Good morning, my name is Teresa, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2018 Results Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instruction] Thank you, Ms. Maria Lee, you may begin your conference.

Thanks Teresa. Good morning, everyone and thanks for joining us. I'm joined today by our Chairman, President and Chief Executive Officer; Dave Nord, and our Senior Vice President and Chief Financial Officer; Bill Sperry. Hubbell announced its first quarter results for 2018 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 us this morning. As you see from our press release this morning, it's certainly a busy quarter, but a productive one as well. We've seen some strong topline results. But of course you know, the good news always has some offsets and as we talked back in our Investor Day earlier in March, we've got the price cost challenges that we're fighting through but I think, we see that more broadly in the market. And then the good news, we've got the tax tailwind benefiting us and I think benefiting the overall economy. And of course, the biggest level of activity in the quarter has certainly been the acquisition and the continued efforts in the integration of Aclara, certainly the largest in our history. I think all those things certainly contribute to a challenge -- it's all good news, particularly on the Aclara side, but I think all of that activity certainly adds to the complexity of telling our story and so, we're going to try to work through that the best we can. We've, heard from you all on different topics. I've had some discussions and we try to address a lot of those, obviously appreciate that input. But one of the things we also want to do is, make sure that we're not changing the rules every quarter and making it even more difficult to follow. So we're trying to maintain some consistency. So, so bear with us as we go through that. You see that sales were up 16%, 3% of that is organic. End markets across all of our five major market segments expanded. We saw particular strength in oil and gas, and hope that, that continues and with the increase in oil prices, certainly that is what we…

Thanks very much Dave. Good to be with you everybody. Just to highlight what Dave was saying, really four trends in the quarter, that are going to be woven into our performance here. One, end market strength; two, the commodity inflation that’s coming with that market strength; three, is the benefit of tax reform; and four, is the Aclara, the new acquisition. So all four of those trends are going to see everywhere in our results. And Dave really gave you the results on page three. So I'm going to start on page four of the slide material that Maria referenced at the beginning of the call. And you will see, our first quarter sales of $991 million, a 16% increase over prior year, 13% of that coming from acquisitions And we can be quick to forget that, that's not all Aclara. So Aclara is about 11 points of that. There's another 2 points coming from previously executed acquisitions earlier in 2017. And just to remind everybody, we had made an investment in the natural gas distribution space, some smaller acquisitions within power systems, notably in telecom hardware space, as well as extending our bushing product line as well as iDevice, which is a real leap forward for us in terms of IoT R&D work that underlies a lot of our new product development. So there's actually a lot of acquisition previous to Aclara. And a lot of that’s also rolling off after Q1. So you'll see a really the balance of the year being dominant and just really by the power systems deals. I'm so beyond, beyond the acquisitions, you have our end markets. It's good to see a page like page four with such consistent green on it, but, but quite a consistent positive market backdrop for Hubbell.…

Sure. Thanks Bill. We ended the first quarter with $216 million of cash, approximately 90% of this was held outside of the United States. The decrease in cash from year end was because we repatriated about a 180 million of international cash and used it to pay down commercial paper, which had increased from your end as a result of borrowings for the Aclara acquisition in February. We ended Q1 with a 149 million of CP outstanding. There are a couple of new items related to financing the Aclara acquisition. We added a prepayable five year term loan A for $500 million as well as the fourth tranche of long-term debt. And as you can see, all of our long-term senior notes have attractive rates in the low to mid teens. So these additions, along with the higher CP, increased our debt to cap to 56% from 39% at year end, reducing our leverage by paying down CP and the term loan is one of our capital allocation priorities. At the bottom of the page is our 750 million credit facility and that backs our commercial paper and it's fully available to us. Let me turn it back over to Bill

All right. It’s okay, I'm going to just give some closing comments here. I think, first on our outlook. And if you look at the market, with one quarter of completed, this year is so far shaping up pretty much as expected. Although admittedly some of the material cost headwinds are greater than we anticipated, but the combination of positive markets and some of the other activity benefits of our cost reduction actions are going to help to mitigate that. And we're working to get the price, but I think as we look at the end markets, we think most of our end markets are still anticipated to perform at the levels, that we have forecasted from the beginning of this year. Going around all in the 2% to 4% percent range, a non-res, maybe a little bit lighter than the, some of the indicators on that, just suggest that it's not as robust, but still growing. And I think as we mentioned earlier, the upside that we're expecting a little bit more positive results in the oil and gas, particularly with the price of oil increasing. So, the good news is continuous to be consistent growth across all of our end markets. Turning to page 13, specifically on the outlook, so, that end market growth translates in combined with acquisitions, translations, and top line growth of 15% to 20%, which are big numbers for us by historical standards. The end market embedded in that, is in the 2% to 4% range. The acquisitions at about 15% and then our new product development and focus on technology, it's going to drive some modest market out-performance. All of that leading to as maintaining our original guidance on diluted earnings per share of 6.10 to 6.50 reported and on an adjusted basis…

[Operator Instruction] And your first question comes from Christopher Glen with Oppenheimer.

Thanks. Good morning.

Good morning, Chris.

Good morning Dave. Call about the lighting margins being, that certainly looks pretty good in the context of the industry. Just wondering if you expect to be able to continue that through the balance of the year?

Chris, it's really driven by cost management. From the volume side, lighting was down about three percent with about a point of price, contributing to that from a sales perspective. So, it's really coming off the backs of more effective cost structure, which yes is continues throughout the year. So hitting our plans and our guidance is not dependent on big volume, it's dependent on controlling those costs, which we feel much better about than we did last year.

So I think Chris, there's an element of I'm really more - as more price discipline and some of that being just what business you're going after, the other – and some of that even goes to a focus on those businesses and those product offerings where we have a differentiated advantage. Because obviously as I mentioned earlier, those are the areas across our entire portfolio, not just in lighting where you have more ability to get price, to offset some of the cost headwinds and naturally those are higher margin businesses too. So that's another area of focus within the lighting business that we see.

Sounds good. And then if we look a very wide angle lens at electrical margin in 2011 to 14, did 14% to 15% margin. That was before the oil and gas crash. But it was also before you had a pretty intensive restructuring program. So I'm just wondering if there are any kind of barriers to ultimately returning to those types of levels for electrical?

Yeah. I think that the, um, the role that oil and gas business played in contributing to that is important. And so they're obviously not back at that level as we come back, we're seeing more land-based rigs rather than the deepwater. We're seeing more diverse i.e. less pure oil for harsh and hazardous. So I do think Chris, I could see as we go forward as harsh and hazardous volumes come back that their margins could be a little bit lower than the peak in that era - that you're describing. And at the same time, our goal would be to find productivity and other things to get back to those levels. So those are good motivating benchmarks for us to get back to him.

Good color. Thanks.

Your next question comes from the line of Steve Tusa with JP Morgan.

Hey guys, good morning

Good morning, Steve.

I was at the, T&B show. Sorry, sorry I missed you. And I don't know, I got the sense that, that the pricing was a little bit slower to come, but you sound very confident on that front. Is there something somebody missing? Did you guys, you know, are there are different pockets? Are there, are there more specific pockets of your business that you're seeing, you know, better price put through? Then maybe I would've picked up on the show talking to like, you know, perhaps transformer guys are some of the other guys that are there? Just a little more color on the confidence? Because you guys are just typically conservative and you don't go out and kind of say stuff that you're not really seeing on the ground level. So I do trust what you're saying. I'm just, I'm just curious as to what may be the difference is.

Well I guess, we could start with slow as a relative term. You might have expectations of timing that's different than ours. So my confidence is based on, what we're seeing in some cases is signs that one, the actions that we're taking to the signs of acceptability, not necessarily on the utility side. Utility side has, you know, has certainly put more pressure on the utilities are under pressure from a cost standpoint, particularly on the O&M side, but even on the capital side. So, I don't think that what you heard at the show is not necessarily at align with what we're dealing with. You know, when we talk about pricing, I think it's certainly going to be more bullish on the C&I side. We're getting some of that. The utility side, it’s got a little more challenge in it. I mean, and I remind you that from our business I think you guys use to give government a little hard time over the last year because for a number of years he was saying, you know, that it's coming and we've been, able to hold price in a commodity weaker environment, while the commodities turn and the utilities remember that in some cases. So, um, so it's a tougher, tougher battle, but I think we also believe that there's a bit of an advantage versus, first is for example, a transformer, a market where it's a much bigger spend, so a lot more price sensitivity versus some of our components products that are critical and lower element of a project cost. So it gives us a little bit more flexibility. But don't get me wrong, the utilities are still pushing back as much as they can.

Okay. That makes some sense. In the electrical channel what are the degree of price increases and you are seeing I know, invent was out there talking about, they're on the enclosure side obviously. So, a little bit different. But they're talking obviously kind of a mid single digit type of thing that they are putting through. I mean, is that kind of the magnitude that all you guys are, are looking at on the electrical side of the equation?

On average, I'd say that that's true. Somewhere in the 4 to 6 on average, I mean we have pockets though that are working on 8 to 10. If they've got a lot of higher material content, which sounds bad, but it is what it is. But I would say on average, it's in the mid single digit.

Okay. And then one last one, and you probably should ask this in the investor day, but the Aclara CapEx and you guys are running this year and I think you said next year as well. I mean, is that something that is kind of builds up a here in the next couple of years and then fades overtime, is this kind of a, not necessarily one time but more lumpy? And so that could, that kind of fades out into the kind of later in the decade kind of 2020 time period, I believe it was like, $15 million to $20 million bucks of CapEx?

Yeah, I think it starts Steve with the R&D effort, right. And so, we had shown your R&D spending sort of in the 10% of sales kind of range based on last year's sales and the amount of R&D that's going on there. So that's obviously significantly higher than a typical Hubbell business. We then - there's a question of how much of that you expense versus how much you capitalize? And I think we're going to end up expensing a little bit more than they have historically done. But nonetheless, I think what happens is that $50 million does not grow, but what happens is your sales grow. And so your percentage of R&D comes down, is I think how we're imagining that - playing out over the next few years.

Okay. On the CapEx side as well?

Yeah. So CapEx then is becomes a function of how much of that R&D you capitalize, which would not be growing. And then how much is on the PPE side, which will not be growing at anything beyond replacement stuff and need growth. Yeah.

Great. Thanks so much guys. Appreciate it.

Thank you. Your next question comes from the line of Rich Kwas with Wells Fargo Securities.

Good morning guys. And Alcara - any anything on seasonality, we should be thinking about as we go through the rest of the year in terms of contribution?

Yeah, I think, I think we, we do expect some seasonality, Rich. Similar seasonality to what Hubbell experiences, namely that second quarter and then especially third, being the stronger areas of both volume as well as margins for them. As I said when we were together, we had been planning that their margins would be mid- teens and I think after a reviewing some of this R&D that Steve was talking about a little expense a little more. So we think their margins will come down to lower double digits. And, but they only were operating kind of add double digits in the first quarter. So we do anticipate seeing their volumes and margins a pickup in the second and third quarter.

Does that change the longer term prospects from origin for the business? The accounting change around expensing? Can this be mid teens to high teens or how should we think about that?

I don't think it materially changes our long term view.

Okay. Bill, what the lighting - what was the margin rate? You exited the fourth quarter around 10, if I recall correctly, did you duplicate that again this quarter?

It was, the cost base is just performing much more in line, much more predictably. And so those kinds of margins are where we are. As Dave said, I think we're finding that to even try to maintain share of a commercial spending, you might have to chase with too much price. So I think we're choosing to forgo a little bit of that volume, and let that cost structure perform and get the margins going better, which is what you're asking about. So that's, that's been kind of a decided a tactic of ours.

Okay and then just level setting on price cost, the 200 bps on power and then the 150 for the overall company is that just the commodity headwind or is that net price cost and then is the assumption that that improves as we go out Q2, Q3, Q4 I mean just, just to be clear on that?

So for the whole company, the price that we pull the ex-lighting was offset by essentially what that point, that lighting gave away. So the net price cost is essentially material cost because pricing was flat overall. And yes, I would say that as the year goes on, we're anticipating that the second half in as part of, I think underlying some of Steve's question too about does it get better? It gets better in the sense that it becomes more balanced in the back half, especially as we exited the year. You think maybe you start to catch up. So that's the - you can't with this much inflation, you can't catch up overnight, but you got to be vigilant and really be disciplined about it. And so, I think it is, I think it will take us the whole year to fight that battle.

Okay, thanks.

And your next question comes from the line of Jeff Sprague with Vertical Research.

Thank you. Good morning everyone. And just back on power pricing in particular, Dave or Bill, are you, are you getting none currently or is there some positive price in the business?

We have been getting priced Jeff. Yes.

You have been okay. And just to be clear on Aclara, can you just put a fine point on what you actually expect the ongoing amortization to be in the year?

Yeah. So if you, if you use the, um, use the last page of the outlook, which is page 14, you can see that, we're anticipating Aclara contributing about $0.50 to the total and that $0.35 of that, well the $0.85 of the add backs of - $0.35 is, the combination of the transaction and reported results. And then Maria within reported, the amortization versus the actual fee split for Jeff.

Yes sure. All of the intangibles amortization which includes the inventory step up in the backlog reevaluation, we would expect this year to be something around 45 million you can convert that into the - 45 to 50 million, I think it turns out to be somewhere between $0.60 and $0.70.

And non on cash flow. I think your comment free cash flow greater than net income as a relative to gap net income, what should we expect your free cash flow to be closer to the adjusted EPS. I mean, arguably it could even be more than that was still $0.50 of non-cash legacy intangibles in there. But yeah, you obviously have some working capital and other noise?

Yeah, yeah. I think the way that we're looking at it, Jeff, and that's really why Dave gave you that $0.50 of legacy and tangible. So I think if you saw the $7.15, which we were guiding to on an adjusted basis, when you add those next $0.50 of legacy intangibles, you get up to about $7.65. And to us, that cash EPS is quite an important measure because we think free cash flow even though we think of it as, as net income, and the percent, but there's, there's an important relationship there. So our expectation would be this year, Jeff, on a run rate basis, because we did have some abnormal first quarter outflows, but on a run-rate basis, we think you should be talking about 110% of net income of free cash flow this year, which would translate into the mid 80s on that higher cash EPS of the $7.65. And then our strong focus would be on using working capital management to get more efficient there and get that conversion on the free cash flow basis higher in subsequent years. So I think that framework that you're talking about is important to how we as management and look at the, at the free cash flow conversion equation.

And is there something specific you are doing on working capital to uncork it here, but I know some timing noise in the quarter, but what's going to drive working capital going forward?

Yeah, I think, I think you're right about the noise in the quarter and receivables are the kind of thing. Our quality of receivables is very high, collectability is often very high so that those do become the most timing sensitive as you point out. So I think our opportunity is in inventory and payables and the inventory, I think you all at investor day, Susan Huppertz , we've hired a new VP of OPs and we're excited to be working with her and figuring out and developing ways to really get more focused and more disciplined around getting our inventory days down, while keeping our service up. And then on the payables side, becoming more, I think more disciplined to, about how to optimize when you're taken advantage of a discount and when you still have some term days, so when you see a quarter like ours where payables were a use while inventories built, you know, that's a good sign that I think we need to be more disciplined there Jeff.

And just one last one for me, Dave mentioned a little bit, but any change in customer behavior now that you own Aclara as oppose to a private equity firm? Any change in discussion, backlog pipeline, anything you'd point out?

Yeah, I think we've seen evidence that the pipeline is growing. The feedback we've got from our customers has been favorable. I think what's exciting for Dave and me to see is the cooperation at the front end of the house between Gervin sales force and the Aclara folks. And really there's been a couple of examples of, some selling efforts where we've been trying to sell our legacy hardware to some of their rural customers and conversely we've had some larger IoU conversations where we've really helped open the door for their communications business. And in those cases where we've been getting our clients together with a broader suite of products, we've received good feedback. It's too early to say, of any tangible quantifiable impact of that, Jeff. But I'd say, those early signs are good and I think more towards the back of the house. It's been interesting watching, the rest of our company get to know and understand what the technology inside the Aclara can do and how maybe that can help make other parts of Hubbell smart and communicating. And so I think you are at the very, very early days of seeing if one plus one equals, you know, more than two. But the signs I would say are encouraging. Right.

Great. Thanks a guys.

And your next question comes from line of Joseph Osha with JMP Securities.

First Maria and Bill, just to clarify you had this $500 million prepayable paper. Are we, should we expect to see any buyback activity until uh, at least some of that gets, uh, it gets paid down some, some colors there would be helpful.

Yeah. I think that, we continue to always evaluate, uses of cash. But I think you're a in share repurchase could be a very viable use. but I do think you're right to assume that priority wise, you know, on a kind of a four year glide path we're looking to pay off that CP and that and that term loan. So, that, I think you're right to assume.

The CPM, the term loan over a four year glide path?

Yeah, I mean CP will be, serves as our, um, overnight kind of funding sources. So any at any quarter end you might have some CP, but that, that's those are good. I'm good gauges to think about how, how much free cash flow the next four or five years we're looking to pay down.

Okay, great. And then a second latest regards to yet again, lighting. I'm wondering if we can get a sense as to where the, the price pricing has been less palatable versus where you've been more able to, to hold on. Thank you.

I think is, as David commented, for us to have a one percent of price in the quarter is actually a better experience than we've been having and I think it's, there are some projects, uh, with some more commodity products that would lend itself to use price to go chase the volume. and I think it's, if there's an opportunity for us here that we've shown in the quarter to be a little bit more selective about, about.

Sorry, I meant in terms of end market. I was just wondering if my dry didn't ask the question. Well, and in terms of which end markets you're, you, you find yourself being able to hold the line a little more. That's what I meant. Sorry.

Yeah, if you're saying between non-res and res, you know, I think the pricing is a little bit firmer and res than it is in non-right as if that's what you mean. If it's sub slicing, non raise, I don't think it's, I don't think you can generalize to too easily.

Yeah. And I think the, you know, adding to that within the C&I markets the challenge is, is in those projects and those offerings that are non-specified or where, where our representation isn't as strong as competition. So if we have good representations with strong representations in a market, whether it's a vertical or a geographic, it's, it's easier to maintain price than when you don't.

Thanks a lot.

There are no further questions at this time. I would like to turn the call back over to Ms Maria Lee.

Thank you. Thanks everyone for joining us. So that concludes today's call and I will be available all day for questions.