Hubbell Inc (HUBB) 2012 Q1 法說會逐字稿

Good day, everyone. Welcome to the Hubbell Incorporated first quarter 2012 earns conference call. As a reminder, today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Jim Farrell. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. I'm here today with Tim Powers, our Chairman, President and Chief Executive Officer;Dave Nord, our Senior Vice President and Chief Financial Officer; and Bill Sperry, our Vice President of Corporate Strategy and Development. Hubbell announced its first quarter results for 2012 this morning. The press release and earnings slide materials have been posted to the investor site of our -- investor section of our website at www.hubbell.com.

Please note that our comments this morning may include statements related to the expected future results of our Company and are therefore forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Therefore please note the discussion of forward-looking statements in our press release and consider it incorporated by reference into this call. In addition, comments made here also include some non-GAAP financial measures. Those are reconciled to the comparable GAAP measures and included in the press release in the earnings slide materials. Now, let me turn the call over to Tim.

Thank you, Jim. Welcome, everyone, and thank you for joining us this morning. I'm very pleased to report our strong first quarter results. Our sales, operating profits and earnings per share all showed healthy increases compared to the first quarter of 2011. Now let me turn it over to Dave for more color on the quarter and our outlook for the remainder of 2012. Dave?

All right. Thanks, Tim. Good morning, everybody. Thanks for joining us. I'm going to start on page three on the accompanying materials.

For the quarter we are very pleased with the strong start to the year, with net sales up 10%. Really with broad-based growth across our businesses,particularly higher demand in the utility business led by transmission projects. The industrial market strong, led by higher industrial production and increased activity in the energy markets. A little weakness on the new construction spending, but offset by higher demand on the renovation market. So all in all, very good growth there. And within our growth was also the benefit of our price and acquisition, so quarter growth up 7%.

Operating margin of 14.1% was up 140 basis points. A big contributor to that was not only the volume increase and incrementals, but what we are pleased has continued favorable price and excess commodity cost that we first saw in the fourth quarter. So all of that is giving us a very nice earnings per share of $1.05, up 28% from the first quarter of last year.

Let me get into more specifics on individual lines. First let's talk about the sales side. Sales of $723.8 million, up 10%. And as I said, we have got a lot of positives in our end markets, even in the nonresidential, the renovation and relight. New construction side still slow to recover and certainly being negatively impacted by the lower spending in the public sector. The industrial side, industrial production or extractive industries all very positive.

The one market that is down for us that we anticipated was our high voltage test equipment in the quarter. Utility side, good growth across the board. Transmission distribution as well as international. And even on the residential side, good market growth there. Largely attributable to the very strong increases that the market has seen on multifamily housing. So all in all, very good performance on the sales side.

That is -- and I turn the page to page five, and so we'll look at the gross margin. Certainly that volume has helped contribute to a gross margin improvement of 110 basis points, but we have also had good performance on the price side, with price in excess of commodity costs in the quarter. Both those things contributing. The price in excess of commodity costs in the quarter nearly offsetting the negative that we experienced in all of 2011. But there is more to go along with that, and I will talk to that in a bit.

On the selling-administrative side, continue to focus on the S&A side, working the volume leverage. But, of course, this is the area that is most impacted by some of the cost headwinds that we noted last quarter and in our investor meeting particularly around pension and benefits, which ends up costing us probably 30 or 40 basis points on that line. But otherwise we think very good performance on the selling and administrative side.

So all of that leading to our operating profit of $101.7 million, up 22% and up 140 basis points, both from the gross margin improvement as well as the S&A improvement.

If I turn to some of the other P&L line items on page seven, ourother expense of $7.1 million, down about $2.5 million from the first quarter of last year. It's largely attributable to the FX losses that we experienced in the first quarter of last year not repeating in the first quarter of this year, and net interest expense running comparable to last year.

For the tax rate in the quarter, 32.8%. It's up a little bit from our full year expectation because some of our tax planning strategies come into play later in the year. The big driver to the increase year-over-year, of course, is the lack of the R&D tax credit renewal, so this year we are facing that headwind. Currently no expectation that will resolve itself until certainly later this year. And the question will be whether it can even get addressed in that period post-election before year end. I think there is a lot that is going to fall into that period. So until then we are operating on the basis that it won't be renewed. So we are focusing on a 32.5% tax rate, certainly trying to do better if we can find ways to do that.

So all a of that turning to the next page, net income of $63.2 million, up 26%. A big contributor to that being the improved operating profit, the benefit of the lower FX losses and the higher tax rate. And that then contributing to our earnings per diluted share of $1.05,up 28% from last year's $0.82. Helping out the earnings per share is also a slightly lower average share count from the first quarter of last year. The second -- the first quarter of this year average share count was 59.9 million. We bought back in the quarter, interestingly, 549,000 shares, consistent with our ongoing strategy to offset dilution from shares under equity issuances. So the quarter -- we ended the month of month of March with a share count of 59.7 million. So all in all a very excellent start to the year.

If I get down into the segment level, let's first talk about the Electrical segment results on page nine, and you see there reporting sales of $505 million, up $39 million or 8%, with really broad-based increases across the business. Core volume up 5%, with acquisitions adding two points and price a point. And really this -- we have got broad-based improvement. Our Electrical Systems products was up low double digits. Even the lighting business was up low single digits largely due to the strength of the residential lighting business, although the C&I lighting products was up low double digits, really because of the relight and retrofit volume there.

Operating profit of $63.8 million, up 11%, 20 basis points in higher sales contributing to that. The incrementals on that volume, we are typically running in the mid 20% range, and that is pretty much what we saw. Price was in excess of commodity cost in the segment, but this is a place where we are also dealing with higher inflationary costs, particularly pension and benefits, which so far in the year those costs are in excess of our productivity. Typically our strategy is to try to offset inflationary cost pressures with productivity initiatives.

Our property initiatives are running consistent with what they have for the last several years, but the inflationary cost pressures, particularly on the benefit side, have been a little bit higher. So we are hoping that -- and working to maintain a positive price commodity cost to help offset that as we he go through the year, as we try to manage those costs down, and identify and implement more productivity gains. But for the quarter that is really part of the story within the Electrical segment. All of the businesses within that segment and all of the product groups running positive, as I said except for the high voltage test equipment. But otherwise very good performance, with strong sales and profit.

The power segment business, very positive performance there, continuing the trend they experienced for most of last year. Sales up 14%. Price contributing about two points of that increase. So the core volume of 12%, really across the board strength in transmission, international growth and even higher distribution spending in that business.

The operating profit, more importantly, of $37.9 million, up 46% to 17.3%. Very good year over year improvement, but we got to keep in mind that the first quarter of last year was a particularly low quarter, as that was the peak of their negative price cost comparison. And also last year started off much slower on the order side, and that picked up as the year went on. So the easiest compare of the quarter, but certainly we are very pleased with the improvement and with 17% margin business in the first quarter. So all in all, very good performance in the Power segment but really across the board.

Let me turn now to cash flow. On the cash flow side, free cash flow generation in the quarter of $33.7 million, a little more than half of net income. Obviously that is not at the level that we target for the year, but the first quarter is our seasonally lowest quarter based on activity, based on the expenditure and payment of year end accrued amounts, particularly on the customer incentive side.

And what we also experienced in the first quarter this year is a little bit of build in inventory, and really around two reasons. A little more than $10 million there and really for two reasons. One is rebuilding some of the inventory that was liquidated. You recall we had a very strong shipment quarter at the end of last year, as a lot of orders received in the second and third quarter got scheduled for delivery in the fourth quarter, so took down the inventory. As well as some intentional build of inventory in anticipation of continued market growth this year. So all very much planned, very well managed. We are very pleased with the performance.

Our CapEx, at $11 million, is very much on track with our expectations for this year. The decline from last year, recall we had the purchase of a building in our operation and in Switzerland last year for $13 million. So adjusting for that, our CapEx investment starting the year was actually he a little bit higher than last year, and I think I mentioned in the past we are targeting that adjusting for that building acquisition will be up about 25% in our investment in CapEx. So ongoing good performance on our cash flow.

Our working capital continues to improve year-over-year. A lot of focus on improving that. We obviously had a very strong fourth quarter on a trade working capital basis, but finishing the first quarter at 17.9% with improvement in our receivables outstanding, our payables performance offsetting with the inventory build as anticipated. Good focus on there. All that leading to the good cash generation.

If I turn to capital is structure, you'll see we finished the quarter with $562 million in cash, actually a little bit down from year end, despite the free cash flow generation of a little over $30 million. We had some share buyback. We had our dividend, and I will note that as a reminder that we he actually increased our dividend in February again by 8%, bringing us to $1.64 annual basis. And we also had a small acquisition, one of our two acquisitions so far this year, for about $11 million in the first quarter. We have actually added another acquisition as mentioned in the release that closed last week. That was a $42 million acquisition, also in the Electrical segment, and I think Tim will talk a little more about that later on.

So, all of that talks about how we did in the quarter. Let me talk a little bit about what that means going forward for the rest of this year. We obviously started the year with caution and conservatism, and I think the performance in the first quarter has given us more confidence in how the year is going to shake out. And so when we look at our four end markets, we certainly think three of the four have improved since the January call and even our investor meeting.

There is some element of volatility, I think, that has been created with weather, the strong weather -- the very warm weather has I think impacted some of the profile of spending, particularly in the construction-related businesses. I think I mentioned that we saw January and February better than expected, better than historically experienced. And I think that is some what attributable to the ability to do some of the construction activities out in the market, and I think others have said that. And I think we see that even in some of the market analysis that comes out, particularly when we are looking at new housing starts and other are areas that may have slowed in March from the January and February levels, but still at very good levels. So it has made forecasting a little bit more of a challenge, but certainly the bias is all for the upside.

If we go around our markets, first on the utility side, we are looking at that market being up 5% to 7%. That is about a point better than we thought a couple of months ago. On the residential side, also we are looking at 5% to 7% growth, up two to five points from what we thought before. Obviously still a small part of the business so not as big a contributor, but I think all of the signs are a slow and steady pace of growth, not -- the multifamily providing a lot of energy early on, but the single family starting to get more traction, and that bodes well for if not later this year, into 2013 and 2014. The nonresidential side, the one market that we still think is going to be low single digits in the 1% to 3% range, the relight retrofit energy efficiency side of that market still remains -- expected to stay strong.

The private sector is just slowly improving and marginally offsetting the weaker public sector. So that is one that we are not seeing great strength and not expecting great strength this year, but certainly it is positioning well to have good growth next year. And lastly on the industrial side also, that is an area that we think probably has more opportunity and market growth, and we think there is a couple of points better growth in that market than we originally thought, so we moved our assumes assumption there up to 4% to 6%. So all of that leading to end market growth as we measure our end markets at the 3% to 5% range, and certainly I would say the bias, we are hoping we will be more likely toward the high end of that range.

So how does that play out to the segments? We turn the page first on the Power segment. Looking at that overall segment to put up 7% to 9% sales growth. That is about a point better than we thought last quarter. And that is partially due to -- largely due to the market maintaining our thoughts on pricing there.

On the Electrical side, moving that up two points to 5% to 7% reported growth, and that is due to a combination of stronger market dynamics as well as the impact of the acquisitions that we have closed this year that we think will give another point of growth. So when you put that all together, we are looking at overall sales growth of 6% to 8%. That is up from our prior guidance of 4% to 6%. So put that all together, we are looking at the sales up 6% to 8%. Our margin expectations continue to be approximately 50 basis points.

Obviously the first quarter performance would suggest that there is opportunity to do better than that, but I will remind you of a couple of things. First, the first quarter comparison was the easiest. Secondly, recall that in the investor meeting in last month that Tim commented that our objective is to improve our margins 50 basis points a year for the next three years, and so we are looking at this on a multiyear basis and may have some opportunities to -- and needs to make some investments in productivity to set up for are a continuation of that margin improvement. Free cash flow certainly still on track, expected to equal net income, and as I mentioned before our tax rate at 32.5%.

So solid start to the year, and we are on track to deliver strong financial performance again in 2012. So with that let me turn it back to Tim for some concluding comments.

Okay, thanks, Dave. Just to kind of summarize where we are in our markets for 2012. It is consistent with what we said going into 2012 and what we said again in our investor meeting, that the market trends in the industrial and utility areas of our business continued to be strong, but not as much of an increase as there was in 2011 over 2010. I think the positive development is that the residential market we believe is beginning to move in a positive way, and that could help us certainly over the near term. I would also comment that certainly the external world market and the volatility surrounding Europe is something that we all have to keep an eye on, but we are not acting in any different way at this moment. We are continuing with our focus towards the areas we can improve in our business and just keeping the watchful eye on developments outside of our control.

Just to talk a little bit more about capital deployment. We have certainly a very sharp focus on increasing our investment in new product development, certainly around areas where technology is changing, that is new sources of light, new types of control of lighting, certainly areas where intelligence can be added and feedback loops added to some of our products, for instance in the smart grid. And this has led for the need for us to shorten the life cycle of our traditional products and invest more in a shorter time period in several categories of our businesses.

If you look at where we have been investing outside in terms of acquisitions, we completed two acquisitions in the fourth quarter, one in the first quarter and just completed another one. Now, none of these in total are huge, but on the other hand they are important little additions for us, and we think we paid some where in the area of six times EBITDA for this, and we believe that its contribution to volume and to margin will be accretive to Hubbell going forward. So while we would like to make larger deals and were very much looking to do that, there is some out -- there are some out there, and it is just dependent on the traditional things that affect those transactions, which are willing seller and something that allows us enough space to add value to it in our portfolio.

So I think Dave said the right thing here, reiterating the investor day, is we are trying to grow the total volume of Hubbell, and at the same time we are trying to add 50 basis points of margin to our business. And we know that margin addition will not come exactly at 50 basis points a year. Last year we came up 20 basis points short. Perhaps this year we will do a little better, but a lot hangs on what happens to volatile materials costs, and we don't have as clear view from the second half of 2012 yet to be more confident to say more.

So we are continuing with our game plan. Our strategy is set. We think we are pretty clear about 2012 at this point and very focused on getting those jobs done. So with that, at this point we would be happy to take more questions from you.

Thank you. (Operator Instructions). Our first question from Brent Thielman with D.A. Davidson.

Hi, good morning.

Good morning.

Just a question on the, I guess, activity in the high voltage business in the first quarter. Any signs of a rebound there as you work through Q2?

I would say the -- we have a lot of possibilities, but this is a business where you need to have booked the orders, let's say on the large systems, six to nine months ago, and we understood that this first quarter would be a little lower than the previous year. The demand -- world demand is out there for these products. The 800 KBA, the DC transmission of high voltage current are all reasons why the demand for these products and demand for transformer and cable facilities will continue. So we are optimistic that particularly 2013 will look better. Right now we are expecting our 2012 to be in line with our guidance, which is good but you not at peak levels where it has been before.

Brent,I think I would also add that is the business -- one of our most volatile because it is so project oriented, and so you have volatility in both the order patterns as well as the delivery patterns. And so you get -- between quarters you can get some big swings.

Okay. That's helpful. And then you mentioned obviously prices down in excess of commodity costs at this point. Can you talk more broadly about opportunity for new price increases this year?

I would say you have to look back when you talk about price versus cost. As you remember most of our business and particularly power were running more cost, less price last year until the very end, and now I would describe where we are as somewhat in a period of catching up. We are raising prices in some categories in the industrial area, in selected categories in our utility business where if you look on a year-over-year basis the cost of materials is higher, and particularly the cost of energy is higher than it was. In the categories where conditions are weak, it is not impossible to get price, it is just more difficult.

Okay. Thanks, guys.

Our next question comes from Christopher Glynn with Oppenheimer.

Good morning.

Good morning, Chris.

Dave, had a question about the Electrical incrementals. I think you mentioned running in the mid 20s range, but I calculate more mid teens. Were you adjusting out the pension and benefits inflation there?

Yes.

Okay.

I was just looking at their volume. Because that is really one of the challenges there across the business, but particularly in the Electrical segment, with some of the cost headwinds, pension being one. But also some of the other costs and areas of investment, and wouldn't be he surprised that some of that hits the Electrical segment, particularly the lighting business, where you are making some investments on the technology side.

Great. Thanks. And Tim, I was wondering if you look at [put in place] as a leading indicator for your non-res, and if there is a lag, you think about that? Because we are noticing the public level off in that number and the private sort of accelerating.

Yes, we have talked about that before, and we think the government stimulus spending on public buildings and the ability for state governments to raise money to continue to spend is declining. That whole category is declining and the good news for us is we are beginning to see -- and it is just the beginning -- of the private sector increasing their investment. So for me these are the very, very early signs of the beginning of a turn in non-res. I don't want to oversell it, like in the next quarter or two you are going to see an improving non-res market. I think we are bottoming. I think certainly what helps us is the relight and retrofit category, which the payback numbers get better and better. I think that is our short-term benefit.

On the relight, do you have any big national accounts approaching any end of life programs -- or end of life of programs or any dynamics like that over the next few quarters?

We are doing business with some of the largest customers that there are in this space, thepeople that own their own buildings and facilities, and we are doing extremely well with them. So we are very pleased with our retrofit and relight business, and also the continued growth of our LED lighting business. So those are all chugging along at very healthy growth rates.

Okay. Thank you.

Our next question comes from Rich Kwas with Wells Fargo.

Hello. This is [Deepak Agwan]. I'm filling in for Rich Kwas. How are you today?

Good, thanks.

One quick question. This is on acquisitions in the Electrical segment. I know you did not mention it under your operating margins section for electricals, but have your acquisitions been dilutive in this current quarter? And when do you expect it to be -- if they are when do you expect it to really start being accretive?

The acquisition impact in the quarter was neutral. It was -- they weren't dilutive in total. There are some that are better, some that are worse, but overall they were neutral, the margins.

Okay. And my next question would be do you expect operating margins to follow kind of like the same seasonality like it did last year on Electrical segment, orwill it be better?

Well, we are -- we would hope to have better margins in every quarter, but certainly the seasonality is a pattern that we can't avoid with construction season, so second and third quarter will give higher volume, which generally give higher margins. ButI don't expect any significant change from historic patterns.

Okay. Thank you. Appreciate it. That is all I had.

Okay.

Our next question comes from Steve Tusa with JPMorgan .

Good morning.

Good morning, Steve.

On the price cost, I'm not sure if you answered this, but obviously a favorable number here in the first quarter. Does that -- is that kind of stable throughout the course of the rest of the year, or does that kind of go down from here, that spread? Or how do you think about that going forward?

I think the spread tends to go down, because it is a year-over-year comparison. It is still positive but in a diminishing amount, but obviously -- and there is two dynamics that we focus on there. One is trying to hold the price increases and make sure that we maintain that. And as I have talked about in the past, that is not always as easy and when commodity costs moderate. So we are carefully watching that.

The other is there's always the volatility on the commodity costs, and I think you have a dynamic that if, for example, if copper stayed at its current level while it is positive over last year, by the fourth quarter it would be negative because you had a big drop. So the quarterly compares are a little more volatile, but rightnow we see that being positive throughout the year, just at a diminishing amount.

So is this better than you expected three months ago or -- for the whole year, or kind of in line with our expectations?

The price cost is little bit better than we expected. It started the year a little bit better thankfully, but we are still trying to navigate that other inflationary cost headwinds as I mentioned that we would typically cover with productivity, but the magnitude this year, we are trying to hold price to offset that as well.

Right. And then some of the dynamics just on commercial construction activity. Is there -- are there any ray of hopes that 2013 is a better year? Is there anything that makes you worried at this point in the cycle it should be doing better, or is this an area where it is kind of tracking as you would expect from a cyclical perspective.

I think we are looking at a long slow turn, just as we have seen in the residential side of the business, and the impediments to improvements are similar to what they are on the residential side. There is a need to refinance a lot of debt on the nonresidential side, so I think it will continue to trail the uptick in the residential market by 12 to 18 months, as it always has. And if the length and duration of this recession continue to be what they are, I would say it would be closer to the 18 months. So there is a hopeful sign on the residential side, and I think what we are seeing is that a little bit of a swing back to the private investments on the non-res side, which to me is something that is a precursor to an improving market.

Right. Thanks. Appreciate the info.

Okay, thanks.

Our next question comes from Scott Davis with Barclays Capital.

Hi, good morning, guys.

Hi, Scott. Good morning.

Tim, I want to ask kind of a big-picture question. It's just related to the international business. How do you think about the importance of scale there? And I think part of the context to my question is if you look at one of the reasons why Thomas and Betts chose to sell was kind of lack of national distribution, or just lack of scale I should say. How important is it in your particular markets, and if it is important, do you have it, do you not have it, or howcan you get there I think is many questions in one, but if you can address that, please.

Sure. Well, if you -- it depends if you are focusing on the entire electrical business, or you're focusing on the part that we operate in, which is connectors and components in roughly about half of the market. So within the space we operate in we feel, because we are focused on the North American market, that we have ample scale to succeed. And while we have a lot of opportunity to grow in that market and we said we would love to be twice the size of what we are in North America, and we feel the advantages of that accrue to stronger position in the channel and so on, we are quite comfortable where we are. And the fact that we are not spread over the world at our size is a good thing.

And this is a business that is primarily driven by North American standards. The products are primarily made within the market and sold within the market, and so we see ourselves as the second largest producer in North America in our space. So we think we have a number of economic advantages. We are quite pleased to continue to grow the way we are, and there is two areas that we would like to grow worldwide, and that would be the harsh and hazardous businesses and our utility business. And our utility business, we have North American standards, so we would love to have the IEC type products in the same product range to go with it. And in the harsh and hazardous you have also two standards, and we would love to have the European -- more of the European standards in our basket of products.

But I believe we are well positioned in the space we are in in a part of the electrical business that is primarily a local business, and I think we have the scale to succeed and grow exactly where we are. So we are quite comfortable with our position, and we think we are focused in the right areas of growth and staying within that component and connector space in the core markets we know.

Sure. Makes sense. Again, another big picture question, because I think everyone has asked the nitpicky stuff by now. But when you think about the future in this business and the changes in distribution, does it become more important to have a broader product line in scale selling into distribution? I mean, is there a greater interest in some of your distribution partners to have less suppliers and have you carry a broader product portfolio? And then kind of part of my question is, too, you are seeing with some distributors, increasing the amount of private label product and such. And again, how do you combat that type of a trend?

Sure --

So two questions there, but --

We have always said that we are focused on being a brand oriented company, and what is important to distributors is to have those powerful brands that mean something to industrial or nonresidential construction consumers of the product. So while you can grow your breadth of your product, you need to grow it with the key brands that are important in our marketplace. So we are always after those names that add to our portfolio as we were when we purchased Burndy. Now that was a tremendous acquisition from the point of view that it made our lineup more attractive to distributors, because it was Burndy, not just because it was anybody. It was a market leading position in the space in the connector and component business.

There will always be a place, on the other hand, for low cost imports at those places in the market where it is a price-only feature, lowly valued space. I don't see that winning any -- more market share than it has in the past, because most manufacturers in our space have added products that compete with those low first price products. So it is important about what you add to your lineup rather than just be bigger.

Okay. Just quickly for Dave, I wanted to get a sense of if the LIFO accounting helped you this quarter, and if you can quantify that at all?

There was no real impact there this quarter, Scott.

All right. Thanks, guys.

Our next question comes from Jeff Sprague with Vertical Research Partners.

Thank you. Good morning, everybody.

Good morning, Jeff.

Good morning, Jeff.

Good morning. Tim, can you just provide a little bit more color on kind of the nature and scope of the transmission projects that you are involved in? And kind of what I'm thinking, is there any common thread -- renewables, interconnects around this [PIR] 1000 or some other kind of clear underlying trend that is driving the business?

I would say there is a couple of themes that continue in the marketplace. Certainly the renewables one for wind and energy is not built out yet and has a number of key projects to go before the projects that are currently finished today have been completed. And there are still a number of solar projects on the drawing board and for which we would expect to win some of the anchor business that goes underlying the solar panels. So that trend is continuing as long as there is some subsidy and support for the cost disadvantage. So that a one category.

The second one is what I would call the FERC. Demanding more safety and reliability and better percentage chance of power reliability in bad weather, and they have come down on the industry around compliance with their rules and regulation. And so they are out -- the utilities are out testing their lines. They are out replacing some of them when either the capacity is noted adequate or the amount of power that can be brought to a city is not totally redundant. So we are getting that I would call adjust the grid category.

And then adjacent mergers between utilities are creating demand for the [inner] connectivity in a bigger footprint. So we are talking to utilities about how they better utilize an expanded footprint of power generation so that they can get power from one side to the other of their newly expanded geography.

And then another category is kind of the creation of these transmission businesses with a guaranteed rate of return that allows them to make investments they could not have made in the past. So we are getting some power lines built that have long been needed, but because they are the focus of a transmission entity, some of these are going ahead, whereas they may or may not have been the priority in the hands of the entire public utility.

So those are kind of the buckets of demand that we see right now, and we are encouraged with the early start on that for 2012. And we see still a long pipeline of projects that are anticipated to move forward, and we will know, we believe, in the second quarter. This is when we have some early releases, so we will see in the second quarter if this develops into a stronger year than we anticipate or know exactly how it plays out. But usually you get three to six months lead time for our product, so anything that -- determining are the gating item on that are getting the right-of-way and clearing the right-of-way.

So kind of that is a long answer on the transmission business, but generally positive and could be better than we expect.

That's a long answer and exactly what I was looking for. I appreciate that. And then the 2% pricing is obviously nothing to sneeze at at all, but is there any particular product areas that are getting tight from a commodity availability standpoint or anything, production capabilities to deliver on that potentially could further drive an inflection into price positive?

I would say materials are readily available with a couple of exceptions. I would say the industrial usage of silver in some of our products is somewhat an issue. Rare earth, as it pertains to the entire electrical business, is expensive and not always easy to find. But generally speaking there is a very good availability of materials and nothing that I would point to that impairs our ability to deliver more product. Even though in some cases we are having to invest in machinery and equipment to expand individual product categories, we still have ample room in our plant to do more, and we would love to do it. We have more capacity on second and third shifts, and so we are more than happy to accommodate an increasing and healthier market.

Okay. And just back on this deal. You characterized it as small but I think it was $42 million just thrown out, so that is not tiny obviously. Could you give us a little more color on what it is you actually just brought and how it fits?

It is a product line called TayMac. It is outdoor weatherproof boxes. It is a similar category to our Bell brand that goes with RACO. It will sell to DIY and electrical distributors. It has got significant intellectual property, with a number of patents around these product lines. And we think that it is a very nice addition to our are box and fittings business, which we have not added on to for a long time. So we are very pleased with that. We think there is an opportunity to leverage it, although again it is a relatively small addition, but very -- we look upon it very positively.

And then just finally, was there any meaningful FX impact in any of the segments in the quarter? I guess no, but --

No, nothing meaningful.

All right. Thanks a lot, guys.

Our next question comes from Jeff Beach with Stifel Nicolaus.

Good morning, Tim and Dave.

Good morning, Jeff.

I have a question on the power segment, or a couple of questions. Can you give us an idea of the distribution growth and whether that trend is -- in spending is strengthening? And then on the international side of the business, what are the drivers and which countries or regions are the most important to you in the international side?

Sure. I think some of our improved business and distribution may be the good weather that allow more crews to be out and about. We have seen the necessity, as I explained on the transmission side, for utilities to improve the reliability also on the distribution side. I'm not putting any big positive effort or thoughts behind them changing their spending pattern relative to electrical consumption, but they know there is areas where they need to improve reliability, and I believe there is spending on that.

The international part is certainly first keyed around transmission lines, so if you look -- and we have talked about Brazil as one area where there are some large projects actually happening to bring power from the northern areas of Brazil down to the large cities in the south. Some of those power lines are 2,000 miles long and will lead to large quotations on transmission type products that we supply. Asia is another category -- anotherarea with a rapidly growing population and rapidly expanding cities, and getting the power in to those cities is an ever more are pressing need.

So it would be transmission that leads it, and rural electrification would be kind of secondary. So Brazil has spent and is spending money to get more electricity to areas that haven't had it. So on a country by country basis that can be a factor also.

All right. And as a follow-up question, just to be sure, did you say that you purchased 549,000 shares in the first quarter?

Yes.

Okay. Thank you.

(Operator Instructions). Our next question comes from Mike Wood with Macquarie.

This is [Adam] in for Mike. Quick question on the lighting business. Can you run through kind of overall growth again, and kind of by segment in terms of relight retrofit versus new construction or project?

I will give you a couple of piece there's. The overall business was up low single digits, really driven by the residential market and the multifamily. The C&I business was obviously lower. The relight retrofit as we try to capture it in the businesses that we have that focus on that either specifically or look at the products, that was continuing at the 20% growth rates that we have been experiencing. So that would tell you that the other parts of the C&I business were flat to slightly down.

Thanks, guys.

It appears there are no further questions at this time. I would like to turn the conference back over to management for any additional or closing remarks.

Okay. We would like to thank everyone again for joining thus morning. Certainly if there are any follow-up questions you can reach out to Bill Sperry or I. We will be around today and tomorrow if there are any follow-ups. Thank you again for joining us.

This concludes today's conference. Thank you for your participation.