Hubbell Inc (HUBB) 2005 Q1 法說會逐字稿

Good afternoon. My name is Natasha and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Hubbell first-quarter earnings press release. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions). Now, I would like to turn the conference over to Mr. Conlin, Vice President of Public Affairs. Please go ahead, sir.

Thank you, Natasha, and thank each of you for joining us today. We released our first-quarter earnings press release this morning at about 9:00, a little earlier than usual, which is why we're having this conference call a little earlier than usual. The press release is available from the wire services and it's also on the Hubbell website at hubbell.com.

This conference call is available by telephone and is being simultaneously Web-cast, also through the Hubbell website. You can hear a replay of this call in two ways. First, by telephone two hours following the conclusion of the call. And if you choose to hear it by telephone, you'll need to dial 706-645-9291 and the replay passcode is 5552370. The second way of rehearing the call will be on the Hubbell website. It will be available there beginning 24 hours from its conclusion, and it will be archived for the next year. If you want to access the audio replay through the website, once again, it's hubbell.com. Click on Investor Relations and then Audio Archives and you'll be prompted to have it start the replay.

Let me also refer each of you to the paragraph on our press release this morning concerning forward-looking statements. Subject of our conference call today is first-quarter results, but it is conceivable that we could look ahead with some expectations. Those expectations will involve inherent assumptions with known and unknown risks and other factors that may cause actual results to differ from what we may discuss here today. Accordingly, please note that paragraph on forward-looking statements and please incorporate it in today's conference call by reference.

With me, as usual, Tim Powers, CEO of Hubbell Inc., and Greg Covino. I will now turn the call over to Tim for his introductory comments.

Thanks, Tom, and good afternoon, everyone. The start of 2005 has been a challenge, particularly on the volume line of our electrical segment. Certainly, we're not pleased with our performance in this first quarter, but we remain optimistic for the full year. 2005 is expected to be a better year than 2004. 2005 should be a year of growth and improvement in our strategic initiatives, and I will have further comment on these toward the end of our -- my opening remarks. As Tom mentioned, our press release and conference call last week hopefully shed some light on a few of the issues which affected us in the first quarter and which have prompted us to revise our full-year 2005 earnings guidance. In addition, as noted in the call, our first-quarter results include certain transactional expenses. We cannot provide any further information than is included in the release on that issue.

Our efforts in the quarter were clearly centered on managing through the slow start to the year in certain of our core markets. Nevertheless, we haven't let that distract us from our focus on strategic initiatives. As a reminder, in the fourth quarter, we took a major business live on SAP, on time and on budget.

As a fully integrated system, SAP has and will have an extremely positive impact on the way we transact business, including the reliability and timeliness of information, daily transaction discipline, and better service to our customers. To date, I continue to be pleased with the work of our team and the functionality of the system. All major business processes have been implemented and are working just fine. Last quarter, we talked about having a backlog of customer shipments, factory inefficiencies and a higher level of project expense that accompanied this go-live. Through the end of March, we have made very good progress in resolving these issues and bringing the business current with its processes. That said, certain costs related to items such as expedited deliveries were still incurred in the quarter. In addition, the affected plants and warehouses continue along the learning curve toward becoming more efficient. And these items did have a negative impact on the first-quarter results. But we expect to be at or close to the historic productivity, service and cost levels by the end of June.

Over the last several quarters, we have talked a lot about cost increases. Raw material and energy increases continue to be a challenge. While we have seen some moderation in certain grades of steel, other metals and energy-related costs have increased; increases have more than offset the benefits. As mentioned in our call last week, we find it difficult to realize necessary pricing increases, including those enacted last year in the businesses like lighting, which needed to offset cost increases which began early in the second quarter of 2004 particularly in such metals as steel, but also copper, aluminum, nickel, and zinc. Many of the latter group, which have continued to rise into 2005. On a year-over-year basis, the group of business most affected by the raw material increases saw operating margins decline due to these increases. Similar to what we have talked about each quarter of last year, during the first quarter we continued to announce and implement price increases. Many of our businesses' pricing actions have been realized and have been able to offset most of the higher costs, including actions in Industrial Technology segment, in wiring systems, and to a lesser extent, our Power segment. However, in lighting and electrical products, we did not completely recover all of the cost increases, and the pricing levels have not held in these markets.

The combination of items I mentioned produced lower year-over-year operating margins in both our electrical and power segments. Margin shortfalls were not completely unexpected. As we talked in our last conference call, cost and price were never expected to fully reach parity by March of 2005. In the power systems business, we feel good about the progress we've made and the overall results. In the Electrical segment, the combination of continued and in some cases escalating costs, lower sales and competitive pricing produced lower margins than we anticipated. Lower earnings also led to lower cash flow numbers. More important, the combination of higher year-to-year incentive payments and planned inventory build and the normal first-quarter seasonal cash needs produced a net cash usage in the quarter. Greg will lead you through the details of these and other quarterly figures in a minute.

First, let me give you an overview of what I am seeing in our markets. The exact pace and magnitude of recovery in many of our markets continues to be hard to predict. However, we believe forecasts for moderate improvement are still valid, but the pace of any strengthening will be slow. Industrial production, maintenance and repair spending, and capacity utilization are more in line with expectations and are all steadily rising, many of which are reaching multiple-year highs. Utilities are spending more on maintenance, although major T&D grid infrastructure investments that we expect will occur over the next few years has not yet begun. As I alluded to last quarter, we have seen our residential markets remain strong a bit longer than some had predicted. But recent interest rate hikes will certainly take their toll on new resi construction. The key market is nonresidential construction, which began the year below expectations, but is still expected to respond to moderate growth as the year progresses. Overall, we continue to view the recovery as slow but fragile and dependent on there being no shocks to consumer confidence, interest rates or other project deterrents such as an additional round of rising raw material costs.

But, lacking those shocks to the overall economic recovery, we think that 2005 will be a better year for Hubbell's markets. And I've said before, the majority of our markets are improving. Now I will give -- I'll have Greg give you a bit more detail on the numbers for the quarter.

Thanks, Tim. Hi, everybody. As Tim said, we are dissatisfied with the progress in the first quarter, and that's despite the year-over-year sales growth, due to the decline in operating margins year-over-year and the lower cash flow. However, we see reasons to be optimistic on achieving good results for the year, as Tim said. Certain of our end-use markets have yet to show any clear signs of being able to achieve the consensus recovery forecasts that have been predicted for the year. And, as Tim said, that's particularly evident in non-resi construction. However, we continue to agree with predictions that call for improving conditions throughout the year.

Our volume in the first quarter increased, but increased primarily due to the carryover effect of price increases implemented throughout the latter two-thirds of last year and, to a lesser extent, new 2005 price increases. And that's all on one less shipping day in '05 in this first quarter versus the '04 first quarter.

On a unit volume basis, our unit volume in many businesses was flat or down slightly year-over-year as a result of fourth-quarter 2004 prebuying, principally affecting lighting, as we've talked about; adverse weather conditions throughout the U.S., which slowed construction activity; and overall very highly competitive marketplace. Strong oil and gas project business and favorable foreign currency exchange rates did positively impact our harsh and hazardous businesses, although the effects of the foreign exchange rates were well under one percentage point of the year-over-year sales improvement.

First-quarter sales were down 3% sequentially from the fourth quarter of '04, despite higher shipping-day totals, and that's due to the negative electrical segment comparison. Both power and industrial technology sales were up both sequentially and year-over-year. Our first quarter reported earnings -- $0.46 a share. That compares with last year's first quarter of $0.56 a share. And both periods include restructuring expenses. This year, about $0.02, and last year about a penny, and, of course, this year's quarter included the unusual transactional S&A expenses of $4.6 million or $0.05 per diluted share. So if you adjust for both of these items, first-quarter earnings in '05 of $0.53 compares with 2004's first-quarter earnings of $0.57 a share, and that's a decline of about 7%.

On the margin line, operating income margin, 8.7%, as reported, for this year's quarter. That compares with first quarter of '04 margins of 11%. But again, on an ex-items basis, if you exclude the charges in both years, margins this year of about 10% compare with margins of 11.3% last year. So a decline of just over a point. Again, sequentially versus last year's fourth quarter, margins also fell by just about a point. Clearly a disappointment, but not entirely unexpected, due in part to more recent commodity cost increases, and that includes record oil prices and the effect that they had on freight and utilities. Modest softening did occur late in the quarter in certain categories of steel, and that was welcome. But it really had little effect on our 2005 costs year-to-date, which on average, as a reminder, are running 60 to 70% higher than the costs we experienced in the first quarter of '04.

We've talked a lot about price increases. Price increases certainly did offset the majority of these costs. However, two things on price. First, certain of the actions have only recently just become effective, and those will benefit us in future quarters. And second, particularly in lighting, we haven't seen competitors follow through on announced price actions, as we talked about last week, and that's certainly depressed price levels throughout the affected markets and probably cost us some business as well. However, we think the right course of action is to stay firm on price and attempt to realize the price changes that are needed.

In addition to the ongoing price cost issue, our profitability in the quarter was hurt by unexpected softness in lighting volume due to lower orders, caused again by the uncooperative weather conditions in many parts of the country in the first quarter and the prebuys that occurred in 2004's fourth quarter resulting from announced November 2004 price increases. And as we noted in the release, these conditions certainly contributed to lower unit volume in certain of our plants, which in turn produced negative manufacturing variances.

Cash flow -- cash flow for the quarter was below last year, with operating cash flow reflecting a use of cash of 1.4 million versus cash provided by operations in last year's first quarter of $25 million. This year's cash flow from operations was negatively impacted by a build in working capital, as you can see in the release. And that resulted from a couple of discrete things. First, we talked about inventory. On inventory, if you exclude the $2 million or so that came along with a small power systems acquisition, we feel we executed on a planned inventory build in a few of our businesses, which is consistent with the start of the U.S. construction season and our forecasts for future business. We also had inventory on hand to support a number of plant moves that are underway in both lighting and wiring systems. But, that said, there's no question that the slowdown -- the sales slowdown contributed to inventory levels being higher than we would like. However, we feel pretty good about being able to work off that excess build as we move ahead in 2005.

Second in the quarter, on cash, we funded our normal first-quarter incentive payments. However, amounts were above the prior year, and that's due to coming off a very strong 2004 annual period on which these payments are based. And lastly, the carryover effect from the late 2004 conversion of wiring systems onto SAP, as Tim said, resulted in higher levels of disbursements as we got caught up there against accounts payable, while accounts receivable levels at wiring remained above their historical averages. And we think that's all having to do with what we see as a normal progression of that business through the SAP learning curve.

After $13 million of capital expenditures pre-cash flow was the use of cash of $15 million. This year's CapEx compared with just under $7 million spent in the first quarter of last year, with the increase being primarily related to capitalized costs for the business system and the first round of costs in connection with the construction of the new lighting headquarters in South Carolina. However, nevertheless, we remained net debt free at the end of the quarter, March 31, 2005.

Now, onto the segments. Electrical segment sales were up 2% year-over-year with increases reported in all of the four businesses that comprise the segment. However, on a unit volume basis, as we spoke of earlier, we saw flat to down sales in each of these businesses. In rough and electrical products and lighting, in those markets we experienced difficult market conditions, lower order input levels year-over-year as a result of the weather and the competitive marketplace pricing. In addition, 2004 prebuys again resulted in orders and shipments being shifted from '05 into '04. And that primarily affected lighting. However, prebuying also created a very typical comparison quarter-over-quarter at our RACO business, which reported record sales in March of last year in advance of the mid-March 2004 price increase announcement. And again, harsh and hazardous sales grew by double digits due to the strong project market we're seeing. Electrical segment margins for the quarter -- 9.4%, and that's just under two points lower than last year's first and last year's fourth quarters due to the lower sales and the resulting absorbed fixed costs in our manufacturing plants, as well as in recovered commodity, raw material, freight and utility cost increases. In addition, wiring margins were lower year-over-year as a result of continued higher costs and inefficiencies caused by the new business system, although significant progress, as Tim said, was made in getting current with our backlog of orders during the quarter. And in harsh and hazardous margins, those were up nicely, consistent with the sales and also due to a good mix of sales.

At Power, sales improved 12% year-over-year and were even on a sequential basis with the fourth quarter of 2004. The year-over-year increase reflected higher shipments, the carryover effect of price increases implemented in 2004, as well as about two points or so of improvement associated with the acquired commercial anchor business earlier this year. Operating margin for Power declined modestly year-over-year due to the anticipated negative effect of cost increases in excess of realized price increases. However, margin growth of just over 1.5 points did occur versus last year's fourth quarter. And that's an indication, as we said, that the segment is close to having recovered the majority of the cost pressure being felt throughout the industry. Successful low-cost product sourcing initiatives also helped to offset the effect of higher freight and energy-related costs this year.

Finally, in the Industrial Technology segment, first-quarter sales and margins up very nicely versus both the prior year and sequentially versus last year. Many of the segment's businesses continued to benefit from higher-based commodity costs, which actually benefit many of the customers served by this segment. Nice sales and margins gains were also reported by electronics specialty communication business. First-quarter capital spending, I said $13 million. That compares with $12 million of depreciation and amortization, and we still expect our full-year '05 CapEx to be in a range of 50 to $70 million, again, higher than last year's $39 million driven by our investment in the new lighting headquarters and the information system, SAP.

As has to do with the project, we expensed $2.3 million and capitalized $4.6 million for the program through the first three months of '05, and that compares with expense and capital of $3 million and $600,000, respectively, in the first quarter of '04. However, it's important to note that the '05 figure does not include just under $1 million of amortization on the capitalized balances, which, of course, is an incremental cost year-over-year.

Our outlook for the year is to expense between 10 and $12 million for the project, again, excluding amortization and capitalizing a similar amount -- 10 to 12 million. Project to date, we've expensed 15.1 million and capitalized just under $21 million, for a total cost of about $36 million -- you know, with the better part of the configuration complete and one out of five of our platforms live on the system. So total cost for the program still expected to be in the range of 50 to $60 million through the end of 2006, with the costs evenly split between capital and expense. And just finally on our effective tax rate, the recorded rate, 27.4% -- that's a blend of the core earnings rate of just under 29% and the higher rate applied to the special charges. And the core rate is in the range of what we said we would do earlier, and it's also in the range of what you might expect for the full year. So, with that, I will send it back to Tim for some more comments on the rest of '05.

Thanks, Greg. We expect full-year 2005 sales to be consistent with our earlier guidance, coming in at above 2.1 billion with year-over-year sales growth in the range of 5 to 7%, which is slightly better than GDP forecast of organic growth along with one to two points of price carryover and new product effects. We expect full-year operating margins to be the same or slightly higher than last year due to the cost price challenge. Our full-year 2005 earnings per share is expected to be in the range of 255 to 280, without restructuring costs. We now expect to record restructuring costs in the range of 15 to 25 million, which is $5 million below our previous estimate. Again, not included in our 255 to 280 guidance. We also continue to expect cash flow from operations will exceed net income, despite the need to support sales growth with additional working capital.

On our strategic initiatives, we are continuing to pursue our strategy of lean thinking, the execution of restructuring actions across all of our business, the focus on working capital efficiency and low-cost country sourcing initiatives. And we are making good progress on our lean initiatives; we have transformed major areas of our operation, 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 lean processes, the more opportunity we see.

2005 will be an important year in our business system implementation as we take additional businesses live, leveraging the tremendous knowledge and skill base that we have built up in the Company over the last 15 months. Our lighting restructuring actions continue to be executed on schedule, and the return on the amount we have invested so far has been good. Important plant and office moves are both underway and planned, and we'll certainly be mindful of the difficult marketplace assignments our lighting management needs to execute as we contemplate further moves. We continue to increase the amount of product that we source from low-cost countries, whether they be from our own factories in Mexico or sourced from third parties in the Far East. And finally, our ability to finance substantial growth remains strong. In addition to our internal growth initiatives, we continue to search for acquisitions that will enhance our position in our four core markets. We're confident we can find attractive, acquirable companies that are priced right.

In summary, we are certainly challenged by the way the year has started. However, we expect our efforts will make 2005 the fourth consecutive year of growth in sales and earnings for Hubbell. And with those comments, Tom, we are prepared to take some questions.

Natasha, if you would remind the audience what they need to do, we'll move to the questions.

(Operator Instructions). Bob Cornell, Lehman Brothers.

A lot of us had a chance to think since you reported the preannouncement, and one of the things I was wondering about is just how the restructuring, consolidation, re-footprinting of the commercial industrial lighting products have gone since you bought LCA. What did you do to consolidate the businesses there? Where are you in that evolution? Is that footprint consolidation complete, and are you happy with the cost situation you've got in that business now?

We're about halfway to where we want to get with the plants -- maybe a little bit more than halfway (multiple speakers)

Hey Tim, would you take a minute and explain what really is going on in terms of what plants you started with -- yours and LCAs -- what you're going to do, and where you are now, and where you want to get to? And just give us a little bit of a more in-depth understanding of what's going on there?

Sure. The first task, when we bought Lighting Corporation of America, was to eliminate the duplication of product lines between our Legacy Hubbell lighting business and Lighting Corporation of America, the largest impact of which was in fluorescent, where last year we closed one plant. In addition, what's going on is that we had a very decentralized business organization the way it was run under U.S. industries, and that was that if you wanted a quote from us, you had to get that information from quite a few sources to quote one job. So, in our consolidation of our headquarters in South Carolina, we're bringing together those people who price product and who are the marketing managers and so forth -- the front end of the business. At the same time, we're outsourcing and moving two groups of products. One is the most commodity-oriented products, with forecastable long-term demand, and those products, as long as they have small cube, which means not fluorescent, are moving to Asia. The second group, which doesn't which has larger cube or lower value added, but needs lower costs, are moving to Mexico, and we have expanded our Tijuana plant and our Juarez plant and we're moving products from those existing facilities in the U.S. to lower-cost facilities in either Mexico or, again, outsourcing.

And then, as a result of that, those two initiatives, we are consolidating behind that those plants which are either very underutilized or don't have a mission in the future. So, really, it's an outsourcing initiative. It's a gathering together of the front end of the business that is going on. So lots of moves are involved in this, and lots of detailed planning. And we are very, very satisfied with our management team and their efforts, and as we have gone through and we've divided this program into I would guess as many as 30 discrete steps, every single one of those steps that we have executed so far has been -- or met our expectations for timing and payback as they have occurred. So we have seen margins rise in our emergency and exit business, in our down and track business, as we have moved products around. We are also gathering people together in Spartanburg, where we talked about the consolidation of the front end.

So I am very pleased with that. It just takes time. That's also an area where we have five or six legacy systems. So it's also -- has to be timed with our implementation of SAP. So, lots of moving parts. But everything is working well so far.

You know, just listening to you go over the range of things that are either going on or to go on, one of the comments you made a week or so ago, whenever it was you preannounced, you said that some other companies that haven't followed you in price may have a different structural cost, a different footprint or thereabouts. It seems to me that while the end game here might be a low cost, it seems like you could well be a higher cost than some of your competitors in the midst of this transition. What do you think of that?

I would agree that we're going to experience some restructuring costs, but we're trying our best to predict and quantify, and what we're seeing from time to time is some inefficiencies occur with the transition of product lines. But, up to this point, we have been able to manage those quite effectively and been able to predict them accurately. And I don't think we're -- I have no expectation that our finishing position will be anything but the lowest competitive position in North America.

And when are you going to get there?

I would say we're about probably a year away from finishing this up. Maybe 15 months.

Just another question. Would you give us an update on the comments you made about the way the lighting and the quarter exited in March and the tone of business in April so far, and the cost price position sort of in the latest -- most recent three weeks in April?

We're following sort of a normal sequence of months. Each month, January, February, March, was a better month than the prior month. But each one of those months was below where we thought the year should begin. And I want to go back to that -- how nonresidential construction has begun in the United States and really, if it is the center of where we've had a disappointment in markets or a lower start in markets. And the numbers, certainly, that we thought the year would begin would be sort of flat with last year, and then growing stronger, and what we've seen from the forecasts as they've turned into actual numbers in Dodge and others -- McGraw-Hill -- have shown that the nonresidential market has started out below, at least, Hubbell's expectations and against most of our forecasters' expectations. And really, it's the level of business in the commercial market that is precipitating, I think, the actions to try to get volume and the extent of the fighting over price.

But I'm still pretty confident that we're going to see that normal strengthening, and I am counting on that there is going to be an improvement year-over-year in the nonresidential construction. Although we're not expecting that increase to be large; just 3, 4, 5% would be enough for us. But it has to improve, certainly, from where it is. Our other markets are behaving at our expectations, or in the case of utility and industrial, slightly better. So we're still optimistic about the year, but certainly we're off to a slow start in the nonresidential construction area.

Jeffrey Sprague, Smith Barney Citigroup.

A couple of questions. Just to clarify -- I believe I asked this on the prior call, but the 4.6 million of the transactional expenses that you highlight are not included in the -- I'm sorry, are embedded in the 250 to 280 guidance, is that correct?

That's correct.

That is correct. I guess I don't understand kind of the disclosure and then the secrecy around this number. You know, if it's related to something material to your strategy or portfolio or something like that, I don't know why you would even bother to call it out because it's not really a restructuring item. It's just an SG&A item. Can you shed any light on what's going on here?

Only that the magnitude of it has affected our earnings and we're hauling it out to specify the size of it and the nature of it. That's all.

You wouldn't be required to call this out though, right?

We thought it would -- 4.6 million on OP in this quarter is a material item, from our point of view.

Okay, that's odd. Could you also just tell us on the restructuring piece alone, what the tax effect is there, or the after-tax effect of that restructuring?

This is Greg, Jeff. We typically apply, for a restructuring that's going to occur in the U.S., a 37% rate or so.

Okay. And just on nonresidential construction, I know that your products go into distribution, obviously, and it's hard to figure out where they ultimately end up. But when you think about your sales in the nonresidential construction markets, do you have a sense of kind of the mix of new construction versus remodeling, upgrade, retrofit -- just in that market specifically?

Vast majority is related to new construction -- vast majority. And (technical difficulty) remodeling market, but it is not anywhere near the 50% of the market. It's much smaller.

Okay. And why have you lowered your restructuring forecast? I guess it means you're ahead of schedule somewhere. But can you give us some color on that?

No, I think it is -- it's not more to do with the total cost of the restructuring thing. It is very difficult for us, under the accounting rules, to predict the timing of when things get expensed and when they get experienced. And so, it looks like some things that were going to be in the fourth quarter might occur in the first quarter, or probably will occur in the first quarter of '06. So it's really related to the sequence of events as they roll out, rather than whether or not the whole project is going to be 5 million or less than it has been. We are still on schedule with everything we said, and we said it was a three-year program, and it still is a three-year program. And we're sticking with our original estimates and our original payback.

And I just wonder, just thinking about the prebuy, given kind of the disruption that that caused. And certainly then, kind of in the wake of the response in the marketplace. Is it your understanding, or would your intelligence of the marketplace lead you to believe that everyone preannounced the price increase and there was a kind of an industry-wide prebuy and kind of the ranks got broken later as we got into the quarter and people kind of wavered on holding on price? Or were there some players just kind of from the get-go that weren't really going for the same price that you were going for?

There was, in our lighting industry, an allowance for many jobs that were already in the pipeline, more so than other types of products. So that would give rise to even the spike of orders in the fourth quarter coming in at old price. And then, even though the price increases were certainly not the same, but within a relevant range, it's just that those prices as we see them as jobs go forward are not being followed through. And we have tried very hard and lost a number of jobs because our prices have been higher than those around us.

(Operator Instructions). Robert McCarthy, CIBC World Markets.

Could you give me a little more color on the pricing effects in power systems -- how much of the year-over-year comparison price?

I don't exactly have that quantified, but I will tell you that price increases in December and January are being realized, and we are very pleased with that marketplace and our ability to recover costs. And we just have experienced part of the quarter, particularly January and the early part of February, when we were shipping product at the old price. Now, we've gotten a 6 or 7% -- or whatever that number is, it's in that range -- average cost increase -- price increase on the steel-related products. And that's been very helpful and it seems to be holding pretty well, and I believe it will hold.

Any update on the CFO search?

That's underway. We're working hard at it and interviewing, and just as quickly as we can conclude it, we will make an announcement.

And in the harsh and hazardous end market, any particular color there on where you're seeing particular areas of strength in oil and gas?

Certainly, there is more worldwide than in the North American space. That means I'm saying the Gulf Coast is not as strong as other areas of the world. Certainly Russia is active. Areas in the Far East along Africa are active. And certainly, our small but profitable businesses in the UK -- that's Hawke and Chalmit -- are doing very well, and our Killark business is also doing much better this year. So we're quite pleased with that product. We just wish it were a little larger part of our business.

Bob Cornell, Lehman Brothers.

Just a couple of follow-ups. You indicated that all the pricing actions haven't taken full effect in the March quarter. If they do take effect at least to the extent that they are holding, what will be the average price increase across the board or maybe in Electrical, let's say, in this June quarter?

That's a hard number for me to estimate, Bob. (multiple speakers)

Give us a sense of what sort of price increase did you have in first-quarter revenues in Electrical, and what that might be in the second quarter? Ballpark?

Well, I'll give you for example, wiring device hasn't had any. Wiring systems hasn't had any in the first quarter. So they had some last year. So it is very difficult for me to answer that. I really don't think I want to answer that, because I really don't have a solid number to give you an overall answer to that. But it is improving. It should improve, as Greg indicated, quarter-over-quarter. But for me to quantify that, I'd have to go back and do some work. Maybe I can write that down and try to be prepared next quarter to be a little bit more responsive on the total effects of all this.

And just -- maybe just go back into the materials cost question. You said that some of your raw (ph) signs of moderation. Is that an end-of-quarter comment or a very up-to-date comment, and maybe just give us a little more of what you think is going to happen going forward in terms of some of these raw material cost issues, based on maybe conversations you've had with suppliers as opposed to what's in actual inventory or shipments.

Okay, we have seen a softening of steel between 5 and 7% from their peak. The problem -- the challenge for us is not all of our product lines got caught up with the cost recovery necessary to overcome that peak. And that's our lighting business and RACO business. Other areas of cost, like zinc, which goes into the plating of many of our steel products, has just gone through the roof over the last three or four months. Also, copper certainly has gone back up again. So it's a mixed bag, and certainly the cost of energy has risen dramatically and that's kind of been a delayed process working its way through the system. So these are the ones that are still going up. Steel has softened. The forecast for steel will be to continue to soften slightly through the second quarter and then we have a divergence of opinion. A small but large minority think it's going to go up. And a slightly larger majority think it's going to continue to soften. So all I can see from pricing with our suppliers is maybe 90 ahead -- 90 days ahead, and we see no further price increases in steel, and perhaps we can do a little better.

How much of your steel buy is locked in and how much has a downside price protection?

I would like to tell you that we have protection, but since this thing began a year or so ago, the steel industry hasn't honored its contracts. As far as we as customers are concerned, don't have any kind of price protection. We may have something on paper, but if the industry decides to go left or right, they have been going left or right without regard to what's on paper.

I guess I was wondering if you guys ended up locking in a good percentage of your steel buy at peak prices or whether you got some (multiple speakers)

No, no, we have negotiated most of our consumption at these lower rates. And we think we have purchase orders that cover us through the first half of this year.

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

No, other than to thank you, Natasha, and to thank each of the listeners for going through the call with us. Thank you.

This concludes today's Hubbell first-quarter earnings press release. You may now disconnect.