Hubbell Inc (HUBB) 2005 Q3 法說會逐字稿

Good afternoon. My name is Vanessa and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Hubbell Incorporated third quarter earnings press release conference call. 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).

I would like to turn the call over to Mr. Tom Conlin, Vice President of Public Affairs. Mr. Conlin, you may begin your conference.

Thank you, Vanessa, and good afternoon, everyone. We released our third quarter earnings press release this morning, which is available from the usual sources including the wire services as well as on the Hubbell website at Hubbell.com.

This conference call is available by telephone and is being simultaneously webcast, also through the Hubbell website. You can hear a replay of this telephone call in two ways. First two hours following the conclusion of the call you can hear the replay by telephone by dialing 706-645-9291. You'll need a pass code and that is 1385551.

The second way of listening to a repeat of the call will be on the Hubbell website. It will be available there beginning 24 hours following the conclusion of the call and it will be archived there for the next year.

If you want to access the video -- I'm sorry -- the audio replay through the website, once again it is Hubbell.com. Click on the Investor Relations tab, then the Audio Archives tab and you'll be prompted as to how to start the replay.

Let me also refer you to the paragraph on our press release from this morning, concerning forward-looking statements, subject of our conference call today is the third quarter results. But we are likely to look ahead and provide some expectations for the remainder of the year. Those expectations will involve inherent assumptions with known and unknown risks and other factors that can cause our actual results to differ from what we may discuss here today in our projections.

As a result, please take special note of that paragraph on forward-looking statements. And I would like to incorporate it in our discussion here today by reference.

With me as in the past, Tim Powers, CEO and President of Hubbell Incorporated and Dave Nord (ph), Hubbell's Chief Financial Officer. I will now turn the call over to Tim for his introductory remarks.

Thanks Tom. Good afternoon everyone. And thanks for joining us.

The first order of business, joining us today is Dave Nord, our new Senior Vice President and Chief Financial Officer. Dave joined the Hubbell team just about a month ago on September the 19th. He comes to us from United Technologies most recently as Chief Financial Officer of the Hamilton Sunstrand (ph) business. Now that our third quarter earnings are reported I hope that you'll all take the opportunity to meet with Dave. I know that he is anxious to get to know each of you as well.

We will follow the regular format, where I will give you an overview of our third quarter results, turn it over to Dave for more detail on the financials and then back to me for comments on the market and the outlook.

Our third -- our results in the third quarter were very good, consistent with our expectation for improving performance as we discussed three months ago. Power Systems performance was an important contributor to our results. The segment benefit from a combination of its storm preparedness strategy, progress in the area of cost price, and the impact of acquisitions, including the Delmar Brazilian acquisition which closed in the quarter.

The Electrical segment reported sales increases at both wiring systems and Hubbell Electrical Products and reported overall improvement in operating margins from the first and second quarters of the year. Lack of recovery of the nonresidential construction market continues to result in lower unit for -- lower unit volume for our affected businesses in this segment, including our commercial and industrial lighting fixture businesses. Strength in the residential fixture market offset that impact.

Energy-related costs continue to be an area of attention for our management team. As we have worked to mitigate the impact of commodity cost increases over the last year, we are now dealing with the impact of higher fuel costs which have created headwind on transportation cost particularly in lighting, but also affecting the energy costs of all of our factories. As referenced in our release, we closed a number of small but important acquisitions in the quarter.

Deals announced with the prior quarter release, Victor Lighting and Delmar, broadened the offering of our existing Power and IEC lighting businesses, respectively. Also closed in the quarter were small product offerings acquired from Siemens, which have been added to our Industrial Controls business in the Industrial Technology segment. These properties represent both a continuation of our global reach in terms of market and product sourcing capability, as well as our success with our lean programs. As all but the Brazilian Delmar business are being accommodated into existing Hubbell facilities as a result of space reduction facilitated by lean (ph).

Another area of improvement in the quarter has been our asset management. As evidenced, our cash flow in the quarter continued to improve as expected. We made progress on improving our trade working capital position despite higher sales, and have planned inventory build in select businesses.

Overall, we were very focused as a management team on our strategic initiatives in the quarter. And I am satisfied with our progress. Dave 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 pace and magnitude of the recovery in many of our markets continues but at a slow pace. The impact of the rebuilding efforts, which will occur as a result of the Gulf area storm, is not yet known and has yet to have any significant impact outside of our Power business.

Prior to the storms, we continue to see moderate level -- levels of market improvement throughout our businesses. Industrial production MRO spending and capacity utilization have stayed positive and are certainly good for our industrial businesses. Utilities certainly spent been more on maintenance and repair in the quarter as a result of storms. And higher spending is likely to continue to both satisfy recovery efforts as well as catch up on normal maintenance activities, put on hold as a result of the unprecedented levels of storm activity. Although the major T&D grid infrastructure investment that we expect will occur over the next several years has still not yet begun.

As expected, residential markets are showing early signs of slowing, as a result of the continued Fed tightening although we don't expect any significant slowing until some time in 2006. Nonresidential construction remains the variable. To what extent and to what degree the slow improvement translates in the higher project awards is difficult to predict. But, certainly, we are not expecting any significant improvement in project activity and price levels before the end of the year.

Overall, we continue to view the recovery as slow and steady but fragile, and very much dependent on sustained high consumer confidence, slowly rising interest rates, and the moderation of other project deterrents such as high material and energy costs.

Now I will have Dave give you more details of the numbers of the quarter. Dave?

Thanks, Tim, it is great to be here on the call to date and joining the Hubbell team. Can't take any credit for the third quarter results, having been on the job for only 12 days of the quarter. But it certainly is a welcome way to start off my career here.

Let's talk a bit about the results for the quarter. First, sales in the quarter, 561 million, up 36 million or 7% versus last year with all segments showing improvement. Operating profit, 73 million up 11.4 million or 18%. And reported EPS, as you've seen, is $0.79 versus $0.67 last year, up 18%.

A couple of items of note that impact comparability at the EPS line. Restructuring costs in the quarter of just over 1.2 million were lower than last year's similar quarter by 900,000, resulting in a favorable impact to earnings of a penny.

Offsetting this was a charge on the tax line in the third quarter of 1.9 million or $0.03, resulting from added expense associated with plans to repatriate foreign earnings under the provisions of the American Jobs Creation Act. This resulted in an effective tax rate for the quarter of 31%. Excluding this item the rate was 28.3%, compared with the 29.4% in the third quarter of last year.

As Tim mentioned, we closed on four acquisitions in the quarter, two in the Power segment and one each in Electrical and Industrial Products. Collectively the sales on these acquisitions are about $5 million in the quarter, with a modest operating profit benefit after integration costs.

Looking at the operations, overall, reported operating margins were up more than a full point to 13.1% compared to 11.8% last year. And year-to-date operating profit margins are back to even with last year at 10.7%.

As Tim mentioned, the strong result is largely attributable to the Power segment, to the combination of the incremental storm volume, acquisitions and favorable cost price. Softer than expected nonresidential construction markets impacted the Electrical segment commercial businesses, although less so than in the first two quarters of the year and the higher freight energy cost, not fully offsetting a modest reduction in some of the commodity costs, particularly in the Electrical segment.

Looking now at the segment results. The Electrical segment, progressively, is improving throughout the year. However the operating profit margin is still below last year by 4/10 of a point at 11.4 versus 11.8%. A couple of items of note in there, the Wiring recovery continues. Sales up 2% and operating profit, excluding investments for the new product introduction, is about flat.

Mixed results, we've seen from the June lighting price increase. Strong residential lighting markets, softer nonresidential construction markets negatively impacting our commercial industrial lighting, rough and electrical and commercial wiring -- although less so than in the first two quarters of the year. And as I mentioned, the higher freight and energy costs are not fully offsetting commodity cost productions.

Power segment reporting very strong sales and operating profit margin gains, from the storm as well as the benefit of acquisitions, and the realized effects of price cost increases.

The Industrial segment benefited from a strong industrial economy, particularly in our GAI-Tronics and Gleason businesses.

Turning now to cash flow and working capital, cash flow from operations improved to 79 million in the quarter, compared to 66 million in the third quarter last year attributable to strong operating performance. Inventory reduction in the quarter of 10 million ahead of last year, for the first time this year. Receivables, unfortunately, showed an increase, in large part, due to the increase in volume. We saw particularly that increase in the back half of a quarter driving our DSOs up. But that should lead to some positive cash performance on the receivables side in the fourth quarter.

Capital expenditures in the quarter was $18 million compared to 11 million last year. The increase related primarily to the Wiring Product launch and building expansions.

Stock repurchased in the quarter totaled 14 million compared to 2 million in last year's third quarter. This brings our year-to-date purchases to 59 million, 1.3 million shares compared to last year's purchase of 5 million. And acquisitions totaled just under 48 million in the quarter as Tim mentioned, bringing the full year-to-date to 53 million.

So in summary, a solid quarter and one more like the Hubbell that I have been following for the last few years. One of the reasons I've been following it before I turn it back to Tim, I'd just like to comment, one of the people who here to answer some of the questions is Greg Covino.

Greg and I go back nearly 20 years now. I first ran into Greg on campus trying to recruit him at O'Brien College. He chose to go to a different firm. Our paths crossed again a number of times, first when he was the Audit Manager serving UTC and then when he joined UTC. So when he joined Hubbell we followed with interest the Hubbell story. And so Greg is one of the reasons why I joined Hubbell. And I just wanted to take the opportunity to think Greg for all the great work he did on behalf of Tim in filling in and keeping the place going in a very sound way. Thanks.

With that, I'll turn it back over to Tim for some comments on the balance of the year.

Thanks.

Thanks Dave. And we all join in in thanking Greg for his service during this time. He's done a great job.

Let's talk a little bit about our outlook for the year. We expect the full 2005 year sales to finish the year at the higher end of the range of earlier guidance of 4 to 6% above 2004, possibly a little better. This includes the carrythrough benefit of the storm volume we experienced in the third quarter and the impact of acquisitions closed in the third quarter.

We expect full year operating margins to finish the year at about the levels reported last year before restructuring. Future uncertainty comes from the near-term impact of high energy prices and the hurricane damage along with the long-term impact of these factors, as well as higher interest rates on the overall economic activity.

Our full year 2005 earnings per share before restructuring is still expected to be in the range of $2.55 to $2.65, consistent with our prior guidance. Further, our estimate for the year includes the potential gain on the sale of one of our factories. This transaction is currently planned to close late this year and its impact will be about $0.04 to $0.05. This is just one of our facilities that we've freed up and are turning into cash.

We continue to expect cash flow from operations. We will exceed income for the year, despite the need to support sales growth and strategic inventory builds with additional working capital.

And finally on our strategic initiatives, we are continuing to pursue our lean thinking, execution of restructuring actions, our focus on working capital, low cost country sourcing initiatives and acquisitions. We are making good progress on our lean initiatives which have been extended to our new product development efforts, and increased integration with customers and suppliers. We have transformed many areas of our operations and, as a result, have been able to consolidate factories and warehouses into less space. And, as I indicated earlier, at the same time generate process improvement and productivity gains. But we are far from where we want to be.

2005 has been an important year in our business systems implementation as we have two additional businesses going live on SAP on October 3. The preparation leading up to this is very focused, particularly on the challenges we experienced in the Wiring Systems go live earlier in the year. So far this implementation is on track with only minor issues coming up and those being quickly addressed.

Our lighting restructuring action continues as planned with plant and office moves underway and plant. 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.

Finally our ability to finance substantial growth remains strong. We continue to search for acquisitions that will enhance our position in our four core markets, similar to those completed in the third quarter. We have a history of buying smart and integrating acquired businesses smoothly into Hubbell. We will not deviate from this approach. We are confident that we continue -- that we can continue to find attractive, acquirable businesses that are priced right.

In summary, we feel good about the balance of this year and are optimistic about our efforts to make 2005 the fourth consecutive year of growth and sales and earnings for Hubbell.

And with that, Tom, I think we are ready to take questions.

Vanessa, if you would assemble the queue we will take any questions which may be there.

+++ q-and-a.

(OPERATOR INSTRUCTIONS) Robert Cornell with Lehman Brothers.

You mentioned a couple of things about lighting, Tim, but maybe go back and -- first of all what were lighting sales in the aggregate, and lighting margins in the aggregate? And then help us with the pieces you mentioned Commercial Industrial and Residential, but maybe go back and give us the picture overall?

We don't usually get into that specific detail but I'll tell you that the margins are slightly better than the prior quarter. The volume is slightly higher than the prior quarter, consistent with the prior year but really we don't get into that level of detail.

How about the comments around non res, right? This business struggle in the first half of the year, both with volumes and price and cost, you mentioned a couple of those things along the way. I mean, how about lighting volumes, lighting -- the June price you mentioned. How about cost?

I can tell you the business is definitely getting better, that the volume is picking up in the margins are improving quarter-over-quarter. It's certainly not where we wanted to be and it's certainly not a year -- as we entered 2005 we thought that non-residential construction would be stronger and our business would pick up in volume and we just haven't seen that.

We have seen a weaker non-residential market than we anticipated. And we have had to adjust in cost and employment levels and we have done that. We feel we've done a very good job on that.

How about the June price increase? Is that -- has that stuck?

It's a mixed bag. Some of that has, not all of it as usual.

Just a follow-up question, I mean, I am surprised that the power margins were so high given the pop in sales. I mean --

When you're operating your plants at their incremental highest level that they can run at that level of business. I mean first of all, we started the quarter as is our strategy, to have inventory available at this time of the year. It is our business to be ready for storms, and to help those utilities that need it. This has been a 25-year history of our Company so we were ready at the beginning. And the magnitude of this storm has caused our factories to run -- several of our factories, not all of them but several of them -- to run as much volume as they possibly can. And we are still in that mode.

What is the normal -- where are you in terms of normal profitability in the Power business now? I mean, this is a peak but what would be -- where would you expect the margins to stabilize?

If you just remove the storm levels probably about 200 basis points where -- below where they are, year-to-date, something like that. This is really incremental peak performance, but not all of it because some of it is coming from acquisitions. And some of it from better cost price relationship. But really the top end of this performance is coming from that storm, no question.

Jeffrey Sprague with Citigroup.

Good afternoon, everyone. I guess first just to clarify on the guidance, Tim, I don't think anyhow -- certainly we weren't aware that there could be a gain of $0.04 or $0.05 in the fourth quarter. It would seem, given the strength in Q3 and for the $0.05 gain in the fourth quarter that the quarter and year could in fact be quite a bit higher. Is there something in particular in the residential business or a drop down in the utility business or something like that, that gives us some additional caution going into the fourth quarter?

No. There isn't. We have not gone back and done a complete analysis on the year so as to give you a better look at this. And also, with as much up in the air as there is with energy, we didn't think we could come to a concise conclusion on that. So we are just repeating our guidance.

There is -- you could say there is upside to that but we are just concerned about the possibility of any slowdown. We don't see any slowdown or anything else. We just feel that there is enough economic variables out there that actually didn't feel that we should give different guidance at this time. But I agree with you that there is a momentum here that looks pretty good at this moment.

Could you give us a sense of price vs. cost? Like electrical, we got a little less than a 3% revenue growth. I could imagine net net, that might be all price.

I would say that that's pretty true.

Does that worry you a little bit? Is that a reflection of negative demand response to price? Or is that more just a reflection that this non-residential business doesn't seem to want to get going?

I would say it is the overall market conditions and I would say that the non-residential market is, month by month, improving. It is still negative to last year but it started out the year very negative to last year. And those numbers, each successive month, are moving up toward bringing 2005 closer to parity than 2004.

So the -- as the year's gone along, things have become a little brighter. What we thought going into the year was that this market would be around 5% in millions of square feet larger as a market size than it was in 2004. What's turned out to be the case it has actually been smaller in millions of square feet.

So that has really been our the area where we are still not certain and I don't think anyone is certain about at what rate this all will recover, and to what extent this pressure of new energy cost will slow or change this direction of improvement.

How about price vs. cost and power? I would imagined you target high single digits pricing there.

We have done a very good job there in recovering our costs. We have been able to recover our costs and Power from the steel and other things that have risen. So that business has not had the challenge that some of the others had in getting back the cost for steel, aluminum and copper, and so on.

Can you just -- you gave us the acquisition impact in the quarter. What is the annualized revenue of all four of those deals rolled up?

We got about $7 million of sales in the quarter from acquisitions. I think that was the number Dave and I quoted and, really, a marginal negligible couple of hundred thousands of OP, Operating Profit, and that's the transition and start up as I discussed. We are moving three product lines into existing plants so as we get through that, they certainly will begin to contribute in a significant way in a pretty short amount of time.

So we will have about maybe 10 or 12 million of those intermodal sales in the fourth quarter. So call it 20 million for the year and annualized sales for next year of 50 or 55 million.

What two businesses are in the midst of doing the next round of the SAP?

Two of our lighting businesses and our Electrical Products business.

And where does that leave us?

Half.

Half are done?

Half of our businesses have now been implemented and we have two more implementations. One in April of '06 and one in October of '06. This one is going as we had hoped the first one would. This month is going much better. All of the improvements that we put in from in there, that we learned from our first experience we put into our second one and we're quite pleased with how it is going at this point although it is still early. But things are looking pretty good.

We all struggle with why companies pay for this stuff some time when it causes these problems. But if you go back and look at the first one you did, which I don't know -- it's been 12 or 18 months from now?

It's about a year ago at this time, yes.

Do you feel that the business is demonstratively better and what is better about it? Your visibility, the forecastability, inventory management? Can you give us a little color there?

Well certainly there's a couple of reasons you would go to SAP. No. 1 is Hubbell has 17 -- had 17 separate business systems all more than ten years old. So we were just running out of useful life of those systems and then none of those were scalable for the size that it would take today for us to make them modern.

Second, our implementation is called a single instance, meaning that we are putting all of our companies into a single database. So that is going to be very helpful in us interfacing to our customers set, being that they are all the same set of distributors, utility customers and so on, and to our suppliers, many of who are in common.

So, certainly, we will see plenty of opportunity for improvement as we go along here. Our first business is about where it was after before its go live. And it's struggled a bit more than we had hoped it would but it is coming along. And it will get better and it will improve past the point that it was. I'm very confident of that.

One last thing and this is always a tough question. We had the same topic last year after the Florida storms but -- and to your point, there is always a storm some year or other. But looking at the magnitude of this event, what -- do you have a sense of what the incremental revenue was there, relative to normalcy thinking about the storm season?

Relative to our expense last year was about $5 million more in sales. But I would say the size of this storm and the severity of its impact -- I mean, usually we sell a certain set of products that are meant to put lines back in action. So that the poles are mainly still standing.

What we saw after this storm was significantly more destruction and kind of a delay after the storms hit then an ordering of a different pattern of products that would relate to putting up all new equipment. So the magnitude, the scope of this is beyond anything that our Company has seen, that any of our managers can remember in their career experience.

Tony Boase with A. G. Edwards.

Just had a quick question here. I apologize if this has been covered in the call but is -- on your guidance of $2.55 to $2.65, is that based on a nine-month EPS of $1.82 or $1.86?

Our guidance is always based on free restructuring.

So, that would be $1.86 then?

Yes.

And also not sure you talked about this much but your electrical business, I don't want to call it weak. But certainly on the commercial side there doesn't seem to be any momentum there. Maybe you could just comment on what you see go forward. And when will we finally benefit from improving commercial business?

I would say that our Electrical segment serves residential, industrial, and commercial and commercial's the largest piece of the market served. And we are doing pretty well in industrial. Very well in residential and the commercial business is weak. So I tried to explain that the year is getting better and we are below construction levels, absolute level of construction from 2005 compared to 2004.

It is getting better on a comparative basis. And I would be more confident about the future of that if it was not for such high energy costs and what effect that might have in the way of adding to the price of new buildings and the demand for new buildings.

So I think we are approaching, hopefully, a turn upward in the commercial market. But I would be more confident of that without oil at $60-some a barrel. But that is where we live today.

So that's the primary reason why we haven't really changed our guidance or changed our view and remain cautious at this point.

I think at the beginning of the year people were suggesting that steel was a big reason why we haven't seen commercial construction improve. And now you are saying it's energy cost. In the face of these commodity headwinds, should we really expect an improvement in commercial? Is there a case that can be made for that?

I would say, Tony, you are seeing some improvement. We started off the year in a very negative trend. Almost double digits of millions of square feet below the comparable period in 2004 in the first quarter. That number, that gap has closed to I think at the end of nine months to about 3%, something like that. So we are about -3% so things are improving.

But when you calculate in any commercial construction building, the fact that concrete is up by more than 30% and steel, even at prices off the peak is up over 50% then the cost per square foot of construction of new buildings are approaching 50% higher than they were, just in 2003. Certainly those are headwinds against the construction of new buildings.

Now yes, you have that to balance again if you are a perspective owner against the prospect of higher interest rates and financing of buildings later with higher mortgages. And the market is sorting its way through that. But, certainly, it has provided all year a headwind against a recovery of the commercial construction market.

I can't predict and I don't think anybody else can predict, with certainty, the timing of that recovery. But the evidence is, the statistical evidence is we are closing the gap with last year and I see some improvement. I'm just kind of a little concerned about what impact, this next wave of commodity called energy cost increase, is going to have on that improving story. That's all.

Thanks, that's helpful. Just one last question here. GE reported that lighting orders were up 2% in the third quarter. Is that a meaningful proxy for you guys in for how we should think about growth for your lighting business?

I think GE's reporting under that category would be lamps, lightbulbs. It's their main business by far and they are not a proxy for us. They have -- that is in relation to their share among other competitors. Their light fixture business is a very small business.

Thanks very much. Just wanted to clarify that.

(OPERATOR INSTRUCTIONS) Jeffrey Sprague of Citigroup.

One other thing on the utility market, Tim. You mentioned you haven't seen the larger, more secular story starting to play out in the T&D market. We do have, now, this energy bill behind us. Obviously there was some fluff in that but there did seem to be a few tangible things that should benefit the market also.

Is there any sign that people are at least thinking about it, drawing up more aggressive plans? Anything that gives you a little more visibility or comfort looking into '06 or '07?

Certainly I think that energy bill is a milestone towards the steps and improvements in our T&D grid that we talked about. I think that as regulations get written around that, they will create more clarity. I think mergers with any utility industry will at first slow this a bit but then, actually, be helpful. Because as you have adjoining facilities -- or utilities combine, they will try to improve their customer base in the way of their T&D grid.

So I see -- I'm optimistic about this. And I don't know exactly what the countdown is here in terms of time but I think we are on the path towards that investment in our infrastructure now.

Robert McCarthy of CIBC World Markets.

Good afternoon. I wanted to follow up on how your comments in respect to the Power systems business and perhaps amplify the inquiry there. It seems to me what you're saying with respect to the storm is, this could be much more of a long tailed opportunity given the size and scope of what you had to do in terms of running your plants. And then have people go back and basically go back to their respective regions and have to go back to normal maintenance of the utility infrastructure throughout the United States. So would you say this could be a more longer tailed opportunity? That that would potentially continue into the fourth quarter?

There's definitely more business for us in the fourth quarter. Definitely. So our order -- our backlogs exiting the quarter for Power were significantly higher than going in our order rate for October in the first half is higher. So the amount of equipment required for all of this has not all been ordered. So you have what I would describe as two distinct sets of repairs to be made.

One is in the infrastructure of getting the Power and all the rest of utilities whether it be the telephone system or water or gas, all those utilities restored to the areas that were affected, and the people being able to return to their homes or their place of business. But in addition to that, you have some extremely large longer-term repair issues.

One is, the oil and gas stream both onshore with oil refineries and ethylene and polyethylene or secondary oil processing, there is a lot of opportunity for all the people in the harsh and hazardous business to get additional business from that, as well as on the platforms that are shut in in the Gulf. These have not yet begun to be ordered because the damage is significant and it takes time to assess. And many of these rigs will have to be brought ashore to be repaired.

So this will be a longer-term opportunity for all those who supplied equipment to the Gulf Coast. And we don't, can't exactly quantify what that is for you but I can tell you that the magnitude of the damage in the Gulf is tremendous and, therefore, the repairs are going to also be very high to get done by their owners. But it is going to take a while.

You have got to pull these rigs out one at a time, bring them back. Mostly they can't be repaired in place. As far as the onshore part of this, we are still talking about all of the fourth quarter. There will be probably three or four refineries yet to come back online. Possibly some other processing plants. So this is a huge impact on the United States infrastructure and a long-term -- there is a short-term correction and then a longer-term opportunity, also.

Interesting. Switching gears to industrial technology you've seen double-digit order rates in high-voltage instrumentation, especially communications and industrial components in controls markets. Can you amplify what you are seeing there, what particular end markets, where you are seeing the spring? Has there been acceleration in the quarter?

We are seen in the Hipotronics and Haefely business, an increased capital spending from the manufacturers of T&D equipment like transformer builders all over the world who have been, in fact kind of a capital spending depression for a couple of years. So they are coming back to what you would describe as more normal.

Also utilities themselves are spending more on test equipment and diagnostic equipment. So really what we are seeing with that business is sort of a return to kind of a normal business where they were really in a depressed mode. Our business in that little area fell by about 50% from its height to its bottom and now it is really coming back quite nicely.

(OPERATOR INSTRUCTIONS) There are no questions at this time.

All right. Vanessa, thank you for your help. And I would like to thank any of you still on the line for joining us this afternoon.

This concludes today's Hubbell Incorporated third quarter earnings press release conference call.