, is getting the answers here.
Yeah, what they really do on as they want to go out or they have the system deployed already and offer some interval building to residential customers so that and if I think from the commercial customers as well so that they can go ahead and do some time to view his billing. So they can have some variable rates, based on what time of the day that they are actually utilizing the electricity.
So this is basically what, lot of people have been talking about doing for a long time but these guys are actually putting a program in place -- it’s a monitory program that people can signed up to do this.
Zack Shafran - Waddell & Reed
Okay.
Gary Muenster
Okay and then Jack, relative to the -- and I’m going rolling it forward through today, so we’re going to count the orders that we have in the separate press release for the additional 200 plus. So this number is not included in the 281 backlog that’s disclosed as of 331, so if you jump ahead to the April orders you are setting there as I noted in that release cumulative orders of about a 112 and then we shift roughly 70 and so we are sitting there with the difference what would be incremental in backlog as of May 1, that’s a shift.
Zack Shafran - Waddell & Reed
So, if you think about the 281 what portion of that perhaps is PG&E?
Gary Muenster
Well obviously we haven’t shipped any other thing we booked in April, so just kind of backing up of that, you can back $11 million off the 112.
Zack Shafran - Waddell & Reed
Okay.
Victor Richey Jr.
About 30 million
Gary Muenster
Yeah, so take that and I think you got about $30 million sitting there as of March 31 embedded in the 281.
Operator
As we have no further questions this concludes today’s questions and now I would like to turn the call back over to Mr. Vic Richey.
Victor Richey Jr..
Okay. I will appreciate the interest in the quarter and we will be talking next quarter.
Thank you very much.
Operator
That concludes today’s conference. Thank you for attending.