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8-K - FORM 8-K - HUBBELL INC | c15782e8vk.htm |
Exhibit 99.1
Date:
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April 21, 2011 | NEWS RELEASE | ||
For Release:
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IMMEDIATELY | |||
Hubbell Incorporated 40 Waterview Drive Shelton, CT 06484 475-882-4000 |
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Contact:
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James M. Farrell |
HUBBELL REPORTS FIRST QUARTER RESULTS;
NET SALES OF $658.1 MILLION AND EARNINGS PER DILUTED SHARE OF $0.82
SHELTON, CT. (April 21, 2011) Hubbell Incorporated (NYSE: HUBA, HUBB) today reported operating
results for the first quarter ended March 31, 2011.
Net sales in the first quarter of 2011 were $658.1 million, an increase of 15% compared to the
$570.5 million reported in the first quarter of 2010. Operating income was $83.6 million, or 12.7%
of net sales, compared to $65.7 million, or 11.5% of net sales, for the comparable period of 2010.
Net income in the first quarter of 2011 was $50.3 million versus $38.6 million reported in the
first quarter of 2010. Earnings per diluted share were $0.82 in the first quarter of 2011 compared
to $0.64 reported in the first quarter of 2010. Free cash flow (defined as cash flow from
operations less capital expenditures) was $31.5 million in the first quarter of 2011 versus $12.8
million reported in the comparable period of 2010.
OPERATIONS REVIEW
Timothy H. Powers, Chairman, President, and Chief Executive Officer said Our first quarter results
were strong, particularly given the commodity cost challenges we faced. Our sales increased 15%
with double-digit growth in each of our segments. Our operating margin of 12.7% was up 120 basis
points compared to 2010 primarily due to higher volume. As anticipated, we did experience commodity
costs headwinds in the quarter. The impact of the higher commodity costs in excess of price
realization reduced our operating margins by approximately one percentage point in the first
quarter. We announced broad price increases during the quarter but do not expect to fully realize
the benefits until later in the year.
Our incoming orders in the first quarter were modestly higher than we expected, with strength in
both of our segments. In our Electrical segment, we experienced broad based higher demand
year-overyear compared to a weak first quarter of 2010. The increased demand was led by our
industrial products, while U.S. non-residential construction continued to benefit from strong
demand for renovation and relight products. The residential market experienced lower demand,
impacted by the continued high levels of unemployment and foreclosures as well as a difficult
comparison to 2010 which benefitted from the Federal Housing Tax Credit. In our Power segment, we
experienced volume increases for both distribution and transmission products compared to the prior
year.
SEGMENT REVIEW
The comments and year-over-year percentages in this segment review are based on first quarter
results in 2011 and 2010.
Electrical segment net sales in the first quarter of 2011 increased 14% to $466.1 million compared
to $409.3 million reported in the first quarter of 2010. The sales increase was broad based led by
demand for industrial products including high voltage test equipment. Compared to the first
quarter of 2010, operating income increased 44% to $57.6 million, or 12.4% of net sales. The
increase in operating income was due to higher sales partially offset by commodity cost increases.
Hubbells Power segment net sales in the first quarter of 2011 increased 19% to $192.0 million
compared to $161.2 million reported in the first quarter of 2010. The increase was due to higher
demand for both distribution and transmission products. Compared to the first quarter of 2010,
operating income increased 2% to $26.0 million, or 13.5% of net sales. The increase in operating
income was primarily due to higher sales largely offset by increased commodity costs and higher
spending to support growth initiatives, including product and brand development.
Page -2-
SUMMARY & OUTLOOK
Mr. Powers commented Based on early indications of improving market demand and higher price
realization, we are now forecasting sales to increase by 5%-7% for the year. As we have previously
mentioned, the sales comparisons versus 2010 are likely to be easier in the first half of the year
and become more difficult as the year progresses. We still expect demand for our power products to
increase in the mid-single digit range with higher levels of spending for both distribution and
transmission products. Our overall industrial market outlook has improved, particularly for our
Harsh and Hazardous businesses which are benefitting from higher spending on energy related
projects. The non-residential construction market is forecasted to be relatively flat in 2011
while demand for renovation, relight and controls is expected to remain strong. The residential
market remains weak and we anticipate this market to be flat to slightly down compared to 2010.
Mr. Powers concluded Turning to our operating margin, we expect to benefit from higher sales and
improved price realization. We also anticipate that commodity cost increases, including the price
of oil, and other inflationary pressures will mitigate much of the benefits. As such, we continue
to expect our operating margin will increase by approximately 50 basis points in 2011. The
commodity market remains volatile as evidenced by prices for certain types of steel that have
increased on average by 30%-40% compared to the fourth quarter of 2010. As always, we are working
to offset commodity cost increases through pricing actions but the timing of recovering those costs
tends to lag by at least one quarter. We remain confident that we should be able to navigate
through these cost challenges to produce record earnings in 2011. Looking beyond the current year,
we are excited with the prospect that fully half of our markets, non-residential and residential
construction, are expected to return to growth following historic slumps. In addition, we expect
strong growth in both utility transmission spending and energy efficient buildings including LED
lighting applications.
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 Quantiative and Qualitative Disclosures about Market Risk
Sections in the Annual Report on Form 10-K for the year ended December 31, 2010.
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 2010 revenues of $2.5 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 -4-
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 | ||||||||
March 31 | ||||||||
2011 | 2010 | |||||||
Net Sales |
$ | 658.1 | $ | 570.5 | ||||
Cost of goods sold |
452.9 | 394.8 | ||||||
Gross Profit |
205.2 | 175.7 | ||||||
Selling & administrative expenses |
121.6 | 110.0 | ||||||
Operating income |
83.6 | 65.7 | ||||||
Operating income as of % of Net sales |
12.7 | % | 11.5 | % | ||||
Interest expense, net |
(7.5 | ) | (7.6 | ) | ||||
Other expense, net |
(2.1 | ) | (0.5 | ) | ||||
Income before income taxes |
74.0 | 57.6 | ||||||
Provision for income taxes |
23.3 | 18.6 | ||||||
Net income |
$ | 50.7 | $ | 39.0 | ||||
Less: Net income attributable to noncontrolling interest |
0.4 | 0.4 | ||||||
Net income attributable to Hubbell |
$ | 50.3 | $ | 38.6 | ||||
Earnings Per Share: |
||||||||
Basic |
$ | 0.83 | $ | 0.64 | ||||
Diluted |
$ | 0.82 | $ | 0.64 | ||||
Cash dividends per common share |
$ | 0.38 | $ | 0.36 |
Page -5-
HUBBELL INCORPORATED
Condensed Consolidated Balance Sheet
(unaudited)
(in millions)
Condensed Consolidated Balance Sheet
(unaudited)
(in millions)
March 31, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 496.9 | $ | 520.7 | ||||
Short-term investments |
7.8 | 8.8 | ||||||
Accounts receivable, net |
397.5 | 341.8 | ||||||
Inventories, net |
303.7 | 298.4 | ||||||
Deferred taxes and other |
61.3 | 56.4 | ||||||
TOTAL CURRENT ASSETS |
1,267.2 | 1,226.1 | ||||||
Property, plant and equipment, net |
365.6 | 358.3 | ||||||
Investments |
31.6 | 30.2 | ||||||
Goodwill |
726.6 | 724.0 | ||||||
Intangible assets and other |
351.1 | 367.2 | ||||||
TOTAL ASSETS |
$ | 2,742.1 | $ | 2,705.8 | ||||
LIABILITIES AND EQUITY |
||||||||
Short-term debt |
$ | 1.8 | $ | 1.8 | ||||
Accounts payable |
219.5 | 160.8 | ||||||
Accrued salaries, wages and employee benefits |
43.4 | 70.4 | ||||||
Accrued insurance |
57.7 | 48.5 | ||||||
Dividends payable |
23.0 | 21.9 | ||||||
Other accrued liabilities |
140.2 | 141.6 | ||||||
TOTAL CURRENT LIABILITIES |
485.6 | 445.0 | ||||||
Long-term debt |
596.0 | 595.9 | ||||||
Other non-current liabilities |
197.9 | 201.4 | ||||||
TOTAL LIABILITIES |
1,279.5 | 1,242.3 | ||||||
Hubbell Shareholders Equity |
1,458.2 | 1,459.2 | ||||||
Noncontrolling interest |
4.4 | 4.3 | ||||||
TOTAL EQUITY |
1,462.6 | 1,463.5 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 2,742.1 | $ | 2,705.8 | ||||
Page -6-
HUBBELL INCORPORATED
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in millions)
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in millions)
Three Months Ended | ||||||||
March 31 | ||||||||
2011 | 2010 | |||||||
Cash Flows From Operating Activities |
||||||||
Net income attributable to Hubbell |
$ | 50.3 | $ | 38.6 | ||||
Depreciation and amortization |
17.6 | 18.3 | ||||||
Stock-based compensation expense |
2.5 | 2.2 | ||||||
Deferred income taxes |
9.7 | 2.7 | ||||||
Changes in working capital |
(20.0 | ) | (33.0 | ) | ||||
Contributions to defined benefit pension plans |
(0.8 | ) | (0.9 | ) | ||||
Other, net |
(5.8 | ) | (4.0 | ) | ||||
Net cash provided by operating activities |
53.5 | 23.9 | ||||||
Cash Flows From Investing Activities |
||||||||
Capital expenditures |
(22.0 | ) | (11.1 | ) | ||||
Net change in investments |
0.9 | (0.5 | ) | |||||
Other, net |
2.1 | 1.1 | ||||||
Net cash used in investing activities |
(19.0 | ) | (10.5 | ) | ||||
Cash Flows From Financing Activities |
||||||||
Short-term debt borrowings, net |
| 3.4 | ||||||
Payment of dividends |
(21.9 | ) | (20.9 | ) | ||||
Acquisition of common shares |
(59.9 | ) | | |||||
Proceeds from exercise of stock options |
16.4 | 9.6 | ||||||
Other, net |
3.3 | 1.7 | ||||||
Net cash used in financing activities |
(62.1 | ) | (6.2 | ) | ||||
Effect of foreign exchange rate changes on cash
and cash equivalents |
3.8 | (1.0 | ) | |||||
(Decrease) increase in cash and cash equivalents |
(23.8 | ) | 6.2 | |||||
Cash and cash equivalents |
||||||||
Beginning of period |
520.7 | 258.5 | ||||||
End of period |
$ | 496.9 | $ | 264.7 | ||||
Page -7-
HUBBELL INCORPORATED
Segment Information
(unaudited)
(in millions)
Segment Information
(unaudited)
(in millions)
Three Months Ended March 31 | ||||||||
2011 | 2010 | |||||||
Net Sales |
||||||||
Electrical |
$ | 466.1 | $ | 409.3 | ||||
Power |
192.0 | 161.2 | ||||||
Total Net Sales |
$ | 658.1 | $ | 570.5 | ||||
Operating Income |
||||||||
Electrical |
$ | 57.6 | $ | 40.1 | ||||
Power |
26.0 | 25.6 | ||||||
Total Operating
Income |
$ | 83.6 | $ | 65.7 | ||||
Operating Income as a % of Net Sales |
||||||||
Electrical |
12.4 | % | 9.8 | % | ||||
Power |
13.5 | % | 15.9 | % | ||||
Total |
12.7 | % | 11.5 | % |
Page -8-
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 | ||||||||
March 31 | ||||||||
2011 | 2010 | |||||||
Numerator: |
||||||||
Net income attributable to Hubbell |
$ | 50.3 | $ | 38.6 | ||||
Less: Earnings allocated to participating
securities |
0.2 | 0.2 | ||||||
Net income available to common shareholders |
$ | 50.1 | $ | 38.4 | ||||
Denominator: |
||||||||
Average number of common shares outstanding |
60.4 | 59.7 | ||||||
Potential dilutive shares |
0.8 | 0.4 | ||||||
Average number of diluted shares outstanding |
61.2 | 60.1 | ||||||
Earnings per Share: |
||||||||
Basic |
$ | 0.83 | $ | 0.64 | ||||
Diluted |
$ | 0.82 | $ | 0.64 |
Page -9-
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
March 31, 2011 | December 31, 2010 | |||||||
Total Debt |
$ | 597.8 | $ | 597.7 | ||||
Total Hubbells Shareholders Equity |
1,458.2 | 1,459.2 | ||||||
Total Capital |
$ | 2,056.0 | $ | 2,056.9 | ||||
Total Debt to Total Capital |
29 | % | 29 | % | ||||
Total Debt |
$ | 597.8 | $ | 597.7 | ||||
Less: Cash and cash equivalents |
(496.9 | ) | (520.7 | ) | ||||
Investments |
(39.4 | ) | (39.0 | ) | ||||
Net Debt |
$ | 61.5 | $ | 38.0 | ||||
Net Debt to Total Capital |
3 | % | 2 | % |
Note: | Management believes that net debt to capital is a useful measure regarding Hubbells
financial leverage for evaluating the Companys ability to meet its funding needs. |
Free Cash Flow Reconciliation
Three Months Ended March 31 | ||||||||
2011 | 2010 | |||||||
Net cash provided by operating activities |
$ | 53.5 | $ | 23.9 | ||||
Less: Capital Expenditures |
(22.0 | ) | (11.1 | ) | ||||
Free cash flow |
$ | 31.5 | $ | 12.8 | ||||
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. |
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