Hubbell Inc (HUBB) 2004 Q2 法說會逐字稿

Good afternoon. My name is Tina and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Hubbell, Inc. Second Quarter Results Conference Call. [Caller instructions.] Mr. Conlin, you may begin your conference.

Thank you, Tina, and good afternoon everyone. As Tina mentioned, this is the Hubbell, Inc. Second Quarter Results Conference Call and as is usual before we start I would like to take a few preliminary notes. This call is being simultaneously web cast on the Hubbell website at Hubbell.com where it will also be archived under the Investor Relations and then Audio Archives tab. You may also rehear this conference call by telephone. It will be available two hours after the conclusion. The replay access number for that--for that archive is 706-645-9291 and you will need an access code, which for the Second Quarter Earnings Call is 8744853.

Secondly, I would like to refer each of you to the paragraph in the press release that came out this morning on forward-looking statements and I would like to incorporate that paragraph by reference into our discussion here today. By way of summary, as most of you know, most forward-looking statements involve numerous assumptions, quantifications, and if possible, unknown risks, and other factors, any one of which or all of which may cause our actual future results to differ from the expectations which we may discuss here today and you should be aware of that.

As usual, with me today, Tim Powers, President and CEO of Hubbell and Bill Tolley, Chief Financial Officer of the company. I will turn it over now to Tim Powers for his comments on the quarter’s results.

Thanks, Tom. We are very pleased with the second quarter results. A 12 percent year-over-year growth in sales, two full points of operating margin improvement before restructuring, and an earnings per share growth of over 30 percent again before restructuring confirms that we are making progress toward our long-term objectives. The actions we are taking to improve our operations, the pursuit of lean thinking, restructuring actions, the focus on working capital efficiency, and low cost country sourcing initiatives are all paying off.

During the last call, we talked a lot about cost increases, announced versus realized price increases, and pre-buying from customers. We said it was our biggest near-term tactical challenge. As expected during the quarter, we partially closed the gap between cost increases and price increases. We have implemented sufficient price increases to offset the cost increases to date and we will make further progress toward the recovery of the cost increases during the balance of the year.

During the second quarter, the cost of several metals, copper, aluminum, nickel, and zinc, had begun to moderate, but our current cost for these metals are still far above year ago levels and steel prices have shown no sign of moderating. In fact, on a few types, there is a price increase announced for August 1. Energy costs are also having an effect on the total picture in the form of rising transportation costs as well as higher costs to operate our facilities and are having a significant--and are a significant portion of the total rise of costs. The volatility of metals costs and raw materials costs in general will continue to be a challenge in the second half and as we head into 2005.

Now let me turn to the markets for a few comments. Our markets, along with the general economy, continue to steadily recover. Industrial production, maintenance and repair spending, and capital--capacity utilization are all steadily rising. Utilities are starting to spend more on maintenance although the major T&D grid infrastructure investments that we expect to occur over the next several years have not yet begun. The residential market remains strong with mortgage rates still providing a strong assist. Residential homebuilder backlogs also remain strong. The non-residential construction market has bottomed although it has not yet started up. We continue to review the recovery as slow and steady, but also fragile and very dependent upon there being no shocks to consumer confidence. But lacking a shock to the overall economy, we think 2005 can potentially be much better for Hubbell’s markets.

As we have said before, 70 percent of our businesses sell into markets that are bottoming and are now beginning to turn up. With those introductory comments, I will turn the discussion over to Bill for further explanation on the financials. Bill?

Thanks, Tim. Good afternoon, everyone. As usual, I will begin with some overall comments on the quarter and then I will add a few details on the segment results.

The segment quarter results reflected solid performances by all of our businesses. After 11 percent year-over-year sales growth in the first quarter, this quarter we reported 12 percent year-over-year growth. But last year’s second quarter was a slow one as activity slowed during the Iraq War. Of the 12 percent year-over-year growth, one to two points was the net effect of price increases announced during the first and second quarters leaving about 10 percent volume growth. The impact of foreign exchange on the year-over-year sales comparison was negligible, only two-tenths of a point impact.

As was the case in the first quarter, there were a lot of moving parts in our second quarter P&L. Cost increases, price increases, customer pre-buying, and underlying recovery in our markets. As we said during the last call, pre-buying positively impacted our first quarter sales, but pre-buying also positively impacted our second quarter sales, especially in the lighting businesses. Second quarter earnings of 51 cents per share compared to last year’s 40 cents.

We spent $10.4m for restructuring action during the quarter compared to $6.6m in the second quarter of last year. Excluding the restructuring expenses in both periods, second quarter earnings this year were 62 cents a share compared to last year’s 47 cents, an increase of 32 percent. The majority of the $10.4m second quarter restructuring expense provided for the consolidation of our two wiring device factories in Puerto Rico into one location. Another portion of the provision covered the cost to close a small lighting factory in Minnesota. The remainder covered ongoing actions in our lighting businesses. About two-thirds of the $10.4m we expensed in the second quarter for restructuring will be non-cash write-downs of fixed assets and inventory and the remainder, about $3m, will provide for out-of-pocket cash costs.

We expect full year 2004 restructuring expense will be in a range of $20 to $30m. As was the case in the first quarter, the highlight of the financial results for the quarter was, again, excluding restructuring expenses in both periods, a two point year-over-year increase in operating margin, in the midst of volatile and rapidly rising commodity costs.

During the first half, all of our businesses announced price increases, some of which were realized in the second quarter and some which were not. But, as Tim said earlier, the total amount of realized price increases in the quarter did not completely offset the total impact of cost increases in metals, freight, and energy.

During the second quarter, we also expensed about $2m associated with our Hubbell 2006 business system initiatives, about the same amount as the first quarter.

We continue to generate positive free cash flow after payment of dividends. The cash and investment balance at the end of the second quarter was $339m. This balance grew by $38m in the first half after payment of $40m in cash dividends to our shareholders.

As you may have noted, we now include a summary statement of operating cash flows with our earnings release. Our operating cash flow for the first half was $80m. That is down a bit from last year’s $90m as higher net income was more than offset by the working capital billed required to support higher sales. However, our trade working capital is a percent of sales. That is, accounts receivable plus net inventories less accounts payable, all as a percentage of sales, continues to improve from 19.7 percent first quarter to 18.6 percent second quarter. DSO, day’s sales outstanding receivables, remained flat at 52 days while inventory days improved by three days, down to 56. As Tim said, we continue to see opportunity to further improve our inventory days position in the coming quarters.

During the first half of the year we used $15m for capital expenditures versus $12m the first half of last year. All of this increase was attributable to our investment in Hubbell 2006, our business system initiatives. As we have said in previous calls, we expect to use somewhere around $35 to $40m in 2004 for capital spending, and that will be above last year’s capital spending of $28m.

Excluding the Hubbell 2006 investment, we are making capital expenditures at a pace that is about 50 percent of depreciation expense. We are able to spend less than depreciation because our lean manufacturing initiatives continue to free up manufacturing capacity and reduce the need for space. Rather than reinvesting via capital expenditures, we are reinvesting more in process improvement, product development, and training.

Now on to the segment results. The electrical segment’s second quarter sales were up 13 percent year-over-year and 9 percent sequentially. As was the case in each of the last two quarters, all four of the businesses that make up this segment reported higher sales with the increases ranging from a low of 2 percent year-over-year to a high of almost 20 percent.

Operating margin for the quarter of 12.1 percent was 2.6 points better than the second quarter of last year and up one full point sequentially from the first quarter. All four businesses also reported higher operating margins driven by higher volume, productivity improvements, and as Tim mentioned earlier, very close management of cost inputs and selling prices.

Wiring system margins benefited from a favorable industrial mix and a steady recovery in maintenance and repair activity.

Our lighting businesses continue to surprise us on the upside as residential markets remain strong and productivity and restructuring actions in the commercial and industrial businesses gained traction. We are also very pleased with the year-over-year growth in sales of commercial and industrial lighting products, well into double digits after mid-digit single growth in the first quarter. Now some of this was pre-buying in advance of price increases announced in the second quarter, but much of it also was real volume gain.

Although harsh and hazardous markets are generally slow, they have recently shown signs of a turnaround, particularly in oil and gas applications. And we continue to believe that we are gaining share in electrical box and fitting markets.

Power system segment sales grew by 13 percent year-over-year, 9 percent sequentially. Utility capital and MRO budgets are growing along with the general recovery in utility balance sheets after several years of cutbacks. This is not substantial growth, but there does seem to be a positive shift underway in these markets. Operating margin for the segment, 9.5 percent, that is 80 basis points above last year, but down 2.5 points from the first quarter as we were not able to completely pass cost increases on to our customers via selling price increases.

And finally, the industrial technology segment’s second quarter sales were down 6 percent from last year, due mostly to lower sales of high voltage test systems. However, second quarter sales in the businesses that make industrial controls and heavy industrial reels grew very nicely. Despite the lower sales, segment operating margin for the second quarter of 10.8 percent was up by three full points from last year, driven by productivity improvements across all of the businesses in this segment.

A couple of other notes. We remain on track with our project plan for the Hubbell 2006 system initiative for both spending and preparation for the first go-live of the SAP software later this year. We expensed about $2m pre-tax in the second quarter for the program, as I said, $5m pre-tax for the first half, and we expect about the same pace for program expense in the second half. We also expect to capitalize between $10 and $15m this year for Hubbell 2006. The P&L benefits from this investment are expected to start in 2006 with full year annualized savings of $10 to $15m in 2007.

And finally, our effective tax rate for the second quarter was about 27 percent, slightly lower than the first quarter due to a higher tax rate associated with the restructuring provision recorded during the second quarter. But the effective rate was slightly higher than the rate used in second quarter of last year due to a larger component of U.S. taxable earnings this year.

And now back to Tim for some comments on the rest of 2004.

Thanks, Bill. Based on the strong first half results and a steady recovery in our core markets, we now expect our full year’s sales will approach $2 billion over—with a 10 to 12 percent sales growth. During the last call we suggested that at least one full point of operating margin would be experienced in 2004 and more if sales grew faster. We are now expected operating margins to improve between 1.5 to 2 points before restructuring. The higher sales outlook, combined with more operating margin improvement, results in an increase in our full year 2004 expected earnings per share to range from $2.35 to $2.50, up from our previous estimates of $2.15 to $2.40. We expect to record, as Bill said, somewhere between $20 and $30m of restructuring expense in 2004, which is not included in the $2.35 to $2.50 earnings per share estimate. We continue to expect that cash flow from operations will exceed net income despite the need to support a higher level of sales growth within additional working capital.

Let me comment on our strategic initiatives. We continue to work hard on six key business initiatives. We are making good progress on our lean initiatives. We have transformed major areas of our operations and as a result have been able to consolidate factories and warehouses into less space and at the same time generate process improvements and productivity gains. But we are far from where we want to be. The more we get into this, the more opportunity we see. Our lighting restructuring actions continue to be executed on schedule. And the early returns on the amount we have invested so far are encouraging, evidenced by the lighting business’s first half financial results were again above our expectations.

But we are also pursuing restructuring actions in other businesses – factory consolidation, warehouse consolidation, will continue for the next two years in most of our businesses as a positive effect of lean and the low cost sourcing take effect. We continue to make progress on turning our inventories faster, but there is still opportunity remaining here. We continue to increase the amount of product that we source from low cost countries, whether from our own factories in Mexico, or sourcing from third parties in the Far East. And as Bill said, we are on schedule and on track with our initiative to implement a common standardized SAP business software across all of our businesses.

And finally, as you have heard in the financial report, our balance sheet and our ability to finance substantial growth continues to strengthen. In addition to our internal growth initiatives, we continue to search for acquisitions that will enhance our core--our position in our four core markets. We have a long history of buying smart and integrating businesses smoothly into Hubbell. We will not deviate from this approach and we are confident that we can find attractive acquirable companies that are priced right.

In summary, we are very pleased with our progress so far this year, but we see plenty of opportunity in front of us. And with those comments, we would be happy to answer any questions.

(Caller Instructions.) We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jeff Sprague with Smith Barney.

Hi. Good afternoon. Thanks. First, just on power margins, timber build--the fact that power declined sequentially and electrical did not. Could you just talk a little bit about, you know, kind of the ability to get pricing in that market relative to the other markets and if there is anything else that would you know, kind of explain the drop other than cost pressures.

This is strictly an issue of the timing of our ability to recoup the costs. And, as you know, in dealing with public utilities, a significant portion of your position is on blankets that are established in the fall and the fact that we have been able to change the price on those blankets is a very positive indication for us. But the time it takes to get that done is a longer amount of time than it takes to execute a price increase in the electrical market. So this is a timing issue and we would expect our margins to steadily improve in the power business and that we get back some of that lost margin as time goes on.

And also just on price generally. You know, when you look across, as a general statement I am sure it really depends--goes product by product. But where you have pricing set now as you just kind of annualize it going forward, do you fully recoup the costs as they stand now or does that require kind of a further pushup in price?

There are a series of limited but very specific price increases that are taking place in the electrical and utility business around steel products. And as I mentioned earlier, there are certain types of steel whose prices are rising as late as August. And so, I can't tell you that it is at the end, but I believe that the vast majority of price increases are over and that by in large for us, if they hold, we will offset on a run rate basis the cost that we see so far. We have some small price increases. For instance, we have a second one coming out on pole line hardware in the utility business just because of the magnitude of our steel increase, but these are quite limited and not the broad price increases that we talked about earlier in the year.

And I guess, finally, and I will get back in line, it certainly makes a lot of sense that there was pre-buying. The numbers would seem to bear that out. But what level of specificity do you have in measuring it? Do you have a good sense of truly the impact on the top line?

Probably the most significant area where that has occurred is in our lighting business in let’s say the fluorescent business and the outdoor architectural business. In an effort to protect jobs underway, we gave a little more latitude to accept orders as the industry did, and so we built quite a backlog there. At one point it reached probably $30m higher than normal. And so that really is our biggest one. The rest are in the, you know, smaller range. But we have not shipped that backlog at this point. So that is yet to come, spread out over the third quarter and early into the fourth probably. Other than that, it's relatively contained, you know, a few million here, a few million there.

Okay. Thanks a lot.

Sure.

Your next question comes from the line of Bob Cornell with Lehman Brothers.

Hey. Good morning. Good afternoon, everybody. You know, Tim, you took the guidance to 10 to 12 percent for the year. I wonder if you could, you know, take that apart and talk about how much of that is price at this point versus volume, And then, maybe you go into which of the end markets now would look better to you relative to the prior guidance, which I think was 4 to 8—4 to 8.

I believe the overall effect on our volume would be 2 to 3 percent--.

--Price. Your price--.

--Yeah. If you annualized it. So if we are at the 10 to 12, you can subtract that and get a real volume number. By market, where we have been very pleasantly surprised has been our utility business. But I am at the same time a little cautious that the rapid ramp up in steel prices have maybe caused utilities to protect themselves. So it is quite difficult to tell as we have no, you know, through the channel measures what utility inventories are. So at this point it looks very strong and it looks good across all of our businesses and we are pleased with that. And right now, we are saying that kind of rate will continue because we believe there is strengthening in spending in the utility business. Again, it is at a maintenance level. It is not any of this business that we talked about, the grid and all of that. That really has not begun to happen.

The other area that has done quite well for us and held up all year, and we would expect that to continue, is the residential business, even though numbers which compare volumes of housing starts month to month. If you compare the year to year, it is still a very healthy market and we thought that market would reach its peak this year, and it has. But it was and remains above most people’s expectation and we feel that will continue all year.

And the other area that has been good for us and encouraging is the starting up of volume at the original equipment manufacturers on the industrial side, our OEM business, and our maintenance and repair business has turned up pretty much in line with the increases in capacity utilization. And those really tell us that factory activity is really rising in the United States and that is good for us now and for the next couple of years.

I see. You mentioned during the call you said that the price cost gap was partially closed. Remind me what you said the cost price squeeze was in the first quarter. What is your narrative to in this quarter and what you see in the third and fourth quarter, if you don’t mind? If you can remember that.

We talked about what we were seeing annualized at that time. And that was a cost increase in the range of $25m. And now we are seeing a cost increase on an annualized rate of $60m. And so our price increases have been targeted to cover that and will cover that. But they don’t cover it on a month-to-month situation and so we are a few million behind in the recovery of our cost increases during the second quarter.

So in the second quarter you were a few being what, two or three?

Yeah, in that range. And I don’t want to be too precise because there is a--there are so many moving parts to that. But I would just say that we're--we feel it is in that range.

Yeah.

Maybe a little more, like three to five we would say we’re behind.

Tolley waving his hand at you there? The--.

--No.

Well, the next question is, you know, given the price increases that were in part of the quarter, you mentioned some other price increases a moment ago. I mean, you know, given the cost increases that you can see, I mean, how would that gap be in this quarter? If it was three to five in the June quarter, what would that cost price issue be in the September quarter?

We would think it would narrow greatly, but the backlog of lighting that will be shipped will be, you know, that I talked about, will be shipped at the old price. But most of the rest of our businesses will be at the new price. So that--the effect of this ability to offset the costs will be much greater and will be closer to parity, but I doubt even in the third quarter will be zero. But it should be much, much smaller.

Okay. Thanks, you guys.

Yeah.

Your next question comes from the line of Tony Bose with A. G. Edwards.

I want to ask a question about the guidance. It just seems to me that maybe it is a little bit on the conservative side. I mean, for the third quarter, as you just said, you are going to be closer to parity. You will have more of the quarter at the increased price. It doesn’t sound like you have an expectation for higher commodity prices in the second half. And it sounds like you are projecting at least 10 percent year over year top point in growth. And on the fact that you achieve solid margins in the second quarter and you only had a partial offset in price--again, it seems to me that you can do better than the top end of your guidance. What am I missing?

I don’t think you are missing anything . I think you are hearing from us that our position has always been one of, you know, a fair amount of conservatism, and we see, you know, a number of things that could happen to us and we always try to factor those into our guidance. So there is just a lot of moving parts, as Bill eluded to. And it is hard to predict with certainty what that outcome can be. Certainly, you can extrapolate to a higher number potentially, but things would have to go, you know, everything would have to break right. So I think we have chosen a range that reflects a lot of details that we seek.

Okay. And just maybe just a little bit premature, but it doesn’t sound like you have really had much of an impact from commercial yet. And I think you stated that that market had bottomed but really had not rebounded. And clearly, your lighting business is exposed to that market. You know, would you care to take kind of a guess at the kind of impact you can have, 1005, from a rebound there and would that be your expectation?

We have seen a nice volume increase in our lighting business in the non-residential construction area and we attribute that to coming back from the major, you know, realignment of the front end of the business with our new lighting agents and our sales force being restructured and gaining back a little of the traction that we lost in 2003. We really don’t see that market being any bigger at the moment, so we think there is upside here and I am a little cautious at what rate non-residential construction will bounce back, but I feel it will. And what, you know, the kinds of things that can slow down that--the ramp--the rate of improvement would be how high steel prices stay in terms of driving up the cost of construction and also with the other materials along with rising interest rates. So I just want a little bit longer to think about that, maybe one more quarter, before we really get into the details of next year. But I see, really, next year as being solidly better for our end markets than they have been through 2004.

Tony, this is Bill. I know you track the put in place--the construction put in place statistics, but the non-resi put in place statistics have been more or less flat lined around zero year over year growth for almost a year now. And the awards are still under water--still negative year over year. So while we believe and all of our market indicators suggest that the market has bottomed, as Tim said, there is no sign yet of it turning up. The predictors, the forecasters, people were paid to predict, say that put in place non-resi should grow from mid to almost 10 percent in over year growth--mid-single digits to 10 percent growth next year. And all that we see, whether it is vacancies in commercial properties, rental rates, and all the other indicators suggest that that is probably pretty good guidance for now.

And just one last question. I mean, what do you think of the more impactful--you know, assuming that interest rates do rise, but also assuming the economy continues to grow. I mean, net-net, is commercial going to be better off then?

Yeah, I believe it will continue to improve. I believe it will turn positive. I believe we will see vacancies decline. It is just that these headwinds of higher interest rates and higher material costs could slow down that improvement, that’s all. It is going to take the marginal project and delay it. That is what could happen.

Okay. Thank you very much.

Sure.

Your next question comes from the line of [Daniel Gutfauld] of UBS.

Hey, good afternoon. Congratulations on a great quarter.

Thank you.

A few questions, first on the earnings this quarter. You gave a pre-tax number on the charge. I was wondering if you could give an after-tax number because I was coming up with 63 or 64 operating EPS and I guess that's off. So, how does the tax rate get adjusted? And, I guess, what is the after-tax charged over?

Well, roughly you take the $10.4m tax, apply a 33 to 33.5 percent tax rate to that and you will get an after-tax impact of roughly $7m divided by shares should be 11 cents a share.

Okay. Thanks on that. Second thing, it looks like you have increased your structuring from 15 to 25, I think it was, now to 20 to 30, should have gone up $5m. What is--was there any project that is in the works or--.

--We did increase the range for full year, Dan, by $5m. That really is only a reflection of what we think we can accomplish this year versus what would have rolled into early next year. And that is all a function of us being able to announce that--and recognize from an accounting point--the restructuring expenses. And I would--I would--there is no significant project that has either been moved forward or backward in our project list. That is just our best estimate with another two quarters behind us of the guidance that we gave in December of last year.

And we talked about, about a year ago, going through a three-year process in which we would continue to shrink our manufacturing base and we are just underway in that overall program in what causes this fluctuation that is the rules around accounting for events and it is a little bit of the timing at which we get these projects completed. That’s all it is. It is not any change to the outcome of the whole program.

Okay. That is helpful. Thank you. And then on the guidance for the year, could you give me color on how that might shake out third quarter versus fourth quarter?

We really don't give guidance on a quarterly basis, but traditionally, the third quarter has been our strongest quarter and it is stronger than the fourth. So probably if you went back and did a three to four year average you would probably get a pretty good split on that.

Okay. And then on cash flow, you said that--I think you expected operating cash flow to exceed net income or did you mean to say pre-tax flow or is that supposed to be operating cash flow? So I guess any color you can give on annual operating cash flow.

The comment on cash flow was operating cash flow in excess of net income. And cash flow is the most difficult number to forecast because it is all dependent on a point in time balance sheet. So we are a little reluctant to give specific values numerically on what our operating cash flows will be. It all really is a function of our fourth quarter sales and how much working capital billed we are going to have to support those sales and how much progress we make on increasing our working capital effectiveness. So I—that is probably as far as we want to go on cash flow guidance.

Traditionally, the second half is stronger for us and there are fewer working days in the fourth quarter, and so receivable balances go down and cash flow goes up and then we do--following the construction cycle, and you know, business starts to slow down in the fourth quarter. And then in the first quarter it is winter, and that starts us off with a slower basis and builds up the second into the third as the peak.

Okay. At this point you are--switching over to capital allocation, your balance sheet--I guess your net cap has been declined pretty rapidly I suppose, and at this point it is pretty low. Do you--.

--It's a negative number right now.

Yeah. I mean if you--negative caps. Are you buying back stock or would you announce a buyback then at some point given where the capital structure is, or is it more of acquisitions at this point?

We do have a--what I call a modest share return program. We announced it last fall at $60m and we intend to buyback shares in the open market or in private transactions. And the intention of that program, really, was to offset the impact of diluted options exercises and that was it. So there is no strategy per se to modify our capital structure. We--our net debt to capital ratio right now is very, very low. We have $300m plus in cash and investable balances and we intend to put that to work. Our first priority for that capital is to make acquisitions and to pile back into our own internal growth initiatives. But time will tell whether we, as Tim said, whether we can find acquirable businesses for reasonable prices. If we can't, we have got plenty of time to regroup and re-determine what our use for that capital should be. But for now, first priority is to use it for acquisitions.

I have one last question. Sorry I am asking so many. But this--these price increases, is there a whole [inaudible] that I guess is going to be going in over the next few months that I guess you kind of announced to your customers during the quarter?

There are not very many that are being--to be announced or just have been announced that have not become effective. They are being realized in the second quarter and into the third quarter primarily. So you could say most of them would be fully implemented during the third quarter. I talked about very limited ones occurring later in the year. Things where steel content is by far the vast majority of the product and as steel continues to rise, it is forcing Hubbell and other manufacturers to face the fact that in some isolated cases our first estimates were understated and we have to come back a second time for a price increase.

With the ones that you have announced, you are saying that if successful, basically, you will cover 100 percent of cost. Does that assume 100 percent success rate or do you only assume for planning purposes maybe 60 percent?

We estimate--we never estimate 100 percent.

So you are basically announcing price increases that are greater than--you know, that are achievable. So that basically if only 60 or 70 percent of that goes through then you will cover your costs.

That is correct.

Okay. Thank you very much.

Sure.

[Caller instructions.] I have a follow-up question from Jeff Sprague with Smith Barney.

Thanks. Dan actually did a pretty good job of hitting most of my follow-ups. But just, you know, on the issue of the capital structure and the share creep notwithstanding the program you have in place. Shares outstanding have kind of crept up here three or four quarters. Why not, you know, at least step it up a little bit, you know, to hold that or just what is your thought there? Are you going to see the share count continue to creep higher?

Our thoughts are what opportunities we are looking at and what we should do with the cash. So we are looking at some other better opportunities and therefore we are hanging on to the cash.

And also, just, you know, on restructuring, just kind of philosophically, as I am sure you may know, I mean, there is a handful of companies in this coverage list that kind of choose not to call out restructuring and just kind of absorb it as they go. Obviously, Hubbell is doing some big heavy lifting here in the near term to kind of change the company and put it on a new course. So we can kind of understand why you are doing what you are doing. But have you given that any thought as you look out a little bit further? You know, a company like this is always going to have restructuring and, you know, maybe over time it's something that should just kind of be absorbed in operations.

We would say we completely agree with that. And we are providing this additional explanation by way of explaining our overall results. And I agree with you that this is, you know, major reshaping of the plant capacity that we have. And as we get to the end of this program, if it, you know, gets down to the much smaller level we will not even comment on it. But given how big it is and how many business units it's affecting, I thought it was in our best interest of our shareholders to understand those components of earnings.

Yeah, I agree. I was just thinking about what we might expect looking out a little bit further. Okay. Thanks a lot.

Sure.

At this time there are no further questions. Are there any closing remarks?

No, Tina, other than to thank each of you for joining us and we will speak to you again at the end of the third.

Thank you. This concludes the Hubbell, Inc. Second Quarter Results Conference Call. You may now disconnect.