Hubbell Inc. ( HUB.B)

Q2 2011 Earnings Call

July 21, 2011 10:00 am ET


Jim Farrell - Director, IR

Tim Powers - Chairman, President and CEO

Dave Nord - SVP and CFO

Bill Sperry - VP, Corporate Strategy and Development


Christopher Glynn - Oppenheimer

Rich Kwas - Wells Fargo Securities

Brent Thielman - D.A. Davidson

Jeff Beach - Stifel Nicolaus



Good day, everyone and welcome to the Hubbell Incorporated Second Quarter Results Conference Call. As I reminder, today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Jim Farrell. Please go ahead, sir.

Jim Farrell

Good morning, everyone and thank you for joining us. I am 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 second quarter results for 2011 this morning. The press release and earnings slide materials have been posted to the investor section of our website at

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 that 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 measures are reconciled to comparable GAAP measures and are included in the press release and the earnings slides materials.

Now, let me turn the call over to Tim.

Tim Powers

Thank you. Welcome everyone and thank you for joining us this morning. As this our typical practice on these calls, I will provide you with some overview commentary on the results we announced this morning and then, Dave will walk you through a detailed discussion of our financial performance. I will share my perspective on the outlook for the remainder of 2011 and some closing remarks. We will open it up and take some questions from you.

We will refer to presentation materials you can find on our website and I will start on page three. I am very pleased with our performance in the second quarter particularly growing the top line by 10% and our operating margins by 30 basis points despite continuing commodity cost pressures.

Our strong financial results in the second quarter are reflective of the performance of our end markets that was better than our expectations. We enjoy particular strength in both our utility and industrial markets while our construction markets, both residential and non-residential continue to face challenges.

Our utility customers are spending more on maintenance and repair of their networks and we are seeing a good flow of transmission projects, which is providing growth for our power business. Our industrial side, we see good demand from manufacturing customers, which helps our electrical products and wiring device businesses and well as strengths from the extractive industrial customers, which drives our Harsh & Hazardous business.

In non-residential construction, spending on new buildings is still down, but we are getting a strong whiff from retrofit re-like and renovation that is allowing us to grow our commercial and industrial lighting businesses. Unfortunately, residential construction is still slumping at low levels. As you are aware, we entered the quarter with significant upward pressure on commodity costs. Therefore, this quarter was particularly important in providing indications that the pricing actions we took at the beginning of the year appeared to be taking hold.

Overall, the quarter still experienced the net headwind, but the gap was narrowed and we expect a favorable balance in the second half of the year. Beyond pricing, we remain focused on positioning our company to succeed in the future and there are several areas worth mentioning this morning.

On the new product development side, we have introduced the new wireless control product that allows the user to control lighting in a room. But more importantly, can be installed in a retrofit application without ripping up walls to install wires. The LED area of our lighting platform continues to make important strides. A recent example is the launching of our new D2LED product. This is the first to market a 2-inch aperture downlight that replaces the 6- inch compact fluorescent light. This product is receiving great reviews and is another example of Hubbell’s leadership in the product development of the solid state lighting area.

Our productivity initiatives are making good progress as well and these are key as we need them to overcome cost inflation. In summary, we had a strong quarter moving Hubbell forward as both markets and our financial results were better than our plans, but let me hand it over to Dave, who will give you the details. Dave?

Dave Nord

Thanks Tim, good morning everybody. I’m going to start on page 4. First overall, looking at the quarter sales that Tim mentioned, overall sales are up 10% to $709.2 million and that’s really with some broad-based improvement other than the residential housing market and it is really led by our utility and industrial markets, both up double digits. Within that 10% year-over-year, 2% of that growth was coming from our price increases that we have been putting in place and working to realize and 2% from foreign currency translation. So, our underlying volume was up 6% year-over-year.

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