Hubbell Reports Fourth Quarter Results: Net Sales of $752.5 Million and Earnings Per Diluted Share of $1.20
SHELTON, CT. Â (January 24, 2013) - Hubbell Incorporated (NYSE:Â Â HUBA, HUBB)
today reported operating results for the fourth quarter ended December 31, 2012.
Net sales in the fourth quarter of 2012 were $752.5 million, an increase of 2%
compared to the $740.0 million reported in the fourth quarter of 2011. Operating
income was $110.5 million, or 14.7% of net sales, compared to $109.8 million, or
14.8% of net sales, for the comparable period of 2011. Net income in the fourth
quarter of 2012 was $71.9 million versus $70.0 million reported in the fourth
quarter of 2011. Earnings per diluted share were $1.20 in the fourth quarter of
2012 compared to $1.17 reported in the fourth quarter of 2011. Free cash flow
(defined as cash flow from operations less capital expenditures) was $139.3
million in the fourth quarter of 2012 versus $103.7 million reported in the
comparable period of 2011.
Net sales for the full year 2012 were $3.0 billion, an increase of 6% compared
to 2011. Operating income was $471.8 million, or 15.5% of net sales, compared to
$423.8 million, or 14.8% of net sales, for the comparable period of 2011. Net
income for the full year 2012 was $299.7 million, an increase of 12% compared to
the $267.9 million reported in 2011. Earnings per diluted share were $5.00, or
13% above the $4.42 reported for the comparable period of 2011. Free cash flow
was $300.0 million compared to $279.6 million reported in 2011.
OPERATIONS REVIEW
Timothy H. Powers, Chairman of the Board said "Before we discuss the financial
results, I would like to take this opportunity to express what an honor and
privilege it has been leading Hubbell over the past decade. As many of you
already know, Dave Nord has been appointed President and Chief Executive Officer
while I will remain Chairman of the Board. I am looking forward to working with
Dave and the Board during this transition and am highly confident that the
Company will continue to prosper under Dave's leadership.
"Now turning to the results, the uncertainty surrounding the U.S. election and
the "fiscal cliff" appeared to have a dampening effect on demand in the fourth
quarter. Our overall sales increased slightly in the quarter with essentially
flat organic demand while acquisitions added two percentage points to our sales
growth. From a profitability perspective, we reported operating margin of
14.7%, in line with our expectations despite some market softening as we exited
the year. I am pleased to report that we completed the acquisition of
Continental Industries, Inc. in January which will be added to our Electrical
segment. Continental makes high quality exothermic welding and connector
products and is a strong fit with our Burndy business. This marks the seventh
deal we have completed in the past year and a half and highlights our
capabilities in this area.
"Looking at our end markets, we experienced a slightly weaker environment than
anticipated during the fourth quarter. U.S. non-residential new construction was
weak as it appeared that spending decisions may have been delayed due to
economic uncertainty. Within this market, relight projects and demand for LED
fixtures were areas of strength in the quarter. The residential market was
another area of growth for us and the recovery is clearly underway. North
American electrical utility demand for our products was higher due in large part
to Hurricane Sandy as well as increased spending on transmission projects. At
the same time, we experienced weaker demand for maintenance related distribution
products as utility budgets were limited due to higher levels of spending
earlier in the year. Industrial demand was mixed with solid growth in the energy
related industries while our high voltage test businesses were much weaker."
Mr. Powers added "In reviewing the full year results, we achieved the highest
sales and earnings per share in our history. For the year, our sales increased
6% with balanced growth between our two segments. We experienced growth in
several key areas; utility, oil and gas and residential markets as well as
continued higher demand for energy efficient lighting used for renovation and
relighting. Looking at our profitability, we finished the year at 15.5%
operating margin which is well above the same point in our previous cycle. This
margin level was attained through a disciplined process of managing costs and
driving productivity across the enterprise and as a result we have evolved into
a structurally more profitable organization. I would also like to highlight that
we have increased the pace of acquisitions; adding to our branded product
breadth. In addition, we raised our dividend two times during the course of the
year and returned approximately $75 million to shareholders by repurchasing
nearly one million shares reflecting our confidence in Hubbell's cash flow
generating abilities and commitment to increasing shareholder value."
SEGMENT REVIEW
The comments and year-over-year percentages in this segment review are based on
fourth quarter results in 2012 and 2011.
Electrical segment net sales in the fourth quarter of 2012 increased 2% to
$521.4 million compared to $513.6 million reported in the fourth quarter of
2011. The increase was due to acquisitions which contributed 2% to sales in the
quarter. In addition, higher demand in the energy and residential markets was
offset by weakness in high voltage test equipment. Compared to the fourth
quarter of 2011, operating income decreased 8% to $68.0 million, or 13.0% of net
sales. The decrease in operating income was primarily due to a less favorable
product mix and higher costs, including pension and benefit related expenses.
Hubbell's Power segment net sales in the fourth quarter of 2012 were $231.1
million compared to $226.4 million reported in the fourth quarter of 2011. The
acquisition that was completed in the 4(th) quarter of 2012 contributed 2% to
sales. The organic sales were essentially flat as the favorable impact of storm
sales and large transmission related projects were offset by lower levels of
spending for distribution maintenance. Compared to the fourth quarter of 2011,
operating income increased 18% to $42.5 million, or 18.4% of net sales. The
increase in operating income was primarily due to productivity improvements and
price realization in excess of cost increases.
SUMMARY & OUTLOOK
David G. Nord, President and Chief Executive Officer commented "Looking to
2013, we expect overall sales to increase in the 3 to 5% range comprised of low
single digit growth from organic volume and 2% from acquisitions. We expect the
volume increases to be more weighted towards the second half of the year due to
anticipated strengthening in the markets and more favorable comparisons to the
prior year. Within our Electrical segment, we expect 3 to 5% growth led by
strong growth in our residential businesses. The non-residential new
construction market is likely to remain challenging in the near term but third
party forecasts still point to some improvement in the second half of the year
and relight opportunities should also have a favorable impact. The industrial
market is expected to be flat to slightly higher with modest increases in
factory utilization and the energy markets partially offset by lower demand for
high voltage test equipment. The Power segment is expected to grow in the 4 to
6% range with acquisitions contributing 2%. We expect modest growth for
maintenance and repair work on the distribution and transmission networks.
Spending for transmission related projects is expected to remain at historically
high levels but the growth rate will be lower than the past couple of years."
Mr. Nord added "Turning to profitability, we expect that operating margins will
expand by approximately 40 basis points in 2013 primarily due to leveraging the
higher volume. As always, we will continue focusing on carefully balancing
productivity and pricing actions to offset all cost increases. Our tax rate is
expected to be approximately 31.5% in 2013 which includes the two year benefit
of the reinstatement of the R&D tax credit."
Mr. Nord concluded "On a more personal note, I am energized by the opportunity
to lead an organization with such a rich heritage as Hubbell. As I look forward,
I am excited to work with Tim, the Board and all of Hubbell's employees to
continue to build upon our successes."
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 Company's reasonable current expectations. Â In
addition, all statements regarding anticipated growth or improvement in
operating results, anticipated market conditions, and economic recovery are
forward-looking. Â 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", "intend" 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. Â 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 impacts from the
Federal stimulus package; expected benefits of process improvement and other
lean initiatives; the expected benefit and effect of the business information
system initiatives 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, 2011.
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. Â With 2012 revenues of $3.0
billion, Hubbell Incorporated operates manufacturing facilities in the United
States, Canada, Switzerland, Puerto Rico, Mexico, the People's Republic of
China, Italy, the United Kingdom, Brazil and Australia. Â Hubbell also
participates in joint ventures in Taiwan and Hong Kong, and maintains sales
offices in Singapore, the People's Republic of China, India, Mexico, South Korea
and the Middle East. Â The corporate headquarters is located in Shelton, CT.
#######
HUBBELL INCORPORATED
Condensed Consolidated Statement of Income
(unaudited)
(in millions, except per share amounts)
  Three Months Ended  Year Ended
  December 31  December 31
----------------------- ---------------------------
+---------+ +---------+ +-----------+ +-----------+
  | 2012 | | 2011 | | 2012 | | 2011 |
+---------+ +---------+ +-----------+ +-----------+
Net Sales $ Â 752.5Â Â $ Â 740.0Â Â $ Â 3,044.4Â Â $ Â 2,871.6
Cost of goods sold   502.7    503.7    2,032.2    1,947.9
----------- ----------- ------------- -------------
Gross Profit   249.8    236.3    1,012.2    923.7
Selling & administrative
expenses   139.3    126.5    540.4    499.9
----------- ----------- ------------- -------------
Operating income   110.5    109.8    471.8    423.8
Operating income as a % of
 Net sales  14.7%   14.8%   15.5%   14.8%
Interest expense, net   (7.5)    (7.3)    (29.0)    (29.6)
Other income (expense), net   (0.9)    (0.6)    (1.0)    (4.4)
----------- ----------- ------------- -------------
Total other expense, net   (8.4)    (7.9)    (30.0)    (34.0)
Income before income taxes   102.1    101.9    441.8    389.8
Provision for income taxes   29.2    31.4    139.7    119.6
----------- ----------- ------------- -------------
Net income $ Â 72.9Â Â $ Â 70.5Â Â $ Â 302.1Â Â $ Â 270.2
Less: Net income
attributable to
noncontrolling interest   1.0    0.5    2.4    2.3
----------- ----------- ------------- -------------
Net income attributable to
Hubbell $ Â 71.9Â Â $ Â 70.0Â Â $ Â 299.7Â Â $ Â 267.9
----------- ----------- ------------- -------------
Earnings Per Share:
 Basic $  1.21  $  1.18  $ 5.05  $  4.47
 Diluted $  1.20  $  1.17  $ 5.00  $  4.42
Cash dividends per common
share $ Â 0.45Â Â $ Â 0.38Â Â $ 1.68Â Â $ Â 1.52
HUBBELL INCORPORATED
Condensed Consolidated Balance Sheet
(unaudited)
(in millions)
  December 31, 2012   December 31, 2011
------------------- ------------------
ASSETS
Cash and cash equivalents $ Â 645.0Â Â $ Â 569.6
Short-term investments   8.8    12.8
Accounts receivable, net   405.2    394.3
Inventories, net   341.7    318.3
Deferred taxes and other   55.5    58.5
--------------------- --------------------
  TOTAL CURRENT ASSETS   1,456.2    1,353.5
Property, plant and equipment, net   364.7    359.6
Investments   36.7    42.0
Goodwill   755.5    727.3
Intangible assets, net   288.1    269.5
Other long-term assets   45.8    94.6
--------------------- --------------------
  TOTAL ASSETS $  2,947.0  $  2,846.5
--------------------- --------------------
LIABILITIES AND EQUITY
Short-term debt $ Â -Â Â $ Â 2.9
Accounts payable   213.1    215.7
Accrued salaries, wages and employee
benefits   75.4    71.1
Accrued insurance   39.6    46.2
Dividends payable   -    22.5
Other accrued liabilities   119.3    133.7
--------------------- --------------------
  TOTAL CURRENT LIABILITIES   447.4    492.1
Long-term debt   596.7    596.3
Other non-current liabilities   235.0    284.6
--------------------- --------------------
  TOTAL LIABILITIES   1,279.1    1,373.0
Hubbell Shareholders' Equity   1,661.2    1,467.8
Noncontrolling interest   6.7    5.7
--------------------- --------------------
  TOTAL EQUITY   1,667.9    1,473.5
--------------------- --------------------
TOTAL LIABILITIES AND EQUITY $ Â 2,947.0Â Â $ Â 2,846.5
--------------------- --------------------
HUBBELL INCORPORATED
Earnings Per Share Calculation
(unaudited)
(in millions, except per share amounts)
  Three Months Ended  Year Ended
  December 31  December 31
--------------------- --------------------
  2012  2011  2012  2011
---------- ---------- ---------- ---------
Numerator:
 Net income attributable to Hubbell $ 71.9  $ 70.0  $ 299.7  $ 267.9
Less: Earnings allocated to
 participating securities   0.2    0.3    1.0    1.0
---------- ---------- ---------- ---------
Net income available to common
 shareholders $ 71.7  $ 69.7  $ 298.7  $ 266.9
Denominator:
Average number of common shares
 outstanding   59.1    58.9    59.1    59.7
 Potential dilutive shares   0.5    0.6    0.7    0.7
---------- ---------- ---------- ---------
Average number of diluted shares
 outstanding   59.6    59.5    59.8    60.4
---------- ---------- ---------- ---------
Earnings per Share:
 Basic $  1.21  $  1.18  $  5.05  $  4.47
 Diluted $  1.20  $  1.17  $  5.00  $  4.42
HUBBELL INCORPORATED
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in millions)
 Year Ended December 31
-------------------------
+----------+ +----------+
 | 2012 | | 2011 |
+----------+ +----------+
Cash Flows From Operating Activities
  Net income attributable to Hubbell $  299.7  $  267.9
  Depreciation and amortization   66.8    68.2
  Stock-based compensation expense   15.8    15.1
  Deferred income taxes   27.5    18.8
  Changes in working capital   (45.3)    (21.5)
  Contributions to defined benefit pension plans   (22.6)    (22.7)
  Other, net   7.2    9.2
------------ ------------
    Net cash provided by operating activities   349.1    335.0
------------ ------------
Cash Flows From Investing Activities
  Capital expenditures   (49.1)    (55.4)
  Acquisition of businesses, net of cash acquired   (90.7)    (29.6)
  Net change in investments   9.9    (14.4)
  Other, net   13.8    12.9
------------ ------------
    Net cash used in investing activities   (116.1)    (86.5)
------------ ------------
Cash Flows From Financing Activities
  Short-term debt (repayments) borrowings, net   (2.9)    1.4
  Payment of dividends   (122.3)    (90.1)
  Repurchase of common shares   (75.6)    (137.7)
  Proceeds from exercise of stock options   24.9    21.9
  Other, net   14.2    6.2
------------ ------------
    Net cash used in financing activities   (161.7)    (198.3)
------------ ------------
Effect of foreign exchange rate changes on cash and
cash equivalents   4.1    (1.3)
------------ ------------
Increase in cash and cash equivalents   75.4    48.9
Cash and cash equivalents
  Beginning of period   569.6    520.7
------------ ------------
  End of period $  645.0  $  569.6
------------ ------------
HUBBELL INCORPORATED
Segment Information
(unaudited)
(in millions)
Three Months Ended
  December 31  Year Ended December 31
------------------------ ---------------------------
+---------+ +----------+ +-----------+ +-----------+
  | 2012 | | 2011 | | 2012 | | 2011 |
+---------+ +----------+ +-----------+ +-----------+
Net Sales
   Electrical  $  521.4  $  513.6  $  2,114.6  $  2,004.2
   Power    231.1    226.4    929.8    867.4
----------- ------------ ------------- -------------
     Total Net Sales  $  752.5  $  740.0  $  3,044.4  $  2,871.6
----------- ------------ ------------- -------------
Operating Income
   Electrical  $  68.0  $  73.7  $  303.7  $  282.0
   Power    42.5    36.1    168.1    141.8
----------- ------------ ------------- -------------
     Total Operating
Income  $  110.5  $  109.8  $  471.8  $  423.8
----------- ------------ ------------- -------------
Operating Income as a % of Net Sales
   Electrical   13.0%   14.3%   14.4%   14.1%
   Power   18.4%   15.9%   18.1%   16.3%
     Total   14.7%   14.8%   15.5%   14.8%
HUBBELL INCORPORATED
Non-GAAP Financial Measures
(unaudited)
(in millions)
Ratios of Total Debt to Total Capital and Net Debt to Total Capital
-------------------------------------------------------------------------------
December
   31, 2012  December 31, 2011
----------------- --------------------------
 Total Debt $  596.7  $  599.2
Total Hubbell's Shareholders'
 Equity   1,661.2    1,467.8
----------------- --------------------------
 Total Capital $  2,257.9  $  2,067.0
----------------- --------------------------
 Total Debt to Total Capital  26%   29%
 Total Debt $  596.7  $  599.2
 Less: Cash and cash equivalents   (645.0)    (569.6)
  Investments   (45.5)    (54.8)
----------------- --------------------------
 Net Debt $  (93.8)  $  (25.2)
----------------- --------------------------
 Net Debt to Total Capital  (4%)   (1%)
Note: Management believes that net debt to capital is a useful measure
regarding Hubbell's financial leverage for evaluating the Company's ability
 to meet its funding needs.
Free Cash Flow Reconciliation
-------------------------------------------------------------------------------
   Year Ended December 31
--------------------------------------------
   2012  2011
----------------- --------------------------
Net cash provided by operating
 activities $  349.1  $  335.0
 Less: Capital Expenditures   (49.1)    (55.4)
----------------- --------------------------
 Free cash flow $  300.0  $  279.6
----------------- --------------------------
Note: Management believes that free cash flow provides useful information
regarding Hubbell's ability to generate cash without reliance on external
financings. Â In addition, management uses free cash flow to evaluate the
resources available for investments in the business, strategic acquisitions
 and further strengthening the balance sheet.
Contact: Â James M. Farrell
      Hubbell Incorporated
      40 Waterview Drive
      P.O. Box 1000
           Shelton, Connecticut  06484
           (475) 882-4000
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Source: Hubbell Inc. via Thomson Reuters ONE
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