James M. Farrell - Vice President of Strategic Planning and Investor Relations David G. Nord - Chairman, Chief Executive Officer, President and Member of Executive Committee William R. Sperry - Chief Financial Officer and Senior Vice President.

Christopher Glynn - Oppenheimer & Co. Inc., Research Division Richard Michael Kwas - Wells Fargo Securities, LLC, Research Division Nigel Coe - Morgan Stanley, Research Division Jeffrey T. Sprague - Vertical Research Partners, LLC Charles Stephen Tusa - JP Morgan Chase & Co, Research Division Mike Wood - Macquarie Research.

Good day, and welcome to the Hubbell Incorporated's Third Quarter 2014 Update. Today's conference is being recorded. At this time, I would like to turn the conference over to Jim Farrell. Please go ahead, sir..

Thank you. Good morning, everyone, and thank you for joining us. I'm here today with our President and Chief Executive Officer, Dave Nord; and our Chief Financial Officer, Bill Sperry. Hubbell announced its third quarter results for 2014 this morning.

The press release and earnings slide materials have been posted to the Investors 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 may also include some non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures and are included in the press release and the earnings slide materials.

And with that, I'll turn the call over to Dave..

Great. Thanks, Jim. Good morning, everybody. We've got a lot to cover this morning. I'm going to spend some time providing some perspective on our performance this quarter. Bill will give you more of the details, and then I'll come back and share our view on the rest of the year and some very preliminary thoughts on next year.

Overall, I would say our -- for the most part, our performance for the organization was good. Top line growth was good. Good organic growth, complemented with acquisitions that, I think, together, relative to the market, is pretty good. Operating margin of 15.9%, on an absolute basis, would also be pretty good by many standards. And that's all in.

It doesn't include -- it doesn't exclude corporate cost, it doesn't exclude onetime cost or other nonrecurring and restructuring costs. However, it's not good enough by our standard. It's also -- it's not at the level that we experienced last year in the third quarter.

And most disappointingly, it's not what we expected to do this year, and there's no one that's more disappointed than I am. When I think about how much effort, and many of you know that we've put into improving margins and the reliability of our forecasting over the last 8 years or so.

Most of our businesses continued to perform at the high level we expected. But that's not enough this quarter to overcome the few businesses and issues more than typical that we faced.

It's been a challenging quarter for us, but it's the fundamental strength of our businesses, and more importantly, the dedicated leaders and employees of this company that gives me continued confidence in the potential that we can realize in the company. So let me start a little bit on the sales side.

As I said, we have sales up 7% with 4 points coming from organic growth, the other 3 coming from acquisitions. And most of our markets performed at or above expected levels. The nonresidential market saw a modest improvement with the renovation market activity still contributing.

The residential market was good, but a little lower than expected -- than we expected. Some of that's due to change in the national account buying pattern. The industrial business was mixed with wiring device side of it, other industrial businesses performing well.

But our Harsh & Hazardous business was lower, and our high voltage test equipment was down significantly. Unfortunately, those 2 markets, in particular, have historically provided some of our better margin opportunities. Last and certainly not least, our utilities business and the market improved from the slow first half.

So I think all that is, for the most part, on the good side. The disappointment really comes on the margin line, where we ended up with operating margin of 15.9%. Let me take a few minutes to give you my perspective on what I see as some of the key drivers to that result, to the lower-than-expected margin.

First and most significantly is in our Lighting business. We've been talking for some time about the challenges in this business as a result of the technology shifting to LED, in particular. Great opportunities for growth.

But the increased cost of LED and a pricing environment not recognizing in many cases the value of that new technology puts a lot of pressure on margins. As I mentioned on last quarter's call, we were stepping up our cost-reduction actions to counter this price in margin pressure, and that continues.

We're unfortunate we ran into several other issues during the quarter, each in their own way, I believe, resulting from this technology shift. Higher-than-normal costs, included legal and warranty-related costs, with the impact on our margin almost 90 basis points in the quarter.

The legal cost relates to a settlement discussion on previously disclosed litigation. Cost largely attributable to 1 case, but I have to say, it's indicative of what we're seeing as a moral litigious environment as many more market participants fight to protect their positions.

The warranty costs relate principally to a product family within one of the lighting brands, that was showing some higher-than-normal failure rates in certain customer installations.

This resulted in a higher-than-normal cost, so as a result, we took action to evaluate the potential exposure in total from these product sales in the market, and based on that analysis for this brand, we increased our estimated future costs in the quarter.

At the same time, we looked at our experience with other brands and determined that the recent trends in our experience suggested that there were some additional exposure in those brands. This could probably be expected when you think about the introduction of new products using new technology.

But our experience up until recently had not been that unusual.

And within the Lighting business, we also had an unexpected slowdown in our residential fixture business, in large part due simply to the change in the stocking practice from a national account that creates some volatility, and to a lesser extent, maybe some slowdown in the new construction volume.

These items within lighting, clearly the most significant impact, and the team is laser focused on all of the actions necessary to address, improve -- prevent and improve the performance around these items.

The other factor that hurt us in the quarter is lower-than-anticipated volume in 2 of our higher margin businesses, I mentioned before, our high voltage test equipment and Harsh & Hazardous.

Those businesses are also 2 of our more global businesses, and therefore are exposed to some of the geopolitical volatility, whether it's the Russian market for our high voltage or oil and gas equipment, or the Middle East for oil and gas, or more recently, the impacts of the rapid decline in oil prices.

Some of these negative volume impacts would have been difficult to plan for, but we certainly could have done a better job. In the high voltage test equipment, it turned more difficult to replace some of the project business that was canceled or deferred, and where we did, it was at lower margins as a result of a much more competitive environment.

And in the Harsh & Hazardous business, the margins we were anticipating, on hindsight, I say were too optimistic. We didn't recognize the difficulty we were likely to face to meet or exceed the tremendous margins, if you go back to the third quarter of last year, that we experienced in that business.

Now on the positive side, and importantly, our Power Systems business performing well. Had a nice recovery from the slow start of the year, both sales and margin, and we expect that to continue. You may have also seen on Tuesday our announcement regarding our 12% increase in our dividend and our new $3 million share repurchase authorization.

I'm pleased that our board approved our request, and I think these 2 items are further evidence of our confidence in the future earnings potential of our company. Now I'm sure there's other topics that I haven't addressed yet.

Let me give Bill a chance to go through some of the details in the quarter, and then I'll come back for some forward-looking and Q&A.

Bill?.

the cost in excess of productivity; the business and product mix that we've mentioned; the legal and warranty that we've mentioned. Just spreading those impacts now over the 3 quarters rather than the one, it's really the same dollars being spread. Page 14 shows the Power results for the year-to-date period.

3% sales growth, all being driven by acquisitions. We've described how the organic market has picked up, but has essentially been flat for the year-to-date period. At the OP level, you actually see very strong incrementals that are distorted, I think, by the facility closure that we did last year.

So not in the quarter, but in the year-to-date period, we experienced easier compares because of the absence of those closure costs and some of the productivity that came with that. But strong performance at 18.8% OP margin for our Power Systems business.

Year-to-date cash flow is a similar story to the quarter where we've got an improved level of cash flow despite some higher CapEx, which is being driven by more efficiencies at the working capital level. Same story there where payables are the driver.

And the trade working capital, you see a reasonably comparable level of trade working capital as a percentage of sales. The acquisitions distort that a little bit, showing a slight uptick in working capital versus the third quarter of '13 because you get the balance sheet impact without getting the full period of sales.

Our capital structure on Page 17. You'll see $654 million of cash, lower than last year, which is reflective of the fact that we have invested $164 million in acquisitions year-to-date and then a comparable -- the 2 bond issues outstanding, no change there, and similar debt to cap of 23%.

That continues to be a flexible balance sheet poised for investment. And with that, I was going to turn it back to Dave to talk about outlook..

Okay. Thanks, Bill. So what's this all mean for the rest of the year? I guess, first on the top line, we're expecting our top line to finish the year up 5% to 6%, although are currently tracking more toward the low end of that range.

But as most of you who've been following us for some time, the fourth quarter has a higher level of volatility in the sales result than you would expect for, particularly with a couple of months to go. There's a number of dynamics that occur and makes it -- what make it so difficult to have a level of precision that we would like in that outlook.

Now things like channel buyer habits, based on their own inventory, stocking, destocking. You don't know until really the month of December. As well in the project business, there's always the potential of project pushouts. So more volatility there than we'd like, but we think we've got a good perspective right now.

From a margin perspective, some of the things we've discussed that impacted us in the third quarter, quite honestly, continue into the fourth quarter. The mix issue that we see, the impact from high voltage and the Harsh & Hazardous continues into the fourth quarter for sure.

Cost in excess of price, I mean the pricing environment, we saw some tougher pricing in the third quarter and we don't expect that to change certainly in the fourth quarter. So we're focused more on the cost side of the equation. The combination of those 2, about 60 basis points.

And then the above -- the variability in volume comes in that higher margin project for international business, so that can be a swing in margin, but right now we're navigating to how we think it things will play.

And then, of course, we've got costs associated with some of these cost-reduction actions that we referred to, and we currently think that'll be $5 million to $6 million of cost in the quarter. I think we've also -- we'll still see some higher-than-normal cost in that full year from the warranty and related costs.

Certainly, going forward, we would expect that to come back down. It wouldn't be at the same level because we're not expecting the product specific and brand specific, but that's still going to impact us for this year. And then, a tax rate, staying at approximately 33%.

There's no assumption of R&D reenactment or any other year-end adjustments contemplated in that guidance. Okay? So let me turn now to next year. Certainly, we'd love to, and I'm sure you would love us to give you a lot more clarity into next year. But we've got our challenges just navigating through the rest of this year.

And we wouldn't typically be providing that guidance because it is too early. But I do want to just give some perspective of how we're seeing things right now. I think if you look at the third party forecast of all of our end markets, they're at worst flat to slight growth to mid-single digits to high single digits.

All in all, could provide 3% to 4% of growth, and that's what we're looking at, and we're planning for. Of course, there's always the market uncertainty, and so we plan for things to be lower. That growth, from a margin standpoint, we would certainly expect that higher organic volumes is going to give us some incremental margins.

But that growth will also come likely, particularly if we look at the business portion of our portfolio, and that's in the nonresidential market. But that would be at margins that are not quite at the level of some of our really high margin performing businesses that could have slower growth to flat growth. And then we have more cost actions.

We're taking actions this year, but we have more on the board for next year. And I'm expecting that those cost actions, in total, will exceed the amount that we did this year, so we'll have some incremental. But as is our practice, when we ultimately provide guidance, it will be with all things considered and all things in.

So I'd like to tell you more. We're working diligently through our planning process, contemplating all the things that we've -- had painful learnings in the third quarter we're working through in the fourth quarter, and we'll be working on and improving next year. We'll give you a lot more detail on that in January on the call.

Okay? With that, I'm sure you have lots of questions. So let me turn it back to Jim, and if you want to moderate the Q&A..

All right, Don. Let's open up the Q&A session here please..

[Operator Instructions] And we'll go first to Christopher Glynn with Oppenheimer..

On the high-voltage test, Dave, wondering if you could put some description on what would you view as a normal year, characterize this year's deviation from that? And any reason to think it doesn't have a normal year next year?.

That's a very interesting question, Chris. I mean, one of the challenges in that business is, there is no normal. What we found is that it's either really good or it's not really good, by our standard. When it's great, when it's roaring, great margins, you love it.

When things slow down, it's one of those high capital-intensive apparatus-type businesses that have a high breakeven point. So the decrementals, when things slow, are much more painful than the incrementals on the upside. So I think next year, we think it will be a little bit better, but I'm very cautious about that.

But -- and certainly, a little bit better in profitability. But you'll understand if I'm unduly cautious on that business based on what we've experienced this year..

Yes, I understand that there is no normal in a sense.

Is there maybe a normal in the typical duration that this business can go away for at times?.

Yes, I'd say, Chris, the cycle times can last a few years when it's kind of going down and along the bottom. It's proved to be, for us, since the '08 period, a very countercyclical business. So for example, in '09, when the rest of our industrial businesses weren't doing so well, that was actually doing strong.

And as Dave said, it's incrementals were good at that time. And so it's providing an offset. In this part of the cycle, it's providing a drag to what is otherwise a healthy industrial business. So it's not -- it doesn't go -- I think, the nature of your question, it doesn't bounce back in 1 year or go down in 1 year. The cycle time is slower than that..

Got you. And then on the restructuring, you mentioned $5 million to $6 million in the fourth quarter, and then 2015, all in, being a little larger for Hubbell than this year.

So just wondering if there was any restructuring here in the third quarter? And what the total amount for Hubbell for the year might be?.

Yes, so we had a very small amount in the third quarter. It was in the Lighting business with a distribution center.

But not a material cost, Chris, and ultimately, the level of expense that Dave was describing and that we're anticipating in the fourth quarter is a bad compare fourth quarter to fourth quarter, but year-over-year in the full year, it's actually comparable to some -- the level that we spent closing a facility that had come along with a Power Systems acquisition that we had made a couple of years ago in the prior year.

So it's at a comparable level to last year. But just -- it's unique in the fourth quarter versus last year, it was in the first half, spread between the first 2 quarters last year..

Okay. And then, in the earlier press release, you mentioned some obsolete inventory charges. I didn't hear that term mentioned today.

Was that swept under some other bucket?.

Yes, that's in the unfavorable price and costs..

We'll go next to Rich Kwas with Wells Fargo..

I wanted to follow up on the margin impact here with the legal and warranty costs. So that was about 100 basis points. The year-over-year -- the rest of the year-over-year decreased 120.

How is that split between the price issues as well as the mix? Is it equally split? Or how do we think about that for the quarter?.

The other part of the 200, not the year-over-year..

Yes. So Rich, for the quarter, the impact of the other 2 items that we have noted were actually comparably sized between the unfavorable mix and the cost in excess of productivity..

Okay.

And then to follow up on that previous question, the obsolescence is in that cost in excess of price or whatever?.

It is, Rich. The complication is when we did the preannounce, we were talking about E&L relative to our July outlook. So it's higher than we thought from July. But when you do the year-over-year, it's not at the level that's worth just calling out as a separate line item. But it is one of the drivers.

So I think the 3 big contributors to those cost are wage inflation, some freight cost and the inventory, Rich..

And is that a -- has the inventory -- is that going to continue to be an impact going forward or is this kind of a onetime?.

I think it's going to impact the second half of the year, Rich. And -- but going forward, not be at recurring levels..

Yes, I think, Rich, I mean, let's talk about that inventory, it's just as an example of the process that we're going through here. I mean, when those things come up, certainly, you would expect that.

And we're all over it from a root cause analysis and figure out what's driving, whatever higher-than-normal costs are even if they may not be significant enough to spike out, and inventory warranty, but inventory as an example. Not surprising that you get a little more inventory obsolescence as you're introducing new products.

And the challenge is making sure that you're not introducing the new products before you've liquidated the old ones sufficiently. And I think that's what has started to build up with the rapid -- more rapid penetration of LED than was anticipated.

So we've been working to get that more in balance as part of a new product launch plan, to be sure that you are managing inventories in advance of that because it's much more difficult to manage those after the fact.

So we've still got a little bit of that, that will probably flow through, I would expect, until those processes get changed, but I would expect those processes to be much more deliberate and more proactive as we go into next year..

Is it -- yes, that's helpful, but is there a dollar amount that we can attach to that? Meaning that as we move forward over the course of the next year, that, that shouldn't be reoccurring? I mean, you didn't split it out, but it would be helpful to get an understanding of that piece, at least, or the range of that piece..

I mean, I'd say it's a couple of million dollars, Rich..

Okay. All right, and then just on the Lighting business. So the warranty issues, I understand the legal cost, but the warranty issues and the inventory obsolescence. How should investors think about your positioning at this point? You had your -- the largest North American player report a few weeks ago, had very strong numbers, strong top line.

They indicated that price mix was, well it was down a little bit, it was mainly more because of mix, not price.

And so how should investors think about how you're positioned? Is there -- how do you feel about your R&D spend? And just -- is there going to be another slug of R&D that's going to have to be required to get this business performing at a very strong margin level? I know the business, as a whole, Lighting is a lower margin, but just trying to understand, how you feel about the business in your conviction on where you are right now..

To the R&D question, I'm not sure that there is a -- from where I'd see, a need for a big uptick in our R&D. Certainly, there's areas that our assessment of the market that we could redirect our attention to differently. It think we're doing a lot of good things, we have a lot of good new products, good market receptance of those products.

I think, obviously, the area that we need to do a better job in our R&D is the design, manufacturability, the sourcing of the products, to make sure that they are more reliable. So we don't have those product cost issues after launch.

So it's hard to say that -- it would be hard for me to say that there isn't some market impact at least in some areas for some of the product issues. But I don't think -- I don't see a big uptick in our R&D spending. I think more focus on the right R&D spending is more likely..

And I think, Rich, more broadly on positioning, I think we had 6% growth in the quarter, that feels to us like market. I think with the resi business growing at double digits, that sounds very strong. I think our LED adoption rate is strong.

And we recently just won a Supplier of the Year award from one of our important customers, which says something to me as feedback from the market to your -- that speaks to your question of positioning. And so I think the spending is less R&D driven as you and Dave were just discussing.

But from a profitability perspective, the spending is going to be in productivity areas. And I do think that we're going to be doing a decent bit of that to -- which is not really the positioning of the business, but more its cost structure..

Okay.

And that 6%, is that just C&I, Bill, or is that overall Lighting?.

That's overall..

Okay.

So C&I was lower than that then for the quarter?.

No, no, sorry, that's -- yes, it was C&I.

The resi was about 10% and the blended was 8%, Jim, is that right?.

So we were up double digits overall. So the C&I was 6x the deals..

Inclusive of an acquisition was what it was, yes..

Okay.

Organic?.

Organics C&I, yes..

Okay. All right. And then just last one quick.

On the Harsh & Hazardous, high volt, what percentage of that business is international for you? Or are those 2 businesses, whether they're combined -- or you can separate them -- however you want to do it?.

Yes, they're both considerably international. We talked with you, Rich, about a 17% international base of our sales, which I know is not necessarily large compared to some of our other players in the space.

The contributors to that International business include Power as well as we have Canadian and Mexican businesses that are selling a broad amounts of our North American design products. And so the balance of that international is really focused in these 2 businesses, which is a high percentage of both of them..

We're taking our next question from Nigel Coe with Morgan Stanley..

So obviously, what's come across pretty clearly here is that you're as frustrated as we all are with the performance.

Just given the -- given all the balls that go all up in the air here with Harsh & Hazardous, high voltage test, you're restructuring quite aggressively, and I'm sure a lot more going on behind the scenes than that, should we expect an important [ph] deal flow while you solve these issues and a bit more of an accent towards returning capital? And I saw the dividend increase, obviously, and the share repurchase.

Should we also expect important [ph] deal flow?.

That's one of the things I love about the question that you guys have is that it either validates that we're thinking about the right things, or in some cases, gives us new things to think about. That's one. But I think about a lot, Nigel, particularly the notion that contributing to some of our issues or taking us away from focusing on the issues.

My answer to that would be, it could be, I can't say that there is absolutely no impact, that we can do everything every day. At the same time, I think that's a part of our culture and process that we have built, the capability around that, for the most part, is not a distraction.

And in fact, it's a -- it really is a part of the fabric of the operation. That said, we're certainly conscious of making sure that we are fixing before we're adding in those businesses that need fixing, but a lot of the adds are in businesses that are doing quite well.

And the last thing I want to do is constraining businesses that are doing quite well from doing even better because they're not impacted by the other businesses. So I think you'll see a little bit of, for example, will you see a deal in Lighting in the near future? I think it's safe to say, no. Okay.

Will you see a deal in the Power business? I think it's safe to say that it's likely. We hope so. The volume of deals is somewhat opportunistic, but we've always been conscious of what is balancing that level of activity and the risk of distraction, if you will. So -- but there's still more out there, but we're conscious of that.

Okay?.

Okay, that's helpful, David. And the issues, we've seen a lot of consolidation. And U.S. levels, which -- some big players coming in, maybe even -- Emerson's taking control of Appleton.

Are some of the issues really a function of a more competitive environment here? And obviously pricing has become more challenging, but is this a bit more structural than perhaps we realize?.

There's no doubt it's a more competitive environment. I'm not sure that it's structural, some of it I suspect is, but that's not -- we're not seeing that yet and in any direct evidence. There will be a pocket, an example in a market or a product offering or a competitor. But that quite frankly, that's been true as long as I've been with Hubbell.

I mean, it depends, but I think more of the competitive environment is because, a, there's some markets that have been slower, and so everyone has the same desire to maintain and grow. So that's made it more competitive, particularly around a pricing environment, as well as in some of our businesses. Obviously, we have good margins.

We focus on a space that has good margins and there continues to be new entrants in the spaces or current participants that are looking to expand in that area. So it's just a more broadly competitive environment, I would say, than simply a structural contributor..

We'll take our next question from Jeff Sprague with Vertical Research Partners..

Just picking up on that.

Is price in low-voltage positive or negative x Lighting?.

Yes, Jeff, on a year-over-year basis, it's really reasonably quiet flat. I think what's different is our expectations where we'd be able to pull a little bit. So it's quite -- we had benign expectations, but it's been harder to even get that modest expectation..

And then, price in Power is, I guess, running negative, right? Has been and still is? Can you size that?.

Yes, again, it's small. It contributes to the way we explain the margin loss [ph], but it's very, very small difference. But still, it is negative in Power..

On Lighting, I assume....

I would tell you it's better to call it flat, frankly, than down is how small it is..

Okay. On Lighting, the obsolescence, I was still a bit unsure.

Are you talking about obsolescence on now obsolete, earlier generation LED stuff or obsolescence in legacy, through legacy -- legacy products because you're mixing away more quickly than you thought?.

Largely, legacy products, Jeff. It's exactly what you point out, we're mixing away a lot of that at a more rapid pace than we were contemplating. And that's much harder inventory to liquidate after the fact..

And then, on Harsh & Hazardous. Is -- so your comments were quite clear about the international exposures.

I mean, would you relate that to any particular vertical? Is it upstream oil and gas? Is it mining? What other kind of complexion could you put on that?.

Yes, Jeff, our exposures are both of those, but the mining is much smaller. So it's much more significant in the upstream oil and gas. And so the impact on -- of price. A barrel of oil really impacts the spending there, and the projects are lumpy anyway. And then you get mix and more attractive projects last year versus this.

So you're getting kind of both volume and business mix at the same time..

I mean, we're all, obviously, out here worried about kind of oil and gas CapEx kind of falling, given what's happened recently. But the sharp drop off is really kind of in the quarter in the commodity prices, right? It wouldn't seem like that would show up in your business that quickly.

Is there something else going on there specific to your projects? Or just -- it seems surprisingly abrupt, right? If this was happening a few quarters from now, I would totally get it. The fact that it happened now seems a little surprising..

Yes, again, I think the volume that's impacted immediately isn't terribly dramatic because there is mix affect, too. But there have been projects, for example, in Eastern Europe and that part of the world, for example, where bids have been favored because of -- in Russia, to Chinese bidders, some of that project spending is getting switched.

But that is -- some of that is happening. Again, it's not big, but it's enough with the decrementals to cause us some pain..

Okay. And then just one last one for me. Just on the failure issues on LED.

I'm sorry, if you talked about that, I was kind of in and out for a second there, but was there a supplier switch going on? Is that -- was that an existing supplier that had a problem? Or really, what's kind of -- a little more detail around what happened there?.

Yes, as you would expect in most of those situations, Jeff, there's a number of causes when you get into it.

There are some component product issues from suppliers and we've -- there's a learning that goes on as to who is a reliable quality supplier and who isn't, and we've learned that and we're transitioning to the suppliers that have proven to be most reliable in quality. So there is an element of a quality -- supplier quality.

There's also an element of manufacturing design, and without getting into the details, but things like, an example is, the color of the wire being misunderstood in the manufacturing process and so it being done incorrectly. So no life safety issue caused by it, but a life cycle issue created by it. So premature failure.

So once you get into it, you conveniently figure these things out, and then the key is to the extend all of those learnings to the rest of the population. And so that's the good news that we take from that painful learning..

I'm sorry, I'll just sneak one more in and then I'm really done.

On share repurchase, should we expect you to jump on that pretty quickly and aggressively? Point taken on the deals where you don't want to shut it off, feed the performing businesses, but you do obviously have a lot of liquidity now, and the stock which is taking a hit here and a lot of stuff to focus on internally..

Yes, I guess I would characterize it this way, Jeff. We didn't seek that authorization simply to replace one that was expiring. So that is an area that we expect to complement our capital deployment on dividends and acquisitions with share repurchase..

We'll go next to Steve Tusa with JPMorgan..

Just on the nonresi front, I mean, you guys are generally pretty cautious.

Can you just talk about what you're seeing in the verticals between the institutional and the private stuff?.

Yes, I think, Steve, the private, we do see a nice pick up when you think about how we're exposed there. We've got general C&I Lighting.

We've got a brand called RACO that makes commercial construction, rough-in electrical, parts of BURNDY and parts of wiring device face off there, and pretty consistently those guys are -- have been -- all those brands have been experiencing reasonable growth.

So to us, that's kind of reflective, not specifically of any vertical within there, but more to the health of the spending, which maybe hasn't had any kind of hockey stick, obviously. But from where we sit, a reasonably good pickup in some spending there, broadly speaking..

Okay. And then, I know this is probably tough for you guys to answer, but there is obviously a lot of noise. I mean, you guys, kind of publicly canceled out of a conference late in the month of September. There was some news around the trust.

Any kind of comments you guys can provide? I mean was the cancelation from the conference really around what was going on with the businesses? And what you kind of came out with several weeks later as far as the miss on the quarter? Maybe if you could just -- I'm not sure what you can say, but if there's any kind of color you can provide, it will be helpful..

Let me speak for Bill, and this is something that we talked about a lot and we debate a lot. One of the challenges, as you know, we try to be very proactive in our investor communications and being out there. And sometimes, we sign up for more than we can actually deliver on.

And the things that are particularly difficult, and we're always cautious about signing up because of the time commitment, are those things that are -- particularly the West Coast ones, because it is such a time commitment that there's risk that some scheduling conflicts come up. That if it was in New York, it's a different story.

I mean, we can always squeeze in a few hours, but when you got something on the West Coast, it's tough to schedule around that, and sometimes you just have to pull out because of scheduling issues. So that's really what that's about..

Okay, so this is all you're saying....

There might be a little more -- go ahead..

Right.

So you're saying this is all kind of like coincidental what happened here with all the news and the preannouncement?.

The preannouncement was when we had information that we felt that needed to be put into the market..

And yes, Steve, I would say the timing of the Reuters article describing some news on the trust, which is not controlled by us in any way. So your word to describe that is coincidental, I'd say, is correct..

Okay. Sorry, I just had to ask just because it's been, obviously, a big question for us. And I think it will be helpful for you guys to just get on the record publicly with a bit more of color. So sorry to be a pain, but just wanted to....

No, no. I have to say, Steve, we certainly are taking that into account in our planning next year and be very conscious about our availability. So we have a much higher likelihood of being able to avoid scheduling conflicts..

Well, I'd tell you what, skipping a couple of days in Southern California for a board meeting, kudos to Bill for being dedicated to the business..

We'll go next to Mike Wood with Macquarie..

First on the Lighting side, you mentioned a change in buying pattern at retail.

Should we take that to imply there are some destocking in the quarter? And then also in Lighting, how are you thinking about benchmark -- benchmarking your margins, your cost basis versus your competitors?.

Yes, Mike, I think your interpretation of destocking is right. I think the -- Dave was describing some national accounts which get very lumpy, and year-over-year, quarter-over-quarter, as they stock or destock, you can get big swings. And so I think your characterization there is right.

And I think for your benchmarking point, there's one pure-play public company that we can use to benchmark. The other couple of large peers of legacy kind of players in the space are divisions of other companies, so harder for us to use as benchmarks..

Okay. How should we think about the payback on the restructuring? Is it sort of 1 to 1 or 2 to 1? Just frame that for us would be helpful..

Yes, I think that will -- it will take a couple of quarters for the benefits to kick in. And so we're hoping to see some of the benefits in the second half of next year. I think what's more important than that, as Dave was describing, an increase in more actions.

And so as those get planned and implemented, we'll quantify both the cost and benefits for you. But ideally, you're getting, yes, something like a 1-year payback, but depending on timing, you may see that in the next calendar year. But we'll help you with that, as we get -- as those plan gets implemented, Mike..

And then just finally, can I ask how you were thinking about the repurchase in terms of looking at A or B shares? Is it simply a matter of price, or are there other factors to consider?.

Yes, no, I think we would evaluate all the factors necessary, I think..

That concludes today's question-and-answer session. Mr. Farrell, at this time, I'd like to turn the conference back to you for any additional remarks..

Okay, thank you again everyone for joining us this morning. Certainly, if there are follow-up questions, feel free to call me throughout the day. I'm available for any follow-up you may have. And if not, we will talk to you in January. Thanks very much..

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