Business Acquisitions

On February 2, 2018, the Company completed the acquisition of Aclara for approximately $1.1 billion. Aclara is a global provider of smart infrastructure solutions for electric, gas, and water utilities with advanced metering solutions and grid monitoring sensor technology, as well as leading software enabled installation services. The acquisition was structured as a merger in which Aclara became a wholly owned indirect subsidiary of the Company. Aclara's businesses have been added to the Power segment. The acquisition is intended to extend the Power segment's capabilities into smart automation technologies, accelerates ongoing innovation efforts to address utility customer demand for data and integrated solutions, and expands the segment's reach to a broader set of utility customers.

The Company financed the acquisition and related transactions with net proceeds from borrowings under a new unsecured term loan facility in the aggregate principal amount of $500 million, the issuance of 3.50% Senior Notes due 2028 in the aggregate principal amount of $450 million and issuances of commercial paper.

Preliminary Allocation of Consideration Transferred to Net Assets Acquired

The following table presents the preliminary determination of the fair value of identifiable assets acquired and liabilities assumed from the Company's acquisition of Aclara. The final determination of the fair value of certain assets and liabilities will be completed within the one year measurement period as required by the FASB ASC Topic 805, “Business Combinations.” As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in 2018. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations. The finalization of the purchase accounting assessment may result in a change in the valuation of assets acquired and liabilities assumed and may have a material impact on the Company's results of operations and financial position.

The following is a preliminary estimate of the assets acquired and the liabilities assumed by the Company in the merger, reconciled to the estimated acquisition consideration (in millions):



Accounts receivable	$	116.1
Inventories	76.9
Other current assets	11.7
Property, plant and equipment	31.5
Intangible assets	444.0
Accounts payable	(50.5		)
Other accrued liabilities	(67.5		)
Deferred tax liabilities	(72.3		)
Other non-current liabilities	(37.0		)
Noncontrolling interest	(2.5		)
Goodwill	669.0
Total Estimate of Consideration Transferred, Net of Cash Acquired	$	1,119.4

In connection with the merger, the Company recorded goodwill of $669.0 million, which is attributable primarily to expected synergies, expanded market opportunities, and other expected benefits that the Company believes will result from combining its operations with the operations of Aclara. The historical goodwill of Aclara resulting from their prior asset acquisitions is expected to be deductible for tax purposes. Any incremental goodwill created in the merger is not deductible for tax purposes. The goodwill resulting from the acquisition of Aclara is subject to potential significant changes as the purchase price allocation is completed. Goodwill has been allocated to the Power segment.

The preliminary purchase price allocation to identifiable intangible assets acquired is as follows:



	Estimated Fair Value		Weighted Average Estimated Useful Life
Patents, tradenames and trademarks	$	55.0	20.0
Customer relationships	204.0		17.0
Developed technology	185.0		13.0
Total	$	444.0

Customer relationship and developed technology intangible assets acquired are amortized using an accelerated method that reflects the pattern in which economic benefits of the intangible assets are consumed and results in higher amortization in the earlier years of the asset's useful life.

Supplemental Pro-Forma Data

Aclara’s results of operations have been included in the Company's financial statements for the period subsequent to the completion of the acquisition on February 2, 2018. Aclara contributed sales of approximately $90.4 million and an operating loss of approximately $4.9 million for the period from the completion of the acquisition through March 31, 2018.

The following unaudited supplemental pro-forma information presents consolidated results as if the acquisition had been completed on January 1, 2017. Following that approach, for the purpose of the pro-forma results presented in the tables below, certain costs incurred by the company during the three months ended March 31, 2018 and December 31, 2017 have been reclassified out of their respective periods and into the pro-forma period ended March 31, 2017. Those reclassifications primarily include the following, which represent the amount of increase or (decrease) to reported results to arrive at the pro forma results. Per share amounts in 2018 reflect the reduction in the U.S. Federal corporate income tax rate from 35% to 21%:



(pre-tax in millions, except per share amounts)	Three Months Ended March 31,						Per Diluted Share
	2018			2017			2018			2017
Aclara transaction costs incurred in the first quarter of 2018⁽¹⁾	$	10.3		$	(10.3	)	$	0.15		$	(0.14	)
Aclara transaction costs incurred in the fourth quarter of 2017⁽¹⁾	—			(7.1		)	—			(0.11		)
Intangible amortization and inventory step up⁽²⁾	1.6			(16.9		)	0.02			(0.19		)
Interest expense⁽³⁾	$	(2.1	)	$	(7.2	)	$	(0.03	)	$	(0.08	)

⁽¹⁾ Aclara transaction costs incurred in the first quarter of 2018 are presented in the pro-forma March 31, 2017 period. The pro-forma March 31, 2017 period also includes transaction costs incurred by the Company during the fourth quarter of 2017.

⁽²⁾ Aclara intangible amortization and inventory step up amortization incurred in the first quarter of 2018 has been reclassified into the pro-forma March 31, 2017 period and increased to include three months of amortization expense. The pro-forma March 31, 2018 period includes three months of intangible amortization that would be incurred assuming the transaction had been completed on January 1, 2017.

⁽³⁾ Interest expense incurred in the first quarter of 2018, reflecting two months recognized in the quarter from the date of the acquisition, has been reclassified into the pro-forma March 31, 2017 period and increased to include three months of interest expense. The pro-forma March 31, 2018 period includes three months of interest expense that would be incurred assuming the transaction had been completed on January 1, 2017.

The pro-forma results were calculated by combining the results of the Company with the stand-alone results of Aclara for the pre-acquisition periods, as described above:



	Three Months Ended March 31,
	2018		2017
Net sales	$	1,037.9	$	959.2
Net income attributable to Hubbell	$	67.7	$	39.5
Earnings Per Share:
Basic	$	1.23	$	0.71
Diluted	$	1.22	$	0.71

The unaudited supplemental pro-forma financial information does not reflect the actual performance of Aclara in the periods presented and does not reflect the potential realization of cost savings relating to the integration of the two companies. Further, the pro-forma data should not be considered indicative of the results that would have occurred if the acquisition and related financing had been consummated on January 1, 2017, nor are they indicative of future results.