Hubbell Inc (HUBB) 2007 Q3 法說會逐字稿

Welcome to the third quarter 2007 earnings release conference call for Hubbell Incorporated. Today's call is being recorded. Now, for opening remarks and introductions, I would like to turn the call over to Mr. Tom Conlin, Vice President of Public Affairs with Hubbell Incorporated. Please go ahead, sir.

Thank you, Sean, and good morning. We've released our third quarter earnings this morning at about seven o'clock. And that release is available, as usual, to you from a number of sources, probably most easily by going to the Hubbell website at hubbell.com. You can access the complete release by clicking on the Investor Information tab at the top, and then Financial Releases on the drop-down menu. It's also available from the wire services, as usual.

This conference call is available by telephone and is simultaneously being webcast also from the Hubbell website. Audio replays of the conference call are available in three ways. First, you can get a telephone replay of this call, starting two hours following its conclusion. And that replay will be available through November 1st. To access the telephone replay, dial 719-457-0820, and you'll need the pass code of 1587204. You can also hear the replay on the Hubbell website, again from the Investor Relations tab and the Audio Archives on the drop-down menu. Finally, you can receive this audio as a podcast by downloading it from hubbell.com. Once again, Investor Information at the top and the Audio Archives on the drop-down menu.

One other piece of business. Let me refer everyone on the call today to the paragraph on our press release regarding forward-looking statements. That release and this call may contain some expectations and some assumptions on the future and Hubbell's performance, particularly regarding our earnings going forward. Clearly, most of these comments will be forward-looking.

We'll also make some comments here today, or answer questions, which may include forward-looking statements. All of these involve inherent assumptions, with known and unknown risks, and other factors that can cause our actual future results to differ from what we may discuss or project here today. So please carefully note that paragraph in the press release, and I'd like to consider it incorporated in our conference call here today, by reference.

I'll turn the call over now to Tim Powers, CEO of Hubbell Incorporated, to discuss the second quarter results.

Thanks, Tom. Good morning, everyone. Let me begin with some comments on our results for the third quarter, and then let--I'll have Dave Nord take you some through of the details and come back to discuss the rest of the year.

The third quarter performance was the best quarterly performance in the history of Hubbell, in terms of overall sales volume and earnings, and continued with very strong cash flow. In addition, it continued to build on the improvement in our operating performance that we have seen over the first half of the year. And this is in light of the continuing challenge we have been dealing with in the residential business.

Sales in the third quarter were $652.7 million and operating profit margin of 13.6%, up more two full points from a similar period last year, contributing to the earnings per share of $1.10. Our focus on three key elements, price realization, cost containment and productivity improvements, have clearly been effective in our drive to return our margins to the industry-leading levels. And continued solid cash flow. Free cash flow in excess of net income in the quarter.

Selling price increases continue to be an important contributor to our margin improvement efforts, although I expect this to be less of a contributor as time goes on. Programs to increase productivity and reduce costs are in place and achieving success. The markets for our products are generally consistent with our expectations. Order volume in non-residential construction and most industrial maintenance and repair markets continue to show growth. Only the residential market continues its decline, and it is likely to show negative compares throughout next year.

And the market served by our Industrial Technology segment, particularly the international markets, provided strong demand in the specialty communications and industrial applications. So again, from my perspective, an outstanding quarter from many different performance measures.

Now I'll have Dave give you more of the details on our results for the quarter, and I'll come back with some views on the rest of the year. Dave?

All right. Thanks, Tim. Good morning, everybody. What I want to do is provide a little bit of--some of the details, first on the overall performance in the P&L and cash flow. Provide a little bit of color around those, and then get into a segment discussion. But clearly--let me start off with the perspective that the quarter--can't help but be pleased with a quarter with margin improvements up 240 basis points. But we'll talk a bit more about these things as we go through.

Starting off with the sales side, as Tim mentioned, we've got sales of $652.7 million in the quarter, which is up 1% from last year's $649 million in the third quarter. We had some--a small acquisition in the--late last year that contributed a point to that growth. So, ex-acquisitions it's about flat. Selling price has added about 3%, so you had that offset by lower volume. And a big part of that was in the residential business.

But the other thing you've got to keep in mind is when we look at the quarter, and why we feel good about the performance is, I'd have to take you back to the third quarter of last year. You'll recall that we had 16% year-over-year volume growth, far ahead of many, if not all, of our peers. And a portion of that was attributable to some of the post-SAP implementation catch-up, particularly in our Power business and the Electrical segment. So, what we look at as a better indicator of the underlying performance within the third quarter business is the order rates as a better compare. And when we look at order rates in the third quarter of this year, versus the third quarter of last year, order rates are running high-single digits improved. So this performance from the last year, and the catch-up we dealt with in the third quarter, sort of masks the underlying run rate performance. Third quarter then brings us to just under $2 billion, $1.92 billion, up 5% over last year.

Gross margin improved to 29.8%, up nearly two points from last year. Selling and administrative costs as a percent of sales were 16.2%, which is down 30 basis points from last year's third quarter, as a result of our focus on cost containment, including lower employment levels from last year. So our net operating profit margin finished the quarter at 13.6%, 240 basis points higher than last year. It's attributable to our selling price increases and improved productivity, including lower freight and logistics costs.

Net interest expense is up $3.5 million. It's up slightly from last year, as we increased our investment late last year in acquisitions, and through this year, for higher share repurchases.

And then the other item to try to bring some clarity around is on the effective tax rate. In the quarter our effective tax rate was 23.8%, which is about 5.5 points lower than we were running in the first six months, due to favorable adjustments that we identified as we finalized and filed our federal tax return for 2006 during the third quarter, as well as the benefit that we expect to realize this year from higher than originally forecasted earnings in our foreign operations. Based on this, the rate for the full year will finish, we expect at this point, about two points lower than we originally thought, about 27.5% below original guidance.

All this results in net income of $65.3 million in the third quarter, up $17.7 million, or 37% from last year. And the lower share count, due to our increased level of share repurchase, earnings per diluted share is up 41% to $1.10, from $0.78 last year. The impact, as we note, of the lower tax rate compared to last year's tax rate is estimated at about $0.09, so adjusting for that, earnings per share on a comparable basis still up 29%.

Cash flow from operations was $81.7 million in the third quarter, $52.3 million above last year's third quarter. And that's largely due to improved operating performance and much better working capital management than we had last year. Capital expenditures were $11.6 million in the quarter, down significantly from last year, as we completed the new lighting headquarters earlier this year, and the substantial completion of the SAP implementation late last year. Year-to-date capital expenditures are $44.6 million, down from last year's $67.1 million, and on track for our full-year forecasted level of $60 million to $65 million of capital expenditures. So our free cash flow in the quarter, $70.2 million, significantly improved from last year.

This strong cash flow has allowed us to increase our investment in share repurchase and acquisition, and particularly continuing the trend throughout, that we've seen earlier in the year. With share repurchase in the quarter of $84.7 million for the repurchase of 1.5 million shares, bringing the year-to-date total to $173.5 million for 3.3 million shares. Full year, we expect share repurchase and acquisitions to total between $225 million and as much as $325 million.

We turn now to the segments and the segment results. First the Electrical segment, where we saw sales of $430.3 million in the quarter, down from 2006 level, but excluding residential, the impact of residential, they are up. Operating income $50.9 million, up $10.2 million from 2006. Operating profit margin of 11.8%, also up 240 basis points from the third quarter of last year. Within the segment, electrical products had low double-digit volume growth, while lighting was down 5% and the wiring business was up 3%.

First talk about wiring. Volume growth with 3%. The profit margin decreased, primarily due to the costs associated with the product-related issues that we mentioned, offset by price and productivity improvements.

On the lighting side, the 1% decline in the C&I business, while residential business was down 16%, due to the weakness in the housing market. But profitability increased significantly, due to increased margins in the C&I lighting business, driven by selling price increases and productivity improvements.

In the electrical products we had strong volume. In the harsh and hazardous business, up nearly 20%, and even in the steel box business, volume growth.

Profitability improved significantly in all the businesses contributing, with selling prices and improved factory performance.

On the Power segment side, sales were $156.3 million, down $4 million or 2.5% from last year's third quarter. But despite that lower volume on the year-over-year basis, the focus on price and productivity resulted in operating profit of $24.6 million, up 6.5% from last year.

The Industrial Technology side saw sales of $66.1 million, up $9.2 million, or 16% from last year's third quarter, with operating profit of $13.4 million, up 47%. The Austdac acquisition that we completed October of last year contributed about three-quarters of the sales growth, and over a third of the operating profit growth in the quarter. But the operating profit improvements are broad-based, with all businesses increasing compared to the third quarter of '06.

I'll let Tim talk about the guidance for--and our updated guidance in more detail. Let me just end--in summary a very solid third quarter from our perspective. Volume pretty much in line with where we thought it would come out, but continuing improvement on the margin side, all resulting from, clearly resulting from, our focus and discipline. It gives us a strong foundation for the next quarter. Take them one quarter at a time, one step at a time, and ultimately into '08.

So with that I'll turn it back to Tim to talk about Q4.

Thanks, Dave. Let me talk a little bit about our markets looking forward. We see most of the markets we serve continuing to be positive as we close out the year, with some short-term variation in demand during the last quarter. The manufacturing sector will continue to chug along for the remainder of the year, with continuing strength in the energy sector, both domestic and internationally.

On the non-residential construction side, the overall market continues to be positive, with continued strength in commercial office, healthcare, and public projects, offset by a softening in the retail sector.

Residential continues to provide a challenge. The decline continues and we don't see this market reaching bottom until the second half of 2008, and that's still a moving target. The utility market continues to grow. However, with the mild storm season, spending has been lower than normal and may result in a continuing inventory adjustment. Despite this, I think the fundamentals of this market support continuing growth.

So what does all this mean for the rest of the year? First of all, on the sales side, at this point of the year we think that sales will finish between 5% and 6% up over last year, including a three point drag in residential. That means the balance of Hubbell will have a growth of between 8% and 9%, excluding residential.

On the profit side, there is still another quarter to the year, and the fourth quarter is typically not the strongest quarter in the year for many of our businesses. So I don't expect improvement in margins Q4 over Q3. However, with our continuing focus on price, cost, and productivity, we believe we will finish the year with margin improvement of more than two full points over 2006.

So with these sales and margin assumptions, we are increasing our forecast for the full year from the previous $3.10 to $3.30 to our current estimate of $3.35 to $3.45. And free cash flow is forecasted to exceed net income. And this is the one time of the year when you can take our nine months' actual result and actually determine what we're forecasting for the fourth quarter. So, by doing the mathematics, our estimated revenues should be between $615 million and $635 million, and our earnings per share between $0.67 and $0.77. We have much work to do, but these last three quarters have provided a solid foundation for continuous improvement.

So with that, Tom, I think we're ready to open it up for questions.

Sean, if you would review the procedures for questions--

Absolutely.

--and we'll proceed to the Q and A.

Certainly. Today's question and answer session will be held electronically. (OPERATOR INSTRUCTIONS). We'll take our first question from Robert Cornell of Lehman Brothers.

Hi, everybody.

Hi, Bob.

Hi, Bob.

I guess the first question would be on the guidance on the fourth quarter. I mean, it looks a little conservative, based on the traditional patterns. You say the fourth quarter is always less than the third quarter, but--more than the first quarter. Traditionally the fourth quarter might have been down like 10% to 15% from the third quarter. This looks like you're looking at a more meaningful drop relative to this quarter. Maybe you could just give us some insights as to why you think that? Or maybe you're being conservative.

Well, as we talked about in our guidance for the whole year, we have a number of restructuring projects to do, and I think year-to-date we're at some number like three. And we expect to finish in the five or six range. And so that $2 million or $3 million number is in the fourth quarter. Secondly, you're right that we are being cautious about the fourth quarter, given the fourth quarter of last year, and given the choppiness of the markets that we see. So we've carefully looked at our volume and our order pattern and concluded that this is our best guidance.

Okay, stay tuned. The other thing I would say is if you just look at the quarter in the aggregate, with the light top line, even giving it recognition that some of the residential comments you made and the margin expansion, the temptation would say that you guys maybe cut back on volume to the benefit of price. I mean the price volume trade in the quarter was in the direction of price and margins and then maybe gave up some share.

Bob, there's--

Could you comment on that?

-- there is absolutely no question about that, that this year we have been more selective in our pricing. Last year we produced very high numbers in terms of increased revenue, and didn't get the incremental profit that went along with it for a host of reasons. And this year we are being extremely vigilant on the price side, and have been willing to give up marginal business in a couple of different areas when we didn't think that it contributed much to our bottom line.

Yeah. But then on the other hand, the order growth you mentioned of high-single digits, you mean that suggests a healthier outlook on both market share and the fourth quarter than maybe you're suggesting. I mean, what's--where's the [error of closure] there?

I would say our strongest area of business is in our industrial business and our harsh and hazardous business, and certainly some of that business has longer lead times and not all of it could ship in the fourth quarter. So we've looked at this pretty carefully on the revenue side.

Okay. Thanks, you guys.

Sure.

The next question comes from Jeff Sprague of Citigroup.

Thank you. Good morning.

Morning, Jeff.

Wondering if you could just give us a little more color. First, Tim, on the Power market in general. This kind of--the comp issues are clear and you repeated them again, but I think you were kind of expecting things to pick up a little bit in this quarter, regardless of that, after kind of really no volume growth in Q2 either. And maybe give us a sense--is there something going on with kind of residential spilling into part of the D business, or is there--where you see the channel inventories at this point and how long that takes to work its way through?

Well I think, first of all, we've just about gotten through a fall with zero storms. So normally we would have some business from that. Second, some of the product lines that have been overstocked are still in an overstocked position, although it's getting better. So we're still--we still don't think the distributors placing orders with us is at a one-to-one ratio for what they're selling. So there's still some inventory liquidation. And there are some products in the utility business that go directly with new construction. So our underground connector business, which is a very small business of ours, is directly related to new construction. And it's down a little more than 10%. So--but it isn't, I would say, in any broad way connected to residential, that we can determine.

And can you give us a sense--when you look at kind of the order outlook, are these pricing trends that you're seeing holding? Are you seeing roughly 3% price or so in the orders, or more or less?

Well, we've been getting that up to now, but, as you recall, it was in the fourth quarter of last year and the beginning of the first quarter of this year when we were able to get some price increases into the market. So the effect of this going forward begins to dissipate. But I feel that the market will accept price increases to offset any future commodity increases with the usual delays. So, I mean I'm still confident about that aspect of the market.

So you're at price-cost parity now, or ahead of that, and you don't--you're not seeking additional price at this point, but stand ready to do so?

That's correct. And on a--usually on an annual basis we would review our prices and look at that at the beginning of the first quarter, or in some of our businesses would do that toward the end of the year.

And you said lower freight and logistics. That actually sounds a little surprising. Why is that down?

Well, as you recall, one of the unpleasant aspects of SAP implementations are your less-than-perfect shipments and your extra shipments that come from not running your factories like they ought to be. So that when you bounce back from those kinds of effects, you get a benefit that takes your freight and logistics costs back in line with some of your historical trends.

And I was just wondering on the non-res, if you could--your intro comments were pretty clear on the verticals, but I wonder if there's any different read from the order there--orders there. Is there any sign of weakness spilling beyond the retail commercial and the other parts of commercial in the bid and proposal activity?

Well, I would say that we are a--I don't know if we're the largest player, but we're a big player in supplying some of the electrical components to big box retail construction. And you're aware of the names that have cut back on the number of stores and all of that. So certainly from non-res in the retail side, some of that is lowering our volume. But other than kind of what's been published in Dodge and others, I don't have any different pattern that we're seeing than you can read about.

Okay. I'll pass the baton. Thanks.

Mm hmm.

(OPERATOR INSTRUCTIONS). We'll go next to Robert McCarthy of BOA Securities.

Good morning, everyone. Congratulations on the margin expansion.

Thank you.

Thanks.

I'm going to follow up on Jeff's question. And I think actually probably Bob nicknamed your management team The Great Prognosticators, probably calling the last recession. So Tim, are we going into a recession?

If I had that wisdom I don't know what I'd be doing, but I may not be doing this. But just--I think we certainly have two more quarters beside the one that's shaking out right now for the credit markets to figure out the story. And the impact of that on the electrical and the construction business is certainly to produce near-term choppy results. I am not predicting a recession. I am in the camp that says we'll wiggle through this, at this point.

But certainly, with what you see going on with financial institutions and their lending practices, has some impact on marginal lenders. On the other hand, low interest rates are probably the biggest primary driver of construction. So I believe that interest rates will continue to decline and that we will get through the point where a person who's credit worthy can borrow money at a pretty good rate, which will begin to drive residential construction again. So I think we're going to wiggle through it, but for me to get ahead and predict more than others on this aspect, with so many moving parts--I don't really have that clarity of view.

All right. And then on lighting fixtures, I mean obviously I think you said across the board that you definitely made a focus on price as opposed to volume, and obviously that seems to be bearing out in your results. But on the lighting fixtures side, you've been accused in the past in the offing by some of your competitors of being somewhat flexible in price to take some share. Clearly given what we've seen in the quarter in terms of lighting, both in the C&I and residential levels, seems to be the case, that you could be supporting price and losing share there. Who is taking share in the lighting fixture channel? Do you get any sense of that, specifically or generally?

I don't want to comment on that. I mean, I think we--I want to comment that we are very focused on not taking business with margins that don't significantly contribute to the improvement of our performance, and that--it's a big market and other people have different cost and efficiency levels. And they see those orders maybe differently than we do.

So we're happy with what's going on right now for our C&I lighting business. Our margins are up significantly and we have preserved a double-digit margin in our progress lighting business, while taking an enormous cycle of contraction. So it's still behaving like the number one market player in decorative lighting. We think it's going to get through this just fine, and come out the other side with slightly higher market shares than it went into this recession. So we're pleased with the performance of that unit.

But we've taken a hit to our profit margins in nine months of something around $15 million of operating profit. So when you swallow that hard in nine months, it kind of holds back how the electrical segment's doing. But outside of that, which they're producing pretty well, I'm quite pleased with what we're doing on the margin side.

Most recently I think you had some price increases in the lighting industry, probably in the July, August timeframe. Why the--any kind of incremental flavor for how sticky that price increases have been?

Right now it's too early to tell. I would say ask me again in three months and I'll tell you how that's going.

All right. And then just--this is more of a housekeeping issue, and you may have already given this and I do apologize, but could you just break out the volume price and FX and acquisition for each segment, in terms of how it impacted top line?

Sure. Dave, do you want to--?

Yeah. Rob, the price was fairly consistent across the segments at three points.

Okay.

We'll start there. The volume side on the Electrical--as I had mentioned, Electrical down about three points overall, offsetting that price. But a big part of that is the residential drag.

Sure.

So you have that piece of it. On the Power side, they're down--it's really on the volume side, offsetting that three points of price.

Right.

There'd be no acquisition impact. And then on the Industrial side, you had about 12 points of the growth, about three-quarters of that growth, from the acquisitions.

Right.

You had price of three, and so you actually had a little bit of volume down there and that's got some timing of shipments, particularly on the high-voltage side. So you see a little bit of negative year-over-year compares on the volume, but not supported by the underlying order rate. That's just when some of these bigger orders go out.

And FX, across the board?

FX was less than a point, across the board.

All right. I'll leave it there.

Okay.

And for our next question, we'll go to Elana Wood of Merrill Lynch.

Morning.

Good morning.

Good morning.

Question for David, around the tax rate. What should we be using next year, assuming, I guess, a higher international mix, but no historical adjustments to your tax rate?

Well, we have--we're still working through our plan, so I don't have specific guidance, although I can say with pretty good confidence that it will likely be higher, probably at least at the level that we expected this year. Just because a lot of the growth we expect next year will still come, and margin expansion will come, from the domestic operations. So we'll have a higher rate associated with it. But I don't have an exact number yet, because we're still working on the '08 planning process.

Okay. And then, are you still thinking about a 25% decline in residential-related sales this year, or have you changed that forecast?

No, that's about right for this year.

Okay. And so if we go back to your comments earlier, your full-year guidance is basically up 8% to 9% for non-residential-related sales. So if we assume about 2% to 3% of acquisition, that suggests about 6%. Of that 6%, how much of that do you think might be volume versus price? Is it split roughly equally between volume and price?

Yes. That's about right.

Okay. Do you have any sense of how much the wiring systems issue may have cost you in the quarter, in terms of sales or EBIT?

$5 million of sales and probably $4 million of EBIT.

And you see this sort of normalizing next year?

Yes. We have resumed shipments and everything is corrected.

Okay. And then my last question is just how much did net--did pricing net of material inflation add to EBIT this quarter? I think last quarter that you had said it was about a $10 million to $15 million benefit year-over-year. Is that still a reasonable--?

Yes. That's about right.

Okay. Thank you.

(OPERATOR INSTRUCTIONS). We'll go next to Christopher Glynn, CIBC World Markets.

Hi. Good morning.

Good morning.

Hi, Chris.

Just back to guidance a little bit. We are using the 110 to back into the fourth quarter and full year. So it seems to imply a margin decline sequentially of about 280 basis points. If we go back before the last couple of years, which weren't really normal, that does seem a little bit extreme. And you also have the wiring devices swing factor here. So I just wanted to revisit that a little bit.

Well you've got to factor $2 million to $3 million for restructuring, dampening margins and--

Just the wiring devices would more than offset that, right?

It would--possibly, possibly.

$4 million EBIT?

Well it all doesn't all recover in the fourth quarter, Chris.

Okay.

And the other piece that I've mentioned is we've made progress on inventory so far this year, but we still have more work to do in that area. The fourth quarter is one of those times where--it's a good time to try and make sure that you keep working that issue and that you're setting up for the next year. But in doing that, in taking that, you have to continue to work to take down your inventory levels. You create some margin drag from absorption. We saw that in a big way last year, but that was from a rapid decline. So there's a little bit of that that's going to filter into the fourth quarter of this year. So that's just one more of the elements to--that impact margin fourth quarter versus others.

Okay, that's helpful. And on the tax benefits of $0.09, in trying to think about what's core, clearly the geographic mix issue is not a one-timer for now. And if you get more profit dollars here your tax rate goes up, but you still have better EPS. So just--what's the one-time impact from the tax return?

It's--I mean, I think you could look at it as half.

Okay.

It's about half.

Okay. And then lastly, on the Power Systems, could you refresh just on how your product mix between T and D works? How much depends on the relative mix of what utilities are spending, so that as they shift to transmission, how much can you follow on that?

Well, the entire market is--about 80% of the money is spent on distribution and 20% is spent on transmission. Now transmission can move dramatically as these large projects move into the space. But that mix of 80-20 is reflected in our lineup every day. And, again, we have a full lineup of the transmission side, so the extent to which that continues to expand, we will participate in that in a market where we have significantly high shares in some of these brands.

Okay. And on the bigger transmission projects, can you just give a little sense of what you're seeing about how many are out there now? How many are in the pipeline that are closer to getting sited, or whatever political and regulatory hurdles they have to cross?

Well, as you recall, I've said this before, that the main investment in the transmission grid right now is in the upgrading and the reliability. That means replacing transformers and upgrading existing lines. And also providing additional links within the transmission system which are relatively short and the regulatory approvals are of--less of a hurdle. So that would mean transmission lines on existing right-of-ways that are generally short. And so, the big ones, so that you've heard about the one from AEP in Ohio coming to New Jersey. Looks like a 2009 job, and the pipeline is filling with proposals in front of public utility commissions. So as we get toward the end of this decade I think we will see some major jobs getting--actually get done. But it isn't too much of in '08, but I think in '09 we will begin to see some big ones.

Great. Thanks very much.

You're welcome.

And we'll take a follow-up question from Jeff Sprague from Citigroup.

Tim, maybe just kind of coming back to this overall productivity quest. Obviously just a lot of focus on this call on [gee] when it all backs out from Q4. But as you think about '08 and '09, and where you've exited this Q3, where are you at on this progression of where you think you can take the cost structure and the productivity of the Company?

Well, certainly our goal is to add 100 basis points per year, year-over-year. And we think we're--obviously this year, because of difficulties in '06, we're getting 200 basis points. So our objective here is to steadily improve by 100 basis points a year in '08, '09, '010 and get us to where we want to go. And this still means moving products around to lower-cost environment, sourcing from China and other low-cost environments, so we're still--we've got work to do on where Hubbell produces product.

So, the fact that you're kind of double-dipped, so to speak, here in '07 doesn't diminish your confidence about building another 100 on top of that in '08?

Oh, we're determined to do that.

And then, additionally, if I can just go back to Dave's cash flow guidance, I guess it assumes you guys--it kind of implies--it sounds like you've got a deal or two in the pipeline. Either that or you're going to pull the trigger on some more share repurchase. Could you just comment on what you see in the deal pipeline, and if we should expect something there?

One thing, Jeff, is that we have in that guidance--the low end of that guidance contemplates the deal that we announced a few weeks ago in the Electrical segment, PCORE.

Mm hmm

So that's a pretty fixed number, the 225, if you add that to our share repurchase through September. So you're really looking at another $100 million on top of that for share repurchase and-or acquisitions. There's a number of acquisitions that are in the pipeline right now that have the potential to fill that gap.

Right. What kind of margins does PCORE come in at?

Sort of slightly--after the amortization of some purchase accounting things, just slightly below Power Systems' numbers. But we would expect over a year or so to get them back up to Power Systems' average numbers.

Okay, great. That's all for me.

Okay.

I have one more question from Christopher Glynn, CIBC World Markets.

Yes, I think on the lighting you said on the C&I side, if I recall correctly, down 1% in volume. It sounded like orders were actually up. Just get some color on the relative differential there? And if you have an idea how much ceded share might have impacted the quarter?

That's sort of an undeterminable number, from my point of view. Certainly there were a number of jobs that we chose not to change our initial bids from, but to calculate what the share impact is is pretty tough. But, do we have some numbers on [input]--?

Yes. I don't have--the share we don't have. I mean, lighting was the other area, Chris, that had--and particularly in C&I, that had the--working off the big backlog in the third quarter of '06, for post-SAP implementation and also post-price increase, where we had this bow wave of orders in the third quarter running through. So that's driving the compares, but overall their orders year-over-year on the C&I side are up about 8% as well.

Wow. Okay. And then just a question on [FC&A]--the dollar is down sequentially, the first time is years, except a little bit third and fourth quarter last year, on up revenues. Anything unusual there, or are you just slashing there?

No, I think a lot of it has to do with not implementing SAP and the resources to go with it, along with yes, there's definitely a company-wide effort to be disciplined about our spending and work towards assisting in margin improvement, [our drive].

Okay. Thanks very much.

You're welcome.

It appears we have no further questions at this time. Mr. Conlin, I'd like to turn the call back over to you for closing remarks.

Okay. Thank you, Sean. I'd like to thank everyone for joining us today. And we'll be back three months, roughly, from now. Thanks for calling in.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may disconnect at this time.