Maria Lee - VP, IR Dave Nord - President & CEO Bill Sperry - CFO.

Rich Kwas - Wells Fargo Securities Nigel Coe - Morgan Stanley Christopher Glynn - Oppenheimer Jeffrey Sprague - Vertical Research Partners Steve Tusa - JPMorgan.

Good morning. I would like to welcome everyone to our Fourth Quarter 2015 Results Call. [Operator Instructions]. Maria Lee, you may begin your conference..

Thanks, Beth. Good morning, everyone and thanks for joining us. I'm joined today by our President and Chief Executive Officer Dave Nord and our Chief Financial Officer Bill Sperry. Hubbell announced its fourth quarter results for 2015 this morning.

The press release and earnings slide materials have been posted to the 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 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 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.

Now let me turn the call over to Dave..

Okay. Thanks, Maria. Thanks everybody for joining and good morning. I want to just spend a little bit of time, first off, giving some overall comments on the year and a few on the quarter and then I will turn it over to Bill for more specifics on the quarter.

Certainly, we had a solid finish to the year, a year that had a lot of mixed and uncertain macro environment to deal with and a lot of that has been on the back of a real focus on execution. Our construction markets continue to grow, but we still are challenged by the oil and gas, as well as the broader industrial markets continuing to deteriorate.

And the transmission and distribution markets were slower than expected throughout the year and that continued a bit in the fourth quarter. Organic growth reflected this profile. In Q1, we were up 4% organically and in Q4 we were down 3%. We expected the year to profile that way, but not necessarily to that degree.

As the top line became increasingly challenged, we've continued to focus on what we can control and meeting our expectations. Our full-year EPS of $5.07 exceeded our expectations of $4.95 to $5.05 that we had provided halfway through the year.

Certainly that wasn't our original expectation for the year, but navigating choppy markets and particularly some of the uncertainty and significant weakness we saw in the third quarter, we're very pleased with the ability to navigate that successfully. We continued launching and implementing actions to improve our cost competitiveness.

We incurred $0.45 of restructuring related costs this year in line with our expectation. We've exited 12 facilities impacting 350 positions and a lot of that has been focused on domestic workforce, particularly the salaried workforce and even more specifically around those businesses that face up to the oil markets.

We've realized $10 million, over $10 million, of savings from those actions. Importantly, we achieved a significant milestone this year in completing our common stock reclassification.

Those of you who follow know that the shareholders overwhelmingly approved the reclassification of our Class A and Class B shares into a single class of common stock on December 23 and we look forward to operating with a simplified governance structure and a structure that aligns the economic interests of all our shareholders.

As a result of the completion of that, we started buying back stock at the end of the year and we're on track to repurchase up to 250 million as we previously announced. Our acquisition strategy, with all of that, our acquisition strategy remains a key component. We acquired a company called Lyall just last week.

Welcome to be part of the Hubbell Chief organization. Lyall is a leading manufacturer of components and assemblies for residential, multiple meter and commercial gas service line applications in the gas distribution system.

Very much complementary to some of the markets that we serve on the electric distribution side as well and their growth prospects are promising. Natural gas infrastructure replacement programs from increased regulatory oversight, regulation and new housing starts.

Already in a week, I've gotten some good comments from customers, very positive comments. Glad that they are a part of the Hubbell organization. That business, we expect, should contribute at least a couple of points of new growth for this year. Let me comment a bit specifically about the quarter.

We had sales of $830 million and our acquisition growth, a big part of our strategy, was offset by organic declines and FX. With mixed markets within the quarter, our lighting -- our core C&I brands within lighting were up double digits. The residential construction mark was up mid-single digits.

Power systems saw growth in telecom offset by some transmission market weakness, we think largely from timing of projects and not underlying weakness. But the harsh and hazardous market continued to be weak and our broader industrial markets continue to be weakened.

Our operating margins for the quarter of 13.5% were impacted by restructuring about 80 basis points.

We continue to fight the mixed headwinds, particularly significant on the electrical side, but we've also had the advantage of some favorable price, cost and productivity as the material cost tailwind across Hubbell has been offsetting some of the price erosion we've seen on the electrical segment.

All that giving us diluted earnings per share of $1.06 or $1.31 excluding restructuring and related costs and the reclassification. Let me turn it over to Bill and he can give you a little more granularity into the quarter and end-year's results.

Bill?.

Thanks, Dave, very much. Good morning, everybody. Thank you all for joining us. I'm going to use the slides as we always do to help guide my comments here this morning and on page 3 of those slides, Dave just gave you the highlights of the summary of the $830 million in sales, OP margin of 14.3% and the $1.31 EPS.

On page 4, we cover our sales by end market and this really helps us illustrate the bifurcated nature of our end markets and a theme that we're going to talk quite a bit about as we discuss margins which is the negative mix effect which has been impacting is all year.

You can see the green arrows here between our residential and nonresidential construction markets have provided us attractive growth throughout the quarter, but the industrial markets are negative led by oil and gas and certainly seeping into the rest of the general manufacturing area.

And the declines in industrial were strong enough to overcome the lift for us provided by the construction markets, so you can see the down 3% organic. We were able to offset that with three points of acquisitions and I will just give you a little bit of commentary on the acquisition program.

You've got, contributing to our sales in 2015, the deals that were completed in 2014 and 2015. Over that two-year span, we have eight different contributing acquisitions, about $250 million invested over that timeframe.

Those acquisitions were in both segments and across all four operating units, so a nice, broad acquisition program helping to contribute and offset that organic sales decline.

On the FX side, headwind for us, this is really a sales chart, but just to comment on FX, we believe we had about a $0.20 impact on earnings from FX, affecting us at the sales and OP line from translation, but the transactional impact also being very significant.

The payers that mattered most to us included the Canadian dollar, the British pound and the Mexican peso, so strong dollar negatively impacting us there.

Page 5, switching to gross margin and S&A expense and I'm going to be using adjusted margins from here on out, just to help make the two periods more comparable and Dave mentioned the restructuring adjustment that is being made there.

At the gross line, you see 32.6% in our fourth quarter, largely impacted by the negative mix of the decline of industrial being replaced with C&I volume. On the S&A side, you seeing a pickup to 18.3% of sales.

The dollar increase there was largely driven by acquired S&A, so certainly as we acquire new businesses, they come on at slightly less efficient S&A structures in the first year that we own them, but it is a good reminder for us, because we expect to be acquisitive.

We've got to continue to work on S&A in order to keep that number flat or down as a percentage of sales. On page 6 we flip to operating profit margin. $119 million at 14.3% margin, a decline of 120 basis points driven by those drivers of both gross and S&A that we've discussed primarily on the mix side and the acquisition side.

Page 7 deals with the non-operating expense which is primarily net interest expense comparable between the two periods and our tax rate was a bit lower in the fourth quarter with some lower discrete adjustments this year and comparable R&D tax extenders included in both fourth quarter periods.

Net income, as a result, on page 8, was $76 million, a decrease of 10% and EPS of $1.31, down slightly less than that 10% as we bought some shares during the year.

We purchased effectively approximately 800,000 shares during the year, the majority of that was early in the year and, as Dave said, we only had a couple of days, buying days left after our December 23 reclass, but we did restart the share repurchase program then.

Starting on page 9, now we'll switch to a segment discussion and we will start with the electrical segment and here you see that effect of the mix and the bifurcated markets that we've discussed.

Similar to the company, had organic sales down 3% with FX headwinds of 2% and the acquisitions offsetting about two points of that resulting in a three point decline to $586 million. Again, you see on the non-res side and residential, good growth, the resi business grew for us in the mid-single digits during the quarter.

On the non-res side, C&I business generally grew in the high single digits and the core section of our C&I lighting business growing at double digits during the quarter. Unfortunately, on the harsh and hazardous side, we were down about 30% in the fourth quarter.

And the industrial side, we also saw weakness, particularly on the heavy industrial area where we were down some double digits in some of those markets. Again, you see strength on the construction side, weakness on the industrial side.

The result on our performance of that mix led to a decline in OP margin down to 11.7% and despite the favorability of price, cost and productivity, not able to overcome that powerful mix headwind. The power segment enjoyed quite a nice quarter as you can see on page 10.

Again, you see some flat markets there with FX headwinds and a slight organic headwind, but our power acquisition program able to offset those.

And really within the organic side, we saw flat contribution from the distribution side of the business, lower transmission spending as a result of projects being pushed out and that lower transmission partially offset by some growth on the telecommunications side which we had talked about earlier in the year with you.

That organic of minus one and flat overall shows the deceleration we've seen in the power segment through the year. Dave made some mention for the whole company opening strong in the fourth quarter. Power business opened similarly strong, high single digits and ending flat as you see a steady decel during the year there for the power top line.

At the OP line, you see $50 million of operating profit and 20.6%. Nice improvement in the OP margins.

Here we have good productivity programs in excess of cost increases and importantly the transactional FX effects that they were seeing, they were largely able in some of their international markets, particularly Canada, to offset some of that with price. The result is a beneficial operating profit margin.

The fact that there is material cost tailwind in there leads to just a comment on my part that difficult to sustain those margins, I believe, because of that tailwind that's inherent in there. Fourth quarter cash flow on page 11. You see the lower income as well as higher CapEx spending. $7 million extra spent on CapEx.

Those are quite important to help us drive our productivity and so as a result, you see the lower free cash flow for the quarter. Now the comments will switch over to looking at the full-year and you see approximately $3.4 billion of sales, a 1% increase which is -- got no help from organic, so a flat organic contribution there.

FX headwinds of 2% and the acquisition program able to provide three points of growth to make it a net growth year, so good contribution from our investing activity there.

The operating profit side, we earned 15.1% adjusted basis, a decline of 50 basis points, really a function of mix there, overcoming good contributions from price, cost, productivity favorability, as well as, some early savings from our restructuring activities that we've done starting the fourth quarter of last year and through the beginning part of this year.

The EPS line of $5.52 generating essentially a flat earnings performance for us for the year. Now we will talk about the segments for the year and I think you'll find the trends quite similar to those that we discussed for the fourth quarter. You see the same characterization of harsh and hazardous markets being down.

They were down about 24% for the year and meanwhile, we had residential growth in the mid-single digits and C&I growth across non-res in the high single digits and yet industrial weakness as well. All that driving essentially a flat sales profile in our electrical segment.

And that unfavorable mix and the FX headwinds creating margin compression to 13.1% despite the favorable price, cost, productivity efforts that we had. Power segment on page 14. You see a couple of notable levels achieving $1 billion of sales and $200 million of operating profit, so I congratulate that team on generating that performance.

Again, you see very attractive contributions from acquisitions at 4% helping drive that growth. The distribution markets were essentially flat for us for the year and some delay in the transmission projects, a similar theme as in the fourth quarter, but growth in the telecommunications work, that netting out to a positive organic year.

On the OP side, 20.1% margin, a healthy increase driven by the same factors that we discussed in 4Q, namely the productivity helping with some of the material cost favorability and being able to offset some of the transactional FX with some price increases. That dynamic will be interesting to continue to watch for us.

The full-year cash flow for 2015, again, you see lower income, D&A higher as a result of both the capital expenditures and spending on acquisitions. Working capital was a lower use, so more efficient working capital with a low growth year and we had a lower source on the other line there driven by deferred taxes.

You see $17 million more spent on CapEx there and then maybe just give you a little bit of a flavor on that CapEx, I would say that that $77 million exceeds our depreciation levels, so I would describe that as a net investing level of spending. A high percentage of those dollars were put into the lighting and the power systems businesses.

Places where we're seeing good growth and the IRR is quite attractive on each of those CapEx projects, so I think that spending is quite constructive for us, so the result was meeting the target of 90% of net income. Capital structure on page 16. Some notables here to pause on. You see cash at $344 million.

That's essentially, at this point, all international cash. You see that we issued some commercial paper towards the end of the year, nearly $50 million. And you see the debt to cap increasing up to 27%. You also see down at the revolver line, in December we closed on a new increased five-year revolver up to $750 million.

We think that upsizing is important to help support our acquisition program of which Dave described the new Lyall acquisition, a $130 million acquisition already, so the new year is off to a good start in terms of our investing. So, the year in review, we had really no help from our end markets.

We had FX headwinds and we were trying hard to overcome headwinds in the industrial end markets, so our acquisitions helped us push growth to up 1%. The operating profit margins, 15.1% at attractive levels, but down 50 basis points over last year with very powerful mix headwinds to overcome.

I think it is worth calling out the good performance in the power segment and contributions they made. And I think it's worth also calling out the strong contributions from the lighting platform that it was within the electrical segment, but nice growth and nice profit margin expansion.

So we got good earnings contributions from our lighting partners and still big headwinds obviously on the industrial side of the company which causes us to keep our focus on our cost competitiveness. We invested $0.45 in restructuring and related activities.

Dave mentioned the 350 positions in the 12 facilities and I think maybe just to give you a little bit more color on that, I think it's reasonably balanced spending between headcount reduction, footprint consolidation and functional redesign where we're taking advantage of our scale and competing collectively.

And I think good results in terms of seeing $0.10 of savings already this year and we continue to expect the $0.30 of incremental savings next year. And so, as Dave commented, concluded the year on 23rd of December with the reclassification of the equity structure.

That kind of wraps up the quarter and the year from my perspective and I am just going to pass it back to Dave to give you our outlook for 2016..

Okay. Thanks, Bill. Certainly 2015 was a challenging year. Navigated a lot of things and it's a year we're quite frankly glad to have behind us. Let's talk about what we've got in front of us now. First let's talk a bit about the end markets and the way we see the end markets and our participation in them.

I would say that overall we're a little bit cautious. A year ago we thought we were feeling good about the markets and we were surprised as they've drifted down and weakened a little bit and so we have to take that into account as we're looking at our outlook for this year.

If I start on the upper right of the pie, first on the electrical transmission and distribution, that market we see still being up 1% to 2%, really no change from our last look to that with distribution flat and transmission being up. On both the resi and the non-residential construction related, those two buys together are both looking at 3% to 5%.

I think certainly on the non-residential, that's down from three months ago when we were thinking it was more like 5% to 7%.

I know there are a lot of reports out there that also suggest that it could be stronger, but there's also a lot of the tone and bias seems to be more concerned about the contagion, similar to what we experienced this year from the oil markets drifting into the industrial markets, does that start to impact the non-residential construction, in particular, next year.

And we're trying to validate that with our channel partners, as well as third-party sources and what other market participants are saying. We hope that is conservative. I think certainly the low end of that I think is conservative and if we're wrong and if the market turns out to be better, we will deliver better results.

The industrial markets, we see as flat to down. You know, our core industrial market down mid-single digits and that continues to show some weakness, but we expect that will start to flatten out as the year progresses. And then on the oil and gas business, down 15% to 20%.

Interestingly, I think if we go back to last year, it played out, at least from a calendar standpoint similar to what we expected where it started modestly down and continued to deteriorate and the fourth quarter ended up down, as Bill mentioned, pretty much at the levels we expected.

It just -- the decline started sooner, so the full-year was weaker and we still think there is a little more of that to go into next year, at least as we're looking at the market. That's why we see it down 15% to 20% and that's what we're planning for.

I think if you turn the page to page 19, we start to put it in context first on the sales side so what does that all mean? The flat markets, in the aggregate, doesn't mean flat growth for us.

We're planning organic growth to outperform those end markets and I think I have some reason to have confidence in that in going through with all of our business leaders as to how they are approaching it and one of the key drivers to that, I would say is important that a large contingent of senior leadership team has a part of their compensation tied to growth and profitable growth.

What gets measured gets managed and what gets rewarded gets achieved. I think there clearly is a focus across our entire business to make sure we're truly doing everything we can to outperform the end markets. We're not happy with the end markets, but they are what they are. Our job is to try and outperform them.

Acquisitions remain a key part of the growth strategy. Bill talked about and I mentioned Lyall already and we're going to continue to look at acquisitions to add to our portfolio and to continue to grow. Unfortunately, the downside, we're still facing some FX headwinds.

Just if rates remain at the levels they are today, that's lower than they were on average last year, so that's something that were going to have to navigate through. On the operating margin, we've got some key drivers there with many moving parts, but with opportunities and potential offsets. First and foremost, is the restructuring savings.

We're looking at $0.30 of savings from last year's restructuring actions, consistent with our prior expectations. But, we have to take another round of restructuring. We have been signaling that for a while and right now, it looks like we're planning to be at the high end of that with another $0.35. A lot of good projects initiated by the business.

Some of those are the ongoing efforts to respond to the lower oil prices and the impact on that market. We've got, on the plus side, we've got share repurchases and the benefit that we expect to see from that up to the $250 million expected. Once we've got the reclassification behind us we were able to get back into the market.

We're still dealing with some headwinds against those profit targets. We, unfortunately, continue to have to deal with and hopefully not for much longer, some of the mix headwinds from the oil and gas and the industrial business which more than offset the benefit that we get from the construction uptick.

Pricing, there is some price headwind as we look into the next year. Generally, our price lags the material cost, so we've had some of the benefit of the lower material costs while maintaining price, but we expect more price pressure next year.

Our overall price, cost and productivity that we try to neutralize on an annual basis, we're expecting that to be slightly negative particularly because of price. But we're continuing to invest in the business. Part of the growth comes from investments, whether it's on the engineering and sales side on power systems.

Great business, but you've got to keep redeveloping, reinventing and selling those products. Some investments in getting into new markets and new customers and the cost to do that. And then some of the investments on the technology and market implications around lighting.

The currency will continue to provide a little bit of headwind for us next year and we also have pension expense headwind, mainly due to the negative asset returns we saw in 2015. So, all of that, the pluses and minuses still give us better earnings next year.

We're looking at earnings per share of $5.20 to $5.40 and that includes the $0.35 in restructuring that we talked about. And we're going to continue to position our cost structure.

It's been focused on, continues to focus on long term, sustainable, profitable earnings growth whether it's on the top line or on the cost structure, all intended to increase shareholder value.

Our free cash flow outlook, as of now, is at 90% of net income and I think that is a reflection of continued focus on investing in the business, particularly on the capital side, but I will tell you that that is one as we have become a net borrower and in a true net debt position, I think Bill and the team are very focused on the continued generation of strong cash flow.

A couple of closing comments before we open it up to questions, I think as I mentioned 2015 was a challenging year, one we're glad to have behind us, but it was also, you can't lose sight of the fact that it was a year of really some very significant change.

Not the least of which was the simplification of our capital structure, but not lost is record cost reduction actions at levels that we've never seen before and the successful execution of those. Continued investment across the board whether you look at CapEx, dividends, share repurchase and acquisitions and we expect that to continue.

All that and at levels, despite the tough markets, at levels that were higher than in 2014, except for maybe share repurchase where we had a little period that we were blacked out of the market, but based on our 250, clearly we're going back in the other direction.

We've also, last year, had significant organizational and leadership changes and those new leaders in the businesses, they took on the roles mid-year and they are clearly owning their businesses this year and are very focused on delivering.

And you're going to have a chance to see those who you haven't seen, yet, in the market when we meet at our investor day in March.

I think a lot of, particularly around the leadership change, is a result of our long term attention to leadership development and succession planning and a big part of that, a big contributor to that I would like to just mention is Gary Amato.

Gary was the Executive Vice President of our electrical segment and you will note that he retired at the end of last year and that was consistent with the succession plan we put in place for many years. Gary's been with Hubbell for more than 25 years, he's instrumental in developing the electrical segment team that's in place now.

When I joined Hubbell in 2005, he was running simply what you may recall was the industrial technology business which if I recall was about a $100 million segment. And he's taken on more and more responsibility. And you think about what he is done and what he's taken on, his contributions are great. We want to thank him for those contributions.

The other leadership change I don't want to lose sight of, most recently, is the appointment of Maria to take on the treasurer's role, as well. So she did such a fine job on investor relations and strategic planning, we gave her more responsibilities.

She now is in a role to have to try and help us execute on all the great investment ideas that you've shared with her over the last year and she's got a great supporting cast with Steve Beers, so I think you all get to enjoy spending more time with her. With that, thanks for joining us and let me turn it over to Q&A..

[Operator Instructions]. Your first question comes from the line of Rich Kwas, Wells Fargo Securities. Your line is open..

Just on the harsh and hazardous exposure, Dave, could you just update where your cost structure is, at this point? Obviously, oil has come down in terms of pricing here in the last few months and I think for I recall you were sized for a $50 environment.

What's the update there?.

I think we're, I would say we're $50 or below, but were not at $35 and so there is more actions to occur there. And I would say the best way to look at it is in the $0.35 that we have next year, about a third of that is still associated with actions around those businesses.

Okay?.

Okay. And then on the power margin, you had a very strong year, relatively speaking, fourth quarter was very good. I know you've talked about the pricing actions that helped 2015 margins and it's unlikely that margins are likely to come down.

Is there any way to think about that in terms of cadence of how projects play out and what you're seeing in the underlying business?.

Yes, I think, Rich, the distribution side, as you know, for us is a larger piece and tends to be, has been a little bit more stable. The transmission projects, while our sales folks and specifiers were working with our customers and we had activity, a lot of those projects got pushed out a little bit.

For us, the cadence was significant deceleration during the year, driven by some of those transmission project push out. Our expectation is those projects land in 2016, but that was an underlying driver for decelerating growth rates down to flat as the year ended..

Okay. So, on the pricing front there, is that going to be, I assume that is going to be a part of the story in terms of--.

Yes. I think pricing, I don't want to be misleading and say that the power segment has pricing power within the typical U.S. segment, I think that would be the wrong takeaway.

You know, they were forced with FX adjusted rising costs north of the border, raised prices and were able to get some of that and to your point, how long does that hang on or does that switch or erode. It's difficult to predict, but I think you are right to say difficult to hold those margins at that level as a result..

Okay and then on the buyback of the 250, my impression was that you were going to be pretty active here once the share request got passed. Sounds like you were toward the end of the year. Should we assume this is going to be more front end loaded? I can't really measure what the bar is there in terms of EPS contribution.

I don't want to get out my ruler right now, but I just wanted to get your thoughts here on, should we assume this is going to be front end loaded versus, it gives the impression that maybe it is going to be more of a gradual pace but I just want to clear that up..

I do like the image of thinking of you with your ruler on that page, but you're right that the 10b-5 allowed us to be purchasing over year-end and through January which would typically be a blacked out period.

We become open market a few days from now and go restricted again in the middle of March, so, you're right to assume that we'd be able to get most of that in during the first part of the year. We've also, the bar is maybe a little smaller than you drew it, because we're assuming, you saw that we had about $50 million of CP, Rich, at year-end.

We spent $130 million on an acquisition last week.

We're spending actively on share repurchases and I think this could give us an opportunity to term out some of that CP, so we would expect some new interest expense next year and we've allocated a portion of that to that bar, so just as you think about the impact, we were tying some interest to that, just as we all have our rulers out on that..

Okay. Just a quick follow-up on the deal, you paid $130 million.

What's the revenue contribution or was it trailing the 2015 number?.

Yes. Dave talked a couple of points. So you're in the $75 million range there and a really interesting business. We had made acquisitions, for those who follow us closely, in Continental Industries, as well as a company called GasBreaker, so this is now our third acquisition in the space.

And it's, as Dave said, always good to get customer feedback that they are appreciating Hubbell having a broader product range in the space.

It's really an MRO-driven business where you have the specified brands and trying to help those customers keep that both resi and commercial and industrial applications there of the last mile of the natural gas distribution system. So nice product build out that we've done there over the last couple of years..

Your next question comes from the line of Nigel Coe, Morgan Stanley. Your line is open..

Just want to start off with, we all know that 4Q was weakened. We just saw the duplicate orders came out and they were horrific in December.

I know January is a very minor month for the year, but anything unusual you have seen in January today?.

We have not seen anything unusual, Nigel, in January, yet. It is tracking more normal than January usually does. January, as you know, has a lot of volatility, depending on what kind of actions occurred in the fourth quarter and around year-end.

And we actually found that the end of the year was a little bit better from a book-to-bill than it has historically been. It's still always a low period. But it was a little bit better, so that was a positive sign for us, at least going into the year, that we weren't going to start in a big hole or that there was really some big warning signs.

But that said, it's not great demand, but nothing is unusual that we're seeing yet..

That's really interesting. And then you called up the 12 facility exits through the year and I think you talked about maybe up to 30 potential actions at a time, so you're a good way through that program.

Any sense on where we're in terms of square footage reduction within this restructuring program?.

I think we're thinking, Nigel, there will be another four facilities that would be impacted this year. That would get you up to 16. As Dave said, I think the harsh and hazardous business still needs some investigating, so the path there continues.

I think you're right, we feel like we got off to a good start, but you're right to point out there's still a lot of opportunity there for us on the square footage side..

Okay. And then just a quick one on power margins, Bill, you obviously called out the sustainability of power margins is going to be tough to maintain.

Was the comment about the absolute level of margins or the rare expansion of margins?.

Yes, I think the absolute level is void right now with some sticking price and some material tailwinds. And just to recall for everybody, Nigel, our power business has a lower gross margin and so therefore more material in the OP margin and so they are vulnerable to, they are vulnerable to commodity price swings.

I think on our last call, we spent some time answering questions about when commodities rise, will that inflection create a problem and it feels like that question may be off the table for a while as commodities stay down and it becomes a little bit more how does price chase that? But I think your understanding of that is right, Nigel..

Your next question comes from the line of Christopher Glynn, Oppenheimer. Your line is open..

In the roughly $30 million restructuring for this year, not sure if you alluded to how to allocate that both during the year and across the segments. Maybe if you could just give some rough guidelines there to help the model out..

Yes, Chris. You're talking about for next year and we were talking about $0.35 and I don't think we would quarterize that for you. The way this past year went, we had the second and third quarters have a higher, as a head and shoulders look to the year. This year, I think, yes this year in 2016 might be a little more equal amongst the quarters.

Where it gets lumpy is with some of the buildings, but I think our expectation being a little more even than last year..

And across the segments it's mostly in the electrical segment which is similar to this year. There is some in power, but it is more electrical weighted..

And just sticking with the power system margin trends.

You've given a lot of color there and some good concepts to help us think about it, but if we look at margins being about flat in the fourth quarter, with the middle quarters, typically there is a seasonal step down there, so it indicates that there was actually some accelerating favorable performance there, so quarter to quarter, you know, I don't know what the price favorability movements were, but when you talk about some reversion potential there, you also have acquisition integrations.

You had 4% contribution top line which were dilutive.

Are we talking differences at the margin, here, in terms of the profitability indices that might come through?.

Yes. I would say so. The price was a meaningful contributor.

If you didn't have that, that would have had an important impact and again, the material tailwind, so to have those two things in concert, I just think and if you go back and did a histogram, I think there has been a quarter, the third quarter, a number of years ago, Chris, where we maybe had a 23% margin, so you can get these quarterly distortions and I'm pointing that out.

It's a great business with nice margins, I just think it would be wrong to assume we're adding 25 basis points a year to 20% margins. I think that's not right..

And to the point of the fourth quarter being higher than maybe seasonally where you'd see a step-down, the material costs and, actually, the price, too, they were -- the favorability on a year-over-year basis increased throughout the quarters of the year.

So it actually, there was more commodity tailwind in the fourth quarter than there was in the second and third..

Okay, so we will take the quote unquote warning type comments as more relative to the fourth quarter run rates than some of the other quarters.

And then on the deal flow, just wondering if you could update on what the competition looks like for larger deals relative to the smaller ones? And you mentioned terming out some of the revolver potentially or the CP.

Does that speak to the larger deal pipeline at all?.

Yes. I think, Chris, I would say the deal pipeline is active. I would describe it as business as usual. To do eight deals over the past couple of years before Lyall, where the average deal size was kind of $30 million, that sort of deal is like business as usual. I think the ability to do those is embedded in our cash flow generation.

The bigger deals, I think there is still opportunity out there. There will be things we consider, but I would say the borrowing could be done just on the basis of what we see near term in the pipeline. We don't need a big deal, I don't think, to get to that point is what I'm saying..

To term out?.

Yes..

Your next question comes from the line of Jeffrey Sprague, Vertical Research Partners. Your line is open..

A couple of things, could you just run us through lighting in a little bit more detail? There were some comments there, but what did total lighting do and then what did C&I versus resi look like? And if you can update us on the performance of LED within that, that would be great..

Yes, Jeff, so the resi side of lighting for the year grew in the mid-single digits. The C&I side overall grew high single digits and the core part of that C&I was in double digits and we enjoyed attractive margin expansion in the order of magnitude of 150 basis points or so.

So it was a good, solid performance by those guys and good, healthy contributions to our earnings..

And how much did the LED portion of the business grow?.

The penetration rates there are up over 60% at this point, continues to outgrow the overall platform..

Okay.

And when you say core C&I up double digits, you are excluding harsh and hazardous and just looking at the core commercial growth?.

Yes and excluding some of the distortions we get on some of the national account business, too..

Okay. I just wanted to come back to restructuring. There's a couple of questions about that. 350 people out, some of that is headquarters, it sounds like. But even if it was all in the plants, that's like 29 people per plant. How many really small sub scale plants are there? You've obviously rolled up a lot of small businesses over time.

I'd like to get a better idea of actually how far through this process you are and maybe put differently, how big of an opportunity remains to perhaps really rationalize this footprint?.

Well, a couple of things, Jeff. First of all, I think you have to look at the distribution of our employee base and just under half is in low-cost country. Between China, Mexico, some higher cost international, so when we look at that 350, it is really focused on our domestic workforce largely.

In particular it's focused on our salaried domestic workforce, because the hourly workforce is flexed more naturally. It actually was a big component of our salaried workforce, but still more to go.

I would say sitting here today there's probably, I don't have the specific numbers, yet defined for this year, but there's probably going to be at least half that level this year as we approach salaries. And depending on, as we get into looking at some of the markets and some of the facility rationalization.

Part of what we're doing with the facility rationalization, it's some onesies and twosies that you get for headcount. It's really the efficiency you get from getting out of that facility with all of the peripheral infrastructure cost, whether it is network, computers, rent and the like.

There's a little bit of a trade-off there when we look at it simply on a headcount basis..

That is what I was getting at is if you were starting today with a clean sheet of paper, I would think you would have fewer larger plants that were maybe plants within a plant. You still need a lot of flexibility and you've got a lot of skus.

But if you really thought about an ideal footprint, can you give us an idea of how far along you are in the process?.

To an ideal footprint? We still have some ways to go to an ideal footprint. There are two key issues relative to our footprint strategy.

One is the cost of exiting large facilities is pretty high and so to make sure that you can and the risks of that are equally high and so we have to make sure we're very deliberate about that and that we can do it successfully and make it economically feasible.

The other is that some of the smaller plants have some really key knowledge in those plants around that production and so I can sit with my former finance hat on and say very simply we should have a third fewer plants.

Until I put on my operating hat and I go out and see what they do and say, boy, that is not the easiest thing to move and boy, that's a pretty high margin product that we're serving a customer with, so not so sure we can do that. So that's the give and take that, it's there, but it takes longer to get to.

Certainly we've been doing it and I think the lighting business has demonstrated, out of necessity, the need to move more aggressively and they have been doing some of that, but I think the other businesses are still evolving on that side of it and that's something were working on..

Your next question comes from the line of Steve Tusa, JPMorgan. Your line is open..

I'm not sure I picked up on it, but can you maybe just tell us what the price was revenue wise for the fourth quarter and then what you expect it to be here for the year?.

Yes. The price impact on sales in the fourth quarter was roughly about a point..

A point positive?.

Yes..

Okay.

And then what do expect it to be for 2016?.

In the range of half a point or so of negative..

Of negative? Half a point of negative. Okay..

Yes..

Got it and what are you guys, maybe just expand a bit on the verticals within non-res and what you are seeing slow the most there relative to what you'd expected three months ago..

You know, I think, Steve, we focus on the cross-section there. I don't think we feel terribly skewed one way or the other either regionally or by vertical and so I think we always frustrate everybody by not providing lots of insight into the verticals..

I will now turn the call back to our presenters for closing remarks..

All right. That concludes today's call. Thanks for joining us. Steve and I will be available following the call all day for questions. Thanks, again..

This concludes today's conference call. You may now disconnect. Thank you..