Good morning. My name is Prince, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2019 results call [Operator Instructions]. Thank you. Mr. Dan Innamorato, you may take it from here.

Thank you, Operator. Good morning, everyone and thank you for joining us. I'm joined today by our Chairman and CEO, Dave Nord and our Executive Vice President and CFO, Bill Sperry. Hubbell announced its second quarter results for 2019 this morning. The press release and earnings slide materials have been posted to the Investor section of our Web site 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, Dan Thanks. Good morning, everybody. And thanks for joining us this morning. I appreciate the time. We know it's a busy day. You can see from our project press release that it was another quarter of strong earnings growth, and particularly strong free cash flow generation. Continue to feel confident about our market position and our ability to deliver differentiated results over the short and long-term. Now, before I get into the results for the quarter and a little more color on that, obviously, a few things, updates, since the last time we spoke to you a quarter ago, particularly organizationally. First, you heard Dan leading office call, as many of you know really had another opportunity outside of Hubbell, so she moved on. But one of many things that she accomplished was building a good team. We're fortunate that we had Dan joining our team a little over a year ago. So he's had a year to get very familiar with Hubbell and all that we have to offer. And I know some of you've had interacted with him. And he's obviously had some great training in the market before coming here. So we're glad to have him on the team. We also named a new VP, General Counsel, Katie Lane. Katie is also evidence of the strong team that we've built over the last 14, 15 years. She joined us a little over 14 years ago, and had worked in the number of positions in the organization, including as General Counsel for the Commercial Industrial Business, and then came up as the Assistant General Counsel. So we welcome Katie into the senior management team here. More significantly, you noted that we promoted Gerben Bakker to President and Chief Operating Officer. Gerben has done a great job…

Thank you, Dave. Good morning, everybody. Good to be with you all. I'll start on Page 4 and echo some of Dave's comments strong financial performance by Hubbell in the quarter, evidenced by double digit growth in earnings and double digit growth in free cash flow generation year-to-date. I think the two most standout drivers of underlying performance were; number one, solid execution; and number two, strengthened balance in the product portfolio. On the execution side, you saw really good price cost management, which allowed us and led to expanding operating profit margins. You saw increased investment in restructuring, which we think sets us up for margin expansion next year and beyond. And you saw strong inventory management, which really helps underlying some of what Dave said about the organizational design changes, as well as what can really help us get free cash flow generating. The strength and balance in the portfolio was really evidenced, and we'll talk about some of the markets on the next page. But you saw some weak oil but strong gas. That strong gas is the result of some business development work that we've done over the last several years where we've really built an impressive main to meter business in attractive market that we didn't have before. Where commercial might have had some weakness, we have the utility strength that Dave was talking about. So good balance in that portfolio. And the results financially is that our model is working in deploying operating leverage throughout the system. So you see 3% sales growth driving 5% OP growth, driving 11% earnings per share growth. So we like when the model works that way. On Page 5, let's talk a little bit about some of that mix at markets that Dave talked about. You see 3%…

Okay, thanks Bill. Turning to Page 11, just talk about throughout, we're seeing some mixed end markets. With puts and takes across the portfolio but net, our overall market growth was tracking in line with our initial expectations overall. We've tweaked down our growth expectations across a few of the Electrical end markets, but we now see stronger growth for the full year in T&D. This is driven primarily by our legacy power business, Aclara still expecting to be in the mid-single-digits for the year. So going around horn, the Electrical T&D now 3.5%, while it was 3% to 5% it was 2% to 4%. Non-res 1% to 3%, same as prior. The industrial 1% to 3%, down a little bit with some softness there. Oil and gas, 1% to 3%, down a little bit as we've seen weakness in the first half and then residential 0% to 2%, same as the prior. So when we look at our outlook, we have -- which I said earlier, we are reaffirming our net sales growth of approximately 4% to 6% with our end market growth of 2% to 3%, a wrap around impact of Aclara in the month -- little over a month, beginning of the year adding 1%. No additional acquisitions contemplated in that and of course the benefit of higher price realization. We've tightened our adjusted diluted earnings per share to $7.85 to $8.15, and that includes $0.40 of restructuring and related investment. And as Bill talked about, we're raising our expectations for full year free cash flow conversion to 100% of adjusted net income. Certainly, feel confident in our ability to continue generating strong cash flow. Turning to Page 13. So you put this all together in graft form, continue to expect strong growth from operations. With some -- what we've heard was non-fundamental headwinds, incremental restructuring and a higher tax rate, still driving us to our outlook of $7.85 to $8.15. So certainly off to a solid start in the first half, puts us well on track to achieve our full year commitments. We're well-positioned with differentiated results, focusing on execution in the near-term, while at the same time, positioning us for future long-term success. So with that, let me open it up to Q&A.

Thank you [Operator Instructions]. Your first question comes from the line of Christopher Glynn from Oppenheimer. Your line is now open.

On the Electrical comments on the channel, just wondering if you could comment on with what you think is there, between the impact of channel adjustments versus end demand. And also your conviction on the kind of -- or maybe not conviction, but comment that the second-half destocking should improve versus view that maybe demand softening a little a little bit yet?

Yes, I think that with some point of sale data, Chris, we can see where end customers are buying the product and the channel is not restocking it. And so that happens with some with some cross-sectional data that we have. We could see that throughout the second quarter, steady diet of that. And if you look for example at July orders in some of those lines of business, you can see a pick up there. So, that's kind of the basis, I would say, for us thinking that, that improves slightly. I'm not talking about a market inflection at all, Chris, little bit cautious about overall growth. But it feels like dynamic will help us a little bit with a little bit more Electrical growth in second half.

And on the power margins, obviously, a nice performance and up nicely year-over-year versus the first quarter was down a few points year-over-year. Did mix or price cost really swing versus the first quarter, or just curious if that…

I think you saw a combination less of mix, but more of price cost kicking in, as well as you really do see the incrementals from higher growth in that business. So that really helps contribute.

Next question comes from the line of Deepa Raghavan from Wells Fargo Securities. Your line is now open.

Hey a couple of questions from me, curious on your second half outlook and what's baked into the guide. It looks like the quarter outpaced your expectation, at least power wise with puts and takes elsewhere. And add to that the Q1 performance that was better than what you expected. Your guide really hasn't moved. So what are some of those incremental risks you're baking into second half that makes you keep the guide closer at the midpoint?

Well, one of the things, Deepa, to keep in mind as a starting point is that our restructuring spend is a little more backend loaded. So I think we spent $0.16 in the first half, so that means we've got $0.24 to reach our target of $0.40 in the second half. So that's -- we thought it might be a little more ratable throughout the year. But to make sure that we're going to execute effectively, some things get deferred. So that's part of it. But Bill, you want to comment on that?

Yes, I think that that is the single largest factor. I think other than that, Deepa, there is maybe a little bit of caution on the Electrical volume side. And that is offset by some of the confidence we have in power. But there's no inflection or headwinds, or risks, or things like that that we see.

With regards to non-res and res outlooks, obviously, you didn't change it overall. But I have to assume, just given your Electrical commentary, there's probably little bit of puts and takes in there. So my question is more, does it feel like those end markets move more towards the high end or low end of range? And how was it different versus what you thought earlier?

Yes, I think the way when Dave went through the pie he kind of showed that we kind of kept the overall 2% to 3%. And that's really supported by stronger utility transmission distribution than we originally thought. And potentially at the lower end of both industrial, oil and gas, as well as some of the non-res. So the kind of nature -- the contributors to the pie change a little bit, but retain kind of the same level.

And I would add, Deepa, that so I'd say probably when we started the year versus now, I think we felt that those two markets and our outlooks have a bit of conservatism in them. And now, I don't think it has quite the same level of conservatism. I think those are still solid outlooks. But I think they are probably more predictable of what we expect to see as the second half shakes out. So, that's probably the -- it hasn't changed, but the bias is probably more to the midpoint than at the high end.

Yes, somewhere half point, Deepa.

Our next question from Robert McCarthy from Stephens. Your line is now open.

Well, 10 years, give or take, so I going to actually to ask about that M&A charge from 2006 that was never disclosed, you just [indiscernible] for the patience as well. Who was that, what that you and Thomas, was that or what was the [indiscernible] open out on the call?

Déjà vu all over again…

Still not going to talk about it, okay. Well, you know I like pie, so let's go back to the pie. The first I would ask is, as you think about the non-residential overall low single-digit. Is there anything given you paused or just thinking about the prevailing macro and looking at institutional in terms of your relative mix of the portfolio that as you pause that perhaps we could be seeing a topping out here and is '20, and there is some concern over the longer-term?

You know I would say as we parse through it, you start to see some strength in some of the public areas versus private, Rob. And really it's been the growth in non-res propelled by private. So that is a little bit interesting. We don't feel we have exposures specifically between institutional and commercial, and that swing us either way. I think the expansion is getting in the later innings. The spending is still at passing priority peaks. And so, it doesn't have the feel to us of a rollover as much as maybe some uneven low single-digit growth. So we think part of why we're putting some effort into, taking fixed costs out of our system to make sure we can get profit growth off of the low single-digit environment.

Okay, that's fair. The second question is just around lighting over the long-term. How do you think about, whether you are going to be continue to invest in that business? Do you think you have to think about being a net seller, do you think about exiting JV-ing? Or do you think it's a core business that you want grow over the longer term?

Well, I think we certainly made a lot of progress in this business through some heavy lifting over the last few years. And we think there's still more opportunity to go in that business. Obviously, the market is sometimes not supportive of that. I think right now, it is. And we're certainly committed to continue to drive improvement in that business. So, it's been a important part of our portfolio and part of our strategy, and being important to our channel partners. That said, that like all of our business, always under review as its long term fit in our portfolio. But I think we’ve put a lot of effort into it, and I think they’ve been performing. And we certainly can see more opportunity on the upside for improvement in performance in that business.

And we saw, just to add some detail underneath that, Rob. We experienced some modest growth in lighting in the quarter. It was really price, so quite modest volume. The volume was even shifted a little towards resin and away from C&I. But the business got price above material cost, such as the second quarter in a row of that I mean -- and a good sign of what Dave's kind of describing in terms of general health of the business and maybe running up lower volume higher margin business there.

The last question is on power. Obviously, good new story particularly today and the performance. How do you think about your cash generation there versus the overall company over the longer term? And what are some of your targets that even improve that cash generation? Give me some sense of how you expect conversion to play out there over the longer term time?

The power business is a good cash generator. They're actually quite efficient in inventory days, They've got some high turning product and some made to order made to engineer product and so -- and an efficient footprint. Their CapEx tends to be in line and generates a lot of productivity. So the yield on the CapEx is very good. So I would say within the power business, the size of the margins and sales growth that you saw, the cash generation is quite good too.

Next question is from Jeff Sprague from Vertical Research. Your line is now open.

Good morning, guys. It's Brett jumping in for Jeff here. I just want to come back to the restructuring and the big quarter in terms of investment. How does that spend feather through the balance of the year? And then similar on savings. How much of that 30 drop, $30 million drops, in 2019 and how that looked in Q2 and for the balance of the year?

So as Dave was doing in sense. If I did it in dollars, we're going to spend $30 million this year. We've invested $11 million of the $30 million. So we still have two-thirds, as Dave was described it as backend loaded. Those projects that will do that spending have already started and initiated. So it's not a question of things on the planning board. And the savings are coming through in some of the projects in the two year range. And so you'll see that we would expect over -- of the $30 million we're spending this year, we're anticipating getting $15 million of savings maybe not all in 2020 that might be spread into 2021. And we would have a similar profile of savings for the next 30 that we would spend in 2020. And so, I'd also say to the extent if Rob's question around is there somehow some softening coming that's a little more pronounced. I do think we would probably respond with some more restructuring and take more costs out if that kind of market condition were to prevail.

And then just as a follow up, specific to the actual investment. How's that layer through Q3, Q4 just in terms of modeling purposes?

About $10 million a quarter, I think you can split it about evenly.

And then just shifting over to Aclara. What are the expectations for the balance of the year in terms of revenue? And then in terms of the returns on that investment how are those trending as you look at the -- as you anniversary here in the first quarter?

I would say that the first thing to note in the quarter was the balance growth between Aclara and legacy power systems, both at 7% organic. And to us, that's a very good sign of customer acceptance in the view that the Hubbell Power segment is providing a broader set of skews now to our utility customers. So we think that that's quite good news. The margins coming out -- and we would expect that to continue for the second half of the year. The margin since we've owned Aclara have been double-digits versus you see the legacy business is high double-digit. And that's been dragged down by the fact that we've had some difficult installation contracts and by the fact that our mix has been skewed more towards meters and away from the communications devices. And so as you talk about returns where we're going to see really positive equity story type returns, we'll come as the communications, the smart grid communications, sales crossover from the traditional Aclara customer, which has been the muni and co-op customer into the investor-owned utilities that's the core Hubbell power systems. And that sales cycle is going to take us a couple of years to get there. So that those -- having that it was kind of outsized equity returns, I think, is still in front of us awaiting that sales cycle to come to fruition. I would say, as we monitor that sales cycle, we're quite encouraged by the meetings that we get, we're quite encouraged by the customer feedback that we get. And the products that we've got seems to be -- it seems to be -- our expectations are quite high for what will happen as we go forward.

Next question comes from Steve Tusa from JPMorgan. Your line is now open.

Can you just talk about the non-resi environment that you're out there? There's been talk of a few project push outs, and the economy is a bit choppy. So anything on that front that's surprise to the downside at all?

No, I'm certainly not going to use that word that you used, I've banded. But I think we have seen certainly some project delays. I think that's created a little bit of volatility in the order book or release of orders. But certainly for the rest of this year, it seems like things are pretty solid. Again, not at the same growth levels that we -- the high end of our growth levels that we might have anticipated going into the year. But it's too early to determine what that means beyond this year for sure. But as Bill mentioned, we're certainly not at peak levels. So while we maybe in later innings, there's a question about how much longer and we don't see any storm clouds out there, if you will.

And then lastly just on freight cost, I don't know if you guys talked about this, I missed kind of the first part of the call. But what do you think for the second half in price costs?

So we think the pricing environment stays intact. So we've got a couple points there of price. It's interesting as the second half comes, Steve. One of the more important commodities for us is steel, as you know. We're starting to see and expect some tailwinds from steel. And yes, we still have an inflationary materials expectation. So a lot of our components are still experience inflation, some of the resin side and others. And so as some of those pricing increases that we pulled, start to get lapped, I think we -- instead of that being a headwind, we're going to get helped by the commodity tailwind that will fill that that back in. So I think we'll see a steady contribution from price cost, even though the components are a little bit different.

[Operator Instructions] We have Nigel Coe from Wolfe Research. Your line is now open.

Good morning guys. This is Bhupender here sitting in for Nigel. So just want to touch on Steve's question here on price costs. Could you give some color on Electrical versus power? How the -- I believe you gave some color on like the lighting business here for the price cost. Could you give some color on Electrical and Power businesses? Thanks.

Yes, Power was a little bit above that point we cited in the quarter and Electrical a little bit below that. The first quarter was actually the opposite dynamic. Electrical contributed a little bit more. I think for the second half, we'd expect power to be at the higher end of the half point we talked about and Electrical a little bit below that as well.

And just moving onto the pie chart here, the end market stuff you talked about. What actually drove the T&D strength? And could you talk about, like if that's sustainable like in the second half?

We think it is sustainable. We think that for our addressable markets, the largest contributor is the distribution that last mile and that spending was the strongest. It tends to be systems hardening and upgrades. They tend to be in CapEx, capital projects. And so as we look at orders and we look at backlog, and we talk to customers that does feel sustainable throughout the second half. The transmission side is a little bit smaller than the distribution. That's been driven by the fact that some of our largest customers are doing some projects. So that's helped move the needle. And the visibility on those projects also is pretty good. And so the second half feels very sustainable in terms of -- and that's why we really raised on the pie, why we raised the T&D growth outlook.

And my last question here on the -- Dave, you mentioned about the -- I think, you gave some color on the orders here for the non-resi side. You believe there were some delays here. Could you just give us some kind of cadence through the quarter, like in terms of order? And what you are thinking or seeing in July in terms of daily order patterns here? Thanks.

I mean, the orders in the Electrical segment overall, have been lumpy. It depends -- we've -- and it's hard to really determine what's underlying demand over a short period of time, because you've had this issue of inventory in the channel and a little bit of destocking. And so in some of the businesses, you saw -- you might have seen a weak June -- May, June, and then it turns back up in July. So I think that, from our standpoint, is evidence of some of that destocking coming into play and timing. On other side, if you are on a project business, some of those project businesses have some lower order rates until those projects release. All indications are that they are going to release. It's just that they've been pushed out a bit. Obviously, there is always the risk that they don't. But we're not seeing that. We're not hearing that, right now.

Are you seeing those in the oil and gas? I mean, like oil was weak in the quarter. Is that something you would point to?

Yes, I think, we -- those projects, as Dave's word of lumpy, is even quite applicable there, where some of the backlog we think will get spent there in the second half.

[Operator Instructions] I'm showing no further questions. I would like to turn the call back over.

Thanks operator. That concludes today's conference call. We will be around for the rest of the day if you have any questions, and we'll available for calls. Thanks for joining us.

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