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ORANGE, Conn.--(BUSINESS WIRE)--July 24, 2002--Hubbell Incorporated (NYSE: HUBA, HUBB) today reported increased sales, net income, and earnings per share for the second quarter ended June 30, 2002.
Results for the period include a number of items which benefited comparisons including acquisitions and a favorable tax settlement.
On a year-over-year comparative basis for the period, revenues rose by 21% to $414.1 million versus $341.2 million in 2001 due to the acquisition of LCA Group, Inc., the domestic lighting division of U.S. Industries, Inc. Net income was 41% higher at $30.8 million compared to $21.8 million, and earnings per share, fully diluted, were $.51 versus $.37. Cash flow in the quarter continued strong led by reductions in inventories and capital expenditures.
Included in second quarter fully diluted earnings per share were:
-
Eight cents per share from a favorable settlement with the Internal Revenue Service.
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One cent per share for costs incurred under the Company's previously announced capacity reduction program.
Excluding the impact of these two items, second quarter 2002 earnings per share were $.44 or a 10% increase over a goodwill-adjusted $.40 for the comparable period last year.
OPERATIONS REVIEW
"Hubbell is where we expected to be at the mid-point of the year. As we've estimated previously, sales volume continues at approximately the same daily rate seen in the fourth quarter 2001 and the first two quarters this year. Also as expected, we're beginning to gain the benefits of cost reduction and restructuring programs. The second quarter is a solid step forward," said Timothy H. Powers, President and Chief Executive Officer.
"The economy remains sluggish, but we're successfully countering with internal improvements," Powers continued. "We are aggressively reducing inventories with a $31 million decline so far this year - in line with our goal of $30-40 million for the year. Excluding unusual tax effects this year and last, operating cash flow for the first half 2002 was $86 million or a 25% increase over the equivalent period last year."
"Hubbell continues to be focused on expanding the Company's core businesses, and generating higher profitability year-over-year from each of them. The positive comparisons shown in the second quarter should continue in the remaining quarters of 2002 even with no improvement in the economy. Integration of the LCA acquisition is off to a good start with improved margins for those operations already in the books. We have more work ahead of us, but Hubbell's expanded lighting business within the Electrical segment, already a contributor to earnings, is well positioned to leverage its growing market prominence when economic expansion returns. Earnings leverage was also evident in the Power Systems segment which improved its return even with lower sales volume. The Industrial Technology segment contended with very weak demand in its industrial markets and the impact of restructuring."
SEGMENT REVIEW
Sales and operating profit totals in the second quarter for each of Hubbell's three business segments reflect continued slow demand across all segments of the economy. The greatest effect was felt in the Industrial Technology segment with its exposure to basic industry. The Electrical and Power Systems segments, which serve a broader range of markets, recorded positive comparisons among individual operations. Daily order input appears to have stabilized at levels consistent with the first quarter of the year. Most important, and demonstrating the effectiveness of internal programs to mitigate the economic environment, were improvements in operating profit margins. Excluding special charge expense and the change in goodwill amortization, Electrical and Power Systems segments reported higher margins both on a year-over-year and sequential quarterly bases.
Percentage comparisons for second quarter results which follow in this segment review exclude the effects of special charge expenses and goodwill amortization expense in the prior year.
For the Electrical Segment second quarter 2002 sales increased by 39% and operating profit by more than 41% with the addition of the LCA lighting operations. Apart from the financial benefit, this acquisition immediately broadened Hubbell's participation in the full range of lighting fixture markets: industrial, commercial, residential, and specialty. Another strong positive in the quarter was the performance of Hubbell Electrical Products. Market share gains and profitability improvement programs generated substantial increases in sales and operating profit.
The Power Systems segment reported a 6% decline in sales but a 29% increase in operating profit as its internal cost reduction and productivity programs gained traction. The utility marketplace, however, remains uncertain as utilities contend with problems in energy trading markets and the slow economic environment. Spending on infrastructure maintenance and planned capital projects have been postponed in many regions of the country.
Hubbell's Industrial Technology segment posted a 19% decline in sales and a loss for the second quarter. The segment's exposure to the basic industrial and high voltage test markets most impacted by continuing reductions in capital expenditure budgets depressed volume. Inventory writedowns of approximately $2 million produced the segment's operating loss. While incoming orders remained weak in the quarter, two units manufacturing specialty products - GAI-Tronics communications systems and Gleason Reel - reported higher operating profits.
SUMMARY AND OUTLOOK
"While some economic indicators have turned positive, optimism is not yet apparent in the customers we serve or in industrial markets in general," Powers said. "Our assessment of the economic environment hasn't changed. The remainder of 2002 will be slow with continuing erosion in demand from commercial markets offsetting any industrial improvement."
"Nonetheless, we're also expecting positive comparisons for Hubbell. Our recent acquisitions should add 20% plus to the top line. Earnings leverage from those sales will get multiple boosts - from capacity reduction programs nearing completion, from further operations integration, and from plant productivity initiatives now underway."
"We're pleased with the positive steps summarized by the second quarter results. But we continue to be conservative in operating our businesses and in our outlook. The full benefit of all of the Company's improvements will come in 2003 and beyond when the U.S. economy returns to expansion. Our estimate of full year 2002 earnings remains unchanged. Excluding charges for FAS 142 goodwill impairment and to complete the integration of the expanded Hubbell Lighting operations - both of which will be quantified in the second half -- full year 2002 earnings are expected to be $1.60 - 1.70 per share."
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 "should", "expect", "might result", 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: achieving sales levels to fulfill revenue expectations; expected costs or charges, certain of which may be outside the control of the Company; general economic and business conditions; competition; the extent to which Hubbell is able to achieve savings from its cost reduction and restructuring plans; and the impact of acquisitions.
Hubbell Incorporated is an international manufacturer of quality electrical and electronic products for commercial, industrial, utility, residential, and telecommunications markets. 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 SIX MONTHS ENDED
JUNE 30 JUNE 30
2002 2001 2002 2001
------ ------ ------ ------
Net Sales $ 414.1 $ 341.2 $ 715.8 $ 685.3
Cost of goods sold 308.0 256.3 533.3 513.9
------ ------ ------ ------
Gross Profit 106.1 84.9 182.5 171.4
Special charge 1.0 - 1.7 -
Selling & administrative expense 69.3 56.4 120.1 113.0
(Gain) on sale of business - - (1.4) -
------ ------ ------ ------
Total Operating Income 35.8 28.5 62.1 58.4
Investment income 1.3 3.1 2.6 6.5
Interest expense (4.3) (4.2) (6.5) (9.5)
Other income, net 0.7 0.1 0.6 0.4
------ ------ ------ ------
Total Other Income (Expense) (2.3) (1.0) (3.3) (2.6)
Income Before Income Taxes 33.5 27.5 58.8 55.8
Provision for income taxes 2.7 5.7 8.5 12.8
------ ------ ------ ------
Net Income $ 30.8 $ 21.8 $ 50.3 $ 43.0
====== ====== ====== ======
Earnings per share - basic $0.52 $0.37 $0.85 $0.73
Earnings per share - diluted $0.51 $0.37 $0.84 $0.73
Average number of shares
outstanding - basic 59,039 58,446 58,968 58,439
Average number of shares
outstanding - diluted 59,896 58,661 59,690 58,639
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data) unaudited
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2002 2001 2002 2001
------ ------ ------ ------
Net Sales
Electrical $ 300.0 $ 215.2 $ 493.1 $ 434.5
Power 84.2 89.1 164.6 177.1
Industrial Technology 29.9 36.9 58.1 73.7
------ ------ ------ ------
Total Net Sales 414.1 341.2 715.8 685.3
====== ====== ====== ======
Electrical $ 29.5 $ 20.1 $ 46.7 $ 40.4
Special charge (0.2) - (0.8) -
Gain on sale of business - 1.4 -
Power 9.0 6.2 16.2 13.9
Special charge (0.5) - (0.6) -
Industrial Technology (1.7) 2.2 (0.5) 4.1
Special charge (0.3) (0.3) -
------ ------ ------ ------
Total Operating Income 35.8 28.5 62.1 58.4
------ ------ ------ ------
Other income, net (2.3) (1.0) (3.3) (2.6)
------ ------ ------ ------
Income Before Income Taxes 33.5 27.5 58.8 55.8
Provision for income taxes 2.7 5.7 8.5 12.8
------ ------ ------ ------
Net Income $ 30.8 $ 21.8 $ 50.3 $ 43.0
====== ====== ====== ======
Earnings per share - basic $0.52 $0.37 $0.85 $0.73
Earnings per share - diluted $0.51 $0.37 $0.84 $0.73
Average number of shares
outstanding - basic 59,039 58,446 58,968 58,439
Average number of shares
outstanding - diluted 59,896 58,661 59,690 58,639
HUBBELL INCORPORATED
CONSOLIDATED BALANCE SHEET
(in millions)
(UNAUDITED)
JUNE 2002 DEC 2001
-------- --------
ASSETS
Cash and temporary cash investments $ 32.6 $ 33.4
Short term investments 70.0 43.1
Accounts receivable (net) 271.6 163.4
Inventories 291.4 242.6
Deferred taxes and other 30.5 25.8
-------- --------
CURRENT ASSETS 696.1 508.3
Property, plant and equipment (net) 345.4 264.2
Investments 75.3 92.5
Goodwill 335.2 267.9
Other 96.7 72.5
-------- --------
TOTAL ASSETS $ 1,548.7 $ 1,205.4
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LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper and notes $ 117.3 $ 67.7
Accounts payable 98.3 55.5
Accrued salaries, wages and employee benefits 33.7 27.8
Accrued income taxes 25.6 43.7
Dividends payable 19.5 19.4
Other accrued liabilities 84.4 69.8
-------- --------
CURRENT LIABILITIES 378.8 283.9
Long-term debt 298.6 99.8
Other non-current liabilities 115.2 85.2
-------- --------
TOTAL LIABILITIES 792.6 468.9
SHAREHOLDERS' EQUITY 756.1 736.5
-------- --------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,548.7 $ 1,205.4
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CONTACT:
Hubbell Incorporated, Orange
Thomas R. Conlin, 203/799-4100