Hubbell Inc

Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2020 results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. We encourage you to limit your questions to one question and one follow-up question. Thank you. I would now like to hand the conference over to your speaker today, Mr. Darren A. Morano. Sir, please go ahead.

Thanks, Operator. Good morning, everyone, and thank you for joining us. I'm joined today by our Chairman and CEO, Dave Nord, our President and Chief Operating Officer, Durbin Bakker, and our Executive Vice President and CFO, Bill Sperry. Hubbell announced its first quarter results for 2020 this morning. The press release and slides are posted to the investor section of our website. Please note that our comments this morning may include statements related to the expected future results of our company. and our 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 slides. Now, let me turn the call over to Dave.

Okay. Thanks, Dan. Good morning, everyone, and thanks for joining us. A lot going on. We appreciate everyone taking the time to join us today in the midst of all that's going on. Most importantly, we hope that you and your families are staying safe and healthy. I'm going to start my comments on slide three with a brief summary of the quarter. You can see from our press release, it was another solid quarter of operating results and free cash flow generation for Hubble. We met with you Less than two months ago now, at our investor day, we laid out our investment thesis based on our operational transformation, our unique and differentiated utility solutions platform, and importantly, our ability to generate and deploy free cash flow. A lot has obviously changed across the world and the economy over these two short months. But fundamentally, those pillars are still intact. You know, they each drove performance in the first quarter. And we believe they'll help sustain us through what we expect to be very challenging, certainly near-term environment. But importantly, allow us to emerge out of this period as a fundamentally stronger company. Before we get into the details of the quarter and our forward look, I want to provide you all with a comprehensive update on how we currently view the impact of COVID-19 pandemic. And importantly, as our action plans and countermeasures So, if you turn to page four, we tried to break out for you the major categories of ways in which this situation has impacted us, as well as our strategic approach to each issue and the specific actions we're taking. You know, starting on the left, first and foremost is the health and safety of our employees. Protecting our people and ensuring the health and safety of them and their families continues to be our number one priority during these difficult times. For our office workers, we've implemented mandatory work from home programs for all employees with the ability to do so. We're extremely proud of our employees who have proven to be very flexible and adaptable through this process, maintaining high levels of productivity while juggling other life priorities. In our factories, importantly, unfortunately, we don't always have the same levels of flexibility as we manufacture essential products. which are necessary for the safety and reliability of critical infrastructure. Now, continuing to provide our customers with these critical products is more important now than ever and underscores Hubbell's value to our customers and communities. However, we need to ensure that we continue to manufacture these products in a way that minimizes risk to our manufacturing employees. And as such, we implemented a series of safety protocols in our plants and warehouses to enhance cleaning and sanitizing processes, staggering our shifts, introducing social distancing measures. We can't emphasize enough how proud we are of our manufacturing workers for the way they've responded to these challenges and continue to commit to work every day to produce these essential products. To that end, we're providing our hourly employees with additional appreciation pay for the second quarter. Second is the impact on our customers, and we're focused on continuing to serve our customers with the same level of quality and service they've come to expect over decades from Hubble. However, this pandemic does create some disruptions in our ability to do so, as we saw several temporary facility closures in the first quarter, and expect to see continuing impacts going forward. It's been a challenging area for us to navigate, as there are often different local orders, or site-specific challenges to work our way through. Well, we've had a thorough review process for any site closures and continue to develop contingency plans that optimize our production capacity across Hubble under a wide range of scenarios. And certainly, we anticipate the economic impacts of this pandemic will have a significant impact on our end markets, and we'll talk you through that a bit later. Now, aside from the facility impacts, we also see operational challenges from the lower productivity and absorption headwinds from what we anticipate will be significantly lower volumes running through our factories, at least in the second quarter. But then we've announced some specific actions around compensation to help offset, including significant reductions across our board, our executive team, and our salaried workforce. We're aggressively cutting discretionary spending across the enterprise. And at this stage, while it's difficult to accurately forecast the magnitude and duration of the downturn in our end markets, we do think the second quarter will be the worst. And so we think these actions will allow us to mitigate some of that near-term downside while maintaining our flexibility long-term when markets start to recover. We'll continue to evaluate our cost structure to determine what actions we may need to take in the future. Finally, in times like these, cash and liquidity are paramount. As you know, And as Bill will walk you through later, pre-cash flow performance has been a highlight of Hubbell's performance recently. And this cash generation capability puts us in a strong liquidity position. We've also taken various cash preservation actions, including cutting discretionary CapEx and significantly reducing our raw material spend in anticipation of lower volumes. We also made the decision with an abundance of caution to draw down $225 million from our evolving credit facilities as a proactive measure to further bolster our liquidity position. While the impact of this pandemic is significant, I'm confident the strength of Hubbell's people, products, and brands, along with the aggressive actions we are taking to preserve long-term value, will continue to position us for success well into the future. I'll turn to slide five, give you some of the financial highlights from the quarter. First, flat sales in the quarter growth with continued strength in utility solutions, offsetting softness in electrical. Relative to our prior expectations, electrical and Aclara were about in line, but power systems achieved stronger growth. We talked to you on Investor Day about our bolt-on acquisition playbook, and the two acquisitions we announced last quarter in our power systems and Burnley businesses are great examples of that. They're performing well. and fully offsetting the impact of our Hathaway divestiture on a sales basis. Operating margins are down slightly, considering some of the headwinds that we've seen. I'm very pleased with that. Seeing strong returns on our investment in footprint optimization, which is generating attractive savings. We continue to achieve positive price costs as we start to lap prior year purchase comparisons, but are realizing benefits from our lower commodity costs. These positives offset a couple of headwinds, which each cost us about a dime of earnings in the quarter. The first being the dynamic we walked through last quarter on our previously planned timing of long-term incentive compensation grants, which were shifted from the fourth quarter of last year to first quarter of this year. And then we also had some headwinds from some of the operational disruptions related to COVID-19. And we'll give you some more color on that when Gervin provides more color on the segments. Below the line, we picked up a few pennies from interest and other expense as expected. You know, and finally, another quarter of really strong free cash flow generation as we continue to execute on our working capital initiatives. Bill will walk you through our liquidity position in more detail later, but obviously an encouraging 1Q result, which supports our liquidity position heading into a period of significant uncertainty. You turn to slide six, here you see some of that information in graph format. We're happy that even with flat sales, as I mentioned, our headwinds we faced, we're able to keep our operating profit flat, grow EPS modestly, and grow our free cash flow significantly. With that, I'll turn it over to Gervin to walk you through the results of our two operating segments. And then Bill can walk you through our outlook considerations and framework. Gervin?