Ladies and Gentlemen, thank you for standing by. And welcome to the Third Quarter 2019 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Dan Innamorato. Please go ahead, sir.

Thanks, JC. 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. Hubble announced its third quarter results for 2019 this morning. The press release and slides are posted to the investor section of our website at www.hubble.com. Please note that our comments this morning may include statements related to the expected future results of our company and 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 considered incorporated by reference into this call. In addition, comments may also include non-gap financial measures. Those measures are reconciled to the comparable GAAP measures and are included in the press release and the slides. Now let me turn the call over to Dave.

Okay. Thanks, Dan. Good morning, everybody. Thanks for joining us just to discuss our third quarter results. Hopefully, you can see from our press release this morning another quarter of solid earnings growth and free cash flow generation for Hubble. Continue to feel confident about our market position and our ability to deliver differentiated results for investors. I want to start my comments on page 3 of the presentation. Some of the key takeaways for the quarter. Now first the end markets are growing modestly overall. You could see that transmission and distribution continues to stand out is driving strong growth both top and bottom line. And that's driven by our ongoing investment at our large utility customers and hardening and upgrading the grid. On the electrical side things are a bit more mixed with some pockets a growth offset by some softness in certain markets. And we'll talk about that in a couple slides. On the margin front, we remain effective in actively managing priced cost across the portfolio, which is driving margin expansion. You see 30 basis point improvements on an adjusted basis year-over-year. Free cash flow remains a critical aspect of our story and we're tracking above prior expectation driven by continued working capital improvement. We continue to invest restructuring dollars in our footprint optimization initiative with more to come in the fourth quarter and into next year, putting a lot of work organizationally into improving our operating intensity. It's paying early dividends with strong cash flow generation and we see these efforts driving significant upside to margins over the next few years. See we also completed the divestiture of the Haefely high voltage test business in the quarter, and recognized a gain that we've adjusted out of results. And also reach an agreement for a bolt-on…

Thanks very much, Dave. Good morning, everybody. Appreciate you joining us. I know it's a busy morning. Like Dave, I'm going to use the slides to govern some of my comment. I'm going to start on page 4, the overall results. You'll see that we generated $1.2 billion of sales in the quarter, 2% growth considering the divestiture that Dave mentioned organic growth was up 3%. Operating margins expanded 30 basis points to 15.8% that was absorbing some extra investment in footprint restructuring. And it was really driven by a very solid performance on the price-cost side. Adjusted EPS of $2.34 as Dave mentioned the reported results have gain on sale, which we've adjusted out to help facilitate your ongoing comparisons of operating results. And for free cash flow $151 million generated which has the year-to-date increase for the nine-month period of 16% on cash flow. So let's look at sales and disaggregate that into how each of our end markets is contributing to our 3% organic story. You can see some bifurcation on the page with some strong areas and in some other areas of softness. I'll start with the strength starting with non res new construction. We continue to see low single-digit performance there. Our commercial construction and ROUGH-in electrical areas are benefiting from that. And as Dave mentioned, the utility facing markets are really the most noteworthy. I'm including gas in there as you all recall, we're in the distribution components business there. So utility facing area where conversions to gas have been increasing and the MRO spends upgrade and strengthening the infrastructure continues to drive impressive growth there, as well as across transmission and distribution of electrical side, we're seeing grid hardening and projects on transmission side including renewables, so very favorable trends in utility. On…

Okay. Thanks Bill. Turn to page 11 to talk about the end markets first and outlook. Now as we've talked about this morning, we're seeing some mixed end market trends and some puts and takes across the portfolio. On net, I think end markets are trending a bit below our prior expectations that closer to 2% versus to 2% to 3%. And that's a result we've tweaked down our growth expectations across a few of our electrical end markets. But again, we're once again seeing stronger growth in the full year in transmission and distribution. Going around starting clockwise, the electrical and transmission distribution is now I think 4% to 5%. It was 3% to 5% prior closing in closer to the high end on better visibility. The non-residential still 1% to 3%, we talked about the softness in lighting, particularly on national accounts but core non res we think is still solid. Industrial now 0% to 1% versus 1% to 3% prior. And that's driven by softening mostly on the heavy industrial side, steel and heavy industries, the light is still holding okay. Oil and gas now 0% to 1% versus 1% to 3% prior. Oil markets, I think most people know haven't been recovering. Rig counts down and so you've seen that we're taking that down a bit. And then residential 0% to 1% versus 0% to 2% prior. We continue to expect modest growth but a little more modest than prior. So if we turn to page and pull that together for our overall outlook. That market dynamic plus price, we expect sales growth of 3% to 3.5% for the full year. As we talked about in the prior slide, this embeds this modest end market growth but we expect to continue to achieve solid traction on…

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

Thank you. Good morning. I was just wondering a little bit more on the power fundamentals. You mentioned great hardening and modernization from a couple other perspectives wondering how much runway you're seeing with respect maybe utility CapEx fundamentally shifting from power gen to T&D. And also besides that is California starting to come into play prospectively?

Well, I think on the first part, I mean I think that the shift from power-gen to T&D has been a contributing factor and we expect that dynamic to continue and that all as part of modernization grid hardening, smart in the grid. On the second on California certainly there's been increased investment, increased intention, attention to the need to focus on more reliability of the grid throughout California, certainly in the northern parts and we're seeing some of the implications of that right now with the need to shut down power to protect. And so we expect that to continue, although that's only been part of the story for us. I think it's a broader shift into T&D from power-gen that's contributed.

Okay and then on your acquisition pipeline, I'm just wondering if that's skewing more power or electrical?

Yes. We're seeing opportunities, Chris, in both, if you looked backwards, we've had a skewed towards power over the last five years or so. But as we look forward, we're seeing opportunities in both segments.

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

Hey, good morning all. A couple of questions for me. First one, did you benefit from storm activity this quarter? If yes, can you quantify that for us? I was also thinking on Aclara coming in flat is that something what you'd expected or was that slightly below what you're expecting?

Well, first on the storms, there was no meaningful incremental impact. I mean it's more of a normal level of storm activity that we saw. So nothing that was a positive year-over-year you. On the Aclara side, I think it was a little less than we expected but remember that last year we had some very significant growth high double-digit, high 20% plus in some of the periods. And so the comps got a little tougher this year. I think there are also some projects that have doubt a little bit to the right, so but there's a whole lot of order activity that we expect to be coming online certainly in the next several quarters.

Got it, thanks. And my follow-up is on lighting, can you provide us your general thoughts on Cooper Lighting sale to signify and what this perhaps could mean to lighting assets such as yours, if you can help us parse some of the competitive merits or demerits that would be helpful? Secondarily, how are you thinking about your timeline to fill in the lighting vacancy? Thank you.

Well, I think the merits and pros and cons of Cooper signify would have to be addressed by them. They're the ones doing as we look at from my history in the market; I think there's been a lot of churn throughout my 14 years. And it's not clear that all of it has resulted in the positive impacts that are intended. It's a tricky industry. I think there's dynamic that sometimes suggest that in some places bigger isn't always better unless executed well. So with any large transaction like that I put that in the category of large. I think it's all about the execution. We feel very good about our position. Our position in the market, our position with our technology and product development. So but it's always -- we're always paying attention to what's going on from a competitive situation. So hopefully that answers the first question. The second question around the timeline, there's no timeline that I can commit to. I mean we evaluate candidates, internal candidates as well as Jim's in position and we expect he's going to be doing a great job. So I don't think we're going to miss a beat as we're going through this process so okay.

Your next question comes from the line of Nigel Coe of Wolfe Research. Your line is now open.

Good morning guys. This is Michael in for Nigel. Hey, so just touching up on the implied 4Q guidance. Can you talk about some of the moving pieces inside the segments? Just looking at normal seasonality, it seems like a bigger drop off than usual. I just kind of want to know what your thinking is that's driving that.

Yes. I think one of the pieces is the pricing and that layered in over last year and as we get to fourth quarter, we are anniversary some of those increase. And so you kind of lose the lift that comes from that. And then on the lighting side, we are anticipating some of that. We were down mid-single digits in the third quarter. So we're anticipating some of that continuing into the fourth and then strengthen the rest of electrical and certainly as Dave was saying continued strength in the power side.

Got you. That's very helpful. And then on Aclara just looking at the backlog, does that provide more clarity and visibility into 2020? Or were customers hesitant to spend in the quarter and that got pushed out to the right?

Yes, no, I think, we've got two concepts right at backlog, which is even near-term and then a pipeline. And we're finding there's even a little bit of gray in between those as part of the pipeline starts to become very close to backlog and that's where we start to see that some 2020 volumes coming in. So there does -- it is lumpy by its nature of kind of large customers putting in large orders. And so you do -- if your question is, is there visibility to that there is and we feel confident about the forward look there.

Okay. That makes sense. And if I've time for one more? Just speaking on the kind of sell-in to sell-out, what are you guys hearing from channel inventory levels from your customers and the inventory drawdown from customers that we saw earlier this year? Is your perspective that that's mostly over? Do you expect it to continue into the back -- into the end of the year?

I would say that the meaningful amount of it is over. I think there are certain customers that we've heard are still working off some of their inventory. But we're not expecting that to have a significant impact. Although you will find some, at least we have found some distributors, who still have some inventory to work off. But the vast majority, I think I've gotten to the level those they that they want to be at.

Your next question comes from the line of Justin Bergner of G. Research. Your line is now open.

Good morning Dave, good morning Bill. First off, I want to ask about power margins. They remained very strong in the quarter; I guess they're even up a little sequentially. How sustainable is that? I know you have seasonality and some timing of price cost. But did that sort of exceed your expectations and what can we expect going forward?

Yes, I think it was -- it did not exceed our expectations. We had both volume at the legacy power systems products, which those dropped through with attractive incremental. We also had price cost, favorability. Continuing that price cost favorability I think is the essence of your question where with that will start to flatten out some of the pricing comps, for example, in the fourth quarter get harder, that probably is offset by maybe easier raw material comps, and then how that plays into next year. We're sort of hoping we can hold on to some of that benefit, but hard to have the same as you noted, sequential quarter-over-quarter kind of walk. I think the other driver ultimately of power margins will be from within Aclara. And as the previous question talking about some of that. Project pipeline and the more AMI kind of richness that can come through. And Dave highlighted in his opening comments, some of the AMI advancements on some piloting within IO use, as well as some larger deployments inside of the co-op world, start to suggest as that margin written, this richness come out that would help our margins as well.

Great. One clarification question, if I may. In terms of your revised guidance, are you absorbing some additional headwinds in terms of either tax restructuring or divestiture?

Yes. So the tax isn't the same as we thought. The restructuring is the same as we thought. And we are absorbing the last OP of our divestiture. Yes.

Is that like $0.05 or something like that?

Yes, that's a good, that's good ballpark.

Your next question comes from the line of Steve Tusa of JP Morgan. Your line is now open.

Hi, guys. Good morning. Just on the free cash, I know you guys kind of reaffirm the long-term targets, but it seems like you guys are obviously doing pretty well against that, I'm not, I missed the beginning of the call. So I'm not sure if you kind of clarified. Is there anything kind of unusual in the base this year that kind of reverses it all? Because it just seems like you’re really kind of close to the long-term targets, even though you’re not quite there yet on from a timing perspective?

No, I think we, what you missed is that we feel good about this year and you’re right, we are-- what we’ve been focused on trying to get ahead on those long-term targets. I wouldn’t say I am ready to advance those long-term targets. But if we can continue to do what we’ve been doing, we certainly think there should be upside to those targets as well. But that remains to be seen. We'll have better insight into that with another quarter behind us when we close out this year and see exactly how this year closes out. But certainly, the thing that we’ve been doing that is driving the focus that we’ve had on it, I think are leading us to where we want to be.

Any major influence you have from the supply chain initiatives that you guys have been talking about, or is it kind of too early to see fruit to that labor?

No, I think you’ve seen, Steve, you’ve seen our inventory days improve which I think is a direct result of that. And to Dave’s point the way we’re modeling next year; we’re seeing a continued step down and improvement in inventory days. So I think that feels like it has legs to it to help drive as we’ve mentioned for long-term target.

We have a follow up question from Christopher Glynn of Oppenheimer. Your line is now open.

Thanks for taking the follow up. Just wanted to go back to the kind of preliminary 2020 comments, Dave. Did you suggest that both segments are positioned for some positive margin trends next year or 2019 granted if the economy doesn’t fall off the cliff?

Well, I certainly the easier one to say is going to be positive is on the electrical. Just because of some of the challenges there, particularly in lighting. But I think power can continue to power through it, there are high levels but certainly we see the opportunity for those to continue to grow. So our objective overall is to --is with our focus on margin as well as growth and cash generation. That we're going to continue to improve on those.

We have a follow up question from Justin Bergner of G. Research. Your line is now open.

Great, thanks again. If I do the math and the writing down mid-single-digit that would suggest I guess that commercial and industrial construction energy sort of combined were up 3% organic. Am I serving the right ballpark there and are you actually doing better than your end markets because that’s what seem to be a little bit better than your end market even if we maybe axe out the lighting piece?

Yes, your math is good. And I think when we consider the end markets, we’re incorporating some of the lighting into that, so it feels like our products and brands are doing just fine. I'm not sure that I would say there's a ton of share gain or outperformance, there’s been Dave made reference to the top to some new products that have done well some new introductions. But I'm not sure I have noted any great share shift.

No further questions at this time, presenters please proceed.

Thanks operator. Thank you for joining us today. And I’ll be around all day for follow ups, if anybody needs us. Thanks.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.