Itron, Inc.
Q2 2009 Earnings Call Transcript

Published: 30 Jul 2009

[Operator:]

Good day, everyone, and welcome to the Itron Incorporated second quarter 2009 earnings conference call. Today’s call is being recorded. For opening remarks, I would like to turn the call over to Ms. Deloris Duquette. Please go ahead, ma’am.

[Deloris Duquette:]

Good afternoon, everyone, and thank you for joining us today. On the call today, we have Malcolm Unsworth, our President and CEO; Steve Helmbrecht, our Chief Financial Officer; and Philip Mezey, COO for North America. Today, Steve is going to start the call with takeaways for the quarter and the year so far; and then Malcolm is going to discuss his initiatives for the year and what we think the rest of the year will look like. After that, we will take your question, and Philip will participate in the Q&A session. Our earnings release includes non-GAAP financial information that we believe enhances your overall understanding of our current and future performance. We also have a supplemental slide deck which is intended to augment our prepared remarks, as well as provide a reconciliation of differences between GAAP and non-GAAP financial measures that we will talk about today. You can find this supplemental information on our corporate web site under the Investor Relations tab. We will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in today’s earnings release, in the comments made during this conference call, and in the risk factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. And with that, I would like to turn the call over to Steve Helmbrecht, Itron’s CFO.

[Steve Helmbrecht:]

Thank you, Deloris. As we discussed last quarter, our financial results in 2009 continued to be a tough comparison against 2008, given the volatility we are experiencing in Foreign Exchange rates, the economic slowdown, uncertainty with utility capital spending and because we had such strong financial results in 2008. So with that background, I will talk about the quarter and the year so far. Total quarterly revenues of $414 million were $100 million or 19% lower than the second quarter of last year. Of the $100 million decrease, over half of it or about $52 million was due to the stronger dollar against the currencies in which we do business. International revenue was done $61 million this quarter compared to last year. Absent the negative effect of FX movements, international revenue decreased 3% from 2008, primarily due to lower revenue in our electric segment related to the completion of an AMI contract last year and the economic slowdown in some regions. North America had $39 million lower revenue from the second quarter last year or a 21% decline. The decrease in North America was due to the completion of AMR contracts in 2008, and a slowdown in spending due to the economy and customer’s delayed purchased related to uncertainty about the stimulus bill. We believe that some of our customers in the US are not purchasing meters or communication systems while they study the opportunity to obtain matching funds. Six-month revenues were $802 million which reflects a $190 million decrease, a 19% decline from revenue last year caused by many of the same factors we experienced during the quarter. Gross margin for the quarter of 32.2% was 210 basis points lower than last year. Both business segments experienced the decline in margins. Our international business had a margin decline of 130 basis points due to a mix shift. International shipped to lower percentage of AMI and prepayment meters during the current quarter and had a higher percentage of service revenue with lower margins. North American margins declined 360 basis points also due to a mix shift. During the current quarter, our North America business shipped 50% fewer automated meters than in the second quarter of last year, and 18% fewer AMR modules. The decreased volumes combined with the effect of shipping our first-generation AMI meters caused the decline in margins. We expect North America to stay at lower margins until our shipments of automated meters and modules increases as a percentage of total shipments and until we begin shipping our cost-reduced OpenWay AMI meter. Gross margin for the first six months of 2009 of 32.7% was 140 basis points lower than last year. International gross margin declined 110 basis points because of a mix shift and completion of a system implementation in 2008. North America margin declined 200 basis points for the first six months of 2009 because we shipped 47% fewer automated meters and 10% fewer AMR modules, and the effect of AMI. Operating expenses for the quarter were almost $19 million lower than last year. $7 million of the decrease is due to lower expenses related to our amortization intangibles and the remainder was due primarily to the stronger dollar. Year-to-date operating expenses have declined over $33 million. Approximately $15 million of the decline was due to lower amortization and the remainder was due primarily to the stronger dollar. Our non-GAAP operating margin was 8.7% for the quarter and 8.5% for the year, both of which are substantially lower than the 13.2% and 12.7% margins last year. The decline in operating margins is due to the lower revenue and decline in gross margins. Debt interest expense is lower for the quarter by more than $8 million and more than $19 million lower for the first six months this year, due to the substantial repayment of debt and lower average interest rates. Our non-GAAP effective tax rate was 6% for the quarter and 19% for the first six months. This lower rate is driven primarily by the expectation of lower income from our higher tax jurisdictions, primarily the US. For the full year, we expect our non-GAAP effective tax rate to be similar to our year-to-date percentage. Non-GAAP diluted EPS was $0.49 for the quarter compared with $1.02 in the second quarter of 2008. Keep in mind that the second quarter of 2008 was the highest non-GAAP EPS in the history of the company. Again, the lower revenue and gross margin significantly affected our earnings. Now, I would like to turn to our capital structure. As a reminder, in April, we completed an amendment to our senior debt agreement. The amended agreement provides for more flexibility in our covenants with a maximum debt-to-EBITDA ratio of 4.75 times through September, stepping down to 4.5 times in Q4, and 4.25 times in Q1 2010. In addition to one-time fees, the amendment increased our interest rate from 1.75% over LIBOR to 3.5% over LIBOR. In May, we completed an equity offering of 3.2 million shares which resulted in net proceeds of about $160 million. We used the equity with the attention of redeeming our $109 million in senior subordinated notes, our highest interest rate in nearest-term debt. The call price on redeeming the notes decreased from about $104 million to about $102 million on May 15, so we saved about $2 million in redemption cost by waiting until after that date. The redemption was completed on July 17. Our debt-to-EBITDA ratio was 4.3 times at June 30 in compliance with our debt covenant of 4.75 times. After the redemption, we have total debt of $885 million. Had we redeemed the debt before June 30, our debt-to-EBITDA ration would have been 3.8 times at June 30. We are focused on strengthening our balance sheet as evidenced by $765 million in total debt repayments since the Actaris acquisition in 2007, inclusive of the sub-note redemption. We now do not have any debt maturing until 2014, although we do have a call and put option under $224 million in convertible debt in mid-2011. Amended debt agreement calls for 25 basis point increase in the interest rate to 3.75% when our debt-to-EBITDA ratio exceeds four times. The blended interest rate on our debt is now 5.97% inclusive of this 25 basis point increase. We will continue to monitor our covenants and our business, and we will balance needs for cash with higher prepayments going forward. Cash flow from operations was $25 million for the quarter and $67 million for the six months ended June 30, which is about $39 million and $53 million lower than the quarter and six-month periods of 2008. Our capital expenditures for the first six months were about $28 million, which is similar to last year. Over a third of this amount has gone towards AMI-related expansion of our manufacturing line in the US. Free cash flow for the first six months was $40 million compared to $92 million in the first six months of 2008. We ended the quarter with $276 million in cash. Keep in mind this is before the retirement of our subordinated notes. We had good AR collections in the quarter and customer credit quality continues to be healthy, although we did have a reserve in our international business during the quarter against the receivable for about $1.8 million. Adjusted EBITDA for the first six months of the year of $90 million is significantly below the $151 million we generated in the first half of last year due to the lower revenue and margins. In summary, we continue to face challenges in 2009 that our negatively affecting both revenue and earnings. We did have another strong quarter in terms of bookings. New order bookings for the quarter were $427 million, although this is slightly lower than the $432 million we booked in the second quarter of 2008. Our book-to-bill ratio was slightly over 1 to 1 compared to 0.9 to 1 in the second quarter of last year. I would also like to point out that this is the first quarter in over a year that our bookings have been above 1 to 1 for our legacy business in North America. Our 12-month backlog increased from $471 million to $646 million during the quarter, due primarily to an increase in scheduled shipments of our OpenWay AMI solution in the next 12 months. With a total backlog of nearly $1.6 billion, we believe we our well positioned for the long term. With that, I will turn the call over to Malcolm.

[Malcolm Unsworth:]

Thank you, Steve, and good afternoon everyone. I am going to make a few comments about the quarter and then spend most of the time updating you on my focus areas that I laid out on the last call. The second quarter was another challenging one. Although currencies were not as volatile during the second quarter as they were in the previous two quarters, the dollar is still stronger compared to last year and continues to have a negative impact on the financial results of our international segment. As we discussed last time, we are not seeing the same impact of the recession in our international business as we are in the US. Business in Western Europe continues to be relatively stable, while in Eastern and Central Europe we are experiencing some slowdown primarily caused by currency devaluation. Our North America business continues to see the impact of the economic slowdown and this is compounded by delayed shipments because of expected stimulus dollars. North America revenues continues to be at lower than expected levels as we are experiencing a faster than anticipated cannibalization of AMR systems without an offsetting benefit yet from AMI systems. So with that, let me move on to updating you on progress against my three initiatives. As you recall, my first area of focus to 2009 is AMI strategy, deployments, and execution. Starting with deployments. Let me say that our AMI project deployments are progressing as we expected. During the quarter, we shipped OpenWay meters to CenterPoint, San Diego, and with the completion of our automated AMI lines in South Carolina, Southern California Edison. Our contract with SCE called for the meters to be built on a fully-automated assembly line. You may have noticed the press release about the executive business and launch we had in mid-June. I am pleased to say that as of the end of June, we have shipped more than 100,000 OpenWay meters, so we are well on our way. We are executing on our AMI contracts and will continue to focus on these deployments throughout the year. Regarding AMI strategy, we recently had some very productive road map meetings covering electric, gas, water, and software, and I am very excited about our direction. Itron has always had a very strong AMR position and we have also established ourselves as an AMI leader in electric, gas, and water. We have a unique position with our large installed base of AMR solutions and we will focus on some of those opportunities going forward. I am really excited about some of the projects that we are pursuing and look forward to updating you on the status of these projects on future calls. As you can see from today’s press release on Glendale, we have secured another contract for smart metering and smart grid solution that includes electric, water, and software. We believe this system is the first of its kind as it is for an electric and water customer. Moving on to my second area of focus, which is international. As we discussed, our international business at this point consists mostly of meter sales that are primarily driven by growth, replacement and the few AMR, AMI, and prepayment contracts. But international is an area of very strong future growth for Itron. We check our bid activity on a monthly basis; and as of the end of June, we are bidding on more than 80 AMR and AMI electric, gas, and water opportunities across seven regions for more than $25 million endpoints of automation we estimate worth more than $2 billion, which shows that there are worldwide opportunities, although we still continue to believe that Europe will be the first region to deploy AMI on a large scale. Just to give you an idea of what is going on in Europe. In France, we are on schedule with our ERDF Phase 1 AMI smart metering project. In the U.K., smart metering mandates are progressing. The government recently solicited comments on how smart metering should be deployed. We are submitting our response next month. There are two ongoing smart metering pilots in the U.K. of 100,000 units from EDF Energy and British Gas, and we are bidding on both of them. In Spain, the government has (inaudible) on smart metering deployment for electricity and the target is to be fully deployed by 2017. And just to remind everyone, Spain has more than 25 million electricity meters. These are just three examples of what is happening in Europe as countries continue to finalize their approach to smart metering. There are also significant growth opportunities in China and it’s being announced that more than 50 million smart meters are projected to be deployed in China in the next three years. In May, we participated in both the USA-China Clean Energy Summit and exhibited at the China Metering Conference in Beijing. We are working on positioning ourselves well in China. We have a gas meter factory in Chongqing and an electricity sales office in Beijing and we assume to open a water meter factory in Suzhou just outside of Shanghai. We are also focused on Australia as they move to smart metering and AMI. We have a strong competitive advantage with our Meter Data Management software solution that should serve us well in Australia’s AMI development. Now, let me close with my third area of focus which is cost reductions. We have made progress during the last three months and we are continuing to sharpen our focus. 2009 is a tough year because of exchange rates, deployments that were pushed to the back half of the year which will of course delay revenue, the negative impact from delays caused by the stimulus bill, and the challenges from the economy. We have targeted specific projects that we are delaying and specific expenses that we are reducing and foregoing. Cost reduction plans continue and we should see some benefit in the second half of the year from these efforts. We are focusing on the long term and will not jeopardize our current AMI deployments or future long-term growth because of a short-term revenue issue. So now, let me turn to the second half and briefly touch upon some of our thoughts for the rest of the year. We will continue to be impacted by the same issues for the balance of 2009

[Operator:]

(Operator instructions) Your first question will come from Stuart Bush from RBC Capital Markets.

[Stuart Bush:]

Yes. Hi guys.

[Deloris Duquette:]

Hi, Stuart.

[Stuart Bush:]

I wanted to know – you guys gave some examples of the projects internationally that you are bidding on. Can you give some more color on the few of the U.S. utilities that you are bidding into?

[Deloris Duquette:]

Well, we can't mention them by name Stuart, obviously, unless they come forward. We would say that they are all around the country in all fairness. I don't know that there is any particular region that is more than others.

[Malcolm Unsworth:]

Yes. We have regions in the USA where our sales people are located and there is many of them that we are involved with.

[Stuart Bush:]

All right. Your bookings were strong in the quarter and it seems that – although, I know you guys highlighted that the North American business has not improved, but it seems to have stabilized and the currency volatility has reduced since the last quarter. What would you need to see before you give a more exact forward guidance?

[Deloris Duquette:]

I think that we'd need to see utilities beginning to behave as they used to behave, that they had set budgets that they would spend against them. I think that we would have to see more clarification on the stimulus bill. Once those funds actually start flowing and customers begin projects, I think that that would probably be a signal where we would feel a bit better; those kinds of things that haven’t necessarily stabilized yet.

[Stuart Bush:]

All right. One last question, do you intend to offer an internet protocol-based solution on your OpenWay system soon? And do you think that that is necessary to do to meet the present [ph] standards coming up of the DOE?

[Malcolm Unsworth:]

I’m going to let Philip answer that.

[Philip Mezey:]

Stuart, we have announced that we will issue a product that supports IP throughout the network and down to the endpoint, and we are doing that as you pointed out partially to ensure that it is the outcome of the NIST initiative requires that it is available as well as to meet market conditions in which it is a stated requirement.

[Stuart Bush:]

Do you have a timeline on when that will be ready?

[Philip Mezey:]

It is a 2010 deliverable. It is a field upgradable deliverable based upon the existing system.

[Stuart Bush:]

Excellent. Thank you.

[Operator:]

And your next question will come from Jason Feldman with UBS.

[Jason Feldman:]

Good morning -- good evening, I guess. There is a large number of small private players in this space. It seems like there are new ones popping out all the time. Are there any products or technology gaps that you are thinking of filling through acquisitions or potential growth areas that you are not involved in now?

[Malcolm Unsworth:]

We have developed, especially on the electric side we have developed our OpenWay solution to have a complete end-to-end solution which obviously covers the meter, the communication and the home area network, and also our Meter Data Management system. So with regards to our smart grid solutions, I think we have got a complete offering today. As we move forward with regards to other areas, especially potentially overseas, there is always opportunities to look at what we could do. But, one of the things that we do do and I must admit, we partner with many, many providers. As much as we provide a complete solution, we do not provide a total solution; so we have got many, many partners that we work with. So, I am not certain if that completely answers your question.

[Jason Feldman:]

No, I think it does. Can you also give us a little bit more color perhaps on some of the cost reduction actions, specifically what types of areas you are targeting, whether there is specific kind of dollar amounts that you think you can improve on the cost side in any particular timeframe?

[Malcolm Unsworth:]

One of the things we always look at, we are always looking at cost reductions, no matter what. If we take a look at the product side of life, we redesign products continuously. We are always trying to get the latest designs installed into manufacturing. We are spending capital on automation to do cost reductions. We obviously try and negotiate different rates if commodity prices go down and look at all those long-term projects. And then at the same time, we have got – we start looking at some of the areas of where in the company do we have lower margin projects or programs that we need to do something about. So when you start looking at all of that, those are the areas that we are looking at, and it is not necessarily one specific thing that is going to make all the difference, so we look at a broad range of areas for cost reduction.

[Deloris Duquette:]

And Jason, we have not quantified a target for it.

[Jason Feldman:]

Okay. Thanks. And then the last one, regarding the stimulus spending, obviously, we've heard about delays from just about everyone in the space. But, it also does seem that there are some applications for the stimulus funding. Some utilities that have already decided to go forward with their AMI projects that are basically now just looking for someone else to perhaps pay for part of it. From what you have seen, do you have a sense of how much of this funding is really going to go to pre-existing projects compared to new not-previously announced projects? How much of this is really going to be incremental?

[Malcolm Unsworth:]

First of all, the four projects that we have are booked, are not dependent on stimulus money. But, of course, a couple of them are going to be applying for stimulus money and the only thing that that will do to those is probably speed it up.

[Jason Feldman:]

Okay, so there could even be a benefit. So, even if a fair amount of this money goes to projects that would go ahead with or without the stimulus funding, you think it could impact the eventual speed with which those projects progress?

[Malcolm Unsworth:]

With our current contracts, yes. With future contracts, we don't know.

[Jason Feldman:]

Okay.

[Malcolm Unsworth:]

With our current contract, yes.

[Jason Feldman:]

Thank you very much.

[Malcolm Unsworth:]

You are welcome.

[Operator:]

Your next question will come from Carter Shoop with Deutsche Bank.

[Carter Shoop:]

Good afternoon. I wanted to start off with a clarification. When you talked about 3Q looking like 1Q and 2Q, was that in regards to earnings per share or revenue? What were you referring to there?

[Malcolm Unsworth:]

Revenue.

[Carter Shoop:]

Okay.

[Deloris Duquette:]

Carter, just in general, we don't see anything out there that would make it be dramatically different in any of those areas, except for potentially some of the cost reduction efforts and even than that, we wouldn't use the word dramatically different.

[Malcolm Unsworth:]

And FX -- FX as well, assumption of about the same FX rate.

[Carter Shoop:]

When you say the same FX rate, are you talking about what you saw in 2Q because rates have increased a little bit here already in the third quarter? In fact, then the calculations will look like FX will be about a 300 basis point sequential benefit in 3Q. Are you assuming those types of rates or are you assuming the rates that you experienced in the second quarter?

[Deloris Duquette:]

More of the rates we experienced in the second quarter.

[Carter Shoop:]

Okay, great. And in regard to the tax rate, based on my calculations, it looks like the lower tax rate was about $0.12 benefit versus your expectations. Why do you we see such a significant decline in tax rate? It looks like operating income in the North America division was about $2 million below 1Q, but we are saying about a $4 million tax benefit this quarter.

[Malcolm Unsworth:]

As I mentioned in my remarks, it is really as we look at high tax jurisdictions, primarily the US, and looking out over the year, that plays a big part in determination of what we think the effective rate is going to be in a given year. As we look out over the course of the year, we think that 19% or 20% is more indicative of the rate we will have for the whole year.

[Carter Shoop:]

Not disclosing any information about customers, can you talk a little bit about your expected AMI ramp? You mentioned that you had shipped about 100,000 by the end of June. Can you give us a little color on where you think you will be by the end of September and in the end of December?

[Deloris Duquette:]

Yes. We do not quantify that any more because we just get ourselves in trouble with our customers. In all fairness, almost all of our customers have filed rates [ph] and deployment schedules and I would just point to those filings.

[Steve Helmbrecht:]

The comment I would add is as I mentioned in the backlog itself growing primarily due to the AMI shipment schedules to give some indication of what we are seeing now in the 12-month horizon and how that has changed over the last quarter.

[Malcolm Unsworth:]

Yes, Carter. We just picked up Q1, of course, in 2010 for our total backlog.

[Carter Shoop:]

All right. Thank you.

[Deloris Duquette:]

Sure.

[Operator:]

From Lazard, we will hear from Sanjay Shrestha.

[Sanjay Shrestha:]

Good afternoon, guys. Just a couple of quick questions. First on the margin performance here in Q2, which obviously was a bit below for you guys, and you guys explained that it was the utilization-related issue. Do we need to potentially worry about the fact that maybe there is a lot of price competition in the market as well and that is forcing you guys to cut pricing as well, or is it strictly just the utilization issue and as demand comes back, those margins would simply go back up?

[Malcolm Unsworth:]

You really have to look at this both domestically and international. If you look at AMI pricing, I do not think so. I think that is holding its own regarding both current and obviously, current and both future projects as well. Regarding regular metering business, if you start looking at the volumes that have been produced today, obviously there is going to be competition especially without AMR and AMI solutions. Overseas, a little bit; not really too much. We have got some price pressure in South America, Western Europe; and the rest of Europe, not really. Nothing more unusual than we have had before.

[Deloris Duquette:]

Sanjay, this quarter, it was also some mix in there. I don't know that we were very clear on the earnings release, but if you looked at the last year for international, we were shipping a higher percentage of AMR and AMI meters as a percent of total. We have a higher mix of residential kilowatt-hour meters, so that brings down your margins in general. And then for North America, you are absolutely right; it is utilization and then that AMI meter shipment.

[Sanjay Shrestha:]

Got it. Great. So a few more questions, if I may guys. So, there certainly seems like some big networking companies are also getting into the smart grid area. It is a big area of focus seems like for a lot of players right now. We are getting the buzz and you guys clearly are, by far, the leader in the smart metering area. Now, when bigger networking companies start to get into this market and get even more aggressive, how do you see this industry unfolding? Is that a net benefit for you, because you don't need to spend as much money on product R&D and just take the benefit of selling electronics meter with a much higher price tag versus electromechanical meter and see that incremental jump? Or how should we think about that evolution of this industry, given how things are pretty rapidly changing here?

[Philip Mezey:]

Sanjay, it is Philip. As we have commented publicly, we see this as a positive development for us. We have a very positive collaborative relationship with these large network providers. Our system is designed in such a way that we feel that we are adding the most value with the endpoint in collection system up to the neighborhood level, and that the large network companies who were providing ubiquitous high-speed communication over the whole distribution territory are really adding value to our smart grid play and are increasing the speed and reliability of the total solution. So, we very much welcome those players into the space and I think it strengthens our offering, and it does not really affect our R&D that much and as much as we have to certify our products with multiple backhaul solutions and already have done so. And so, we would expect to work with a wide range of partners.

[Sanjay Shrestha:]

Got it. One last question, two-part though guys. So, I know you guys don't want talk about the specific utilities that have gone into looking for the stimulus money, if you would. But, is there a way you guys can give us a sense as to how much maybe in net, near term, pushing out to the right impact that you guys had with some of the large-scale AMI opportunity? And two, given that, how should we think about 2010? I mean ’09 is what it is, we all know that. But how big of a growth can we potentially see in 2010? Can you guys talk about that a bit more?

[Malcolm Unsworth:]

I am going to talk a little bit about the stimulus package and how that is going to be rolled out, and then I am going to let Philip talk about the opportunities that we could have for 2010. When you think about the process that has been developed right now, I think August 6 is when all of these applications have to be filed; and you think about how much this $3.5 billion, I believe, that is going to be utilized. There were three tranches originally, tranche 1, 2, and 3; the second is back half of the year. If you take a look at how many of these applications are being presented, there is a significant number. But, how long that takes to sift through all of those to determine how each is judged, it is going to be – you are going to have to go obviously to the commissions if they decide to go forward and they have not put proposals forward today. It is a lengthy process that they go through. So, with the contracts that we have, as I have said before, I think there are opportunities potentially for acceleration; but after that, I am not certain exactly how long it is going take, but it is not going to happen overnight. So Philip, you want to add some color to that?

[Philip Mezey:]

Well, I think, the question was, is there a way to quantify the retardant effect. And then, there was a question about 2010 benefit, yes. The retardant effect is expressed in – particularly, let us just take a look at the mid-tier of the market, the muni and coop market, markets that would be traditional buyers of our products that through the stimulus process now are applying for the most advanced technology available, which causes near-term declines in some of our basic business lines while those applications are being considered. So, it is fairly widespread, but in small increments that effect. And I would just say that we have made public comments about unexpected decline in our legacy business as the market transitions from AMR to AMI; that decline has been more rapid as we have commented on prior calls as a result of economic pressure. And now, we are saying that that decline is even a bit sharper as a result of this stimulus retard. So, I think you can probably model that against last year to get some sort of an idea about the magnitude. In terms of the benefits for next year, of course, we see this very strong backlog in AMI rolling out. We have some nice visibility in what we would think of this legacy business and our 12-month backlog as well. And at this point, very conservative about modeling these stimulus projects because there is so much uncertainty, but certainly a very, very high volume of application activity.

[Sanjay Shrestha:]

That is great, very helpful. Thanks.

[Operator:]

Next question will come from Paul Coster with JP Morgan

[Malcolm Unsworth:]

Hi, Paul.

[Paul Coster:]

Hi. Good afternoon in fact. Just following through on a few of those questions, Phillip, do you have a sense of what the addressable market is in North America for electric AMI meters? We are hearing numbers in the 80 million and 90 million range, does that work for you?

[Philip Mezey:]

80 million to 90 million addressable market? 80 to 90 million points?

[Paul Coster:]

In North America, yes.

[Deloris Duquette:]

Well, we have seen a prior survey from Telepoint that was in that range. We don't know that we would disagree with that, no.

[Malcolm Unsworth:]

Yes.

[Paul Coster:]

All right, and that is far about – you had about 12 million allocated to you in these projects, so that probably right about 30% of the market. You think that's a good assessment?

[Deloris Duquette:]

Yes, we have got 14 million. Now remember, some of those include GAAP, so it depends on how you are defining the market. Yes, we think we probably have 30%, 35% of the real awards that are out there, excluding pilot.

[Malcolm Unsworth:]

Yes.

[Paul Coster:]

All right. Is there any reason why the next sort of tranche of AMI adaptors should move quickly or can they take their time? What are the pros and cons in waiting a year or two?

[Malcolm Unsworth:]

Well, if you take a look at the ones that we have -- they have defined deployment plans. Stimulus will probably – could accelerate those. On the new ones traditionally, they will go anywhere from 3, 5 years deployments; so whether that stimulus money would help accelerate that 5-year deployment, whichever it is -- these last contracts, that could help. What they would bring it down to, I really don't know today. Paul Coster – JP Morgan Okay. When we look at the actual configurations that are being deployed at the moment, it seems to get more difficult the more you have learn here that sometimes the communications vendors is capturing the smarts for communicating with the home area network for instance; and on many occasions, it is the actual meter itself. Is it correct to think that there are all different configurations for different utilities and therefore, the selling price of let us say an OpenWay meter will change according to the specs for that particular utility, or is it a uniform type of product deployment for you across the nation?

[Malcolm Unsworth:]

I am going to take this and then I am going to let Philip take it. One of the advantages that we have is that we manufacture in the United States in one factory and we can do all of those communications and metering solutions ourselves. So, I do believe we have a cost advantage compared with everybody else. And when you look at the combined selling price of one of those communication boards or communication companies, and the meter, their selling price is definitely combined; we believe it is higher than ours when you do the two together. So, on a competitive basis, I think we have the edge on that particular solution. Philip, do you want to comment on that?

[Philip Mezey:]

Well, Paul, I think you are absolutely right that we are comparing apples and oranges at times, that when we talk about these market share numbers because, when we give you a number, it is for almost entirely for an integrated meter and communications offering. However, we also do provide our communications separately from our meter in selected cases and vice versa as we supply the meters under others' communications. But the large numbers that we have quoted generally for these contracts are in the assumption that we are providing both elements. There are companies out there providing only a single element and to your question of configurations, generally speaking, we are providing within all of our endpoints the integrated home area network and disconnect switch as you mentioned, and so we do not have that many configurations. Paul Coster – JP Morgan Okay. Thank you.

[Malcolm Unsworth:]

Thanks, Paul.

[Operator:]

From Pacific Crest Securities, we’ll hear from Ben Schuman.

[Ben Schuman:]

Hi, guys. Thanks for taking my call. Can you guys talk about the relative effect on the North American gross margin between capacity utilization and AMI? Was capacity utilization a much larger driver of the weaker gross margin?

[Deloris Duquette:]

You know what, it’s about half and half.

[Ben Schuman:]

Okay. And just to put some context around the gross margin impact to the Actaris business, can you guys tell us how much revenue that Sweden AMI project contributed last year or maybe how many endpoints?

[Steve Helmbrecht:]

No.

[Deloris Duquette:]

I don’t know that we have quantified it in terms of dollars. But again, with the margin decline, that was about half; the services business is about half when you look at the margin decline.

[Ben Schuman:]

Okay, great. And going back to the stimulus, with the grants coming in three tranches, it looks like lasting through June. Are you guys concerned that some of the uncertainty can maybe push into mid-2010?

[Deloris Duquette:]

What we’re hearing is that most of that will probably be released with the first tranche.

[Ben Schuman:]

Okay.

[Deloris Duquette:]

And that there’s no guarantee there will be any money left for the other two.

[Malcolm Unsworth:]

Yes. That’s what we’ve heard, is that the whole amount of the stimulus money will be used up in the first tranche.

[Ben Schuman:]

Okay. And then one last one, are you guys active in other vendors' AMI deals, just as a meter supplier? I know I’ve seen some compatibility arrangements announced, but I haven’t seen any big deals with you guys as a meter supplier on other vendors' AMI networks.

[Philip Mezey:]

We are currently participating in sort of small volumes and completing R&D works that we hope will provide meter in larger volumes; that is our intent. But, so far today, no, we have not participated as a large meter supplier in these deals.

[Ben Schuman:]

Okay, great. And sorry, just one last one. I think I saw an article last week about that Glendale project. They were mentioning $28.5 million on that contract. Is that kind of in line with what you guys are going to get or were there some other vendors content included in that?

[Philip Mezey:]

There is a small amount of other vendor content, but that number is very close to our portion.

[Ben Schuman:]

Okay. Thank you.

[Malcolm Unsworth:]

Thank you, Ben.

[Operator:]

Next question will come from John Quealy with Canaccord Adams.

[John Quealy:]

Hi, good afternoon.

[Steve Helmbrecht:]

Hi, John.

[John Quealy:]

In terms of – just to go into the details a little bit on the P&L, what you folks made mention previously of not a dramatic shift in operating expenses in the back half of the year versus the front half, if you look at Q2 for example, it’s about $120 million in operating expenses. On a run rate basis in the back half of the year, is a 10% decrease material to you folks or can you calibrate it a little bit for us? What do you consider meaningful or not in saving on OpEx?

[Steve Helmbrecht:]

This is Steve. As Malcolm mentioned, we’re continuing to look at a number of programs, not only the OpEx line but also in cost of sales and what we’re doing above the line. But speaking to OpEx, the two key areas that we’re continuing to focus on is infrastructure in terms of sales and R&D, while we’re working to improve efficiency there. As Malcolm said, we have a core level spending we need to stay on track with the number of very key deliverables. That does leave other areas that we’re focused on, particularly on the G&A line and just line item spending, and that’s an area we’re focused on. We can’t get to that 10% number in that area certainly in the second half of the year, but we’re focusing on everything we can to take cost out while we run the business -- while maintaining Malcolm’s key initiatives he talked about.

[Malcolm Unsworth:]

Yes. We’re looking at different areas, both in North America and international as far as cost reductions.

[John Quealy:]

Okay. Thanks. And then just a couple more questions, with regard to the software product and the product line, it seems to be – I think if you quote it 33% or 30% AMI share for real AMI jobs, it seems like software is much, much higher than that. Can you talk about in terms of the future open-bid opportunities, where you’re packaging the IEE platform in the hardware? Does it make a difference competing now moving forward having such a big share in software? And then also, can you talk about third-party relationships that you expect going into 2010, broaden out the platform a little?

[Malcolm Unsworth:]

One of the things that we’re also addressing is that our IEE solution for the software meter data management system is actually universal. We’ve got a lot of deals that we’ve secured internationally as well as North America, so one of the terms that we’ve used is -- we use it as bundling. We call it bundling, so we’ve looked at those opportunities on a global basis. With regards to North America, I want Philip to talk about that one as far as what that looks like. So, Philip?

[Philip Mezey:]

So, as you pointed out, the software market share is even higher than the hardware share and I believe that the competitive advantage there is we’re still on early stages in the market in which people throw around terms like service-oriented architecture and plug-and-play and that sort of thing. I think what we’re going to see as these implementations scale up and you start getting into reading millions of interval meters that having a solution that is proven to very, very high scale with proven deployments out in the field, that the combination of our hardware and software together is going to provide a significant advantage, once we move beyond this sort of specsmanship that’s going on in these early selections.

[John Quealy:]

And then final two questions, just to come back to the stimulus conversation, it seems like there’s very high incentives for every utility to apply for stimulus funding for basically anything they can throw in, just to pass muster with the Public Utility Commission, if you will. I know that’s a fairly cynical way but perhaps, every bit of CapEx is going through the stimulus just to pass muster. What’s your thought if, number one, a lot of those jobs that may have been pushed into stimulus, quite frankly, don’t get funded? Do you think that business goes away or do you think they just have to check the box to make the regulators happy, and then move forward? And then I have a follow-up.

[Philip Mezey:]

John, my assumption is we are being very cautious about that business coming back. Once the market has an appetite for this very high-priced and advanced functionality, if it does not come through, I’m thinking that it’s going to have a retarding effect on going back to other technology. That is our thought.

[Malcolm Unsworth:]

And, John, just thinking about the way that the utilities decide on what projects to do, I mean, all of these specific projects, whether they’re an AMI project, whether there are specific requirements for generation capacity or whatever, they’re all fighting for funding. So, this really is no different than what we had before.

[John Quealy:]

And then lastly, internationally, I know there’s – we have all talked about the visibility in the way utilities have been acting domestically. But, if you strip out FX for international, it seems to be in line with your previous expectations of low single-digit declines. Have you seen any normalization of spending behavior in Europe or are you still seeing some unconventional buying patterns over there?

[Malcolm Unsworth:]

No. As I said in the presentation, the Western Europe, we really haven’t seen really any impact. But, as far as Eastern and Central Europe, yes, it has definitely had an impact because the devaluation of their currency has made a difference. We’ve seen that in certain parts of the Eastern Europe, so it is having an impact there definitely; no question, John.

[John Quealy:]

Thank you.

[Operator:]

Next, we’ll hear from Scott Graham with Ladenburg Thalmann.

[Scott Graham:]

Hey, good afternoon. Several questions for you. The revenue, I want to maybe ask the question in a different way in terms of what you’re thinking for the second half. When you said that it’s going to look like the second quarter and I’m sorry to ask this question the second or third time, but when you say it’s going to look like the second quarter, you’re saying in dollars, year-over-year percent, which one is it?

[Deloris Duquette:]

Scott, actually this is going to be hard for us to specifically answer because we’re obviously not giving guidance. We have fairly good visibility 90 days out and we’re just saying that we’re seeing things in the third quarter look similar to the second quarter. We haven’t gotten much more specific than that. Obviously, based on AMI shipment schedules, we’re seeing an uptick at this point in time in the fourth quarter. We’ve always talked about the year being back-end loaded, which we would still characterize it as back-end loaded, but we’re seeing the fourth quarter be more so than we would say the third at this point in time.

[Scott Graham:]

That’s fine. On the revenue side, could you quantify for us what the SCE, San Diego and CenterPoint were for the quarter?

[Deloris Duquette:]

No, but AMI shipments in total were in that $10 million to $12 million range.

[Scott Graham:]

Okay. And lastly, you went into a fair amount of detail on the mix issue in North America. I was wondering if you would just repeat that. You went through it pretty quickly. A lot going on there I think, within the mix issue altogether within AMI. Could you repeat that and maybe give me a little more color on that?

[Deloris Duquette:]

I’m sorry. Can you just – we’re not sure what –

[Scott Graham:]

The mix shift. When you were talking about in North America, the lower gross margin. The gross margin in North America dropped whatever that number was.

[Deloris Duquette:]

Yes, yes.

[Scott Graham:]

I don’t know if it’s handy, but you were talking about a portion of that being – sounds like a fairly half of it was mix and I was wondering if you would unbundle that again.

[Deloris Duquette:]

Well, I think that what we said was about half of that drop was caused by lower production volumes and about half of that drop was caused by shipping our first-generation AMI meters, which were at the lower margin.

[Philip Mezey:]

With the comment that we had fewer automated meters as a result of some – in relation to contract completions in 2008, so we had a lower volume of that type of product.

[Deloris Duquette:]

Yes. Does that make sense?

[Scott Graham:]

Yes, right. That’s the piece I was looking for. Okay, thank you.

[Operator:]

(Operator instructions) Your next question will come from Richard Verdi with Sturdivant & Company.

[Richard Verdi:]

Good evening. Thank you for taking my call. Much of my questions have been answered, but touching on the water side, I know you touched on it briefly there. But, domestically here, can you just discuss what type of trends you’re seeing here in AMR/AMI? Because despite the challenging economy here, these water utilities are still acquiring companies and staying on their typical pace and in speaking with them, they say that they intend to install them. And I was just hoping maybe you could discuss what you’re seeing in there.

[Malcolm Unsworth:]

Let me just give you an indication of the stimulus money that’s happening with the water side. The stimulus funding of $2 billion for drinking water; they’ve used the same ruling as the same format of applications that they have with the EPA, so one of the things that we see in the water side is that these municipalities will actually get funding quicker than the Department of Energy because it’s all structured. So, we expect to see that kind of activity a lot quicker on the water side than the electric side. Philip, do you want to add anything to that?

[Philip Mezey:]

Yes. I would say that the water business is holding up pretty well, although it’s somewhat of a mix story in which we see a decline in some of our traditional channels and through our distribution mechanism, some of these smaller accounts to which we do not sell directly and it’s strengthening on our project business in which we’re selling to networks and mobile systems. So, actually, we’ve been very, very pleased with activity on the water side.

[Malcolm Unsworth:]

And if you look at our international business, we’re seeing quite – not much change, actually, in our international water business, which is quite substantial.

[Richard Verdi:]

Okay. Now, with the AMI, I know that water utilities aren’t as quick as the electric utilities to switch to AMI. They like the AMR, what have you, but are you seeing any uptick there even in just water utilities enquiring about the AMI technology?

[Malcolm Unsworth:]

We did have the recent press release that we put out for Glendale, which covers our AMI solution absolutely. We’re seeing more and more activity going on with our AMI two-way communication system.

[Philip Mezey:]

Yes, a very strong shift towards large two-way network bid activity.

[Richard Verdi:]

Okay. Everything else has pretty much been answered. Thank you very much.

[Philip Mezey:]

Thank you.

[Operator:]

We will hear from Steve Sanders with Stephens Inc.

[Steve Sanders:]

Good afternoon, everyone.

[Malcolm Unsworth:]

Hi, Steve.

[Deloris Duquette:]

Hey, Steve.

[Steve Sanders:]

Just a follow-up, I know you don’t want to talk real specifics about the core projects. In the last few months, have you seen the shipment schedules change significantly in aggregate for those projects?

[Malcolm Unsworth:]

No, Steve, we haven’t. They’ve been quite stable.

[Steve Sanders:]

Okay. And as we think about maybe 2010, I think in the past, you’ve commented that AMI margins should be comparable to historical Itron North America margins, which I think about as high 30s to low 40s. So, understanding that you had some issues in the core business, once you hit the kind of run rate to expect to hit in 2010, is there any reason to think those margins won’t be back to those historical levels?

[Malcolm Unsworth:]

They will end up being back to historical levels once we get the product, should I say, commercialized like we have done in the previous products that we’ve had with electricity. It takes a couple of generations to get to the margins that we’re at and we should see that towards the latter half of 2010.

[Deloris Duquette:]

And the only thing that I would add to that, Steve, it also is going to depend on the mix of services that are in there. Malcolm is certainly talking about it from a product level, which is true to the extent you have more services in there, which to some extent we price at a lower margin such as installation. That, of course, drags down your overall margin; but it’s good for your gross profit dollars obviously.

[Steve Sanders:]

Right, okay. And then, Malcolm, on the international side, we don’t have the cannibalization issue related to AMR that we have in North America. But, are you concerned that the replacement side of the meter business will be negatively impacted in 2010 and 2011 as a lot of these countries look to starting significant AMI projects in 2012 and beyond?

[Malcolm Unsworth:]

You almost have to look at that country by country and obviously, I don’t have the time to got into it in such detail, but there’s no question that if they have a choice of waiting a little bit until they’ve replaced their product with a new AMI meter, they probably will. However, there are regulations that require that these utilities do change out those meters and it’s more replacement than new housing starts in certain countries. So, the answer is yes in one respect and maybe no in another.

[Steve Sanders:]

Okay. Thanks very much.

[Malcolm Unsworth:]

Thanks, Steve.

[Operator:]

Next question will come from Jess Osborne with Thomas Weisel Partners.

[Jeff Osborne:]

Good afternoon. Just a couple of clarifications for Philip. Philip, you mentioned that your software market share was higher than your meter share and advanced meters. I thought that for the first four AMI, when you folks said only one of them actually had your Meter Data Management system, so can you just expand upon that comment and talk about what share you’re seeing there?

[Philip Mezey:]

Sure. So, that comment is correct and it’s just our ability to sell the Meter Data Management system independently of the hardware, so that we are supplying the Meter Data Management system in a large number of competitive AMI deployments as well as non-AMI deployments. And so, there are over 40 installations of the meter data management system out there and, of course, a very, very broad array of other Itron data collection systems including MB90 out there with very, very large market shares.

[Deloris Duquette:]

And Jeff, I think that the last independent survey that was done shows us having a 50% market share in the meter data management in U.S.

[Philip Mezey:]

Yes, that’s right.

[Jeff Osborne:]

And then also, just for Philip, if you could expand, maybe quantify the comment about the communication board coupled with the meter being a more expensive solution than OpenWay. Is there any way you could expand upon that and give a rough estimate as to what degree more expensive you think it is?

[Philip Mezey:]

I mean, I can just say that historically, the reason that Itron purchased Schlumberger Electric Metering – and this is relating to Malcolm’s history very closely – was the effort to combine Itron’s electric AMR product and directly embed it into the solid-state electric meter. I mean, we’ve been through this process before. Historically, we feel there is leverage and advantage into merging these manufacturing, assembly, and delivery processes in order to capture the margins of having multiple companies, including contract manufacturers, involved in the ultimate delivery of the solution. So, the only quantified number I have is that the traditional margin required by contract manufacturers is typically in the 5% to 7% range. And so, when you have a number of parties involved in the process, margin will be consumed and we feel that we have optimized that very, very carefully.

[Jeff Osborne:]

Got you. And then, the last question is just a follow-up to Stuart Bush’s question. When you mentioned the IP field upgradable capability of the AMI units in the field, is that the assumption there that you would be moving away from the C12.22 standard into a full native IP meter or are you just referring to an IP communications technology that you would still be capturing the data from a meter data management standpoint, legacy protocol?

[Philip Mezey:]

Yes, great question. So, frequently IP and C12.22 are assumed to be competing standards and in fact, IP is a transport protocol and C12.22 is a full application protocol. So, we would use IP for communication purposes. All of the data would be packaged and therefore understood, open and available by the C12.22 protocol to any other applications that we’re still consuming.

[Jeff Osborne:]

Do you ever see the need three to five years down the road to a native IP meter and away from that protocol, just given you would need more layer four through seven technology at the edge to analyze all that and that could present some security risks?

[Philip Mezey:]

It’s a detail follow-up. The distinction that you’re drawing about it being non-native, I don’t accept. So, if you’re implying that there is a significant additional overhead associated with what we’re proposing, I don’t believe that to be the case.

[Jeff Osborne:]

Okay. We can follow-up some other time. Thank you.

[Philip Mezey:]

Sure.

[Operator:]

Next we will hear from –

[Deloris Duquette:]

Operator, we’re past an hour. Is there any other questions in the queue or – ?

[Operator:]

You have two questions left in the queue.

[Deloris Duquette:]

We’ll take those two please.

[Operator:]

All right. The first one will come from Jesse Pichel with Piper Jaffray.

[Elaine Kwei:]

Hi. This is Elaine Kwei for Jesse. Thanks so much for taking the question. Could we get a little more color on the international regions and segments that experience stronger or weaker shipments in the quarter? It looks like total meters were down sequentially, but revenue was up. And you said you didn’t see any significant pricing pressure. So, I’m just trying to understand if there was a meter mix shift or services that might have contributed to the higher sequential revenue.

[Malcolm Unsworth:]

As Deloris said earlier and what we said in the script, we have a mix change. The actual volume of specific meters, if you take a look at the volume that we have for electricity meters, for example, is fairly similar to what we’ve had in the previous quarter. Gas is about equal and water is maybe slightly down a little bit. But, overall, with no significant change. It was just a mix issue on revenue, but the volumes are holding out.

[Elaine Kwei:]

All right. And then, does the new OpenWay production only for (inaudible) just for SCE in the near term or will (inaudible) also begin supplying meters for the San Diego, CenterPoint and DTE deployments?

[Malcolm Unsworth:]

We have the OpenWay meter go into all three of these projects and even Glendale.

[Elaine Kwei:]

The productions from the new line, the new automated line?

[Malcolm Unsworth:]

No. The new line, the reason that I mentioned that with Southern California Edison was that they would only accept that product on the new line. All the other customers have actually previously accepted that; so it’s not an issue.

[Deloris Duquette:]

Yes. All of them will be produced on that.

[Malcolm Unsworth:]

All of them are going to be produced on that line.

[Elaine Kwei:]

Okay, great. Thank you.

[Malcolm Unsworth:]

Thank you.

[Operator:]

Your final question will come from Mark Rogers with Gagnon Securities.

[Mark Rogers:]

Thank you. First question is why is product development, as a percentage of revenue, trending down when you are supposed to be developing OpenWay to the IP addressable version? Philip, if you could answer that, that’d be great.

[Deloris Duquette:]

(inaudible), Mark?

[Mark Rogers:]

I said why is product development as a percentage of revenue trending down when you are supposed to be developing OpenWay version 2. And if Philip could answer that, that’d be great.

[Deloris Duquette:]

At this point in time [ph], we don’t think it is trending down as a percentage of revenue, so I’d like to know what comparison are you using?

[Mark Rogers:]

On a sequential, actually.

[Deloris Duquette:]

From quarter to quarter?

[Mark Rogers:]

Yes.

[Steve Helmbrecht:]

Yes. This is Steve. It was sequentially down a bit from Q1. There are some factors, FX for example, but really, it’s not down when compared to last year as a percent of revenue overall. That said, while we said we’re not going to be disinvesting in R&D, we are looking for efficiency at the same time and we’re fairly comfortable with this level of spending on that going forward. So, we expect going forward as revenue increases that that will increase at a rate higher than our R&D. One of the main strategies we have, and we’ve had in the past with Centron, is to invest in a platform that is scalable and we don’t need to customize a product for every individual order or customer, and we’re building that same type of platform for the OpenWay meter as well.

[Mark Rogers:]

Okay.

[Unidentified Speaker:]

And you might want to just talk a little bit about the development of what we talking about for IP.

[Philip Mezey:]

Yes, sure. Mark, two comments. The first is that R&D quarter-to-quarter is primarily headcount driven and it also fluctuates in that we are involved in capital development projects. I mean, there are a variety of things that are going on, in which we are involved with third parties in cost reductions, in particular focusing on application-specific integrated circuit development. So, it’s a little tough to look at one quarter to the next and assuming that that’s all headcount-related change. And to your point on IP development, it’s actually a very tight core group that’s working on it. It is, as you’ve heard, a firmware development project; small teams do the best work there. And so, there is absolutely a protected team focusing entirely on that and it’s considered high visibility, very predictable project.

[Mark Rogers:]

Okay. And you said this was going to be ready in 2010. The DOE, we’ve in some recent press releases that the DOE is saying that stimulus funding won’t be handed out until several security measures have been tested. How does your development of a product in 2010 affect your customers who are going to be receiving this product receive stimulus funding because the DOE won’t have the products to test for its security?

[Philip Mezey:]

The underlying assumption you've made is that the release of IP in some way is related to the security of the system and that is not the case.

[Mark Rogers:]

I mean, could you elaborate further?

[Philip Mezey:]

Sure. We have put out press releases and public presentations on our security architecture. We provide application security, not transport security. It is possible, if you wish, to turn on transport security as well, but we have fully vetted and tested our application-level security and it’s compliant with all of the standards that have been proposed on the DOE NIST process.

[Mark Rogers:]

Okay. And I know you wouldn’t give guidance on how many OpenWay meters you plan on shipping at the end of September and December, but how many OpenWay meters were shipped at the end of March?

[Deloris Duquette:]

Well, we’ve got that information in the earnings release. We have 100,000 year-to-date and we reported it for the quarter, so that would be the delta.

[Mark Rogers:]

Okay. I’m looking at the earnings release. I don’t seem to see.

[Deloris Duquette:]

It’s on the bottom of the segment information. I’m sorry. I don’t have the number right in front of me.

[Mark Rogers:]

Okay. I’ll go ahead. And then final question, the Glendale project, is that for the time being -- in that when I say time being, maybe two, three quarters out, the typical size of projects going forward?

[Deloris Duquette:]

No, not necessarily.

[Mark Rogers:]

Okay. Thank you.

[Operator:]

And there are no further questions. At this time, I’d like to turn the conference back over to the speakers for any additional or closing remarks.

[Deloris Duquette:]

Okay. Well, we thank you for joining us today and if you have any follow-up questions, feel free to give us a call.

[Malcolm Unsworth:]

Thank you, guys.

[Operator:]

Ladies and gentlemen, there will be an audio replay of today’s conference available this afternoon. You can access the audio replay by dialing 1-888-203-1112 or 1-719-457-0820 with a passcode of 9496493, or go to the company’s web site at www.itron.com. Thank you for your participation.