ORANGE, Conn.--(BUSINESS WIRE)--Jan. 22, 2002--Hubbell Incorporated (NYSE: HUBA, HUBB) today announced its results for the fourth quarter and full year ended December 31, 2001.
The Company also announced an accumulated pre-tax charge totaling $62 million primarily for capacity reduction and other programs that will be recorded against earnings beginning in the fourth quarter 2001.
For the fourth quarter, sales totaled $301.2 million and, excluding the net charge and an additional gain related to the sale of a business in 2000, pro forma net profit was $17.7 million and earnings per share were $.30. Including the quarter's component of the charge, $53.0 million, and the gain net profit was a loss of $14.1 million and earnings per share were a negative $.24.
For the full year 2001, sales were $1,312 million and, before the charge and the additional gain related to the sale of the business in 2000, pro forma net profit was $80.2 million and earnings per share were $1.36. With the effect of the charge and gain included, net earnings were $48.3 million and earnings per share were $.82.
``Each quarter of 2001 proved more challenging,'' said Timothy H. Powers, President and Chief Executive Officer, ``with economic slowing earlier in the year worsening into a broad-based recession. The events of September exacerbated the difficulties as consumer confidence turned down with a consequent further dampening of demand in the United States and abroad.''
``As we've noted before,'' Powers continued, ``the task is to manage for the realities. An economic downturn is not unexpected after an unprecedented decade of prosperity in the U.S. The speed and severity of the downturn has been exacerbated by the collapse of inflated expectations in the Internet and telecommunications sectors. Hubbell has responded with a series of consistent and prudent steps to mitigate the effects of weakness in the markets we serve by sizing the Company for current and expected levels of business.''
``We began that comprehensive effort in the latter part of 2000 with programs to reduce variable costs and increase financial flexibility. Our accomplishments through 2001 have been substantial:
- Total workforce has been reduced by 19% compared to one year ago.
- Those savings plus reductions in capital expenditures and other operating expenses will reduce annual costs by $70 million.
- Debt has been reduced from $359 million to $167 million.
- A tight focus on asset efficiency has achieved a $58 million reduction in inventories year-over-year with a further reduction targeted for 2002.
- Operating cash flow in 2001 approximated $200 million which is the highest level in the Company's history and represents better than a 50% increase over the prior year. Free cash flow exceeded $90 million versus a negative $6 million in 2000.``
Powers continued: ``The fourth quarter charge represents added initiatives to lower fixed costs and reduce variable costs to the level of business that we expect in 2002. Programs include new product sourcing from low cost supply areas, further product line rationalizations, and capacity reductions. The total charge includes approximately $17 million in cash for severance and other costs of plant closings net of estimated recoveries. The remainder is primarily comprised of asset write-downs of redundant machinery, tooling, inventories and other assets. The actions will be completed by year-end 2002 and should provide $10 million in savings in 2002 and $20 million annually going forward.
``The majority of the pre-tax charge, $53 million, was taken in the fourth quarter 2001 just reported. This cost is net of $3.3 million in pre-tax income resulting from the reversal of costs accrued under Hubbell's 1997 streamlining program for actions which are no longer necessary. The second phase of the charge, $5.7 million pretax, will be recorded in 2002 as funds are actually spent and specific capacity reductions are announced and implemented''.
Sales and operating profits for each of Hubbell's three business segments were impacted by the decline in demand across all segments of the economy. Nonetheless, some operations reported positive comparisons and all segments were profitable in a year when other manufacturing companies faced greater difficulties. The year-over-year percentage comparisons which follow in this Segment Review exclude the effects of charges and one-time gains.
Sales for the Electrical Segment declined by 10% and operating profits by 34% chiefly as a result of the contraction of U.S. industrial demand. Within the segment, Hubbell's Mexican operation reported higher sales and operating profit as did both the Killark and Chalmit operations that serve the energy exploration and processing industry. In addition, the Raco/Bell unit has returned to significant profitability with its service levels to customers back to Hubbell standards providing strong market share gains.
Similar comparisons were reported in the Power Systems Segment with sales off by 10% and operating profit down by one-third. Capital investment by the electric utility industry continues to be focused on new generating capacity rather than the power transmission and distribution grid where the greater part of Hubbell utility products are utilized. Growth in this sector will resume as more units of new generating capacity come on-line, and the utility industry turns to necessary expansion and upgrading of the grid infrastructure.
The Industrial Technology Segment reported a 14% increase in sales driven by the GAI-Tronics operation which completed its first full year as a Hubbell operation. Operating profit declined by half as demand for high voltage and industrial controls products fell. The Company is continuing its program to transition this segment through internal development and acquisition into faster growing and more profitable instrumentation and industrial communications markets.
In its discussion of results for the full year 2001, the Company noted a number of points affecting year-over-year comparisons. The balance sheet reflects Hubbell's continuing financial strength. Even after repaying $192 million in short-term debt the Company's total cash and investment position is strong; cash and equivalents, short-term and other investments ended the year totaling $169 million. Cash and investments now slightly exceed the total of short-and long-term debt. The Statement of Earnings incorporated several non-recurring events. Within operations, there were special charge expenses totaling $53 million and an additional reserve of $3 million for doubtful accounts. These were partially offset by a gain from partial contingency settlements related to the sale of a business in the prior year. Other Income was positively affected by a $3.6 million gain from the sale of a leveraged lease investment.
Summary and Outlook
``All indications are,'' Powers said, ``that 2002 will be another difficult year for American manufacturers. Much will depend on the consumer's response to lower interest rates and taxes. At this point, however, it's difficult to cite any sector of the economy which might begin to drive an upturn. We have seen some firming of order patterns from industrial and utility customers, but they remain at the low levels experienced prior to September 11. Demand from commercial customers continues to decline and is expected to extend that negative trend through much of 2002.''
``Volume levels in each of the first two quarters of the year will likely approximate the fourth quarter just completed. Even with a modest improvement in the second half, by no means certain, Hubbell's 2002 sales may show a small decline year-over-year. Profits in 2002 can rise by 10-15% as the full benefits of cost reductions and the exclusion of goodwill amortization are gained.''
``Most important,'' Powers added, ``as we complete our capacity reduction and other programs in 2002, the Company will be positioned for economic recovery. That means greater profitability in the current environment of slow demand and much greater earning power with renewed top line growth. Hubbell has inherent advantages in the competitive markets we serve: product line breadth, brand preference second-to-none, and a diverse customer base. We expect that those factors combined with the internal efficiencies already achieved and those being put in place in 2002 will return the Company to a higher level of profitability as the economy returns to growth.''
Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking works or phrases such as ``can rise'', ``will approximate'', ``expects'', ``projected'', ``scheduled'', and ``unanticipated''. 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: achieving sales levels to fulfill revenue expectations; unexpected costs or charges, certain of which may be outside the control of the Company; general economic and business conditions; and competition.
Hubbell Incorporated is an international manufacturer of quality electrical and electronic products for commercial, industrial, utility, and telecommunications markets. With approximately $1.3 billion in annual revenues, Hubbell Incorporated operates manufacturing facilities in North America, Puerto Rico, Mexico, Italy, Switzerland, and the United Kingdom, participates in a joint venture in Taiwan, and maintains sales offices in Singapore, Hong Kong, South Korea, People's Republic of China, and the Middle East. The corporate headquarters is located in Orange, CT.
HUBBELL INCORPORATED CONSOLIDATED STATEMENT OF EARNINGS (in millions, except per share data) THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31 DECEMBER 31 2001 2000 2001 2000 Net Sales $ 301.2 $ 346.1 $ 1,312.2 $ 1,424.1 Cost of goods sold 238.6(a) 254.8 998.2(a) 1,055.0(b) Gross Profit 62.6 91.3 314.0 369.1 Special charge (credit), net 40.0 - 40.0 (0.1) Selling & administrative expense 54.8 53.6 222.2 220.9 (Gain) on sale of business (4.7) - (4.7) (36.2) Total Operating Income (Loss) (27.5) 37.7 56.5 184.5 Investment income 1.8 3.9 10.5 15.9 Interest expense (2.7) (5.9) (15.5) (19.7) Other income, net 3.2 - 4.3 3.6 Total Other Income (Expense) 2.3 (2.0) (0.7) (0.2) Income (Loss) Before Income Taxes (25.2) 35.7 55.8 184.3 Provision (benefit) for income taxes (11.1) 7.4 7.5 46.1 Net Income (Loss) $ (14.1) $ 28.3 $ 48.3 $ 138.2 Earnings (loss) per share - basic ($0.24) $0.48 $0.83 $2.26 Earnings (loss) per share - diluted ($0.24) $0.48 $0.82 $2.25 Average number of shares outstanding - basic 58,652 59,016 58,529 61,160 Average number of shares outstanding - diluted 58,913 59,134 58,766 61,312 (a) 2001 includes a special charge of $13.0 for product rationalization. (b) 2000 includes a special charge of $20.3 for product rationalization. HUBBELL INCORPORATED CONSOLIDATED STATEMENT OF EARNINGS (in millions, except per share data) THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31 DECEMBER 31 2001 2000 2001 2000 Net Sales Electrical $ 192.9 $ 216.9 $ 837.7 $ 928.6 Power 77.0 92.2 335.0 372.9 Industrial Technology 31.3 37.0 139.5 122.6 Total Net Sales $ 301.2 $ 346.1 $ 1,312.2 $ 1,424.1 Operating Income Electrical $ 16.5 $ 23.8 $ 75.2 $ 122.3 Special & nonrecurring charge, net (25.0) - (25.0) (19.2) Gain on sale of business 4.7 - 4.7 36.2 Power 4.6 10.7 24.4 39.7 Special & nonrecurring charge, net (21.3) - (21.3) (3.7) Industrial Technology (0.3) 3.2 5.2 10.0 Special charge (6.7) - (6.7) (0.8) Total Operating Income (Loss) (27.5) 37.7 56.5 184.5 Other income (expense), net 2.3 (2.0) (0.7) (0.2) Income (Loss) Before Income Taxes (25.2) 35.7 55.8 184.3 Provision (benefit) for income taxes (11.1) 7.4 7.5 46.1 Net Income (Loss) $ (14.1) $ 28.3 $ 48.3 $ 138.2 Earnings (loss) per share - basic ($0.24) $0.48 $0.83 $2.26 Earnings (loss) per share - diluted ($0.24) $0.48 $0.82 $2.25 Average number of shares outstanding - basic 58,652 59,016 58,529 61,160 Average number of shares outstanding - diluted 58,913 59,134 58,766 61,312 HUBBELL INCORPORATED CONSOLIDATED BALANCE SHEET (in millions) DEC 2001 DEC 2000 ASSETS Cash and temporary cash investments $ 33.4 $ 74.8 Short term investments 43.1 - Accounts receivable (net) 163.4 209.8 Inventories 242.6 298.6 Deferred taxes and other 25.8 29.4 CURRENT ASSETS 508.3 612.6 Property, plant and equipment (net) 264.2 305.3 Investments 92.5 192.9 Goodwill (net) 267.9 262.0 Other 72.5 75.7 TOTAL ASSETS $ 1,205.4 $ 1,448.5 LIABILITIES AND SHAREHOLDERS' EQUITY Commercial paper and notes $ 67.7 $ 259.5 Accounts payable 55.5 69.9 Accrued salaries, wages and employee benefits 27.8 21.0 Accrued income taxes 43.7 43.9 Dividends payable 19.4 19.5 Other accrued liabilities 69.8 75.6 CURRENT LIABILITIES 283.9 489.4 Long-term debt 99.8 99.7 Other non-current liabilities 85.2 89.9 TOTAL LIABILITIES 468.9 679.0 SHAREHOLDERS' EQUITY 736.5 769.5 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,205.4 $ 1,448.5
Certain prior year amounts have been reclassified to conform with the current year presentation.
Hubbell Incorporated, Orange
Thomas R. Conlin, 203/799-4100