Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview of the Business

The Company is primarily engaged in the design, manufacture and sale of 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, Italy, the United Kingdom, Brazil, Australia and Ireland. The Company also participates in joint ventures in Taiwan and Hong Kong, and maintains offices in Singapore, China, India, Mexico, South Korea and countries in the Middle East. The Company employs approximately 16,200 individuals worldwide.

The Company made the following management changes in 2015 as part of its succession planning program.

On May 5, 2015 the Board of Directors appointed, effective June 1, 2015, Kevin A. Poyck, Rodd R. Ruland and Darrin S. Wegman Group Presidents for its Lighting, Construction and Energy, and Commercial and Industrial businesses, respectively, which businesses together form the Company's Electrical segment. The newly appointed Group Presidents were overseen by Mr. Gary N. Amato, Executive Vice President, Hubbell Electrical Segment, until his retirement, effective December 31, 2015.

In December 2015 the Board of Directors appointed Maria R. Lee, Vice President, Treasurer and Investor Relations, effective January 1, 2016. Ms. Lee previously held the position of VP, Corporate Strategy and Investor Relations and was appointed following the retirement of James H. Biggart, Jr., VP, Treasurer, effective December 31, 2015.

The Company’s reporting segments consist of the Electrical segment and the Power segment. Results for 2015, 2014 and 2013 by segment are included under “Segment Results” within this Management’s Discussion and Analysis.

The Company is focused on growing profits and delivering attractive returns to our shareholders by executing a business plan focused on the following key initiatives: revenue growth, price realization, productivity improvements and capital deployment.

As part of our revenue growth initiative, we remain focused on expanding market share through new product introductions and more effective utilization of sales and marketing efforts across the organization. In addition, we continue to assess opportunities to expand sales through acquisitions of businesses that fill product line gaps or allow for expansion into new markets.

Price realization and productivity improvements are key areas of focus for our company. Productivity programs impact virtually all functional areas within the Company by rationalizing our

manufacturing footprint and activities through restructuring actions, reducing or eliminating waste and improving processes. We continue to expand our efforts surrounding global product and component sourcing and supplier cost reduction programs. Value engineering efforts, product transfers and the use of lean process improvement techniques are expected to continue to increase manufacturing efficiency. In addition, we continue to build upon the benefits of our enterprise resource planning system across all functions and have also implemented a sustainability program across the organization. Material costs are approximately two-thirds of our cost of goods sold therefore volatility in this area can significantly impact profitability. Our goal is to have pricing and productivity programs that offset material and other inflationary cost increases as well as pay for investments in key growth areas.

Reclassification of Common Stock

On December 23, 2015, the Company completed the reclassification of its dual-class common stock into a single class of Common Stock (the “Reclassification”).

The Reclassification, among other benefits, simplified the Company's capital structure, better aligned voting rights with economic interests of all shareholders, and has eliminated the ability of the Louie E. Roche Trust and the Harvey Hubbell Trust (collectively, the “Trusts”), which, prior to the Reclassification, collectively owned 3,488,460 shares of the Company’s Class A common stock, par value $0.01 per share (the “Class A common stock”), representing approximately 49% of Class A common stock then outstanding, and approximately 36% of the total voting power of the Company's shareholders, to effectively prevent the approval of any matter that comes before the shareholders that requires, under Connecticut law, the approval of holders of two-thirds of the Company's outstanding common stock.

Following the filing of the Amended and Restated Certificate of Incorporation of the Company with the Secretary of the State of Connecticut, the Reclassification became effective at 11:59 p.m. on December 23, 2015 (the "Effective Time"), at which time (i) each holder of Class A common stock as of immediately prior to the Effective Time became entitled to receive cash in the amount of $28.00 for each share of Class A common stock held ("Class A Cash Consideration") and (ii) each share of Class A common stock issued and outstanding immediately prior to the Effective Time and each share of Class B common stock of the Company, par value $0.01 per share (the "Class B common stock"), issued and outstanding immediately prior to the Effective Time was reclassified into one share of common stock of the Company, par value $0.01 per share and having one vote per share upon all matters brought before any meeting of the shareholders (the "Common Stock").

18	HUBBELL INCORPORATED - Form 10-K

Trading in the Class A common stock and Class B common stock ceased after markets closed on December 23, 2015 and trading in the Company's single class of Common Stock commenced on the New York Stock Exchange on December 24, 2015, under the ticker "HUBB".

The aggregate amount of the Class A Cash Consideration paid in connection with, and at the time of, the Reclassification was $200.7 million.

The Company has accounted for the Reclassification by adjusting the Company’s capital stock accounts. The par value of the Class A common stock and the Class B common stock has been reclassified to Common Stock par value. Paid-in capital of the Class A Common Stock is zero at the time of the Reclassification and, therefore, the full amount of the Class A Cash Consideration paid in the Reclassification has been applied as a reduction to retained earnings.

In the third quarter of 2015 the Company incurred $7.4 million of costs related to the Reclassification (the "Reclassification Costs"), primarily consisting of professional fees. Reclassification Costs are recognized in Other expense, net in the Condensed Consolidated Statement of Income. Certain other Reclassification Costs of $12.3 million, including additional professional fees and the reimbursement of certain costs of the Trustee, were contingent upon closing the Reclassification and were recognized in the fourth quarter of 2015. Total Reclassification Costs incurred in 2015 were $19.7 million.

Additional information about the Reclassification is included in the Company’s current reports on Form 8-K filed on August 24, 2015 and December 23, 2015 and the Company's registration statement on Form S-4 (File No. 333-206898), initially filed with the SEC on September 11, 2015 and declared effective on November 23, 2015.

Outlook

In 2016 we expect our end markets in aggregate to be flat, with low to mid single digit growth in the construction-related non-residential and residential markets, and modest growth of one to two percent in the electrical transmission and distribution market. We expect growth in those markets to be offset by an anticipated decline in oil and gas markets, which we project may decline by approximately fifteen to twenty-percent, and industrial markets that are flat-to-down by approximately two percent.

We expect our organic net sales growth to outperform end markets and that acquisitions will continue to be a key driver of growth, but that net sales growth will also be challenged in 2016 by continued pressure from foreign exchange rates and the potential for price erosion in light of expected continued weakness in commodity costs.

We expect our operating margins in 2016 will continue to be affected by the unfavorable product and business mix experienced in 2015 as well as the foreign exchange and pricing pressures that we expect to be a headwind on net sales growth. We also expect operating margins in 2016 to be impacted by our plans to continue investing in our businesses in higher growth markets as well as restructuring and related activities with attractive returns. Pension expense is also expected to be a headwind on margins.

We anticipate earnings per diluted share in the range of $5.20 to $5.40 in 2016, including approximately $0.35 of restructuring and related costs in 2016 as well as $0.30 of incremental savings in 2016 from restructuring and related actions initiated prior to December 31, 2015.

Finally, with our strong financial position and cash flows provided by operating activities, we expect to continue to enhance shareholder value through capital deployment including both share repurchases and acquisitions. We expect to use the borrowing capacity available to us to fund a portion of these activities in 2016. Our estimate of 2016 earnings per diluted share includes the anticipated impact of up to $250 million of share repurchases in 2016 as well as higher interest expense from the projected increase in borrowings. We expect free cash flow (defined as cash flows from operating activities less capital expenditures) to be approximately 90% of net income in 2016.

HUBBELL INCORPORATED - Form 10-K	19

Results of Operations

Our operations are classified into two reportable segments: Electrical and Power. For a complete description of the Company’s segments, see Part I, Item 1 of this Annual Report on Form 10-K. Within these segments, Hubbell primarily serves customers in the non-residential and residential construction, industrial and utility markets. The industrial market includes a segment of customers in energy-related industries, including oil and gas as well as mining industries. The Company’s served markets, in order of magnitude of net sales for the Company, are primarily non-residential construction, industrial, utility and to a lesser extent, residential construction.

Our overall end markets were mixed in 2015. Our largest end market, non-residential construction, grew on the continued strength of the renovation and relight market as well as increased demand for private construction spending. The residential market also grew in 2015, albeit at a more modest pace than in the past several years. Strength in the non-residential and residential markets was more than offset by deteriorating oil and gas and broader industrial markets resulting in weakness in net sales of our products serving these markets. The utility market was approximately flat in 2015 driven by distribution markets and delays in transmission projects.

SUMMARY OF CONSOLIDATED RESULTS (IN MILLIONS, EXCEPT PER SHARE DATA)

	For the Year Ending December 31,
	2015			% of Net sales		2014			% of Net sales		2013			% of Net sales
Net sales	$	3,390.4				$	3,359.4				$	3,183.9
Cost of goods sold	2,298.6			67.8	%	2,250.4			67.0	%	2,113.4			66.4	%
Gross profit	1,091.8			32.2	%	1,109.0			33.0	%	1,070.5			33.6	%
Selling & administrative expenses	617.2			18.2	%	591.6			17.6	%	562.9			17.7	%
Operating income	474.6			14.0	%	517.4			15.4	%	507.6			15.9	%
Net income attributable to Hubbell	277.3			8.2	%	325.3			9.7	%	326.5			10.3	%
EARNINGS PER SHARE - DILUTED	$	4.77				$	5.48				$	5.47

Our consolidated results of operations in 2015 and 2014 include what we refer to as "Restructuring and Related Costs". Restructuring actions support our cost reduction efforts involving the consolidation of manufacturing and distribution facilities and workforce reductions. Restructuring-related costs are costs associated with our business transformation initiatives, including the consolidation of back-office functions and streamlining our processes.

Our consolidated results of operations in 2015 also include costs associated with the reclassification of the Company's common stock to eliminate its two-class structure (the "Reclassification Costs"). Reclassification Costs are primarily professional fees associated with the reclassification and are recognized in other expense, net in the Consolidated Statement of Income. Only a portion of the Reclassification Costs are tax deductible.

We believe certain non-GAAP measures that exclude the impact of these costs may provide useful information regarding our underlying performance from period to period and allow readers to assess the impact of the Company's restructuring and related activities and business transformation initiatives on the results of operations. Adjusted gross profit, adjusted selling & administrative ("S&A") expense, and adjusted operating income exclude Restructuring and Related Costs. Adjusted total other expense, adjusted net income attributable to Hubbell and adjusted earnings per diluted share exclude Restructuring and Related Costs as well as Reclassification Costs. Management uses these adjusted measures when assessing the performance of the business.

20	HUBBELL INCORPORATED - Form 10-K

The following table reconciles our adjusted financial measures to the directly comparable GAAP financial measure (in millions, except per share amounts):

	For the Year Ending December 31,
	2015			% of Net sales		2014			% of Net sales		2013			% of Net sales
Gross profit (GAAP measure)	$	1,091.8		32.2	%	$	1,109.0		33.0	%	$	1,070.5		33.6	%
Restructuring and related costs	23.7					3.4					—
Adjusted gross profit	$	1,115.5		32.9	%	$	1,112.4		33.1	%	$	1,070.5		33.6	%
S&A expenses (GAAP measure)	$	617.2		18.2	%	$	591.6		17.6	%	$	562.9		17.7	%
Restructuring and related costs	15.2					1.7					—
Adjusted S&A expenses	$	602.0		17.8	%	$	589.9		17.6	%	$	562.9		17.7	%
Operating income (GAAP measure)	$	474.6		14.0	%	$	517.4		15.4	%	$	507.6		15.9	%
Restructuring and related costs	38.9					5.1					—
Adjusted operating income	$	513.5		15.1	%	$	522.5		15.6	%	$	507.6		15.9	%
Total other expense (GAAP measure)	$	56.0				$	31.9				$	33.8
Reclassification costs	19.7					—					—
Adjusted total other expense	$	36.3				$	31.9				$	33.8
Net income attributable to Hubbell (GAAP measure)	$	277.3				$	325.3				$	326.5
Restructuring and related costs, net of tax	26.3					3.5					—
Reclassification costs, net of tax	17.4					—					—
Adjusted net income attributable to Hubbell	$	321.0				$	328.8				$	326.5
Less: Earnings allocated to participating securities	(0.8		)			(0.8		)			(1.0		)
Adj. net income available to common shareholders	$	320.2				$	328.0				$	325.5
Average number of diluted shares outstanding	58.0					59.2					59.6
ADJUSTED EARNINGS PER SHARE - DILUTED	$	5.52				$	5.54				$	5.47

The following table reconciles our restructuring costs to our Restructuring and Related Costs for 2015 and 2014 (in millions):

	For the Year Ending December 31,
	2015			2014				2015			2014				2015			2014
	Cost of goods sold							S&A expense							Total
Restructuring costs (GAAP measure, Note 22 - Restructuring Costs)	$	15.3		$	3.4			$	8.3		$	1.7			$	23.6		$	5.1
Restructuring related costs	8.4			—				6.9			—				15.3			—
Restructuring and related costs (non-GAAP measure)	$	23.7		$	3.4			$	15.2		$	1.7			$	38.9		$	5.1

Of the $38.9 million of Restructuring and Related Costs incurred in 2015, $32.8 million is recorded in the Electrical segment and $6.1 million is recorded in the Power segment. All of the Restructuring and Related Costs in 2014 were recorded in the Electrical segment.

HUBBELL INCORPORATED - Form 10-K	21

2015 Compared to 2014

Net Sales

Net sales for the year ended 2015 were $3.4 billion, an increase of one percent over 2014. Acquisitions added three percentage points to net sales in 2015, offset by the impact of foreign currency translation which reduced net sales by two percentage points. Organic volume was flat as net sales growth in our Power segment and in our Electrical segment products in the non-residential and residential construction markets was offset by lower organic net sales of our Electrical segment products in the energy-related and industrial markets, primarily our Harsh and Hazardous products.

Cost of Goods Sold

As a percentage of net sales, cost of goods sold increased to 67.8% for 2015 compared to 67.0% in 2014. The increase was primarily due to higher Restructuring and Related Costs in 2015 as compared to 2014, contributing approximately 60 basis points to the increase, unfavorable product and business mix, and the unfavorable impact of foreign exchange, partially offset by the favorable net impact of price and material costs as well as productivity in excess of cost inflation.

Gross Profit

The gross profit margin for 2015 declined to 32.2% compared to 33.0% in 2014. Excluding Restructuring and Related Costs, the adjusted gross profit margin was 32.9% in 2015 as compared to 33.1% in 2014. The decrease in the adjusted gross margin is primarily due to unfavorable product and business mix, and the unfavorable impact of foreign exchange, partially offset by the favorable net impact of price and material costs as well as productivity in excess of cost inflation.

Selling & Administrative Expenses

S&A expense increased four percent compared to 2014 primarily due to the addition of S&A expense of acquired businesses and higher Restructuring and Related Costs in 2015 as compared to 2014. As a percentage of net sales, S&A expense increased to 18.2% in 2015 compared to 17.6% in 2014. Excluding Restructuring and Related Costs, adjusted S&A expense as a percentage of net sales increased to 17.8% in 2015 compared to 17.6% in 2014. The increase in adjusted S&A expense is primarily due to acquired businesses with relatively higher S&A as a proportion of net sales in the near-term post-acquisition.

Operating Income

Operating income decreased eight percent in 2015 to $474.6 million and operating margin declined by 140 basis points to 14.0%. Excluding Restructuring and Related Costs, adjusted operating income decreased two percent and the adjusted operating margin was 15.1% in 2015 compared to 15.6% in 2014. Adjusted operating income and the adjusted operating margin decreased primarily due to unfavorable product and business mix, and the unfavorable impact of foreign exchange, partially offset by the favorable net impact of price and material costs as well as productivity in excess of cost inflation.

Total Other Expense

In 2015, total other expense was $56.0 million compared to $31.9 million in 2014. Excluding Reclassification Costs that were incurred in 2015, adjusted total other expense was $36.3 million in 2015 compared to $31.9 million in 2014 and increased primarily due to the write-off of an indemnification asset related to an acquisition.

Income Taxes

The full year effective tax rate was 32.6% in 2015 and was flat as compared to 2014. In 2015 the effective tax rate increased due to certain costs associated with the reclassification that were not deductible. That increase in the effective tax rate for 2015 was primarily offset by international reorganization actions in the current year as well as certain discrete tax items in 2014. Additional information related to the Company’s effective tax rate is included in Note 12 — Income Taxes in the Notes to Consolidated Financial Statements.

Net Income Attributable to Hubbell and Earnings Per Diluted Share

Net income attributable to Hubbell was $277.3 million in 2015 and decreased 14.8% as compared to 2014. Excluding Restructuring and Related Costs and Reclassification Costs, adjusted net income attributable to Hubbell was $321.0 million in 2015 and decreased 2.4% as compared to 2014. Earnings per diluted share in 2015 decreased 13.1% compared to 2014. Adjusted earnings per diluted share declined slightly in 2015 as compared to 2014 due to lower adjusted operating income, partially offset by the impact of a lower average number of diluted shares outstanding for the year, which declined by approximately 1.2 million as compared to 2014.

Segment Results

Electrical Segment

(In millions)	2015			2014
Net sales	$	2,388.3		$	2,398.2
Operating income	$	279.0		$	337.9
Restructuring and related costs	32.8			5.1
Adjusted operating income	$	311.8		$	343.0
Operating margin	11.7		%	14.1		%
Adjusted operating margin	13.1		%	14.3		%

Net sales in the Electrical segment were approximately flat in 2015 compared with 2014 as the contribution of net sales from acquisitions were more than offset by the impact of foreign currency translation and lower organic net sales volume. Acquisitions contributed three percentage points to net sales offset by two percentage points due to foreign currency translation and one percentage point due to lower organic volume.

22	HUBBELL INCORPORATED - Form 10-K

Within the segment, net sales of lighting products increased six percent in 2015 compared to 2014, while electrical systems products declined by four percent in the same period. Net sales of lighting products increased five percent due to organic growth in both the non-residential and residential construction markets, and one percent due to acquisitions. Net sales of electrical systems products declined by four percent due to a four percentage point decline in organic volume and three percentage points of unfavorable foreign currency translation, partially offset by three percent net sales growth from completed acquisitions. The decline in organic net sales volume is primarily due to lower net sales of products in the energy-related and industrial markets, primarily our Harsh and Hazardous products, partially offset by net sales growth in our other electrical systems products, primarily in the non-residential and residential construction markets.

Operating income in the Electrical segment for 2015 was $279.0 million and decreased seventeen percent or $58.9 million compared to 2014. Operating margin in 2015 decreased by approximately 240 basis points to 11.7% as compared to the same period of 2014. Excluding Restructuring and Related Costs, the adjusted operating margin was 13.1% in 2015 as compared to 14.3% in 2014. The decrease in the adjusted operating margin is primarily due to unfavorable product and business mix and the unfavorable impact of foreign exchange, partially offset by the favorable net impact of price and material costs as well as productivity in excess of cost inflation. Acquisitions contributed approximately 30 basis points to the decrease in operating margin.

Power Segment

(In millions)	2015			2014
Net sales	$	1,002.1		$	961.2
Operating income	$	195.6		$	179.5
Restructuring and related costs	6.1			—
Adjusted operating income	$	201.7		$	179.5
Operating margin	19.5		%	18.7		%
Adjusted operating margin	20.1		%	18.7		%

Net sales in the Power segment were $1.0 billion, up four percent compared to 2014, due to the contribution of net sales from acquisitions. Growth from organic volume was offset by the unfavorable impact of foreign currency translation. The net sales contribution of completed acquisitions added four percentage points. Organic volume contributed one percentage point and was offset by one percentage point of unfavorable foreign currency translation. The increase in organic volume was primarily due to higher sales of telecommunications products.

Operating income in the Power segment increased nine percent to $195.6 million in 2015 compared to 2014. Operating margin in 2015 increased by 80 basis points to 19.5% as compared to 2014. Excluding Restructuring and Related Costs, the adjusted operating margin was 20.1% in 2015 as compared to 18.7% in 2014. The increase in the adjusted operating margin is primarily due to productivity in excess of costs increases, including favorable material costs. Operating margin improvement from pricing was offset by cost inflation from foreign currency. Acquisitions increased operating income, but reduced operating margin by approximately 20 basis points.

2014 Compared to 2013

Net Sales

Net sales for the year ended 2014 were $3.4 billion, an increase of six percent over the year ended 2013. Acquisitions added four percentage points to net sales in 2014 compared to 2013 while volume increased net sales by two percentage points. Price realization was flat and foreign currency translation was slightly negative and not significant to the year over year change in net sales.

Cost of Goods Sold

As a percentage of net sales, cost of goods sold increased to 67.0% for 2014 compared to 66.4% in 2013. The increase was primarily due to unfavorable business and product mix, higher material costs, and cost inflation in excess of productivity, including approximately 10 basis points from higher warranty and related costs in the Electrical segment incurred in the third quarter of 2014.

Gross Profit

The gross profit margin for 2014 declined to 33.0% compared to 33.6% in 2013. The decrease was primarily due to unfavorable business and product mix, higher material costs, and cost inflation in excess of productivity, including approximately 10 basis points from higher warranty and related costs in the Electrical segment incurred in the third quarter of 2014.

Selling & Administrative Expenses

S&A expense increased five percent compared to 2013 primarily due to the addition of S&A expense of acquired businesses. As a percentage of net sales, S&A expense declined to 17.6% in 2014 compared to 17.7% in 2013 primarily due to the favorable impact of volume leverage.

Operating Income

Operating income increased two percent in 2014 to $517.4 million, while operating margin declined by 50 basis points to 15.4%. The increase in operating income is primarily due to the favorable impact of higher organic volume and the contribution of acquisitions, which exceeded the unfavorable impact of business and product mix, and cost increases that are described within the discussion of Gross Profit. The increase in organic volume and contribution of acquisitions, in aggregate, were not significant to operating margin.

Total Other Expense

In 2014, total other expense, which is primarily interest expense on long-term debt, was $31.9 million compared to $33.8 million in 2013. The $1.9 million decrease was primarily due to lower net foreign currency transaction losses in 2014 compared to 2013.

HUBBELL INCORPORATED - Form 10-K	23

Income Taxes

The effective tax rate in 2014 was 32.6% compared to 30.4% in 2013. The increase in the tax rate for 2014 was due primarily to the benefit in 2013 of the retroactive application of certain 2012 tax provisions, including the research and development tax credit, that were part of the American Taxpayer Relief Act of 2012, which became law during the first quarter of 2013, a comparative increase in domestic earnings and decrease in foreign earnings in low tax jurisdictions, as well as certain discrete tax items. Additional information related to the Company’s effective tax rate is included in Note 12 — Income Taxes in the Notes to Consolidated Financial Statements.

Net Income attributable to Hubbell and Earnings Per Diluted Share

For the reasons described above, net income attributable to Hubbell decreased 0.4% in 2014. Earnings per diluted share in 2014 increased 0.2% compared to 2013 as the average number of diluted shares outstanding for the year were lower by approximately 0.4 million as compared to 2013.

Segment Results

Electrical Segment

(In millions)	2014			2013
Net sales	$	2,398.2		$	2,262.6
Operating income	$	337.9		$	341.1
Restructuring and related costs	5.1			—
Adjusted operating income	$	343.0		$	341.1
Operating margin	14.1		%	15.1		%
Adjusted operating margin	14.3		%	15.1		%

Net sales in the Electrical segment increased six percent in 2014 compared with 2013 due to acquisitions and higher organic volume. Acquisitions added almost four percentage points and organic volume almost three percentage points to net sales. Price realization was positive but not significant and was offset by the impact of negative foreign currency translation.

Within the segment, electrical systems products net sales increased five percent in 2014 compared to 2013 due to acquisitions and higher organic volume. Price realization was positive but not significant and was offset by the impact of negative foreign currency translation. Higher organic net sales of electrical systems products was driven by strength in our wiring, connectors and grounding products that support the non-residential and residential construction markets, partially offset by weak demand for our high voltage test equipment and Harsh

and Hazardous products that support the extractive industries. Net sales of lighting products increased eight percent in 2014 compared to 2013 due to acquisitions and strong organic volume in the non-residential market, which continued to benefit from increased relight and retrofit renovation project demand, and growth in the residential market.

Operating income in 2014 was $337.9 million, a one percent decrease compared to 2013, while operating margin declined by 100 basis points to 14.1%. Excluding Restructuring and Related Costs, the operating margin decreased by 80 basis points to 14.3% due to unfavorable business and product mix and cost inflation in excess of productivity, partially offset by higher organic volume and price realization. Operating margin for the year ended 2014 also includes higher warranty and related costs which were incurred in the third quarter of 2014, and contributed approximately 15 basis points to the decline. Acquisitions were 10 basis points dilutive to operating margin.

Power Segment

(In millions)	2014			2013
Net sales	$	961.2		$	921.3
Operating income	$	179.5		$	166.5
Restructuring and related costs	—			—
Adjusted operating income	$	179.5		$	166.5
Operating margin	18.7		%	18.1		%
Adjusted operating margin	18.7		%	18.1		%

Net sales in the Power segment increased four percent in 2014 compared to 2013 due to acquisitions and organic volume. Acquisitions contributed four percentage points to net sales and organic volume contributed two percentage points. Higher organic volume was driven by modest growth in distribution and transmission spending. Price realization was negative and foreign currency translation was unfavorable, each by one percentage point.

Operating income increased eight percent to $179.5 million and operating margin increased by 60 basis points to 18.7% in 2014 compared to 2013. The increase in operating margin reflects productivity in excess of cost inflation and lower facility closure costs in 2014, partially offset by higher material costs and negative price realization. The increase in operating income can be attributed to these factors and also includes the contribution of acquisitions, which were 20 basis points dilutive to operating margin.

24	HUBBELL INCORPORATED - Form 10-K

Financial Condition, Liquidity and Capital Resources

Cash Flow

	December 31,
(In millions)	2015			2014			2013
Net cash provided by (used in):
Operating activities	$	331.1		$	391.5		$	381.8
Investing activities	(249.2		)	(242.6		)	(151.1		)
Financing activities	(371.1		)	(215.6		)	(130.9		)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(21.2		)	(20.1		)	(4.1		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(310.4	)	$	(86.8	)	$	95.7

2015 Compared to 2014

Cash provided by operating activities for 2015 decreased compared to 2014 primarily due to lower net income after adjusting for the non-cash impacts of depreciation and amortization, stock-based compensation and deferred income taxes, offset partially by lower use of cash for working capital. Cash used for working capital was $32.3 million in 2015 compared to $44.7 million in 2014 primarily due to increased collection of accounts receivable and increased current liabilities, offset partially by higher inventories.

Cash used for investing activities of $249.2 million in 2015 increased compared to cash used of $242.6 million in 2014. This increase is primarily due to an approximately $22 million increase in investments in our business, including a $16.8 million increase in capital expenditures as well as a $5.0 million investment in a privately-held electrical utility substation security provider as well as lower proceeds from the disposition of assets in 2015. Those increases in the use of cash for investing activities are partially offset by lower cash used for acquisitions in 2015 as compared to 2014.

Cash used for financing activities of $371.1 million in 2015 increased compared to $215.6 million of cash used in 2014. The increase in cash used is primarily the result of $200.7 million of Class A Cash Consideration paid in connection with the Reclassification and a $15.8 million increase in dividends paid, partially offset by cash provided by $48.0 million of commercial paper outstanding at December 31, 2015 and lower cash used on the repurchase of common shares. There was no commercial paper outstanding at December 31, 2014. For more information about the Reclassification refer to the Executive Overview of the Business, in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 16 – Capital Stock, in the Notes to Consolidated Financial Statements.

The unfavorable impact of foreign currency exchange rates on cash increased to $21.2 million in 2015 as compared to $20.1 million in 2014. The unfavorable impact in 2015 and 2014 was primarily related to the U.S. dollar strengthening against the British pound, Australian dollar, Canadian dollar, and Mexican peso.

2014 Compared to 2013

Cash provided by operating activities for 2014 increased compared to 2013 primarily due to higher net income after adjusting for the non-cash impacts of depreciation and amortization, stock-based compensation and deferred income taxes, and a lower use of cash for working capital, partially offset by higher pension contributions. Cash used for changes in working capital was $44.7 million in 2014 compared to $55.1 million of cash used in 2013 primarily due to increased collection of accounts receivable.

Cash used for investing activities of $242.6 million in 2014 compared to cash used of $151.1 million in 2013. This increase is primarily due to an $87.3 million increase in net cash used for acquisitions in 2014 as compared to 2013.

Cash used for financing activities of $215.6 million in 2014 compared to $130.9 million of cash used in 2013. This increase is primarily the result of $74.5 million of higher spending on the repurchase of common shares and an $11.9 million increase in dividends paid.

The unfavorable impact of foreign currency exchange rates on cash increased to $20.1 million in 2014 as compared to $4.1 million in 2013 primarily related to the U.S. dollar strengthening against several currencies, most notably the British pound, Australian dollar, Mexican peso and Canadian dollar.

Investments in the Business

Investments in our business include cash outlays for the acquisition of businesses as well as expenditures to support our restructuring and related activities and to maintain the operation of our equipment and facilities.

In 2015, the Company completed four acquisitions for $163.4 million, net of cash acquired, and including a $0.2 million payment in 2015 to settle the net working capital adjustment relating to an acquisition completed in the fourth quarter of 2014. Three of these 2015 acquisitions were added to the Electrical segment, while one was added to the Power segment. In January 2016, the Company acquired all of the issued and outstanding shares of capital stock of R.W. Lyall & Company, Inc. ("Lyall"), a leader in the design and application of

HUBBELL INCORPORATED - Form 10-K	25

components and assemblies for the natural gas distribution market for a cash purchase price of approximately $130.0 million. Lyall will be added to the Electrical segment. In February 2016, the Company acquired all of the issued and outstanding shares of Electric Motion Company, Inc. and all of the membership interests in Elmot Realty Associates, LLC, Elmot Realty Associates II, LLC, and DelRi LLC, collectively referred to as "EMC", a manufacturer of grounding and connector products for the communication, power, and transportation industries for approximately $43.0 million. EMC will be added to the Power segment. The Company continues to assess opportunities to expand sales through acquisitions of businesses that fill product gaps or allow for expansion in new markets. For more information refer to Note 2 – Business Acquisitions in the Notes to Consolidated Financial Statements.

Beginning in the fourth quarter of 2014 and continuing through 2015 we have initiated certain restructuring actions, primarily in response to weakness in certain of our end markets. As a result of those restructuring actions we have exited twelve facilities in 2015, which together with additional workforce reduction initiatives, have impacted more than 350 positions. We expect to initiate additional restructuring actions in 2016.

Costs relating to restructuring actions primarily include severance and employee benefits, facility exit costs and asset impairment charges. With the exception of asset impairment charges, these costs are predominantly settled in cash and will be funded by our operating activities.

The table below presents the cost incurred in 2015, additional expected costs and the expected completion date for restructuring actions initiated in the 2014 and separately for those initiated in 2015 (in millions):

	Costs Incurred in 2015			Additional Expected Costs			Expected Completion Date
2015 Restructuring Actions	$	19.2		$	6.1		2016
2014 Restructuring Actions	4.4			—			2015
Total	$	23.6		$	6.1

During 2015, we used cash of $77.1 million for capital expenditures, an increase of $16.8 million from 2014 as we made investments in our businesses in higher growth markets in 2015 that we expect will drive productivity.

Additional information with respect to future investments in the business can be found under “Outlook” within Management’s Discussion and Analysis.

Stock Repurchase Program

During 2015, the Company executed share repurchases totaling $88.1 million, of which $79.1 million of repurchases have been settled in cash, and an additional $9.0 million common shares were repurchased in the three days prior to December 31, 2015, but were not cash settled by that date according to customary settlement terms. On August 23, 2015, our Board of Directors

approved a stock repurchase program that authorized the repurchase of up to $250 million of Common Stock (the "August 2015" program). When combined with the $141.4 million of remaining share repurchase authorization under the program approved by our Board of Directors in October 2014 (the "October 2014" program), as of December 31, 2015 we have a total remaining share repurchase authorization of approximately $390 million. The October 2014 and August 2015 programs expire in October of 2017. Subject to numerous factors, including market conditions and alternative uses of cash, we intend to conduct discretionary repurchases through open market or privately negotiated transactions, which may include repurchases under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. Subject to these factors, we expect to repurchase up to $250 million of Common Stock in 2016.

Debt to Capital

At December 31, 2015 and 2014, the Company had $595.9 million and $594.9 million, respectively, of senior long-term notes outstanding, net of unamortized discount and the unamortized balance of capitalized debt issuance costs. The long-term fixed-rate notes, with amounts of $300 million due in 2018 and 2022, respectively, are callable with a make whole provision and are only subject to accelerated payment prior to maturity if we fail to meet certain non-financial covenants, all of which were met at December 31, 2015.

At December 31, 2015 and 2014, the Company had $48.2 million and $1.4 million, respectively, of short-term debt outstanding.

◦	Short-term debt at December 31, 2015 includes $48.0 million of commercial paper borrowings to partially fund the Class A Cash Consideration paid on December 23, 2015 in connection with the Reclassification. There were no commercial paper borrowings outstanding at December 31, 2014.

◦

The Company has a credit agreement for a 5.0 million Brazilian reais line of credit to support its Brazilian operations. The line of credit expires in October 2016; however, an undrawn balance is subject to an annual review by the lender. At December 31, 2015, there were no borrowings outstanding under this line of credit. At December 31, 2014, 3.0 million Brazilian reais (equivalent to $1.1 million) was outstanding.

◦	Short-term debt at December 31, 2015 is also comprised of outstanding borrowings of 1.3 million Chinese renminbi (equivalent to $0.2 million) under existing lines of credit used to support the Company's operations in China. At December 31, 2014 there were 1.7 million Chinese renminbi (equivalent to $0.3 million) of borrowings outstanding under this line of credit.

Net debt, defined as total debt less cash and investments, is a non-GAAP measure that may not be comparable to definitions used by other companies. We consider net debt to be a useful measure of our financial leverage for evaluating the Company’s ability to meet its funding needs.

26	HUBBELL INCORPORATED - Form 10-K

The following table sets forth the reconciliation of net debt at December 31, 2015 and 2014:

	December 31,
(In millions)	2015			2014
Total Debt	$	644.1		$	596.3
Total Hubbell Shareholders’ Equity	1,740.6			1,927.1
TOTAL CAPITAL	$	2,384.7		$	2,523.4
Debt to Total Capital	27		%	24		%
Cash and Investments	$	405.2		$	705.8
NET DEBT	$	238.9		$	(109.5	)
Net Debt to Total Capital	10		%	(4		)%

In November 2010, the Company completed a public debt offering for $300 million of long-term, senior, unsecured notes maturing in November 2022 (“2022 Notes”) and bearing interest at a fixed rate of 3.625%. Prior to the issuance of the 2022 Notes, the Company entered into a forward interest rate lock which resulted in a $1.6 million loss. This amount was recorded in Accumulated other comprehensive loss, net of tax, and is being amortized over the life of the 2022 Notes.

In May 2008, the Company completed a public offering of $300 million long-term senior, unsecured notes maturing in May 2018 (the “2018 Notes”). The 2018 Notes bear interest at a fixed rate of 5.95%. Prior to the issuance of the 2018 Notes, the Company entered into a forward interest rate lock which resulted in a $1.2 million gain. This amount was recorded in Accumulated other comprehensive loss, net of tax, and is being amortized over the life of the notes.

The 2018 Notes and the 2022 Notes are both fixed rate indebtedness, are callable at any time with a make whole premium and are only subject to accelerated payment prior to maturity in the event of a default under the indenture governing the terms of the 2018 Notes and 2022 Notes, as modified by the supplemental indentures creating each such series, or upon a change in control event as defined in such indenture.

Liquidity

We measure liquidity on the basis of our ability to meet short-term and long-term operational funding needs, fund additional investments, including acquisitions, and make dividend payments to shareholders. Significant factors affecting the management of liquidity are cash flows from operating activities, capital expenditures, cash dividend payments, stock repurchases, access to bank lines of credit and our ability to attract long-term capital with satisfactory terms.

The Reclassification required a significant cash outlay in the fourth quarter of 2015. Additional significant cash outlays may be required in the near term to fund our intended share repurchases as well as our continued strategy to expand through acquisitions and invest in our business. We expect to use the borrowing capacity available to us to fund a portion of these activities in 2016.

◦

Upon completion of the Reclassification on December 23, 2015, each holder of Class A common stock became entitled to $28.00 for each share of Class A common stock held. The aggregate amount of the Class A Cash Consideration paid in connection with, and at the time of, the Reclassification was $200.7 million. Short-term debt at December 31, 2015 includes $48.0 million of commercial paper borrowing to partially fund the Class A Cash Consideration paid. In addition, certain costs of the Reclassification were contingent upon closing the Reclassification and were recognized in the fourth quarter of 2015.

◦	We have approximately $390 million of total share repurchase authorization remaining at December 31, 2015 and, subject to numerous factors, including market conditions and alternative uses of cash, we expect to conduct discretionary repurchases through open market or privately negotiated transactions of up to $250 million of Common Stock in 2016.

◦	In January 2016 we completed the acquisition of Lyall for an aggregate purchase price of approximately $130.0 million and EMC for an aggregate purchase price of approximately $43.0 million and expect to complete additional acquisitions in 2016. Further discussion of the Lyall and EMC acquisitions can be found in Note 22 — Subsequent Events of the Notes to Consolidated Financial Statements.

In addition to these uses of cash, we will require cash outlays to fund our operations, capital expenditures, and an increase in working capital that would be required to accommodate a higher level of business activity for the foreseeable future, as well as our rate of cash dividends. We also have contractual obligations for long-term debt, operating leases, purchase obligations, and certain other long-term liabilities that are summarized in the table of Contractual Obligation as of December 31, 2015. Since December 31, 2015, there were no material changes to our contractual obligations.

HUBBELL INCORPORATED - Form 10-K	27

Our sources of funds and available resources to meet these funding needs are as follows:

◦

Cash flows from operations and existing cash resources: We continue to target free cash flow (defined as cash flows from operations less capital expenditures) of approximately 90% of net income in 2015. We also have $343.5 million of cash and cash equivalents at December 31, 2015, of which approximately 9% was held inside the United States and the remainder held internationally. Except for a portion of current earnings, the Company’s intent is to indefinitely reinvest all of its undistributed international earnings and cash internationally.

◦	We have the ability to issue commercial paper for general corporate purposes and our $750 million revolving credit facility, which expires in December 2020, serves as a backup to our commercial paper program. We maintain investment grade credit ratings from the major U.S. rating agencies. Outstanding commercial paper borrowings as of February 16, 2016 are $362 million.

On December 16, 2015 the Company entered into a five-year revolving credit agreement (the "Credit Agreement") with a syndicate of lenders that provides a $750 million committed revolving credit facility, and replaces the $500 million five-year credit agreement dated as of October 20, 2011 that was scheduled to expire in October 2016. Commitments under the Credit Agreement may be increased to an aggregate amount not to exceed $1.250 billion. The interest rate applicable to borrowing under the Credit Agreement is generally either the adjusted LIBOR plus an applicable margin (determined by reference to a ratings based grid) or the alternate base rate. The single financial covenant in the Credit Agreement, which the Company is in compliance with, requires that total debt not exceed 55% of total capitalization as of the last day of each fiscal quarter of the Company. Annual commitment fees to support availability under the credit facility are not material. Although not the principal source of liquidity, we believe our credit facility is capable of providing significant financing flexibility at reasonable rates of interest. However, in the event of a significant deterioration in the results of our operations or cash flows, leading to deterioration in financial condition, our borrowing costs could increase and/or our ability to borrow could be restricted. We have not entered into any guarantees that could give rise to material unexpected cash requirements. As of December 31, 2015 the credit facility had not been drawn against.

◦	In addition to our commercial paper program and existing revolving credit facility we also have the ability to obtain additional financing through the issuance of long-term debt. Considering our current credit rating, historical earnings performance, and financial position we believe that we would be able to obtain additional long-term debt financing on attractive terms. In 2016

we expect to convert some of our commercial paper borrowings to term debt through a long-term debt offering.

◦

The Company also maintains other lines of credit that are primarily used to support the issuance of letters of credit. Interest rates and other terms of borrowing under these lines of credit vary from country to country, depending on local market conditions. At December 31, 2015 and 2014 these lines totaled $54.6 million and $54.6 million, respectively, of which $22.5 million million and $27.1 million was utilized to support letters of credit and the remaining amount was unused. The annual commitment fees associated with these lines of credit are not material.

Pension Funding Status

We have a number of funded and unfunded non-contributory U.S. and foreign defined benefit pension plans. Benefits under these plans are generally provided based on either years of service and final average pay or a specified dollar amount per year of service. The funded status of our qualified, defined benefit pension plans is dependent upon many factors including future returns on invested pension assets, the level of market interest rates, employee earnings and employee demographics.

Changes in the value of the defined benefit plan assets and liabilities will affect the amount of pension expense ultimately recognized. Although differences between actuarial assumptions and actual results are no longer deferred for balance sheet purposes, deferral is still permitted for pension expense purposes. Unrecognized gains and losses in excess of an annual calculated minimum amount (the greater of 10% of the projected benefit obligation or 10% of the market value of assets) are amortized and recognized in net periodic pension cost over the average remaining service period of our active employees, which approximates 10-12 years. During 2015 and 2014, we recorded $12.1 million and $3.9 million, respectively, of pension expense related to the amortization of these unrecognized losses. We expect to record $13.7 million of expense related to unrecognized losses and prior service cost in 2016.

In 2015 and 2014, we contributed $22.6 million and $23.5 million, respectively, to our qualified foreign and domestic defined benefit pension plans. We contributed $3.2 million to our qualified foreign defined benefit pension plans in 2013. These contributions have improved the funded status of all of our plans. Although not required under the Pension Protection Act of 2006, the Company made a voluntary contribution to its qualified domestic defined benefit pension plan of $20.0 million in January 2015. Although not required by ERISA and the Internal Revenue Code, the Company may elect to make a voluntary contribution to its qualified domestic defined benefit pension plan in 2016. The Company expects to contribute approximately $2.2 million to its foreign plans in 2016. The anticipated 2016 level of pension funding is not expected to have a significant impact on our overall liquidity.

28	HUBBELL INCORPORATED - Form 10-K

Assumptions

The following assumptions were used to determine projected pension and other benefit obligations at the measurement date and the net periodic benefit costs for the year:

	Pension Benefits					Other Benefits
	2015		2014			2015		2014
Weighted-average assumptions used to determine benefit obligations at December 31,
Discount rate	4.71	%	4.23	%		4.60	%	4.10	%
Rate of compensation increase	3.59	%	3.15	%		3.92	%	3.60	%
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31,
Discount rate	4.23	%	5.04	%		4.10	%	4.60	%
Expected return on plan assets	6.36	%	6.06	%		N/A		N/A
Rate of compensation increase	3.15	%	3.18	%		3.60	%	3.58	%

At the end of each year, we estimate the expected long-term rate of return on pension plan assets based on the strategic asset allocation for our plans. In making this determination, we utilize expected rates of return for each asset class based upon current market conditions and expected risk premiums for each asset class. A one percentage point change in the expected long-term rate of return on pension fund assets would have an impact of approximately $7.6 million on 2016 pretax pension expense. The expected long-term rate of return is applied to the fair market value of pension fund assets to produce the expected return on fund assets that is included in pension expense. The difference between this expected return and the actual return on plan assets was recognized at December 31, 2015 for balance sheet purposes, but continues to be deferred for expense purposes. The net deferral of past asset gains (losses) ultimately affects future pension expense through the amortization of gains (losses) with an offsetting adjustment to Hubbell shareholders’ equity through Accumulated other comprehensive loss.

At the end of each year, we determine the discount rate to be used to calculate the present value of our pension plan liabilities. For our U.S. and Canadian pension plans, this discount rate is determined by matching the expected cash flows associated with our benefit obligations to a yield curve based on high quality, fixed income debt instruments with maturities that closely match the expected funding period of our pension liabilities. This yield curve is derived using a bond matching approach which incorporates a selection of bonds that align with our projected benefit obligations. As of December 31, 2015, we used a discount rate of 4.80% for our U.S. pension plans compared to a discount rate of 4.30% used in 2014. For our Canadian pension plan, we used a discount rate of 3.90% in 2015, compared to the 3.95% discount rate used in 2014.

For our UK pension plan the discount rate was derived using a yield curve fitted to the yields on AA bonds in the Barclays Capital Sterling Aggregate Corporate Index and uses sample plan cash flow data as a proxy to plan specific liability cash flows. The derived discount rate is the single discount rate equivalent to discounting these liability cash flows at the term-dependent spot rates of AA corporate bonds. This methodology resulted in a December 31, 2015 discount rate for the UK pension plan of 4.00% as compared to a discount rate of 3.70% used in 2014.

An increase of one percentage point in the discount rate would lower our 2016 pretax pension expense by approximately $9.0 million. A discount rate decline of one percentage point would increase our 2016 pretax pension expense by approximately $10.3 million.

In 2014 we changed the mortality table used to calculate the present value of our pension plan liabilities from the RP-2000 mortality table to the RP-2000 mortality table with generational projection using Scale BB-2D. That change resulted in an approximately $40 million increase in the projected benefit obligation of our U.S. defined benefit pension plans upon remeasurement at December 31, 2014. The same mortality assumption was used to calculate the present value of pension plan liabilities as of December 31, 2015. The RP-2000 mortality table with generational projection using Scale BB-2D was chosen as the best estimate based on the observed and anticipated experience of the plans after considering alternative tables, including RP-2014 and generational projection using Scale MP-2015.

Other Post Employment Benefits (“OPEB”)

The Company also has a number of health care and life insurance benefit plans covering eligible employees who reached retirement age while working for the Company. These benefits have been discontinued for substantially all future retirees. These plans are not funded and, therefore, no assumed rate of return on assets is required. We use a similar methodology to derive the yield curve for our post employment benefit plan obligations that we use for our pension plans. As of December 31, 2015, the Company used a discount rate of 4.60% to determine the projected benefit obligation compared to a discount rate of 4.10% used in 2014. In accordance with the accounting guidance for retirement benefits, we recorded to Accumulated other comprehensive loss, within Hubbell shareholders’ equity, a charge, net of tax, of approximately $1.1 million in 2015 and a charge, net of tax, of approximately $1.7 million in 2014, related to the annual remeasurement of the OPEB plans and the amortization of prior service credits and net actuarial gains.

HUBBELL INCORPORATED - Form 10-K	29

Off-Balance Sheet Arrangements

Off-balance sheet arrangements are defined as any transaction, agreement or other contractual arrangement to which an entity that is not included in our consolidated results is a party, under which we, whether or not a party to the arrangement, have, or in the future may have: (1) an obligation under a direct or indirect guarantee or similar arrangement, (2) a retained or contingent

interest in assets or (3) an obligation or liability, including a contingent obligation or liability, to the extent that it is not fully reflected in the financial statements.

We do not have any off-balance sheet arrangements as defined above which have or are likely to have a material effect on our financial condition, results of operations or cash flows.

Contractual Obligations

A summary of our contractual obligations and commitments at December 31, 2015 is as follows (in millions):

	Payments due by period
	Total			2016			2017-2018			2019-2020			2021 and thereafter
Debt obligations(a)	$	648.2		$	48.2		$	300.0		$	—		$	300.0
Expected interest payments	117.9			28.7			47.0			21.8			20.4
Operating lease obligations	56.8			13.3			19.0			11.2			13.3
Retirement and other benefits(b)	223.2			8.3			16.3			15.8			182.8
Purchase obligations	198.9			198.6			0.3			—			—
Obligations under customer incentive programs	40.7			40.7			—			—			—
Income tax payments	3.3			3.3			—			—			—
TOTAL	$	1,289.0		$	341.1		$	382.6		$	48.8		$	516.5

(a)	Amounts exclude unamortized discount and capitalized debt issuance costs.

(b)

Amounts above reflect projected funding related to the Company’s non-qualified defined benefit plans. Projected funding obligations of the Company’s qualified defined benefit pension plans are excluded from the table as there are significant factors, such as the future market value of plan assets and projected investment return rates, which could cause actual funding requirements to differ materially from projected funding.

Our purchase obligations include amounts committed under legally enforceable contracts or purchase orders for goods and services with defined terms as to price, quantity, delivery and termination liability. These obligations primarily consist of inventory purchases made in the normal course of business to meet operational requirements and commitments for equipment purchases. As of December 31, 2015, we have $20.3 million of uncertain tax positions reflected in our Consolidated Balance Sheet. We are unable to make a reasonable estimate regarding the timing of settlement of these uncertain tax positions and, as a result, they have been excluded from the table. See Note 12 — Income Taxes in the Notes to Consolidated Financial Statements.

Critical Accounting Estimates

Note 1 — Significant Accounting Policies of the Notes to Consolidated Financial Statements describes the significant accounting policies used in the preparation of our financial statements.

Use of Estimates

We are required to make assumptions and estimates and apply judgments in the preparation of our financial statements that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors deemed relevant by management. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in estimates and assumptions used by us could have a material impact on our financial results.

We believe that the following estimates are among the most critical in fully understanding and evaluating our reported financial results. These items utilize assumptions and estimates about the effect of future events that are inherently uncertain and are based on our judgment.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable and collection is probable. Product is considered delivered to the customer once it has been shipped and title and risk of loss have been transferred. The majority of our revenue is recognized at the time of shipment. Certain of our businesses account for sales discounts and allowances based on sales volumes, specific programs and customer deductions as is customary in the electrical products industry. These items primarily relate to sales volume incentives, special pricing allowances, and returned goods. This requires us to estimate at the time of sale the amounts that should not be recorded as revenue as these amounts are not expected to be collected from customers. We principally rely on historical experience, specific customer agreements, and anticipated future trends to estimate these amounts at the time of shipment.

Inventory Valuation

Inventories in the U.S. are primarily valued at the lower of LIFO cost or market, while non-U.S. inventories are valued at the lower of FIFO cost or market. We routinely evaluate the carrying value of our inventories to ensure they are carried at the lower of LIFO or FIFO cost or market value. Such evaluation is based on our judgment and use of estimates, including sales forecasts,

30	HUBBELL INCORPORATED - Form 10-K

gross margins for particular product groupings, planned dispositions of product lines, technological events and overall industry trends. In addition, the evaluation is based on changes in inventory management practices which may influence the timing of exiting products and method of disposing of excess inventory.

Excess inventory is generally identified by comparing future expected inventory usage to actual on-hand quantities. Inventory values are reduced for on-hand inventory in excess of pre-defined usage forecasts. Forecast usage is primarily determined by projecting historical (actual) sales and inventory usage levels forward to future periods. Changes in these estimates may necessitate future adjustments to inventory values.

Customer Credit and Collections

We maintain allowances for doubtful accounts receivable in order to reflect the potential uncollectability of receivables related to purchases of products on open credit. If the financial condition of our customers were to deteriorate, resulting in their inability to make required payments, we may be required to record additional allowances for doubtful accounts.

Accrued Insurance

We retain a significant portion of the risks associated with workers’ compensation, medical, automobile and general liability insurance. We estimate self-insurance liabilities using a number of factors, including historical claims experience, demographic factors, severity factors and other actuarial assumptions. The accrued liabilities associated with these programs are based on our estimates of ultimate costs to settle known claims as well as claims incurred but not reported as of the balance sheet date. These assumptions are periodically reviewed with a third-party actuary to determine the adequacy of these self-insurance reserves. Changes in these assumptions may necessitate future adjustments to these self-insurance liabilities.

Employee Benefits Costs and Funding

We sponsor domestic and foreign defined benefit pension, defined contribution and other postretirement plans. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on the pension fund assets, rate of increase in employee compensation levels and health care cost increase projections. These assumptions are determined based on Company data and appropriate market indicators, and are evaluated each year as of the plans’ measurement date. Further discussion of the assumptions used in 2015 and 2014 are included above under “Pension Funding Status” and in Note 10 — Retirement Benefits of the Notes to Consolidated Financial Statements.

Taxes

We account for income taxes in accordance with the applicable accounting guidance which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. Additionally, deferred tax assets are required to be reduced by a valuation allowance if it is more-likely-than-not that some portion or all of the deferred tax asset

will not be realized. The factors used to assess the likelihood of realization of deferred tax assets are the forecast of future taxable income, available tax planning strategies that could be implemented to realize the net deferred tax assets, and future reversals of deferred tax liabilities. Failure to achieve forecasted taxable income can affect the ultimate realization of net deferred tax assets.

We operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. The Internal Revenue Service (“IRS”) and other tax authorities routinely review our tax returns. These audits can involve complex issues, which may require an extended period of time to resolve. The Company records uncertain tax positions only when it has determined that it is more-likely-than-not that a tax position will be sustained upon examination by taxing authorities based on the technical merits of the position. The Company uses the criteria established in the accounting guidance to determine whether an item meets the definition of more-likely-than-not. The Company’s policy is to recognize these uncertain tax positions when the more-likely-than-not threshold is met, when the statute of limitations has expired or upon settlement. In management’s opinion, adequate provision has been made for potential adjustments arising from any examinations. See also Note 12 — Income Taxes in the Notes to Consolidated Financial Statements.

Contingent Liabilities

We are subject to proceedings, lawsuits, and other claims or uncertainties related to environmental, legal, product and other matters. We routinely assess the likelihood of an adverse judgment or outcome to these matters, as well as the range of potential losses. We record a liability when it is both probable that a liability has been incurred and the amount can be reasonably estimated. A determination of the reserves required, if any, is made after careful analysis, including consultations with outside advisors, where applicable. Where no amount within a range of estimates is more likely, the minimum is accrued. The required reserves may change in the future due to new developments.

Valuation of Long-Lived Assets

Our long-lived assets include land, buildings, equipment, molds and dies, software, goodwill and other intangible assets. Long-lived assets, other than land, goodwill and indefinite-lived intangibles, are depreciated over their estimated useful lives. The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the dates of acquisition. Goodwill represents purchase price in excess of fair values assigned to the underlying identifiable net assets of acquired businesses. Intangible assets primarily consist of patents, tradenames and customer related intangibles.

We review depreciable long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. If such a change in circumstances occurs, the related estimated future undiscounted cash flows expected to result from the use of the asset group and its eventual disposition is compared to the carrying amount. If the sum of the expected cash flows of the asset group is less than the carrying amount, an impairment charge is recorded. The impairment charge is measured as the amount by which the carrying amount exceeds the fair value of

HUBBELL INCORPORATED - Form 10-K	31

the asset. The fair value of impaired assets is determined using expected cash flow estimates, quoted market prices when available and appraisals as appropriate. We did not record any material impairment charges related to long-lived assets in 2015, 2014, or 2013.

Goodwill and indefinite-lived intangible assets are reviewed annually for impairment unless circumstances dictate the need for more frequent assessment. We perform our goodwill impairment testing as of April 1st of each year unless circumstances dictate the need for more frequent assessments. The accounting guidance provides entities an option of performing a qualitative assessment before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors, that it is more-likely-than-not that the goodwill is not impaired, the entity would not need to proceed to the two step goodwill impairment testing process as prescribed in the guidance. The Company has elected to bypass the qualitative assessment and proceeded directly to the quantitative analysis. The goodwill impairment testing requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future discounted cash flows, determining appropriate discount rates and other assumptions. We use internal discounted cash flow estimates to determine fair value. These cash flow estimates are derived from historical experience and future long-term business plans and the application of an appropriate discount rate. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit. As of April 1, 2015, our goodwill testing resulted in fair values for each reporting unit that substantially exceeded the reporting unit’s carrying value. We have not recorded any goodwill impairments since the initial adoption of the accounting guidance in 2002.

The identification and measurement of impairment of indefinite-lived intangible assets involves an assessment of qualitative factors to determine whether events or circumstances indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. If it is more likely than not that the asset is imparied, the fair value of the indefinite lived intangibles will be determined using discounted cash flow estimates. If the carrying value of these assets exceeds the estimated fair value, the carrying value will be reduced to the estimated fair value. We did not record any impairments related to indefinite-lived intangible assets in 2015, 2014, or 2013.

Stock-Based Compensation

We determine the grant date fair value of our stock-based compensation awards using either a lattice model or the Black-Scholes option pricing model. Both of these models require management to make certain assumptions with respect to selected model inputs. These inputs include assumptions for the expected term, stock volatility, dividend yield and risk-free interest rate. Changes in these inputs impact fair value and could impact our stock-based compensation expense in the future. In addition, we are required to estimate the expected forfeiture rate and recognize expense only for those awards expected to meet the service and performance vesting conditions. If our actual forfeiture rate is different from our estimate, adjustments to stock-based compensation expense may be required. See also

Note 17 – Stock-Based Compensation in the Notes to Consolidated Financial Statements.

Forward-Looking Statements

Some of the information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Form 10-K, contain “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. These include statements about our expected capital resources, liquidity, financial performance, pension funding, and results of operations and are based on our reasonable current expectations. In addition, all statements regarding restructuring plans and expected associated costs and benefits, intent to repurchase shares of Common Stock, and the expected amount of such repurchases, and improvement in operating results, anticipated market conditions and productivity initiatives are forward looking. Forward-looking statements may be identified by the use of words, such as “believe”, “expect”, “anticipate”, “intend”, “depend”, “should”, “plan”, “estimated”, “predict”, “could”, “may”, “subject to”, “continues”, “growing”, “prospective”, “forecast”, “projected”, “purport”, “might”, “if”, “contemplate”, “potential”, “pending,” “target”, “goals”, “scheduled”, “will likely be”, and similar words and phrases. Discussions of strategies, plans or intentions often contain forward-looking statements. Important factors, among others, that could cause our actual results and future actions to differ materially from those described in forward-looking statements include, but are not limited to:

•	Changes in demand for our products, market conditions, product quality, or product availability adversely affecting sales levels.

•	Changes in markets or competition adversely affecting realization of price increases.

•	Failure to achieve projected levels of efficiencies, cost savings and cost reduction measures, including those expected as a result of our lean initiative and strategic sourcing plans.

•	The expected benefits and the timing of other actions in connection with our Enterprise Resource Planning ("ERP") system.

•	Availability and costs of raw materials, purchased components, energy and freight.

•	Changes in expected or future levels of operating cash flow, indebtedness and capital spending.

•	General economic and business conditions in particular industries, markets or geographic regions, as well as inflationary trends.

•	Regulatory issues, changes in tax laws or changes in geographic profit mix affecting tax rates and availability of tax incentives.

•	A major disruption in one or more of our manufacturing or distribution facilities or headquarters, including the impact of plant consolidations and relocations.

•	Changes in our relationships with, or the financial condition or performance of, key distributors and other customers, agents or business partners which could adversely affect our results of operations.

•	Impact of productivity improvements on lead times, quality and delivery of product.

•	Anticipated future contributions and assumptions including changes in interest rates and plan assets with respect to pensions.

32	HUBBELL INCORPORATED - Form 10-K

•	Adjustments to product warranty accruals in response to claims incurred, historical experiences and known costs.

•	Unexpected costs or charges, certain of which might be outside of our control.

•	Changes in strategy, economic conditions or other conditions outside of our control affecting anticipated future global product sourcing levels.

•	Ability to carry out future acquisitions and strategic investments in our core businesses as well as the acquisition related costs.

•	The ability to effectively implement ERP systems without disrupting operational and financial processes.

•	Unanticipated difficulties integrating acquisitions as well as the realization of expected synergies and benefits anticipated when we first enter into a transaction.

•	The ability of governments to meet their financial obligations.

•	Political unrest in foreign countries.

•	Natural disasters.

•	Failure of information technology systems or security breaches resulting in unauthorized disclosure of confidential information.

•	Future repurchases of common stock under our common stock repurchase program.

•	Changes in accounting principles, interpretations, or estimates.

•	The outcome of environmental, legal and tax contingencies or costs compared to amounts provided for such contingencies.

•	Adverse changes in foreign currency exchange rates and the potential use of hedging instruments to hedge the exposure to fluctuating rates of foreign currency exchange on inventory purchases.

•	Other factors described in our Securities and Exchange Commission filings, including the “Business”, “Risk Factors” and “Quantitative and Qualitative Disclosures about Market Risk” sections in this Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Any such forward-looking statements are not guarantees of future performances and actual results, developments and business decisions may differ from those contemplated by such forward-looking statements. The Company disclaims any duty to update any forward-looking statement, all of which are expressly qualified by the foregoing, other than as required by law.