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ORANGE, Conn.--(BUSINESS WIRE)--Jan. 21, 2003--Hubbell Incorporated (NYSE: HUBA, HUBB) today reported its results for the fourth quarter and full year ended December 31, 2002.
Sales in the fourth quarter 2002 totaled $426 million or a 42% increase over the $301 million reported in the same period last year. Sales for the full year 2002 rose to $1.588 billion or an increase of 21% compared to $1.312 billion recorded in 2001. The following acquisitions, completed in 2002, benefited the year-over-year comparisons:
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LCA Group, Inc., the domestic lighting fixture business of U. S. Industries, Inc., completed in April.
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Hawke International, a U.K.-based global leader in brass cable glands and connectors, closed in February, and the assets of the utility pole line hardware business of Cooper Power Systems, Inc., completed in September.
Reported net income for the fourth quarter 2002 was $27.2 million or $.45 per share as compared to a reported loss of $14.1 million or $.24 per share in the same period 2001. Both periods included items that affect year-over-year comparisons. For 2002 these were:
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A charge of $10.3 million pre-tax or $.11 per share for facility, force reductions and product rationalization within Hubbell's lighting business, and expenses of $2.1 million pre-tax or $.02 per share under Hubbell's 2001 capacity reduction program. In addition to the 2002 charge, additional costs for the lighting restructuring are expected to be charged against profit in 2003 as specific actions are announced and implemented.
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A reduction in tax expense of $5.8 million or $.10 per share associated with R&D tax credits.
In the fourth quarter of 2001 net income included a charge of $53.0 million pre-tax or $.60 per share for Hubbell's 2001 capacity reduction program, and $4.7 million of pre-tax income or $.06 per share to adjust the previously recorded gain on sale of the WavePacer DSL business.
Reported net income for the full year 2002 was $83.2 million or $1.38 per share, versus $48.3 million or $.82 for 2001. Included in 2002 results are the previously noted fourth quarter charges as well as tax related benefits of $10.8 million or $.18 per share and a $25.4 million or $.43 per share non-cash write-down of goodwill resulting from the Company's adoption of FAS 142. Full year 2002 and 2001 net income included a $3.0 million and $4.7 million pre-tax or $.03 and $.06 per share increase to the previously recorded gain on the sale of the WavePacer DSL business.
OPERATIONS REVIEW
"Hubbell's results for 2002 demonstrate the capability of our employees in a very difficult environment," said Timothy H. Powers, President and CEO. "We expected, and experienced, a difficult economy throughout the year. Demand from non-residential construction and industrial markets declined through much of the year and remain at low levels. Commercial product volume continues to decline, though at a slower pace in the last quarter, and is expected to remain weak in 2003. Only our residential and consumer/home center related businesses saw positive year-over-year industry growth."
"Our 2002 business plan set a series of ambitious goals. Virtually every objective was achieved. We completed difficult actions to reduce costs. Our goal to revitalize Hubbell's acquisition program added three immediately accretive operations and added to our product breadth and channel position. We completed a full year of Lean Sigma productivity programs that are beginning to transform our culture. And we continued investing in other initiatives for product rationalization and low-cost sourcing."
"The net effect of these efforts is higher operating margins," Powers continued. "Excluding the impact of FAS 142, restructuring charges, and gains on sales of businesses the fourth quarter 2002 operating margin in the Electrical Segment increased to 10.8% from 8.9% last year, Power Systems increased its operating margin to 11.6% from 7.0%, and the Industrial Technology Segment moved to modest profitability from break-even. Our acquisitions contributed to the increases, but the chief benefits arose from our programs for cost reduction, operations restructuring, and productivity and process improvement."
Powers also noted that Hubbell's cash generation remained at a high level. "We continue to focus on working capital. Excluding the impact of acquisitions, inventories were reduced by more than $60 million in 2002 to bring the total reduction over the last two years to more than $100 million while improving service to customers. Total debt net of cash and investments at year-end 2002 was $167 million versus essentially zero at year-end 2001. The increased debt partly funded cash acquisitions of $270 million. The remainder of the 2002 acquisition costs and $78 million in dividends to shareholders were funded by operating cash flow."
"In all, we advanced toward our long-term goals in a very tough economy. Those achievements make us confident as we move into 2003."
SEGMENT REVIEW
The comments and year-over-year percentage comparisons which follow in this segment review are based on fourth quarter results in 2002 and 2001 excluding the impact of goodwill that was amortized in 2001 and not 2002, restructuring charges, and gains on sale of businesses.
Hubbell's Electrical Segment reported a 64% increase in sales and a doubling in operating profit and operating margin increased by 2 points. The Segment benefited from acquisitions and strength in several markets. Among the former, the tripling of lighting revenues and higher year-over-year profitability resulting from the LCA acquisition were the primary contributors. The addition of Hawke International and increased share of market at Raco/Bell produced positive comparisons at Hubbell Electrical Products. Hubbell's Wiring Systems operations reported a modest sales increase and improved operating margins. Average daily order volume from distribution partners improved somewhat in the latter part of the quarter, but total volume remained low.
The Power Systems Segment reported a 2% gain in sales and over a 4 point increase in operating margin. The sales performance reflects a continuing low level of demand from utility customers countered by improved share of market. Utility customers are delaying capital investment programs as liquidity concerns across the industry, the collapse of energy trading, and the lack of a firm federal energy policy make new commitments difficult. Nonetheless, the Segment's progress in reducing costs and increasing productivity generated higher profits.
Contraction continued to characterize the industrial markets served by the Industrial Technology Segment which reported flat sales with profitability moving into the black versus essentially break-even in the prior year. Many industrial customers continue to hold capital expenditure budgets at low levels in response to low demand from their markets which impacts equipment replacement or upgrade. On the positive side, demand for high voltage test and instrumentation products improved modestly during the quarter while the GAI-Tronics specialty communications unit recorded another good performance.
SUMMARY AND OUTLOOK
"Hubbell took a major step forward in 2002," Powers added. "We delivered our targeted operations objectives, grew the Company substantially, integrated the LCA Lighting businesses successfully, maintained our financial flexibility, and built momentum for the year ahead."
"Our goals for 2003 are far-reaching but consistent with our stated strategy. First, our program to rationalize the facilities, products, and overhead in our recently expanded lighting business will reduce cost and position us for market share growth. Second, we plan to double the rate of Lean Sigma productivity activities in 18 of our largest facilities. Third, we are increasing our investment in new product development and improved customer service. From these and other initiatives, we expect substantial productivity gains and another year of improved working capital efficiency and cash generation."
"Our outlook for the economic environment remains unchanged," Powers concluded, "with 2003 expected to be similar to 2002. Industrial markets are likely to be only modestly improved, non-residential construction is expected to remain weak, and we expect our utility customers to invest in infrastructure only when absolutely necessary. Still, we expect to show substantial growth in revenues and earnings with a full year of 2002 acquisition contribution, a 100 basis point increase in operating margin in each of our segments, and earnings per share in the range of $1.95 -- $2.15."
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 words or phrases such as "plan", "could", "expect", "expected", "estimates", "should", "likely", "goal", "probably", 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: executing actions and achieving benefits from the lighting restructuring program, achieving projected sales levels and operating profit targets; 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, residential, utility, and telecommunications markets. With 2002 revenues of $1.6 billion, 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) unaudited
THREE MONTHS ENDED
DECEMBER 31
2002 % 2001 %
------- ------ ------- ------
Net Sales $426.2 100.0 $301.2 100.0
Cost of goods sold 315.0 (1) 73.9 238.6 (2) 79.2
------- ------ ------- ------
Gross Profit 111.2 26.1 62.6 20.8
Selling & administrative expenses 72.1 16.9 54.8 18.2
Special charge, net 7.0 40.0
(Gain) on sale of business - (4.7)
------- -------
Total Operating Income (Loss) 32.1 7.5 (27.5) (9.1)
Investment income 2.0 1.8
Interest expense (5.5) (2.7)
Other income (expense), net (0.8) 3.2
------- -------
Total Other Income (Expense) (4.3) (1.0) 2.3 0.8
Income (Loss) Before Income Taxes
and Accounting Change 27.8 6.5 (25.2) (8.4)
Provision (benefit) for income taxes 0.6 (11.1)
------- -------
Income (Loss) Before Effect
of Accounting Change 27.2 6.4 (14.1) (4.7)
------- -------
Effect of Accounting Change
Net of Tax (SFAS 142) - -
------- -------
NET INCOME (LOSS) $27.2 6.4 $(14.1) (4.7)
======= =======
Earnings per share before accounting $0.45 ($0.24)
change - diluted
Earnings per share after accounting $0.45 ($0.24)
change - diluted
(1) 2002 Cost of goods sold includes a special charge of $5.4 for LCA
product rationalization.
(2) 2001 Cost of goods sold includes a special charge of $13.0 for
product rationalization.
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data) unaudited
TWELVE MONTHS ENDED
DECEMBER 31
2002 % 2001 %
--------- ------ --------- ------
Net Sales $1,587.8 100.0 $1,312.2 100.0
Cost of goods sold 1,178.7 (1) 74.2 998.2 (2) 76.1
--------- ------ --------- ------
Gross Profit 409.1 25.8 314.0 23.9
Selling & administrative
expenses 265.3 16.7 222.2 16.9
Special charge, net 8.3 40.0
(Gain) on sale of business (3.0) (4.7)
--------- ---------
Total Operating Income (Loss) 138.5 8.7 56.5 4.3
Investment income 5.9 10.5
Interest expense (17.8) (15.5)
Other income (expense), net 0.4 4.3
--------- ---------
Total Other Income (Expense) (11.5) (0.7) (0.7) (0.1)
Income (Loss) Before Income
Taxes
and Accounting Change 127.0 8.0 55.8 4.3
Provision (benefit) for income
taxes 18.4 7.5
--------- ---------
Income (Loss) Before Effect
of Accounting Change 108.6 6.8 48.3 3.7
--------- ---------
Effect of Accounting Change
Net of Tax (SFAS 142) 25.4 -
--------- ---------
NET INCOME (LOSS) $83.2 5.2 $48.3 3.7
========= =========
Earnings per share before
accounting $1.81 $0.82
change - diluted
Earnings per share after
accounting $1.38 $0.82
change - diluted
(1) 2002 Cost of goods sold includes a special charge of $5.4 for LCA
product rationalization.
(2) 2001 Cost of goods sold includes a special charge of $13.0 for
product rationalization.
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data) unaudited
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
2002 2001 2002 2001
------- ------- --------- ---------
Net Sales
Electrical $316.4 $192.9 $1,142.5 $837.7
Power 78.6 77.0 325.8 335.0
Industrial Technology 31.2 31.3 119.5 139.5
------- ------- --------- ---------
Total Net Sales $426.2 $301.2 $1,587.8 $1,312.2
======= ======= ========= =========
Operating Income (Loss)
Electrical $34.2 $16.5 112.5 $75.2
Special charge, net (11.8) (25.0) (12.4) (25.0)
Gain on sale of business - 4.7 3.0 4.7
Power 9.1 4.6 33.4 24.4
Special charge, net (0.2) (21.3) (0.5) (21.3)
Industrial Technology 1.2 (0.3) 3.3 5.2
Special charge, net (0.4) (6.7) (0.8) (6.7)
------- ------- --------- ---------
Total Operating Income
(Loss) 32.1 (27.5) 138.5 56.5
------- ------- --------- ---------
Other income (expense), net (4.3) 2.3 (11.5) (0.7)
------- ------- --------- ---------
Income (Loss) Before Income Taxes
and Accounting Change 27.8 (25.2) 127.0 55.8
Provision (benefit) for income
taxes 0.6 (11.1) 18.4 7.5
------- ------- --------- ---------
Income (Loss) Before Effect
of Accounting Change 27.2 (14.1) 108.6 48.3
------- ------- --------- ---------
Effect of Accounting Change
Net of Tax (SFAS 142) - - 25.4 -
------- ------- --------- ---------
NET INCOME (LOSS) $27.2 $(14.1) $83.2 $48.3
======= ======= ========= =========
Earnings per share before
accounting $0.45 ($0.24) $1.81 $0.82
change - diluted
Earnings per share after accounting $0.45 ($0.24) $1.38 $0.82
change - diluted
HUBBELL INCORPORATED
CONSOLIDATED BALANCE SHEET
(in millions)
(UNAUDITED)
DEC 2002 DEC 2001
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ASSETS
Cash and temporary cash investments $40.0 $33.4
Short-term investments 15.0 43.1
Accounts receivable (net) 221.2 163.4
Inventories 258.0 242.6
Deferred taxes and other 62.1 25.8
------------ ---------
CURRENT ASSETS 596.3 508.3
Property, plant and equipment (net) 320.6 264.2
Investments 76.5 92.5
Goodwill 314.6 267.9
Intangible assets and other 101.0 72.5
------------ ---------
TOTAL ASSETS $1,409.0 $1,205.4
============ =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper and notes $- $67.7
Accounts payable 86.2 55.5
Accrued salaries, wages and employee benefits 39.8 27.8
Accrued income taxes 25.5 43.7
Dividends payable 19.5 19.4
Other accrued liabilities 83.7 69.8
------------ ---------
CURRENT LIABILITIES 254.7 283.9
Long-term debt 298.7 99.8
Other non-current liabilities 109.3 85.2
------------ ---------
TOTAL LIABILITIES 662.7 468.9
SHAREHOLDERS' EQUITY 746.3 736.5
------------ ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $1,409.0 $1,205.4
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CONTACT:
Hubbell Incorporated, Orange
Thomas R. Conlin, 203/799-4100