Hubbell Inc (HUBB) 2013 Q4 法說會逐字稿

Good day, and welcome to the Hubbell Incorporated fourth quarter 2013 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jim Farrell. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. I am here today with our President and Chief Executive Officer, Dave Nord, and our Chief Financial Officer, Bill Sperry. Hubbell announced its fourth quarter and full-year results for 2013 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 therefore 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 some non-GAAP financial measures. Those measures have been 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.

Thanks, Jim. Good morning, everybody. I am just going to provide a little bit of highlights for our fourth quarter and full-year results. Got a couple other topics to cover, and then I will turn it over to Bill for a little more of the detailed review.

Obviously, you saw our results, I am very pleased with how we finished the year, particularly a year that has had mixed markets throughout the year, with sales up 7%, acquisitions contributing 3% of that. So good core growth, probably the best core growth we have seen all year. The end markets, as I said were mixed. Our non-res was a little better than we have seen all year, obviously still depending on the strength and the renovation, and energy efficiency market.

Residential market continued to be solid for us, double-digit growth. The utility market was much weaker, as we signaled early in the year, particularly on the transmission side, also a little tougher compare because you don't have the storm activity that we saw last year. And I think there was a little bit -- certainly in December, and some of that continuing into this year, the impact of the severe cold weather.

Obviously storms, to the extent they provide activity, but regular maintenance, a lot of that is getting deferred until the weather warms up a bit. And then, on the industrial side, we saw some good performance there, particularly on the high-voltage business. Of course, that is a very lumpy business, but we predicted that would be recovering. We saw that earlier in the year and that was a contributor in the fourth quarter.

All that giving us some good margin expansion, up 90 basis points, with productivity driving that as well as some lower material cost. And all that leading to earnings per share, up 15%. Anytime we deliver 15% earnings, I can't help but be very pleased with the performance of the organization.

So all that helps us finish the year, a very solid year, good operational performance in an environment of a lot of ups and downs in the markets, with sales up 5%. Acquisitions benefiting that by about 3%, so core growth up 2%. As I said, the end markets were all mixed, and we think and we will talk later about that -- how we see that playing out into 2014. But from my standpoint, I am just pleased that we were able to navigate through those mixed markets, still focusing on the execution that this organization has really become very keen on.

We finished with margin expansion, up 40 basis points and what we guided this time last year, so I am pleased that we are able to deliver that. We obviously, had some help from lower material costs, but still focusing on continued improvement and productivity. I think we also spent a lot of time focusing on our capital deployment.

We increased our CapEx spending last year, up 20%. We increased our dividend, up 11%. We spent nearly $100 million on acquisitions in 2013, and we had share repurchase, just over $30 million to make sure we kept up with the dilution from employee options.

So continued focus on investing in the business, and returning our strong cash flow to shareholders. I think we have also made some good progress on building on that foundation of our One Hubbell strategy, we had good progress during the year. We have realized some early successes, but there is still a lot of opportunity in front of us, and we will talk more about that at our Investor Day at the end of February.

I think the other two points that I would raise, one, and you saw that we closed in the last week on three transactions, three acquisitions. One in our electrical systems business, a $30 million manufacturer of power resistors. And then in the Power Systems business, two deals, one, a manufacturer of plastic enclosures that helps fill out our line for our underground enclosure and pedestal business.

And then, a small but very meaningful for us transaction, a little market leader in devices that store reserve fiber-optic cable, so really supporting the telecommunications industry which is a part of that business that we are continuing to expand. So all in all, I think we saw that we expect that to contribute about $45 million in sales for 2014.

The other significant item of note is the organizational change that we announced yesterday. A part of our strategy around One Hubbell, in addition to focusing on customers and operating discipline and people, is really on the growth initiative. And that had two elements, one on acquisitions, and the other is investing in new products.

So that -- one of the things we want to make sure that we continue to increase our capabilities and our investment in our resources. And further evidence of that, is something that we have created a position to help drive some of that more effectively in the organization, created a senior vice president of growth and innovation reporting to me. And we are fortunate that we have someone in our organization that can really fit that bill very well, and that is Bill Tolley.

It is tough to pull -- to take Bill Tolley out of the Power Systems business that has performed so well, particularly in tough markets. But he is a great resource, particularly with his diverse experience, both from a financial background as well as operating in multiple businesses within Hubbell. So I am really pleased that he is going to be joining the corporate team, and helping us to drive both acquisitions -- our acquisition agenda, as well as investing in new products.

We are also fortunate that we have a strong team that allows us to fill that gap in the platform with an internal candidate, Gerben Bakker, who I think some of you might have met at prior investor meetings, is stepping in replacing Bill as the President of the Power Systems business. Gerben has very diverse experience. He has been with Hubbell for 25 years, started in the wiring business, had some international experience. Ran the Brazilian operations for Power Systems, and then has run a third of the business over the last few years in Power Systems.

So I am really delighted that we have this capability internally, we have these resources internally, and that we are committed to investing to improve, and continue the grow of the business. So two good events, just reported in the last week.

And with that, let me turn it over to Bill to get through some details on the financials.

Thanks, Dave. Good morning, everybody. Thanks for joining us. I am going to start on page 3 of the slides that Jim had mentioned to you. So we reported sales for fourth quarter, up 7% with the balance between acquisitions and organic. Operating margins up 90 basis points from the prior year to 15.6%, with productivity really being the main driver there. EPS of $1.38, 15% increase in strong free cash flow.

Just wanted to pause for a second on the acquisitions. Our format with these slides sometimes doesn't let us aggregate multiple year's worth of information, and you all always ask us lots of good questions about our capital deployment and acquisition program. So let me just share some of the facts over the last few years, give you a sense of what is going on with the acquisition program.

So back in 2011, we invested about $30 million in that year, in 2012, $92 million. As Dave said, this past year, $98 million, and already $95 million in 2014. That program comprises 12 different companies that we have acquired, and I would make kind of the following observations. I think, first is, you see good balance offered against our organic markets by that level of activity.

Now the average deal is a small tuck-in, really averaging about $20 million in sales of those last 12 companies that we have bought. They have been across our portfolio of businesses, power, lighting, and electrical, different pieces of electrical. And I think you are seeing an increase in case, which Dave mentioned. So just give a little bit of background to that 3% of acquisitions, and put it in context for the last few years, and in case that inspires more questions when we get to Q&A.

On page 4, you see for the quarter, the $807 million of sales, the 7% increase. 4% of that increase came from our end markets, and those end markets were skewed very much toward our electrical segment, and away from our power segment. In the non-res area, really not getting a lot of help from new construction yet. But the renovation and relight is really where we are getting our growth.

We really are exposed to non-res -- I think of it two different ways. We have got our lighting business which really is benefiting, that relight is quite significant, versus some of our other non-res electrical businesses. Commercial construction, rough-in electrical boxes, some of the connector businesses, you are seeing a little bit still growth, but driven more from that reno. So lighting part of our exposure there, is getting the most lift from non-res.

Industrial as Dave referred to, really mixed between some of the extractive industries being up modestly with industrial production, but the driver of industrial growth coming from high-volt test equipment. And as Dave mentioned they got off to a slow start this year. We were expecting sort of a U-shaped year, and that is really what played out there.

On utility for the fourth quarter, distribution fairly flat, and transmission being quite soft, continued to be quite soft for us. Residential, I know some of the data that has been coming out recently is mixed, but we are seeing very nice broad-based growth contributing there. So the 4% from end markets skewed strongly to electrical.

On page 5, got the gross margin for the quarter, up 40 basis points to 33.6%, and I would really call your attention to our productivity initiatives. Those -- the payoff from some of our capital spending which we will talk about when we get to cash flow, kind of accelerating during the year, being a little more effective, early year projects getting late year pay off.

On the selling and administrative side, the increase in dollars that you see there can be largely attributed to acquisitions that we made. But those acquisitions come with volume, and the net result with S&A spending up 4%, you are getting leverage against the larger sales growth. So 60 basis point improvement there to 17.9% of sales for S&A. So happy to see that leverage kicking in.

On page 6, we have got the operating profit for the quarter of $126 million, a very nice improvement of 90 basis points to 15.6%, 14% improvement is nice. Really just good to see contributions, both at the gross and S&A levels there, so a nice strong quarter for OP. On page 7, we switch to the non-op side, and for us in other expense, the interest expense comparable. So the delta there on small dollars is really attributed to higher foreign-exchange losses.

Tax rate, similarly comparable. A little higher tax rate as -- despite the fact that we had the R&D in this year, but we had less favorable adjustments, so a 30 basis point increase in tax. So you get, on page 8, the resulting net income of $82 million, again a strong 14% increase, especially considered the contribution all comes from the operating side. And earnings per share of $1.38 -- I like Dave's assessment 15%, feeling strong, 1% better than net income, because of slightly lower shares outstanding by about 100,000 shares, which is the result of the purchases Dave described, which were really executed through the second and third quarter. So gave us slightly lower share count for 4Q.

Page 9, we will shift to a view by segments. So here, we are talking about the electrical segment for fourth quarter. $585 million of sales, a12% increase, with 5 points of that coming from acquisition. Residential continuing to be quite a strong contributor for us, and the non-res on that reno side continuing to be the story. Not a lot of news there.

If I [tease] down for your lighting performance, lighting was up 12% in the quarter. We think that is nice and strongly above market growth, but so lighting and part of lighting, being aided by resi being a good contributor to the growth side. On the performance operating profit of $86 million, up a very attractive 170 basis points to 14.7%. Really benefiting from the leverage of volume, but also lower costs, productivity, material costs, and also contributors from an area like pension, where pension math was in our favor this year.

Switching to page 10, you see the power segment having a down quarter, 4% down. Dave highlighted Superstorm Sandy was -- contributed about mid teens level of dollar volume last year, and we also had weaker transmissions. So a down sales quarter for the power business, and you see the resulting pressure on margins, about $40 million of OP at 18.1%. Good productivity projects there, but fighting lower volume.

On page 11, switch to cash flow. And again, a very strong finish to the year there, good net income. Working capital demonstrating the seasonality that we typically get in our fourth quarter, where working capital is a source of cash as we liquidate receivables there, and the CapEx numbers still being strong. And we will talk about CapEx a little more when we get to the year. But a good strong finish of cash flow of $137.5 million.

For the full-year, when we were together on this call last January, Dave made reference to this. We were talking about 3% to 5% sales growth, and 40 basis points of operating profit margin. I would say what happened for us, getting to the high end of the sales range of 5% was really with -- I would say, we were surprised by how soft utility was during the year. That was the main story.

Some of industrial was a little bit soft as well, but I think Hubbell demonstrated the strength of its financial model and its business model, by using acquisitions to fill in some of that unexpected softness and delivering these results. So 5% sales growth of $3.2 billion, operating profit of $508 million or 15.9% margins, those 40 basis point improvement.

For the full-year, we got tax help from the R&D inclusion in 2013 that -- and we will talk about that when we get to outlook. The fact that it wasn't in 2012, put two years of R&D in 2013, and creates a particularly different -- a difficult compares -- five quarters were actually concentrated in the first quarter of 2013. We will get back to tax rate, when we get to outlook.

Net income though, up 9%, EPS, $5.47, up 9%. We often get questions about incremental margin performance. So doing the math on this page, I think you would get to mid 20%s incrementally. And some of the factors that drive that, you end up with price, costs, productivity, favorability, and then some of the deals that you do tend to offset some of that. And so, pretty good incremental performance by our historical standards.

Page 13, give you the view of the full-year for electrical. I think the themes are similar to the fourth quarter that we have already discussed. But $2.3 billion, nearly there, 7% increase, acquisitions accounting for 4 points of that 7, again, the higher resi demand and consistency seen throughout the year. Reno helping non-res, also consistent, seen through the year, and we have talked about the mixed industrial with high-voltage providing the growth.

But for the year, very healthy operating profit growth of 70 basis points to 15.1%. Again, tailwind's from price and material costs, as well as productivity offsetting inflation.

For power on page 14, you see a very flat performance for the full-year. We are showing sales down 1%, but considering that we actually bought -- we bought a company called Trinetics which added 2%. And netting out FX, we really had volume organically down 2%. Distribution was reasonably flat, so most of that volume decline we attribute to the transmission side. And given that flat volume story, you see quite flat operating profit as well, $167 million at 18.1%.

Page 15, switch to cash flow for the full-year, you see a nice increase in net income to $327 million. Working capital and increased use, I would highlight that as an area that needs work on our side, in terms of working capital management. I have got a page coming up that shows that in a little more detail, but certainly an area that we would like to keep focusing, staying efficient on.

On the other line, you will see an increase of a source. Given some of the pension math that I mentioned before, we did not need to -- we are fully funded on our pension, didn't need to make a funding. So that proves to be a relative source compared to last year.

And CapEx, Dave mentioned the focus on the increase of $10 million there. That $59 million, while kind of reflecting kind of a contra cash flow, is something we are excited to be doing. A lot of that spending is in both the areas of new product development as well as productivity and some capacity expansion.

CapEx in some years can get lumpy for us, if there is something to do with a building. Or in the years for example, when SAP was being put in. This is a year where, not one project accounted for more than 5% of this CapEx, lots of little projects, individual productivity and new product projects. So as Dave mentioned, with the highlight of the Bill Tolley joining on the growth side, we are going to keep doing this spending. We hope to be creating a lot of value coming out of that.

Page 16, as I mentioned is the follow-up -- a little more detail on working capital. You can see the seasonal progression from Q3 to Q4 was similar to last year, a nice reduction of essentially 1.3%, but it is higher than last year. So our days on inventories were up a little bit, receivables up a little bit, and payables not really providing the source to maker -- to fund those too. So an area we would like to keep tight focus on, but similar kind of seasonal trends to what we have been experiencing.

Page 17, we talk about the capital structure. And as Dave highlighted, the deals that we did in January sort of makes the cash look a little bit overstated. So we have already spent $100 million of that this year on those three acquisitions. But with a debt-to-cap of 24%, we feel well-poised to continue to make investments like we have done, and we are looking forward to doing.

Dave, that sort of wraps up the discussion of the quarter and the year, and I will turn it back to you to talk about our outlook.

Okay, great. On page 18, just a few comments on our end markets, and our overall outlook. I think as we look through the end markets, we think certainly they are poised for continued growth next year overall. I think starting with the non-res market, I think there is some good outlook there.

Certainly, we expect a continuation of the investment and the opportunity coming from the energy efficiency, particularly on our lighting side. But hopefully, we will see some additional investment on the new construction and the more traditional nonresidential.

I think the industrial side, we expect to see that to continue to grow in the 2% to 3% range. We have seen some of the improvement on the high-voltage side, but really on our core industrial for the most part. I would say that, when you get into the harsh and hazardous, there will be a little bit of a mix, mixed performance there. I think the oil and gas will continue to improve next year. I think the mining side of the business will still have some challenges, as they have seen this year.

I think the utility side, we think that is going to -- at least at this point be flat. We certainly hope that turns out to be conservative. But I think from the experience we have had this year, particularly on the transmission side, but even the challenges that the utilities have seen on distribution, being able to fund investments, we are a little more cautious on that.

As Bill mentioned, we were surprised by the weakness. We signaled that earlier on, as soon as we saw that particularly in transmission. And we have seen that, although our orders in December were a little bit better. But I can't say that is the case in January, and some of that is -- may be attributable again to the severe weather conditions that we are dealing with.

I think that is also a market that -- what we have seen this year, and I think some of the impact on our business in the past year has been on some of the competitive pressures on pricing, and we continue to maintain discipline on that front. But I think we expect that, we have taken a hard look at some of our costs, and we are going to take some more aggressive positions on cost.

Lastly, on the residential side, we are forecasting that market to be up 10%. I think a year ago, we said that 10% -- might have been a little bit conservative. I am not sure I would say that this year. I think -- if you have seen the date on housing starts and permits, most recently new home sales, I think that is -- we are paying close attention to that.

On the other hand, I would say that I am very optimistic about our ability to perform in those markets, and our team particularly on our Progress lighting side is very well-positioned. They have performed very well. I was just with them a couple of weeks ago at the Dallas market for residential lighting, and the customer feedback that I received was very complimentary about the Progress team ability to perform this year -- far better than many of the competitors, and so we see some of that continuing. So very optimistic about that.

So when you put that all together, we think there is overall growth of end markets in the 2% to 3%. Turning the page, how does that play out for our segments? On the power side, which is a little less than a third of the business, we see that business is up 2% to 3% overall, acquisitions contributing 2% of that.

And on the electrical side, up 6% to 7% with the non-res and res growth, and acquisitions contributing 3%. So overall sales, up 5% to 6%, the balanced contribution between both acquisitions and organic, which is the model that we like. And that is on acquisitions that have been completed.

Operating margin expansion, up 20 to 30 basis points. A little bit lower than our normal guidance, simply because from the acquisitions that we have done, we think there will be a short-term margin dilution of about 10 basis points. So the core business still up 30 to 40 basis points.

Tax rate up a little bit. We go through this cycle every other year on R&D tax credit. So since it hasn't been extended, we are assuming a rate that doesn't have an R&D tax credit. If that changes, we will let you know, and free cash flow equal to net earnings.

So Bill, I don't know if you want to add any additional comments to that?

I think it is worth, Dave, maybe just reminding the call about Hubbell's seasonality. We tend to -- in a typical seasonal year, get more of our sales out of the back half of the year, typically order of magnitude historically, maybe 52%. And from an earnings perspective, even a little but more than that.

I think for the first half, first quarter tends not to be easy -- it is less of a contributor than the second. So, and I think as Dave -- when you talked about what we can see from January orders, it is not -- we are not getting a clear vision. We have talked with you over the past year about month-to-month, some slightly erratic order behavior. Dave mentioned the weather.

December and January are interesting months, because you sometimes get customers being motivated by incentives which pulls some orders forward. And so, in any case, it is a -- just remind everybody of the seasonality of which this annual outlook has embedded in it. And also, I guess, from that tax rate, just to remind everyone as well, that there really was a concentration in the first quarter of a lower rate last year. So of the headwind, it will be a little more pronounced in the first quarter.

So I think, just wrapping up, our performance last year fully demonstrates our ability to deliver improved performance, even in the uneven markets. We finished the year strong. We look forward to building on that next year. And the entire team really is unifying around our One Hubbell approach, as we look to exceed expectations in every level of our organization.

So with that, Jim, you can open it up for questions.

Delona, let's open it up the Q&A portion?

Yes, thank you.

(Operator Instructions)

And we will take our first questions from Christopher Glynn with Oppenheimer.

Thanks, good morning.

Good morning.

I had a question. I was just wondering if you could split out C&I lighting performance, and what you see in terms of the competitive landscape there? Any changes in the industry competitively?

I am not sure, Chris, that we see a lot of competitive change. I think that, the nature of some of the -- on the C&I side, maybe some of the relight projects. There may be some lumpiness and share shifting that can go on as big customers do a bunch of projects, and then maybe they pause. But I don't see a big shift or change per se in the competitive dynamics.

Okay. And then you asked for further questions on the acquisition front, at least as I heard it. So let me throw my hat in that ring. Thanks for breaking out the recap. Still looks like, even adjusted for the new deals, the cash on hand is going to be about 2X what you have spent in the last three years and one month, we will call it. So just if you could re-clarify how the capital structure sits right now, and the strategic importance of that?

Yes, we would describe it, Chris, as being highly liquid and poised for investment. You are looking at it compared to the last few years, annual run rate, which I think is one way to look at it. I think another is to consider that we did Burndy for $355 million, right? And so, I think having the optionality of the cash on hand to be able to do Burndy and bigger-sized deals, I think is a competitive and strategic and value-creating advantage for us right now.

Great, thanks.

Chris, I would just add to that -- I think -- I don't want to lose sight of and I don't want to put undue pressure, but maybe it is good that I put some pressure on Bill Tolley. But the significant part of what I am expecting him to add support to, is not simply more of the same when it comes to acquisitions. I would say, to make sure that we can put our emphasis on much more of the same, or more of the different, the larger, the more strategic transactions that we have talked about, and put some energy around, but it is just one more step in putting more energy around those types of transactions. That is what he is going to be spending a lot of his time on, which he has got great experience from the breadth of his experience in the organization to really help facilitate that. So that is a big part of what we are talking about.

Okay, and on the bigger deals, have you seen price get away from you on any? Have you had to walk away from anything there?

No, actually some of the things that have occurred out there that we have looked at, I think have been consistent with our view of valuation. There hasn't been anything that we have been considering that -- is not actionable because of price. It is more of other influences that come into play, and whether it is actionable in the timing of actionability. So it really is just more of a -- probably a longer lead time to actionability on larger deals.

Got it. And then -- thanks for all that. And then, just a quick one on electrical margin. Called out lower costs. Is that a separate bucket from productivity?

Yes, there were just more things in there than productivity, Chris. So something like pension for example, that was lower. We sort of expanded the bucket from productivity, to say lower costs.

Chris, that would also include lower materials.

Great, thank you.

And we will go next to Rich Kwas with Wells Fargo Securities.

Hello, good morning, everyone.

Hello, Rich.

How are you doing? Just a follow-up on the guide here for organic growth. If I look at the acquisition contribution, and look at your end market outlook, it appears that you expect to grow in line with your end market outlook. And just what are the barriers to you outperforming the end market outlook, as we move through the year> Is it lumpiness of projects? Is it mix of business? How should investors think about that?

Yes, I think that -- price is one angle to that, Rich. And whether you are price leading and putting pressure on even maintaining share versus the market, I think that is one consideration. But other than that, we would try -- the barrier is making sure you are doing -- I invert the question a little bit, in the way Dave challenges our operating team is, what are the ways to outperform the end markets? How much capital do you need for new product developments and the like, and how aggressive can you invest in productivity so you can be a price leader?

So we take your question and invert it as we do our strategic planning, and challenge our teams to try to outperform. In this case, I think you are right to say, the way we are starting the year is to assume performance, which is, again, given some of that caution that Dave mentioned, and some of the pieces of the end market pie really.

Yes, and Rich, I would -- let me just add that, when I look at this outlook, my view of it, certainly what I am pushing as Bill mentioned, the organization, we are not satisfied with growing with the market. So part of it is I think, a, we hope the market is a little bit better. And we, as you know we tend to try to be a little conservative in our market expectations, and then be prepared to deliver on better market conditions. Also, we are trying to where appropriate, capture share. As I was talking about before, on the residential lighting side. I think we have seen some of that performance already this year.

So I would expect some of that to continue next year, just because we have a great position there, and we have a great track record there. And I think there is other parts of the market. And then lastly, we are certainly -- as we talk about, continue to focus on acquisitions, and we would add growth to the portfolio through acquisitions. So all of those things from my standpoint, suggest that the bias from our outlook would be better. But it is still early. Okay?

Understood. Understood. And then, just to tie up some loose ends, on high-voltage, would the debt grow in the quarter? And as you think about the year, I assume that the growth should stay fairly robust here in the early part of the year, and then slow down against tougher comps in the back half? Is that the right assumption? Excuse me. And then on lighting, Bill, do you have the split between C&I and residential growth, and what the LED mix was in the quarter?

Yes, so let's start with high-volt. As you pointed out, they had a very strong double-digit fourth quarter, a very strong outperformance, which came against an easy lap versus last year. And so, they are recreating the inverse of this year, by having now tougher compares in the second half. And so, a little bit easier time growing the first half. So your assumption on that is right.

Your question on growth within lighting, the LED adoption rate in December was very strong, and breached the 30% level, which is a good breakthrough for us. That is a good sign for the strength of that, and a good sign that our lighting platform is adopting that technology very effectively.

And do you have the C&I and resi split on the lighting piece?

Rich, the residential was a bigger contributor to that. So resi was higher than the overall, and C&I was in the low to mid single-digits.

Okay. Great, I will pass it on. Thanks.

(Operator Instructions)

We will go next to Steve Tusa with JPMorgan.

Hello, good morning.

Hello, Steve.

One of the utilities yesterday was talking a lot about -- continuing to put money to work in transmission projects. I just want to get a little bit of color on that. It is unclear to me whether that is a step-up actually, or it is just robust at a high level. There was -- they were just talking about how the returns are allowing them to throw money at transmission, and it is going to be a priority. Maybe just provide a little color around that?

I think Steve, if we were to abstract to the entire utility market, it feels to us like the average utility customer is feeling like that their CapEx dollars may be getting called towards the generation end actually, as they are dealing with gyrating fuel prices, and making sure their fleet is properly aligned relative to natural gas versus coal. But we are finding I think net-net, people thinking that there is a little bit less attention and maybe less dollars available to be doing this kind of transmission and distribution spending that would affect Hubbell's level of volume.

I think there is always pockets, and I certainly agree that a good transmission project can really -- can have good IRRs, and it can really help -- if you put some good efficient high-voltage in there, or connect maybe to another FERC region, it can really lower your investment that you need to make on the generation side.

So I think somebody saying that makes sense, but I think it is probably not reflective of the broader general utility market, as we are seeing it right now. But hopefully that is maybe a trend of the future and where we are going. We have had some pretty soft T in those compares, which is the other element of your question. Those compares start to get a little bit easier.

Okay. How much do you think storms and the weather impacted the 4Q utility growth there? I think you said, mid teens level of Sandy impact, but I am not sure what that referred to. Maybe put a little bit finer point on that?

Yes. So I think the Sandy spending for us was in that order of magnitude of $15 million type range of spending. And last year, we were talking about that potentially crowding out other spending. And this year it feels like it makes more of a tough compare.

Okay. And then, one last quick one. I am not sure if --

Dave described the cold weather affecting maintenance spending, and that cold is a little bit different than what Hubbell loves, which is an ice storm that knocks down the lines that we can immediately get replaced very quickly for an utility.

And then, just last quick one. You have given some good color on non-res, but I guess, just the vertical discussion around institutional and commercial and other areas, maybe give us a little bit of color on what you are seeing today, and what you expect for 2014?

Yes, I think the first cut I would give you, Steve, on that is the fact that the way outlook is constructed, and again, we use third-party forecast to inform us in some of that regard. It looks like the first split we make vertically, is between public and private. While private has been growing, it looks like that is continuing to grow in 2014 as is expected.

But I think some of the better news is the public looks like it may be has bottomed in 2013, and should maybe return to growth. So I think from a broader perspective, that is pretty good news for us. And then, as far as further slicing the verticals, we tend to be fairly market represented in each of them. So we tend not to get terribly focused on what -- which verticals might be popping. We try to get our fair share of each piece.

Right. Okay, thanks.

Okay.

And we will go next to Jeff Sprague with Vertical Research.

Thank you, good morning. Just a few questions.

Hello, Bill.

How's it going? First on the deals that you did, I was a little unclear if the three deals collectively had $45 million in sales? Or was -- the power deals had $45 million, and then that resister deal is another $30 million? Can you just clarify that point?

Sorry, Jeff, in aggregate $45 million, sorry.

In aggregate $45 million, okay. Just in terms of the M&A targets zone now with Bill in the new role, I think about that pyramid you used to put up, and I can't totally visualize it right, but you have got a sweet spot in low-voltage, and you say you want to avoid apparatus and there is a few other things. I mean, do you come outside of that construct? What kind of license does he have, do you have, to open it up to broader adjacencies?

We, generally, we don't come outside that construct. That doesn't mean that it is a firm line on the top or the bottom, so there could be some -- there could be some drift there. But with the core of whatever the target is, certainly being in that middle part of the pyramid. I think that, as we look at larger deals -- the issue with the larger deals is that they are not as pure, as the bolt-on deals that we have. They always have some element that wouldn't necessarily be within our core.

But it is not so far afield, that we would not take that along with what is the fundamental core. So that is a little bit of what I am expecting us to spend a little more time on, and a little bit more identification and evaluation to get more of those type transactions in the pipeline. So we have a number that we have always had in the pipeline, but part of the effort is to expand the possibilities. Okay?

I think, Jeff, you are right to bring up the pyramid. The -- that sweet spot, middle section, above commodity and below apparatus tended to be in the high $30 billion of wholesale volume. So we always felt like, as a $3.2 billion company that suggested lots of room within that piece for us to keep getting bigger. So that, you are right to use that pyramid as a guide of how much addressable market is there.

Okay. And then, just on pricing, can you address what is going on? Has it tipped negative anywhere, perhaps in power in particular, I am thinking? But what is -- I mean, you have got a little bit of relief on cost, obviously. But how about headline price, what is going on?

It was -- I would say, Jeff, a very competitive year. We were net able to pull price, but quite a small amount. And I agree with you, some of that is being influenced, I think, by the very benign commodity market. And so then, your question evolves into, are there some markets that are pretty competitive? I would say, you are absolutely right to point out within the power segment -- and I would say even particularly within power, that large transmission sort of mega project as that comes up, I think people are willing to bid that pretty competitively. And I think the lighting side continues to be aggressively priced as those projects come up.

Is lighting pricing just more reflective of the natural pricedown from LED? Or is there -- or do you feel like there is some like-for-like pricedown, as you try to adjust through the mix affect?

Yes, I think there is -- yes, just good old-fashioned price pressure there. Just call it competitiveness

Okay. And then, just finally for me, on the high-voltage -- and I do recall, as far back as kind of this time last year, you were saying you expected it to pick up. Just wonder if you could give any insight on what is going on at your customer level around that? I mean, is there new transformer capacity going in? Or is it a --an increase in transformer production at your customers that is driving that? Is there any visibility in behind what is actually driving the business?

Yes, there is -- there are really two customers that we have for that segment. One, as you point out, is the OEM transformer manufacturer. The other is the utility who is doing field testing. And these products, Jeff, really -- if I were to say the single biggest driver, it is probably emerging market electrification. A lot of our product is going into international markets. A lot being said about emerging markets right now -- maybe not being the solid performers going forward that everybody is expecting.

But the other side, on the OEM side, it is hard for us to say that there is net capacity. Our customers, in some cases, are getting out of certain facilities. Some are relocating to new locations, others are adding capacity. So it is actually a slightly mixed picture for us on the OE side. And so, net-net, I would say our opportunity comes on the international side.

Great, thank you. Thank you for the color. Take care.

And we will go next to Noelle Dilts with Stifel.

Hello, thanks. Good morning. I just had another quick question on non-res. If -- I am curious to know your thoughts on how you see non-res progressing through the year? When you think we will start to see kind of an acceleration in large projects, given that you typically see this pick up in the spring, and then how your product cycle would follow that? Would you expect to see again, more of a backhalf-loaded benefit, as some of those projects progress?

Yes, Noelle, I am not sure that we feel we have any crystal ball. I think some of the early optimism around hockey stick -- the hockey stick rebound is probably not the way we are planning our year. I think you are right to point out that spring and second half, we are really hoping to see stronger growth, maybe than the first. But I don't think we have any great crystal ball on that. And in terms of cycle timing, you are right to point out that some of our products, like the rough-in electrical boxes and commercial construction-oriented, are sort of mid-cycle spend, and things like C&I lighting tend to be late cycle in a project (inaudible).

Okay. And then, when you were discussing this new structure of the organization, I think you mentioned a bit about new product development. I was hoping you could expand on that a little bit. Maybe touch on the key areas of focus, and is this really disproportionately -- would this be disproportionately weighted to lighting?

Sure. First of all, no, it is not disproportionately weighted to lighting, although they certainly have had the most dynamic change in the market, and so, it had a lot of investment there. It really is focused around making sure that we are, one, doing the best to share a lot of the best practices that were around the organization in new product development, whether it is on the lighting side, on the utility side, and or on the electrical systems.

We brought Burndy on for years ago. They had a really nice process, that we have been trying to build off of. I think the power systems side, and it is interesting that Bill is going to be taking this on, because the Power Systems has done some things around new product development, but I think that is a market that has a lot more opportunity to develop more advance capabilities in those products.

So it is really just to make sure that we have -- are putting the appropriate emphasis and investment to be sure that we are maintaining a leadership position, particularly in those markets that we are a leader in. And then building off of that, to develop a leadership potential in those markets that we are. So it is really around the focus, the sharing, and to some extent, the investment. And making sure that we are appropriately investing, and pushing ourselves as aggressively as possible so. Okay?

Great. Yes, I appreciate that, thanks.

And we will take our last question from Mike Wood with Macquarie.

Just take just one quick one from you, Mike, if we could.

Yes, sure. I guess I will just ask on M&A, historically it looks you have paid about 1 times sales. I am curious if you can just give some color, in terms of what was different in first quarter on these acquisitions? Looks like you paid just over 2 times sales?

Yes, I think if you were to broaden Mike, to the last 12 that I highlighted in our conversation, that has been about one and a quarter, that tends to be really more our average. What drives that multiple is obviously margin and growth rates, so it can bounce around. But if you were looking for averages, I would think more in that 1.2, 1.3 range is probably more what I would expect to be typical.

Delona, I think that wraps up the Q&A portion.

Yes, that is the end of the Q&A session. I would like to turn it back to our host for any closing remarks.

So everyone, thanks again for joining us this morning. Certainly, if any of you have any follow-up questions, you can certainly contact me throughout the day, and into tomorrow. So thanks again for joining us.

Thank you. This does conclude today's conference. We appreciate your participation.