ORANGE, Conn.--(BUSINESS WIRE)--Oct. 17, 2002--Hubbell Incorporated (NYSE: HUBA, HUBB) today reported strong year-over-year increases in revenues, net income, and earnings per share for the third quarter ended September 30, 2002.
On the same comparative basis, the Company also noted improvement in operating profit margin in every segment of its business.
Sales in the quarter were $445.8 million for a 37% increase over the $325.7 million reported for the equivalent period in 2001. A series of acquisitions completed during the past four quarters - - MyTech Corporation in October 2001, Hawke International in March 2002, and LCA Group, Inc., in April 2002 - - produced the revenue gains. Sales excluding the acquisitions declined from the prior year to $298.4 million due to sluggish industrial and commercial markets.
Net income for the third quarter was $31.1 million or a 60% increase over the $19.5 million reported in the third quarter last year. Earnings per share, fully diluted, were $.52 versus $.33, respectively, for the two periods. Operating profit contributions came from each of the acquisitions which have been accretive to profits since the dates of closing. The largest increment to year-over-year third quarter results came from the LCA transaction which tripled annualized revenues for Hubbell Lighting, Inc.
Included in third quarter 2002 operating profit totals were a favorable final adjustment to the previously reported gain on the sale of Hubbell's WavePacer DSL assets, and income resulting from the net of expenses and the reversal of a prior reserve for severance costs under the Company's previously announced capacity reduction program. The combined effect was a contribution of $2.0 million to pre-tax income. With those items excluded, third quarter 2002 earnings per share, fully diluted, were $.49 or a 36% increase over a goodwill-adjusted $.36 for the equivalent period last year. The adjustment of 2001 earnings per share for comparability results from Hubbell's adoption of FASB 142 effective at the beginning of 2002.
As required by FASB 142, the Company has conducted a review of its goodwill for impairment which resulted is a charge of $25.4 million net of tax or $.43 per share, fully diluted. This charge is reported as a cumulative effect of a change in accounting principle retroactive to January 1, 2002, and therefore is reflected as an adjustment to year-to-date net income but does not affect net income for the third quarter.
Also of note during the quarter was Hubbell's definitive agreement announced September 20 to acquire the assets of the utility pole line hardware business of Cooper Power Systems, a subsidiary of Cooper Industries. The purchase price is $8.7 million in cash subject to adjustment at the closing. The transaction is expected to be completed in 2002. The Company also declared a regular quarterly dividend of $.33 per share.
"We are exactly where we expected to be when we set our business plan for 2002 last October," said Timothy H. Powers, President and Chief Executive Officer of Hubbell. "Our forecast called for a difficult full year in most of our markets - residential and the home center channel were exceptions - and that has proven to be the case. In the third quarter, no new trends either positive or negative have appeared in the wide range of markets which the Company serves. The pace of order input to our short cycle industrial businesses varied month-to-month because of fluctuating end-user volume working through the electrical distribution channel. On the whole, industrial markets are flat, residential and consumer demand remains strong, and commercial markets continue to weaken though at a slower pace."
"One facet of our 2002 business plan envisioned opportunities in managing for the reality of a sluggish economy. We've made significant strides with a striking contrast between the depressed state of the industrial economy and the third quarter results achieved by the 12,000 people at Hubbell. With capacity utilization - a primary driver of our industrial markets - at a 20 year low, electric utility customers limiting capital investments in infrastructure, and price/cost pressures virtually across the board, they are succeeding in adapting to the economic environment while improving internal operations.
"That achievement is most apparent in our segment operating profit margins," Powers continued. "For the third quarter year-over-year, the Electrical Segment increased to 10.0% from 8.8%, Power Systems moved to 10.2% from 7.3% and Industrial Technology rose to 8.3% from 4.1%. These gains are the early results of our initiatives targeted on cost reductions, capacity and product rationalization, low-cost sourcing, continuing restructuring of operations, and the expanding application of productivity and process improvement techniques. We expect to add further improvement even within an uncooperative economy as these initiatives are fully implemented."
Powers also cited further financial accomplishments. "Our aggressive inventory reduction program has generated a $48 million decline through nine months of 2002 which exceeds our goal for the year and brings the total reduction over the last seven quarters to $107 million. This is a permanent reduction, freeing capital for investment in operations, and has been accomplished while improving service levels to customers. During the third quarter 2002, debt was paid down by $11 million while cash and investments increased by $46 million. As a result, total short-and long-term debt net of cash and investments is $181 million. Free cash flow from operations year-to-date stands at $76 million or a 9% increase year-over-year after paying $58 million in dividends to shareholders and investing $16 million in capital expenditures year-to-date."
The comments and percentage comparisons which follow in this segment review are based on reported results.
Hubbell's Electrical Segment reported a 58% increase in revenues and an 82% increase in operating profit compared to the third quarter of 2001. The Segment benefited from the first full quarter of an expanded lighting fixture business. Among lighting operations, Progress Lighting, the nation's leading residential and light commercial fixture supplier, turned in a strong performance due to strength in demand from the residential construction and home center retail markets. Those same two markets also contributed to strong comparisons at Hubbell Electrical Products. Increased sales and operating profits at the Raco/Bell unit, a leading supplier of enclosure products, and the addition in March of this year of the harsh and hazardous location products manufactured by Hawke International produced positive year-over-year sales and operating profit comparisons well into double-digits for the group. Hubbell's Wiring Systems group which is primarily an industrial market supplier contended with continuing low levels of demand which yielded flat sales year-over-year and a decline in operating profit. Hubbell performance in service and operations gained several awards during the quarter. For the third consecutive year, Hubbell Wiring Device-Kellems won the Grainger CFQ-1 award. W. W. Grainger is a leading electrical distributor in North America, and its CFQ award stands for Customer Focused Quality. The standards are rigorous: product quality, information accuracy, on-time delivery, and company commitment. Of 1,100 suppliers to Grainger, Hubbell is the only electrical supplier to win the award in each of the last three years. In addition, Hubbell Canada Inc., was honored as a 2002 Supply Chain Innovator by Supply Chain Systems magazine. The subsidiary's distribution and warehouse system reduced order cycle time by 80% and quadrupled total online order placements.
The Power Systems Segment reported a 2% year-over-year gain in sales with a 42% increase in operating profit. This performance reflects the benefits of significant productivity restructuring activities initiated in the fourth quarter 2001 which have positioned the segment very well for an economic recovery. A positive turn in demand, however, may be delayed until late 2003 or into 2004. The current liquidity concerns and uncertainty about deregulation within the utility industry may dampen 2003 spending plans. While the need for upgrading of the aging power transmission and distribution infrastructure becomes more pressing, the basic financial health of the industry could continue to delay those investments. In the meantime, Hubbell Power Systems continues to improve its cost and service position.
Contraction continued to characterize most of the markets served by the Industrial Technology Segment which reported a 13% decline in sales. Its primary markets are industrial where downsizing and reduced capital investment remain the norm. Many of these customers are contending with the same recessionary conditions in their markets by extending usage of existing equipment rather than replacement or upgrade. One exception is the specialty communications market served by the GAI-Tronics unit which helped to improve the Segment's operating profit total compared to the third quarter last year. Telephony products for security and transportation applications were a primary contributor here. Also contributing to increased profitability were cost controls in the high voltage instrumentation operations.
SUMMARY AND OUTLOOK
"We have an ambitious program of continuing improvements underway," Powers added. "Full integration of Hubbell's lighting operations is our primary focus, and we're on track. Already completed are the vital tasks of establishing our new management organization, selection and appointment of agents and representatives across the nation, and installation of a new internal marketing and sales team to serve those agents. Product training across the full breadth of Hubbell's lighting lines is underway. Product line and logistics rationalization is proceeding as is planning for manufacturing facility rationalization. We expect to record a restructuring charge in the fourth quarter of 2002 to support this effort. When fully restructured, Hubbell Lighting will be positioned for achieving our goal of $1 billion in sales with a 12% operating margin."
"The Company's overall objectives are straightforward: size Hubbell for the expected level of revenues, utilize our comprehensive series of initiatives to return profitability to historic levels, and complete accretive acquisitions that build on Hubbell's product and brand strengths. The last two quarters were solid steps forward."
"As we move into the final quarter of 2002," Powers added, "virtually all of our businesses are on or slightly ahead of plan. As a result, our estimates for full year 2002 remain unchanged. Revenues should total better than $1.6 billion. Excluding charges for the restructuring of the Lighting operations and FAS 142 goodwill impairment fully diluted earnings per share for the year should be in the $1.60 - 1.70 range."
"Our outlook also remains unchanged, and it is essentially conservative. Over the next 2-4 quarters, industrial markets are likely to remain flat to current levels, non-residential construction will probably weaken somewhat, and utility markets will remain slow as that industry struggles with questions of financing and return on infrastructure investment awaiting direction from federal energy policy. Nonetheless, our goals for 2003 include a substantial gain in top line growth with a full year of Hubbell's expanded lighting operations, a 100 basis point increase in operating margin in each of our segments and a bottom line improvement in excess of 10%."
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 "may", "could", "expected", "estimates", "should", "are 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: 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, residential, utility, and telecommunications markets. With 2001 revenues of $1.3 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 NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 2002 2001 2002 2001 Net Sales $ 445.8 $ 325.7 $ 1,161.6 $ 1,011.0 Cost of goods sold 330.4 245.7 863.7 759.6 Gross Profit 115.4 80.0 297.9 251.4 Selling & administrative expenses 73.1 54.3 193.2 167.3 Special charge (credit), net (0.4) 1.3 (Gain) on sale of business (1.6) - (3.0) - Total Operating Income 44.3 25.7 106.4 84.1 Investment income 1.3 2.2 3.9 8.7 Interest expense (5.8) (3.3) (12.3) (12.8) Other income, net 0.6 0.7 1.2 1.1 Total Other Income (Expense) (3.9) (0.4) (7.2) (3.0) Income Before Income Taxes and Accounting Change 40.4 25.3 99.2 81.1 Provision for income taxes 9.3 5.8 17.8 18.7 Income Before Effect of Accounting Change 31.1 19.5 81.4 62.4 Effect of Accounting Change Net of Tax (SFAS 142) - - 25.4 - NET INCOME $ 31.1 $ 19.5 $ 56.0 $ 62.4 Earnings per share before accounting change - diluted $ 0.52 $ 0.33 $ 1.36 $ 1.06 Earnings per share after accounting change - diluted $ 0.52 $ 0.33 $ 0.93 $ 1.06 HUBBELL INCORPORATED CONSOLIDATED STATEMENT OF EARNINGS (in millions, except per share data) unaudited THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 2002 2001 2002 2001 Net Sales Electrical $ 333.0 $ 210.3 $ 826.1 $ 644.8 Power 82.6 80.9 247.2 258.0 Industrial Technology 30.2 34.5 88.3 108.2 Total Net Sales $ 445.8 $ 325.7 $ 1,161.6 $ 1,011.0 Operating Income Electrical $ 31.6 $ 18.4 78.3 $ 58.8 Special (charge) credit, net 0.2 - (0.6) - Gain on sale of business 1.6 - 3.0 - Power 8.1 5.9 24.3 19.8 Special (charge) credit, net 0.3 - (0.3) - Industrial Technology 2.6 1.4 2.1 - Special (charge) credit, net (0.1) - (0.4) 5.5 Total Operating Income 44.3 25.7 106.4 84.1 Other income (expense), net (3.9) (0.4) (7.2) (3.0) Income Before Income Taxes and Accounting Change 40.4 25.3 99.2 81.1 Provision for income taxes 9.3 5.8 17.8 18.7 Income Before Effect of Accounting Change 31.1 19.5 81.4 62.4 Effect of Accounting Change Net of Tax (SFAS 142) - - 25.4 - NET INCOME $ 31.1 $ 19.5 $ 56.0 $ 62.4 Earnings per share before accounting change - diluted $ 0.52 $ 0.33 $ 1.36 $ 1.06 Earnings per share after accounting change - diluted $ 0.52 $ 0.33 $ 0.93 $ 1.06 HUBBELL INCORPORATED CONSOLIDATED BALANCE SHEET (in millions) (UNAUDITED) SEP 2002 DEC 2001 ASSETS Cash and temporary cash investments $ 79.5 $ 33.4 Short term investments 70.0 43.1 Accounts receivable (net) 250.1 163.4 Inventories 271.9 242.6 Deferred taxes and other 29.8 25.8 CURRENT ASSETS 701.3 508.3 Property, plant and equipment (net) 327.4 264.2 Investments 74.9 92.5 Goodwill 318.5 267.9 Other 108.0 72.5 TOTAL ASSETS $ 1,530.1 $ 1,205.4 LIABILITIES AND SHAREHOLDERS' EQUITY Commercial paper and notes $ 106.8 $ 67.7 Accounts payable 95.1 55.5 Accrued salaries, wages and employee benefits 33.7 27.8 Accrued income taxes 22.2 43.7 Dividends payable 19.5 19.4 Other accrued liabilities 90.5 69.8 CURRENT LIABILITIES 367.8 283.9 Long-term debt 298.6 99.8 Other non-current liabilities 120.8 85.2 TOTAL LIABILITIES 787.2 468.9 SHAREHOLDERS' EQUITY 742.9 736.5 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,530.1 $ 1,205.4CONTACT:
Hubbell Incorporated, Orange
Thomas R. Conlin, 203/799-4100