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8-K - FORM 8-K - HUBBELL INC | c07023e8vk.htm |
Exhibit 99.1
Date: | October 21, 2010 | NEWS RELEASE | ||||
For Release: | IMMEDIATELY | |||||
Hubbell Incorporated 40 Waterview Drive Shelton, CT 06484 475-882-4000 |
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Contact: | William R. Sperry |
HUBBELL REPORTS THIRD QUARTER RESULTS;
NET SALES OF $685.0 MILLION AND EARNINGS PER DILUTED SHARE OF $1.18
SHELTON, CT. (October 21, 2010) Hubbell Incorporated (NYSE: HUBA, HUBB) today reported
operating results for the third quarter ended September 30, 2010.
Net sales in the third quarter of 2010 were $685.0 million, an increase of 15% compared to the
$593.9 million reported in the third quarter of 2009. Operating income was $117.6 million, or
17.2% of net sales, compared to $91.3 million, or 15.4% of net sales, for the comparable period of
2009. Net income in the third quarter of 2010 was $71.3 million versus $57.3 million reported in
the third quarter of 2009. Earnings per diluted share were $1.18 in the third quarter of 2010
compared to $1.01 reported in the third quarter of 2009. Free cash flow (defined as cash flow from
operations less capital expenditures) was $71.4 million in the third quarter of 2010 versus $137.8
million reported in the comparable period of 2009.
For the first nine months of 2010, net sales were $1.9 billion, an increase of 8% compared to the
same period last year. Operating income was $276.8 million, or 14.6% of net sales, compared to
$215.2 million, or 12.2% of net sales, for the comparable period of 2009. Net income in the first
nine months of 2010 was $167.5 million, an increase of 28% compared to the $130.5 million reported
in the first nine months of 2009. Earnings per diluted share were $2.77, or 20% above the $2.31
reported for the comparable period of 2009. Free cash flow was $142.2 million compared to $277.8
million reported in the first nine months of 2009.
OPERATIONS REVIEW
Timothy H. Powers, Chairman, President, and Chief Executive Officer said I am very pleased with
our strong third quarter performance. Our overall reported sales increased 15%, including the
Burndy acquisition which added 9% to net sales in the quarter. During the quarter, we experienced
higher demand for industrial and power products as well as increased shipments of high voltage test
equipment. I am particularly pleased with our operating margin of 17.2%, up 180 basis points
compared to 2009. The margin improvement was due to the benefits of productivity initiatives,
higher sales and a favorable product mix partially offset by higher commodity costs. These
impressive results reflect Hubbells multi-year productivity initiatives that have resulted in a
leaner, more profitable company.
Mr. Powers added The incoming orders for the third quarter were reflective of improving overall
trends for our business. In our Electrical segment, U.S. non-residential construction was lower;
however, increased demand in the renovation, relight and controls markets provided some offset. The
industrial maintenance and repair markets remained robust with our businesses that serve those
markets experiencing strong growth rates. The residential market remained near the bottom as the
Federal Housing Tax Credit expired and unemployment rates have remained high. In our Power segment,
spending for distribution products was higher than the third quarter of 2009 as utility companies
resumed spending on maintenance that had been deferred in the second half of 2009.
SEGMENT REVIEW
The comments and year-over-year percentages in this segment review are based on third quarter
results in 2010 and 2009.
Electrical segment net sales in the third quarter of 2010 increased 18% to $490.6 million compared
to $414.2 million reported in the third quarter of 2009. The Burndy acquisition added 13% to sales
in the third quarter of 2010. In addition, increased sales of industrial products and high voltage
test equipment were partially offset by weaker demand in the commercial and industrial lighting
markets. Compared to the third quarter of 2009, operating income increased 63% to $83.9 million,
or 17.1% of net sales. The increase in operating income was due to productivity improvements, the
contribution of Burndy and a higher mix of industrial products.
Page -2-
Hubbells Power segment net sales in the third quarter of 2010 were $194.4 million compared to
$179.7 million reported in the third quarter of 2009. The increase was due to improved demand for
distribution products as utility companies returned to spending on maintenance that had been
deferred in the second half of 2009. Operating income decreased to $33.7 million compared to $39.8
million reported in the third quarter of 2009. The decrease in operating income was primarily due
to higher commodity costs and increased selling and administrative costs partially offset by
productivity improvements.
SUMMARY & OUTLOOK
Mr. Powers commented Looking at the remainder of 2010, we expect net sales to be up approximately
7% for the year which reflects our normal seasonal pattern of lower sales in the fourth quarter.
Based on the strength of our year to date performance we now expect full year operating margin to
expand by approximately 180 basis points.
Mr. Powers concluded Looking into 2011, Hubbells largest served market, non-residential
construction is forecasted to decline modestly. Within the non-residential market, public sector
spending is likely to continue to benefit from the Federal stimulus plan. In addition, we expect to
continue to realize the benefits of higher demand for our energy efficient products in the relight,
renovation and building controls areas. The utility market is expected to grow with higher demand
for our distribution products that maintain the infrastructure. We also expect increased spending
on transmission projects as previously delayed projects begin in 2011. The industrial markets are
expected to expand in the coming year with capacity utilization rates increasing and higher
spending on oil and gas projects. The residential market is forecasted to improve; however, the
recovery could be slow as the existing supply of inventory, including foreclosures, and high levels
of unemployment are impediments to growth. So, overall, we expect our sales to increase modestly
in 2011 compared to 2010. From a profitability perspective, we remain committed to our long term
objective of expanding operating margin. I remain very positive on
the outlook for Hubbell. I am excited about secular growth trends in the areas of energy efficient
buildings, including new technologies such as LED, as well as infrastructure spending for upgrading
the U.S. power grid where Hubbell is well positioned to participate in the growth.
Page -3-
Certain statements contained herein may constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These include statements about capital
resources, performance and results of operations and are based on the Companys reasonable current
expectations. In addition, all statements regarding anticipated growth or improvement in operating
results, anticipated market conditions, and economic recovery are forward-looking. These
statements may be identified by the use of forward-looking words or phrases such as improved,
leading, improving, continuing growth, continued, ranging, contributing, primarily,
plan, expect, anticipated, expected, expectations, should result, uncertain, goals,
projected, on track, likely, and others. Such forward-looking statements involve numerous
assumptions, known and unknown risks, uncertainties and other factors which may cause actual and
future performance or achievements of the Company to be materially different from any future
results, performance, or achievements expressed or implied by such forward-looking statements.
Such factors include, but are not limited to: achieving sales levels to fulfill revenue
expectations; unexpected costs or charges, certain of which may be outside the control of the
Company; anticipated benefit from the Federal stimulus package; expected benefits of process
improvement and other lean initiatives; the expected benefit and effect of the business information
system initiative and streamlining programs; the availability and costs of raw materials and
purchased components; realization of price increases; the ability to achieve projected levels of
efficiencies and cost reduction measures; general economic and business conditions; competition;
and 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 the Annual Report on Form 10-K for the year ended December 31, 2009.
Page -4-
Hubbell Incorporated is an international manufacturer of quality electrical and electronic products
for a broad range of non-residential and residential construction, industrial and utility
applications. With 2009 revenues of $2.4 billion, Hubbell Incorporated operates manufacturing
facilities in the United States, Canada, Switzerland, Puerto Rico, Mexico, the Peoples Republic of
China, Italy, the United Kingdom, Brazil and Australia. Hubbell also participates in joint
ventures in Taiwan and Hong Kong, and maintains sales offices in Singapore, the Peoples Republic
of China, Mexico, South Korea, and the Middle East. The corporate headquarters is located in
Shelton, CT.
Page -5-
HUBBELL INCORPORATED
Condensed Consolidated Statement of Income
(unaudited)
(in millions, except per share data)
Condensed Consolidated Statement of Income
(unaudited)
(in millions, except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales |
$ | 685.0 | $ | 593.9 | $ | 1,901.9 | $ | 1,763.7 | ||||||||
Cost of goods sold |
449.8 | 401.0 | 1,280.0 | 1,229.6 | ||||||||||||
Gross Profit |
235.2 | 192.9 | 621.9 | 534.1 | ||||||||||||
Selling & administrative expenses |
117.6 | 101.6 | 345.1 | 318.9 | ||||||||||||
Operating income |
117.6 | 91.3 | 276.8 | 215.2 | ||||||||||||
Operating income as of % of Net sales |
17.2 | % | 15.4 | % | 14.6 | % | 12.2 | % | ||||||||
Interest expense, net |
(7.8 | ) | (7.7 | ) | (22.9 | ) | (23.0 | ) | ||||||||
Other expense, net |
(0.6 | ) | 0.3 | (1.6 | ) | (0.7 | ) | |||||||||
Income before income taxes |
109.2 | 83.9 | 252.3 | 191.5 | ||||||||||||
Provision for income taxes |
37.5 | 26.4 | 83.7 | 60.3 | ||||||||||||
Net income |
$ | 71.7 | $ | 57.5 | $ | 168.6 | $ | 131.2 | ||||||||
Less: Net income attributable to noncontrolling interest |
0.4 | 0.2 | 1.1 | 0.7 | ||||||||||||
Net income attributable to Hubbell |
$ | 71.3 | $ | 57.3 | $ | 167.5 | $ | 130.5 | ||||||||
Earnings Per Share: |
||||||||||||||||
Basic |
$ | 1.19 | $ | 1.01 | $ | 2.79 | $ | 2.31 | ||||||||
Diluted |
$ | 1.18 | $ | 1.01 | $ | 2.77 | $ | 2.31 |
Page -6-
HUBBELL INCORPORATED
Condensed Consolidated Balance Sheet
(unaudited)
(in millions)
Condensed Consolidated Balance Sheet
(unaudited)
(in millions)
September 30, 2010 | December 31, 2009 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 342.8 | $ | 258.5 | ||||
Short-term investments |
11.4 | 2.6 | ||||||
Accounts receivable, net |
409.4 | 310.1 | ||||||
Inventories, net |
294.0 | 263.5 | ||||||
Deferred taxes and other |
67.5 | 68.7 | ||||||
TOTAL CURRENT ASSETS |
1,125.1 | 903.4 | ||||||
Property, plant and equipment, net |
357.7 | 368.8 | ||||||
Investments |
31.0 | 25.5 | ||||||
Goodwill |
746.6 | 743.7 | ||||||
Intangible assets and other |
348.8 | 361.4 | ||||||
TOTAL ASSETS |
$ | 2,609.2 | $ | 2,402.8 | ||||
LIABILITIES AND EQUITY |
||||||||
Short-term debt |
$ | 2.3 | $ | | ||||
Accounts payable |
172.9 | 130.8 | ||||||
Accrued salaries, wages and employee benefits |
65.7 | 62.8 | ||||||
Accrued insurance |
51.0 | 49.3 | ||||||
Dividends payable |
21.6 | 20.9 | ||||||
Other accrued liabilities |
163.9 | 154.7 | ||||||
TOTAL CURRENT LIABILITIES |
477.4 | 418.5 | ||||||
Long-term debt |
502.1 | 497.2 | ||||||
Other non-current liabilities |
196.8 | 185.1 | ||||||
TOTAL LIABILITIES |
1,176.3 | 1,100.8 | ||||||
Hubbell Shareholders Equity |
1,428.9 | 1,298.2 | ||||||
Noncontrolling interest |
4.0 | 3.8 | ||||||
TOTAL EQUITY |
1,432.9 | 1,302.0 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 2,609.2 | $ | 2,402.8 | ||||
Page -7-
HUBBELL INCORPORATED
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in millions)
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in millions)
Nine Months Ended September 30 | ||||||||
2010 | 2009 | |||||||
Cash Flows From Operating Activities |
||||||||
Net income attributable to Hubbell |
$ | 167.5 | $ | 130.5 | ||||
Depreciation and amortization |
54.8 | 51.1 | ||||||
Stock-based compensation expense |
6.9 | 6.2 | ||||||
Deferred income taxes |
4.7 | 13.0 | ||||||
Changes in working capital |
(67.3 | ) | 89.6 | |||||
Contributions to defined benefit pension plans |
(2.6 | ) | (2.4 | ) | ||||
Other, net |
12.0 | 9.1 | ||||||
Net cash provided by operating activities |
176.0 | 297.1 | ||||||
Cash Flows From Investing Activities |
||||||||
Capital expenditures |
(33.8 | ) | (19.3 | ) | ||||
Acquisition of businesses, net of cash acquired |
| (0.3 | ) | |||||
Net change in investments |
(12.0 | ) | 6.3 | |||||
Other, net |
2.3 | 1.7 | ||||||
Net cash used in investing activities |
(43.5 | ) | (11.6 | ) | ||||
Cash Flows From Financing Activities |
||||||||
Short-term debt borrowings |
2.2 | | ||||||
Payment of dividends |
(64.0 | ) | (59.1 | ) | ||||
Payment of dividends to noncontrolling interest |
(0.9 | ) | (0.3 | ) | ||||
Acquisition of common shares |
(2.9 | ) | | |||||
Proceeds from exercise of stock options |
11.1 | 2.7 | ||||||
Other, net |
2.4 | 0.2 | ||||||
Net cash used in financing activities |
(52.1 | ) | (56.5 | ) | ||||
Effect of foreign exchange rate changes on cash
and cash equivalents |
3.9 | 5.2 | ||||||
Increase in cash and cash equivalents |
84.3 | 234.2 | ||||||
Cash and cash equivalents |
||||||||
Beginning of period |
258.5 | 178.2 | ||||||
End of period |
$ | 342.8 | $ | 412.4 | ||||
Page -8-
HUBBELL INCORPORATED
Segment Information
(unaudited)
(in millions)
Segment Information
(unaudited)
(in millions)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales |
||||||||||||||||
Electrical |
$ | 490.6 | $ | 414.2 | $ | 1,358.3 | $ | 1,213.7 | ||||||||
Power |
194.4 | 179.7 | 543.6 | 550.0 | ||||||||||||
Total Net Sales |
$ | 685.0 | $ | 593.9 | $ | 1,901.9 | $ | 1,763.7 | ||||||||
Operating Income |
||||||||||||||||
Electrical |
$ | 83.9 | $ | 51.5 | $ | 185.1 | $ | 110.4 | ||||||||
Power |
33.7 | 39.8 | 91.7 | 104.8 | ||||||||||||
Total
Operating
Income |
$ | 117.6 | $ | 91.3 | $ | 276.8 | $ | 215.2 | ||||||||
Operating Income as
a % of Net Sales |
||||||||||||||||
Electrical |
17.1 | % | 12.4 | % | 13.6 | % | 9.1 | % | ||||||||
Power |
17.3 | % | 22.1 | % | 16.9 | % | 19.1 | % | ||||||||
Total |
17.2 | % | 15.4 | % | 14.6 | % | 12.2 | % |
Page -9-
HUBBELL INCORPORATED
Earnings Per Share Calculation
(unaudited)
(in millions, except per share amounts)
Earnings Per Share Calculation
(unaudited)
(in millions, except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Numerator: |
||||||||||||||||
Net income attributable to Hubbell |
$ | 71.3 | $ | 57.3 | $ | 167.5 | $ | 130.5 | ||||||||
Less: Earnings allocated to participating
securities |
0.3 | 0.3 | 0.7 | 0.6 | ||||||||||||
Net income available to common shareholders |
$ | 71.0 | $ | 57.0 | $ | 166.8 | $ | 129.9 | ||||||||
Denominator: |
||||||||||||||||
Average number of common shares outstanding |
59.8 | 56.3 | 59.8 | 56.2 | ||||||||||||
Potential dilutive shares |
0.4 | 0.2 | 0.4 | 0.1 | ||||||||||||
Average number of diluted shares outstanding |
60.2 | 56.5 | 60.2 | 56.3 | ||||||||||||
Earnings per Share: |
||||||||||||||||
Basic |
$ | 1.19 | $ | 1.01 | $ | 2.79 | $ | 2.31 | ||||||||
Diluted |
$ | 1.18 | $ | 1.01 | $ | 2.77 | $ | 2.31 |
Page -10-
HUBBELL INCORPORATED
Non-GAAP Financial Measures
(unaudited)
(in millions)
Non-GAAP Financial Measures
(unaudited)
(in millions)
Ratios of Total Debt to Total Capital and Net Debt to Total Capital
September 30, 2010 | December 31, 2009 | |||||||
Total Debt |
$ | 504.4 | $ | 497.2 | ||||
Total Hubbells Shareholders Equity |
1,428.9 | 1,298.2 | ||||||
Total Capital |
$ | 1,933.3 | $ | 1,795.4 | ||||
Total Debt to Total Capital |
26 | % | 28 | % | ||||
Total Debt |
$ | 504.4 | $ | 497.2 | ||||
Less: Cash and cash equivalents |
(342.8 | ) | (258.5 | ) | ||||
Investments |
(42.4 | ) | (28.1 | ) | ||||
Net Debt |
$ | 119.2 | $ | 210.6 | ||||
Net Debt to Total Capital |
6 | % | 12 | % |
Note: Management believes that net debt to capital is a useful measure regarding Hubbells
financial leverage as a gauge for evaluating the Companys ability to meet its funding needs.
Free Cash Flow Reconciliation
Nine Months Ended September 30 | ||||||||
2010 | 2009 | |||||||
Net cash provided by operating activities |
$ | 176.0 | $ | 297.1 | ||||
Less: Capital Expenditures |
(33.8 | ) | (19.3 | ) | ||||
Free cash flow |
$ | 142.2 | $ | 277.8 | ||||
Note: Management believes that free cash flow provides useful information regarding Hubbells
ability to generate cash without reliance on external financings. In addition, management uses
free cash flow to evaluate the resources available for investments in the business, strategic
acquisitions and strengthening the balance sheet.
Page -11-