Industry Segments and Geographic Area Information

Nature of Operations

Hubbell Incorporated was founded as a proprietorship in 1888, and was incorporated in Connecticut in 1905. Hubbell designs, manufactures and sells quality electrical and electronic products for a broad range of non-residential and residential construction, industrial and utility applications. Products are either sourced complete, manufactured or assembled by subsidiaries in the United States, Canada, Switzerland, Puerto Rico, China, Mexico, the UK, Brazil, Australia and Ireland. Hubbell also participates in joint ventures in Taiwan and Hong Kong, and maintains offices in Singapore, Italy, China, India, Mexico, South Korea and countries in the Middle East. Each of the above references to manufacturing locations, joint venture participation, and office locations relate to the three year period ending December 31, 2017, prior to the acquisition of Aclara on February 2, 2018.

The Company’s reporting segments consist of the Electrical segment and the Power segment, as described below.

The Electrical segment is comprised of businesses that sell stock and custom products including standard and special application wiring device products, rough-in electrical products, connector and grounding products, lighting fixtures and controls, components and assemblies for the natural gas distribution market and other electrical equipment. The products are typically used in and around industrial, commercial and institutional facilities by electrical contractors, maintenance personnel, electricians, utilities, and telecommunications companies. In addition, certain businesses design and manufacture a variety of high voltage test and measurement equipment, industrial controls and communication systems used in the non-residential and industrial markets. Many of these products are designed such that they can also be used in harsh and hazardous locations where a potential for fire and explosion exists due to the presence of flammable gasses and vapors. Harsh and hazardous products are primarily used in the oil and gas (onshore and offshore) and mining industries. There are also a variety of lighting fixtures, wiring devices and electrical products that have residential and utility applications, including residential products with Internet-of-Things ("IoT") enabled technologies. These products are primarily sold through electrical and industrial distributors, home centers, retail and hardware outlets, lighting showrooms and residential product oriented internet sites. Special application products are primarily sold through wholesale distributors to contractors, industrial customers and OEMs. High voltage products are also sold direct to customers through our sales engineers. The Electrical segment is comprised of three business groups, which have been aggregated as they have similar economic characteristics, customers and distribution channels, among other factors.

The Power segment consists of operations that design and manufacture various distribution, transmission, substation and telecommunications products primarily used by the electrical utility industry. In addition, certain of these products are used in the civil construction and transportation industries. Products are sold to distributors and directly to users such as utilities, telecommunication companies, pipeline and mining operations, industrial firms, construction and engineering firms. Refer to Note 2 - Business Acquisitions for information regarding the Aclara Acquisition on February 2, 2018 and the products and capabilities that acquisition will add to the Power segment.

Financial Information

Financial information by industry segment, product class and geographic area for each of the three years ended December 31, 2017, 2016 and 2015 is summarized below (in millions). When reading the data the following items should be noted:


•	Net sales comprise sales to unaffiliated customers — inter-segment and inter-area sales are not significant.


•	Segment operating income consists of net sales less operating expenses, including total corporate expenses, which are generally allocated to each segment on the basis of the segment’s percentage of consolidated net sales. Interest expense and investment income and other expense, net have not been allocated to segments as these items are centrally managed by the Company.


•	General corporate assets not allocated to segments are principally cash, prepaid pensions, investments and deferred taxes. These assets have not been allocated as they are centrally managed by the Company.

INDUSTRY SEGMENT DATA



	2017			2016			2015
Net Sales:
Electrical	$	2,532.8		$	2,460.2		$	2,388.3
Power	1,136.0			1,045.0			1,002.1
TOTAL NET SALES	$	3,668.8		$	3,505.2		$	3,390.4
Operating Income:
Electrical	$	282.5		$	267.4		$	279.0
Power	221.2			210.4			195.6
Operating Income	$	503.7		$	477.8		$	474.6
Interest expense	(44.9		)	(43.4		)	(31.0		)
Loss on extinguishment of debt	(10.1		)	—			—
Investment income and other expense, net	(5.6		)	(4.0		)	(25.0		)
INCOME BEFORE INCOME TAXES	$	443.1		$	430.4		$	418.6
Assets:
Electrical	$	2,344.7		$	2,246.0		$	2,120.9
Power	1,102.2			911.5			839.7
General Corporate	273.7			367.5			248.1
TOTAL ASSETS	$	3,720.6		$	3,525.0		$	3,208.7
Capital Expenditures:
Electrical	$	48.0		$	43.4		$	47.9
Power	29.0			22.7			28.4
General Corporate	2.7			1.1			0.8
TOTAL CAPITAL EXPENDITURES	$	79.7		$	67.2		$	77.1
Depreciation and Amortization:
Electrical	$	65.7		$	61.2		$	56.2
Power	34.1			31.1			29.0
TOTAL DEPRECIATION AND AMORTIZATION	$	99.8		$	92.3		$	85.2

PRODUCT CLASS DATA



	2017		2016		2015
Net Sales:
Electrical Systems	$	1,597.1	$	1,514.4	$	1,476.7
Lighting	935.7		945.8		911.6
Power	1,136.0		1,045.0		1,002.1
TOTAL NET SALES	$	3,668.8	$	3,505.2	$	3,390.4

GEOGRAPHIC AREA DATA



	2017		2016		2015
Net Sales:
United States	$	3,280.9	$	3,147.4	$	3,008.4
International	387.9		357.8		382.0
TOTAL NET SALES	$	3,668.8	$	3,505.2	$	3,390.4
Operating Income:
United States	$	422.1	$	419.1	$	426.1
International	81.6		58.7		48.5
TOTAL OPERATING INCOME	$	503.7	$	477.8	$	474.6
Long-lived Assets:
United States	$	1,877.4	$	1,762.9	$	1,627.7
International	232.8		200.1		187.1
TOTAL LONG-LIVED ASSETS	$	2,110.2	$	1,963.0	$	1,814.8

On a geographic basis, the Company defines “international” as operations based outside of the United States and its possessions. As a percentage of total net sales, shipments from foreign operations directly to third parties were 11% in 2017, 10% in 2016 and 11% in 2015, with the Canadian, UK and Brazilian operations representing approximately 31%, 21% and 12% respectively, of 2017 total international net sales.

Long-lived assets, excluding deferred tax assets, of international subsidiaries were 11% of the consolidated total in 2017, 10% in 2016 and 10% in 2015, with the UK, Mexico and Canada operations representing approximately 31%, 19%, and 16%, respectively, of the 2017 international total. Export sales from United States operations were $217.2 million in 2017, $213.8 million in 2016 and $224.9 million in 2015.