Good morning. My name is Samantha and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter 2018 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Maria Lee. Please go ahead.

Thanks, Samantha. 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 fourth quarter and full-year results for 2018 this morning. The press release and earnings slide materials have been posted to the Investors section of our website at www.hubbell.com. Please note that our comments this morning may include statements related to the expected future results of our Company and are 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. Before I hand the call to Dave, I'd like to thank Steve Beers for his many contributions to Hubbell Investor Relations over the last three years. Steve will be moving on at Hubbell to be CFO of our Commercial and Industrial group. Going forward, Dan Innamorato will be the primary IR contact for Hubbell and lead all day-to-day IR activities. Congratulations to both Steve and Dan and best wishes for continued success in your new roles. Now, let me turn the call over to Dave.

Okay. Thanks, Maria, and thanks, everybody, for joining us. I guess I'll have to second my -- the appreciation for Steve Beers for all of his efforts and we're really looking forward to his contribution in an operating role taking with him his three years of investor insights gained in dealing with the investor population. I think we found that to be a really good perspective to bring to the operating role. So good luck to you, Steve. We're going to talk a bit about our results for the fourth quarter and the full year as well as our outlook for 2019. Certainly, you can see from our press release this morning it's another quarter of strong earnings growth and particularly free cash flow generation for Hubbell. It certainly demonstrates our confidence in our market position and our ability to deliver differentiated results for investors over the short and long term. I'm going to start on Page 3 of the materials and follow through there. First on the fourth quarter, some of the key takeaways. Obviously another strong quarter of end market growth. All markets up again in the quarter across the board, particularly some major end markets; core industrial, outside plant communication, gas distribution; and what was particularly positive toward lighting is real stronger than anticipated, particularly on the residential side. And we expect this end market growth overall to continue into 2019. Our pricing actions have gained traction and acceptance in the market. Price realization was up nicely on a sequential basis from the third quarter as we continued to implement increases in the face of our increasing cost headwinds. Bill will take you through some of the details in just a minute. And even the lighting pricing was slightly positive, which I think is the first time…

Yes. Thanks very much, Dave. Appreciate you all joining us here. Pleasure to be with you guys. Dave walked you through Pages 3 and 4 really in his comments. I'm going to start on Page 5, which deals with our sales and end markets for the fourth quarter of 2018 and you'll see a pattern here that's been consistent for the last couple of quarters, namely strong sales growth driven by demand really across a full range of the end markets that we are exposed to. So you see sales up 25% to $1.1 billion, largest driver of that 25% was acquisitions and the investment in our smart grid space through Aclara, but the organic of 5% is still strong. I think, noteworthy, see 2 points of price in that 5%. We'll talk through a little bit the price/cost dynamic as we go through our results this morning. I think noteworthy in the end markets to start at Industrial, strong demand across both light and heavy that we experienced in the fourth quarter. In oil and gas, our gas business which is really upstream in its exposure really saw continued very strong spending there. On the oil side, you see we transitioned to a yellow arrow, that's our Harsh & Hazardous business, that's really upstream exposure and in sympathy with the oil prices moderating down into the high $40s, we saw a little bit slower growth there on the Harsh & Hazardous oil side. Utility electrical transmission distribution, we experienced stronger distribution than transmission. I think that's quite a healthy dynamic. Smart grid and grid hardening continue to be driving spending there. And residential even though it's our smallest end market exposure, certainly worth calling out the growth that we've seen driven by single family more than multifamily, but we…

Sure. Thanks, Bill. So, I'm on Page 11 of the slides. Our balance sheet remained strong. We added a middle column here for Q1, since we closed the Aclara acquisition in February. If you can see the increase in debt resulting from the transaction as well as the reduction of commercial paper and term loan since then. We ended 2018 with $189 million of cash, of which approximately 90% was held outside of the United States. U.S. tax reform enabled us to repatriate a significant portion of our international cash in 2018. We used the cash brought back from overseas in addition to internally generated cash to pay down CP and the term loan as well as pay our dividend, fund CapEx, and buyback shares. As a result, we've now paid down more than a third of the cost of the Aclara transaction since February. And our net debt to cap ended 2018 at 43%. Our leverage in terms of gross debt to EBITDA is down from more than 3 times at the time of the acquisition on a pro forma basis to about 2.5 times now, slightly better than we planned. We feel confident in our ability to continue to manage our leverage given our strong cash performance and that our balance sheet can support our [long-term] strategy of purchasing bolt-on acquisitions. We go on to the next page, footprint consolidation. As acquisitions have been a key component to Hubbell's growth and have added to our breadth of offerings to our customers. These acquisitions typically come with an existing footprint allowing us the opportunity to increase efficiency through scale and focus. As most of you know, Susan Huppertz joined Hubbell about a year ago, as Vice President of Global Operations. She has conducted a comprehensive review of our operation and has added tools, processes, and challenges that complement our existing operational capabilities. As a result, we have the opportunity to accelerate impressive actions to streamline our operations. These actions are a continuation of the cost reduction efforts we began in 2014. Since 2014, we exited 29 facilities, invested about $100 million in restructuring actions, and achieved annual run rate savings of approximately $60 million. This investment was made largely to combat the industrial downturn and price pressure in Lighting market. Looking ahead, our planned actions in 2019 and 2020 are proactive in nature and are more focused on footprint and reach more broadly across the Hubbell portfolio. We plan to take out more than 1 million square feet over the next two years and invest approximately $60 million with an anticipated run rate savings of about $30 million per year on average at two to three year payback. We expect these actions to deliver a 20% improvement in sales per square foot by 2020. We anticipate benefits from further development of centers of excellence, regional sourcing, and automation. With that, I will hand it off to Dave to talk about the outlook.

All right. Thanks, Maria. I'm going to go to Page 13, first talk about our outlook for end markets. We showed our early preview of this in October and we certainly feel so good about our prospects for 2019 although if you go back to our outlook in October, we've trimmed the high end of our expectations from 2% to 4% to 2% to 3%. As we look at it, some of our businesses maybe having a little bit more slowdown than we originally had expected. Although it is still early, the good news is that across the board still all positive. I think starting in the upper right-hand side, our biggest part of the pie is the Electrical T&D, which obviously now includes Aclara, and it's the biggest piece of our pie. We expect Aclara to grow mid-single digits next year off tough comps this year and the legacy T&D to grow low single digits with continued solid end market demand, but some moderation off of tougher comps. Residential of 0% to 2%, down from 2% to 4%, I think there's a lot of early indicators of some weakness in that market and so we're being a little bit cautious on that although as we said, we saw good demand in the fourth quarter and the early part of this year so that remains to be seen. On the non-resi side, we expect it to be up low single digits with steady growth 1% to 3% same as in the past. The industrial side, up low to mid-single digits with some moderation into some tougher comps of 2% to 4%. And oil and gas, we expect the gas piece to be up high single digits and oil to be up low single digits giving us an overall growth of…

[Operator Instructions] Your first question comes from the line of Jeffrey Sprague with Vertical Research Partners.

Thank you. Good morning, everyone.

Good Morning, Jeff.

I just see the step up on the restructuring, good luck with that. And maybe just a little more color on that, Dave, if you could. It sounds as if there's not a lot of headcount that would come out with this footprint consolidation. Is that the case and if so, why?

Well, I think it's early on that, Jeff. Certainly, we're working through plans around the facilities and we still need to produce the product, but I think that once we get further into it, our experience would suggest that there will be staffing efficiencies that come from it as well. So I think there will be more, but it's still early, particularly in some of the more complicated transactions.

Yes. And then from a cash flow standpoint, Bill obviously spoke to inventory -- this should unlock some inventory tied up in your footprint. I'm wondering if you can give us some early view on how much cash could be released from these efforts and what the cash restructuring costs are to kind of hit this initial new wave of things you're sharing with us today?

Yes. So there is -- we do think that there's inventory benefits, Jeff, as we consolidate the footprint not just from just better practices, but having larger more scaled facilities. So, I do think that's going to be a benefit. There will be some capital involved to your question on cash, but that's all contained in the guidance. So, you met Susan at your conference in the fall and she's put together and rallied the team around we think a plan that's very achievable. It's got, as Dave was indicating, a slightly different nature where we are -- there's more cooperation across the lines of business, more centers of excellence, and those kinds of concepts to help drive it.

And then just on the tariff kind of headwinds and what you're dealing with there. I think going back to our discussion on the Q3 call, right, if we hit List 3 at 25% plus the Q4 incremental on the carryover effect from List 1 and 2, just kind of upwards of $1 of headwinds that you were looking at is -- you may have taken some actions in your supply chain to counteract that. But is that the right order of magnitude?

I think it's a little bit less than that, Jeff. And so that's why we talk about getting at least 2 points of price. I mean, that sort of gives you the order of magnitude that we're looking to cover both in tariffs and some of the other cost headwinds in that range.

The 2 points get you the price/cost parity essentially?

Yes.

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

Just on this footprint thing, does this at all kind of -- I understand kind of the annual run rate savings, but my guess is that there is a pretty substantial amount of this that's structural. Does this at all kind of tweak up what you would expect your kind of incremental core leverage to be overtime? Let's say you're at your gross margin rate, I mean, can this help tweak that up maybe a few basis points here over time on a sustainable basis?

Definitely, I mean that's really where the benefit would be coming from, particularly if you look at some of our metrics on the S&A side, we tend to be at or above peer average. So, we've obviously performed very well there. So, the benefit from this is more on the operating side and getting that benefit on the gross margin fees.

And then when it comes to free cash flow, obviously strong finish to the year. And you've been pretty explicit about your guide. It still is a bit of a hurdle to get to that 475 million number you guys put out there last year. Is that something we should -- maybe a little bit of update on kind of where you stand on getting to that number?

Well, since I'm the one that put it out there, Steve, I'll tell you that I certainly after a 421 million year feel a lot better about that. Obviously there's things that we have to deal with over the next two years, but I think that's certainly still well within sight.

And then one last quick one. Just on kind of the pipeline of M&A, I would assume you're deleveraging here a little bit in the near term, but any kind of loosening up on that front?

Yes, Steve. I think that Maria's discussion the balance sheet was good to show that it feels to us like we could afford to do acquisitions. Our experience is you can't kind of shut them off and so we've been actively pursuing things during the year, but it does feel now like there's things getting closer and you never know stuff that cannot come to fruition. But I do expect we'll be doing deals again in '19 as opposed to the last 10 months of '18 where we really didn't.

Your next question comes from the line of Christopher Glynn with Oppenheimer.

On the dollar of amortization that's being adjusted now, obviously we have the Aclara baseline, but on the new basis. Curious how much of that is in Electrical because I think you'll be talking about margins on a pre-amortization basis?

About equal across Electrical and Power.

And just on Power, wanted to talk about market share trends there. Dave went into some detail or maybe it was Bill about the performance on the comparison and that struck me too. So, just wondering about overall share trends there and if your core T&D outlook might not necessarily reflect your prowess in the marketplace.

Yes. I think that our experience with spending tends to be in the GDP kind of range. The bulk of our sales are MRO in nature here, Chris. And so that replacement of material of others it's in the grid and in the infrastructure. We would say GDP or better is actually strong. I think the fact that distribution has been strong as this year ended is a good sign. I think the transmission projects can be easier to be delayed and pushed out to the right. So, the market feels actually very healthy from where we sit. And Steve, I think that the fact that some of the smart grid products are outgrowing the base. But share, no, I don't think we're anticipating on gaining lots of shares as we see things. I do think -- I commented on the storms just because I do feel like for large utilities who have to face disruptive events from weather, I do think our value proposition that Hubbell winds up being able to provide 90% of their products that they need to get the lights turned back on and they can deal with us and we're committed to getting trucks in the field and get people's lights back on is -- there's opportunities there, but I don't think it's a share gain kind of environment.

I'm sure, Chris, that our Power Systems guys would really appreciate your characterizing their prowess. I think they do a fine job. Some of the things that you got to keep in mind is certainly in 2018 there was good project activity on the transmission side and that can be a little lumpy. So not as much as anticipated in 2019, maybe a little more normal. And obviously on the Aclara side, they had some really strong performance so it makes just tougher comps. So, it's not an indication of share loss or weakness. It's more attributable to tougher comparisons coming off a strong year.

Okay. And if I could get one more, I just wanted to kind of level set the outlook for seasonality for the year. If we take $8 midpoint of adjusted guidance, we know that you're starting the year with a little more challenging price/cost tale and then that turns your way more and more as you go through the year. So in terms of kind of earnings distribution and margins versus normal seasonality, what nuance or insight could you offer as we kind of build out the linearity for 2019?

Well, Chris, I think you highlighted one which is price/cost, which is going to continue to accelerate favorably throughout the year so that's not going to. And I think as we're looking at our restructuring program, it's a little bit more front-end loaded to the first half at least, somewhere first more second quarter. At least that's our current thinking on that. So, I think that is likely to influence against a historical seasonal pattern.

Your next question comes from the line of Josh Pokrzywinski with Morgan Stanley.

Can you just remind us of the two points of price that you're expecting in 2019? How much of that is already out there in the marketplace versus what is incremental versus maybe what is kind of dependent on 25% for List three tariffs?

Yes. So Josh, if you think about how the year unfolded for us, the first half had in the ballpark of 0.5 point of price embedded in it, ended the fourth quarter with 2 points of price. So, the way Chris was just doing that is the same way we think of it, right. So you've got -- you get the 2 points that you're launching from, but you got to lap that 0.5 point and then it gets -- it's harder so you got to keep pulling. And as Dave was highlighting, the four List 3 tariffs we've already notified customers of that -- of those price increases to come. So, that's how it -- that's how the '18 rolled out and then you got a big lump basically in March of how it would get implemented here in '19.

I guess behind that though if List 3 doesn't ultimately go through with 25% and you already have some price in the marketplace, the incremental ask is not terribly large relative to what you were having to chase in 2018?

That's right.

And then I know that over time, you try to get back to price/cost neutrality and there's always a bit of a lag. Do you have a sense on a dollar basis or a margin basis, what is kind of left out there in aggregate over the past call it 12 months and how we should think about the timing on getting back to neutrality if now is different or it takes a bit longer or if tariffs somehow change that structural dynamic?

I mean I would say, Josh, that we're probably -- exiting last year, we're probably behind maybe 70 basis points. And I think based on the trends, it will take until the early part of 2020 potentially to get to neutrality over that time frame. I think you're referring to our historical look at it over a two-year period to where it will be positive. So we think as this year progresses, we'll turn positive and then continue into 2020. Okay. Does that help?

Your next question comes from the line of Nigel Coe with Wolfe Research.

Hey, just wanted to go back to the footprint consolidation. Just wanted to confirm there wouldn't be much if any of your payback in 2019 just given the long-term nature of this kind of action. And then -- so if you can just maybe confirm or deny that? And then last time we did some footprint work, there was a little bit of friction on the execution side. What lessons have been learned and how can we be confident that execution will be better in '19, '20 versus back in '15, '16?

Well, certainly you're right there. We've had our share of friction in past transaction, but I think we've gotten better overtime as we've learned some hard lessons and as we've applied those lessons. I think one of the keys for us has been to put that -- put the right expertise into the planning as well as the execution. And I think one of the things that Maria mentioned that Susan has done is work to -- with the existing operating organization to hone skills and enhance skills and resources. So, we think the combination of the experience and incremental resources and a collective attention to the success of this certainly reduces the risk dramatically. There's always some level of execution risk, but we really think that the things that we've done will really minimize that to a great degree.

Yes. I think, Nigel, if you look at one of our most recent Lighting facility closures, which is one of the more one of the larger plants we've closed, I think that went -- which is one of the most recent went really the smoothest. I think the preparation Dave described, particularly getting the receiving plants to have really well documented processes is really important. I think discontinuing the really high variety, very low volume items helps a lot too. And then you opened by just -- I would confirm that your assumption of the savings kicking in '20 and beyond as we start in the year.

And then going back to cash flow, I mean, for me the real highlight this year was the improvement in cash conversion. And I think, Bill, you called out inventory turns improving, and there's still a ways to go there. Maybe just touch on, aside from larger facilities providing efficiencies, what else is driving the improvement in inventory at a time when demand is improving? And then I think you're running about 10 points higher on inventory turns versus maybe 10 years ago. Is that the sort of the line of sight you have on improvements? So, how should we quantify the potential to drive inventory out the system?

Yes. I mean if you start with your last part of your question, we've benchmarked across with competitors and peers and then as you suggest, we've also benchmarked internally what were some of our best turning times. And I think that those are -- both give good guidepost as to what kind of targets we have to get better. I think contributing to the turns is everything from larger facilities, focusing on optimizing our SKU breadth. I think we talked with you guys a lot about having the order of magnitude of north of 350,000 SKUs and focusing on the better runners can be helpful. What kind of relationship with vendors, a design that can be more modular? There's really a lot of contributors to it. No silver bullets, I wouldn't say if you could set up some push-ups. And that's an exercise regime that we are very focused on continuing and we are confident we still have room to improve.

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

So, just with regards to the restructuring, how do we think about the 15% margin target on a GAAP basis by 2020? I assume obviously this is a pretty big step-up in the restructuring. So, just any framework in terms of an update?

I would say that that's still something that we are working toward. I mean, it's not -- we've been there before and certainly if not from restructuring benefits in 2019 and 2020, some of the price/cost benefits would certainly be contributing factors to that. So, it's not out of the question. It's certainly a goal that we have, whether it's by 2020 or 2021 when we get the full benefit of some of the restructuring, but that is absolutely in the cards as far as we see it.

And then, Bill, in terms of the guidance construct with regards to the operations improvement, is it about a 25% incremental margin you're factoring in on organic sales between price and volume in '19?

Yes. Historically, it tends to be in that range and so that's consistent with how it's been.

And did I catch that right, you have some of the costs at a 25% tariff already included?

Yes. We're guiding on the basis that that happens on March 1st. Yes.

Okay. So, you've got that. So if it doesn't go there, I mean you wouldn't get the price, but theoretically it could be a little bit of a tailwind as we go through the year because you have it already in there?

That's correct.

Okay. And then last one for me just on Lighting. So with the price being positive, how do you delineate between the stock and flow short cycle stuff and then the C&I project stuff? I assume there's been some repricing or some discussions that you're having to reprice some of the stuff that was in backlog?

I don't think so, Rich. I mean, we -- I mean one of the things that interestingly we found as we exited the year n meeting with customers, particularly channel partners, was how important it was to actually get in front of the price issues and not be trailing, particularly because of one of the things you highlight which is the problem that you would have in the market is where you're trying to push a price to a contractor that's already bid on a deal. So, the more that you could get ahead of it. So that's why in some cases, we have built in pricing either actual or certainly forecast to try and get ahead of those. But on the backlog, it's why you want to make sure that there is a lag. I'd say that's why there is a lag in our realization because you're still working through some of the backlog at lower prices.

Okay. That makes sense. Just real quick one. Just I know you talked about the construct in terms of restructuring spend and then how price/cost is going to flow through. If we think about the first quarter here, are you expecting to be up earnings wise year-over-year?

Yes, I think we would, Rich.

Okay. Thank you.

Your next question comes from the line of Joe Osha with JMP Securities.

Hi. This is actually Hilary on for Joe Osha. I just had one quick question for you guys. And I was just wondering if you could kind of speak to where you're seeing lead times coming in and if we might see those come down as we go through the year?

Yes. I think it's too broad a question for us to answer across a $4.5 billion enterprise. But there are places for example in natural gas where the lead times are decently long just with demand being so high. I think some of the electronics elements supply chain had lengthened a little bit. But those are not proving to be a challenging obstacles, the market is adjusting those in normal course.

There are no further questions at this time, I would now like to turn the call back over to Maria for any additional or closing remarks.

Thanks, everybody, for joining us today. This concludes today's call. And Dan and I will be available all day and the rest of the week with any follow-up questions. So, thanks again for joining.

This does conclude today's conference call. You may now disconnect your lines.