1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10Q / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1994 ------------------------------- -- OR -- / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------------------------- Commission File Number 1-2958 -------------------------------------------------------- HUBBELL INCORPORATED - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) STATE OF CONNECTICUT 06-0397030 - - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 584 DERBY MILFORD ROAD, ORANGE, CT 06477 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (203) 799-4100 - - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --------- -------- The number of shares of registrant's classes of common stock outstanding as of August 8, 1994 were: Class A ($.01 par value) 5,886,000 Class B ($.01 par value) 25,458,000 2 -- 2 -- HUBBELL INCORPORATED PART I -- FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Consolidated Balance Sheet (unaudited) (in thousands)
June 30, December 31, 1994 1993 ------------ ------------ Assets - - ------------------------------------- Current Assets: Cash and temporary cash investments $ 21,358 $ 44,231 Accounts receivable (net) 142,859 109,987 Inventories 216,996 181,699 Prepaid taxes 24,766 15,875 Other 6,679 10,289 ---------- ---------- TOTAL CURRENT ASSETS 412,658 362,081 Property, Plant and Equipment (net) 191,587 154,621 Other Assets: Investments 200,930 245,081 Purchase price in excess of net assets of companies acquired (net) 140,669 66,522 Property held as investment 10,767 7,794 Other 35,961 38,199 ---------- ---------- $ 992,572 $ 874,298 ========== ========== Liabilities and Shareholders' Equity - - ------------------------------------ Current Liabilities Notes payable $ 131,900 $ 91,100 Accounts payable 30,686 20,964 Accrued salaries, wages and employee benefits 26,280 20,215 Accrued income taxes 27,006 35,617 Dividends payable 13,476 12,816 Accrued restructuring charge 14,000 14,000 Other accrued liabilities 70,362 35,494 ---------- ---------- TOTAL CURRENT LIABILITIES 313,710 230,206 Long-Term Debt 2,700 2,700 Other Non-Current Liabilities 89,871 79,160 Deferred Income Taxes 5,632 4,572 Shareholders' Equity 580,659 557,660 ---------- ---------- $ 992,572 $ 874,298 ========== ========== See notes to consolidated financial statements. 3 -- 3 -- HUBBELL INCORPORATED Consolidated Statement of Income (unaudited) (in thousands, except per share amounts) See notes to consolidated financial statements.
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1994 1993 1994 1993 --------- --------- --------- --------- Net Sales $261,935 $211,261 $468,979 $409,279 Cost of goods sold 184,198 145,051 326,701 279,341 --------- --------- --------- --------- Gross Profit 77,737 66,210 142,278 129,938 Selling & administrative expenses 42,546 35,408 76,647 69,249 --------- --------- --------- --------- Operating Income 35,191 30,802 65,631 60,689 --------- --------- --------- --------- Other Income (Expense): Investment income 3,553 3,817 7,420 7,715 Interest expense (1,423) (916) (2,290) (1,728) Other income (expense), net (625) 94 (1,188) (411) -------- -------- -------- -------- TOTAL OTHER INCOME, NET 1,505 2,995 3,942 5,576 -------- -------- -------- -------- Income Before Income Taxes 36,696 33,797 69,573 66,265 Provision for income taxes 10,237 8,787 18,785 17,229 -------- -------- -------- -------- Net Income $26,459 $25,010 $50,788 $49,036 ======== ======== ======== ======== Earnings Per Share: $0.83 $0.79 $1.60 $1.55 ======== ======== ======== ======== 4 -- 4 -- HUBBELL INCORPORATED Consolidated Statement of Cash Flows (unaudited) (in thousands) See notes to consolidated financial statements.
Six Months Ended June 30 ------------------------ 1994 1993 ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES - - ------------------------------------ Net Income $50,788 $49,036 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,688 15,843 Restructuring charge (4,614) -- Deferred income taxes 1,993 465 Changes in assets and liabilities, net of the effect of business acquisitions: (Increase)/Decrease in Accounts receivable (11,329) (4,456) (Increase)/Decrease in Inventories (10,158) (2,132) (Increase)/Decrease in Other current assets 6,022 (1,089) Increase/(Decrease) in Current liabilities (excluding dividends payable) 619 (10,407) (Increase)/Decrease in Other, net 1,054 (177) --------- --------- Net cash provided by operating activities 53,063 47,083 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES - - ------------------------------------ Acquisition of businesses (110,000) (16,245) Additions to property, plant and equipment (26,445) (12,230) Purchase of non-current investments (6,455) -- Sale of non-current investments 50,606 10,606 Other, net (312) 1,101 --------- --------- Net cash used in investing activities (92,606) (16,768) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES - - ------------------------------------ Payment of dividends (25,658) (24,953) Short-term borrowing 40,800 11,400 Exercise of stock options 1,528 863 --------- --------- Net cash provided (used) in financing activities 16,670 (12,690) --------- --------- Increase (Decrease) in cash and temporary cash investments (22,873) 17,625 CASH AND TEMPORARY CASH INVESTMENTS - - ----------------------------------- Beginning of period 44,231 28,255 --------- --------- End of period $ 21,358 $ 45,880 ========= ========= 5 -- 5 -- HUBBELL INCORPORATED Notes to Consolidated Financial Statements June 30, 1994 (unaudited) 1. Inventories are classified as follows: (in thousands) 2. Shareholders' Equity comprises: (in thousands)
June 30, December 31, 1994 1993 ---------- ------------ Raw Material $ 70,937 $ 58,359 Work-in-Process 57,333 49,653 Finished Goods 129,218 113,312 -------- -------- 257,488 221,324 Excess of current Production costs over LIFO cost basis 40,492 39,625 -------- -------- $216,996 $181,699 ========= ========= 3. In the opinion of management, the information furnished in Part I--Financial Information on Form 10-Q reflects all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial statements for the periods indicated. 4. The results of operations for the three and six month periods ended June 30, 1994 and 1993 are not necessarily indicative of the results to be expected for the full year. 5. On April 19, 1994 the Company completed its acquisition of A. B. Chance Industries Inc., a manufacturer of electrical apparatus, anchors, hardware, insulators, hot-line tools, and other safety equipment. The acquisition was for $110 million in cash, of which the company borrowed $45 million on a short-term basis, and will be recorded under the purchase method of accounting.
June 30, December 31, 1994 1993 ---------- ------------ Common Stock, $.01 par value: ----------------------------- Class A--authorized 50,000,000 shares, outstanding 5,890,861 and 5,875,748 shares $ 59 $ 59 Class B--authorized 150,000,000 shares, outstanding 25,449,416 and 25,382,793 shares 254 254 Additional paid-in capital 359,478 358,219 Retained earnings 228,257 203,787 Unrealized holding gains (losses) on securities (2,100) Cumulative translation adjustments (5,289) (4,659) -------- -------- $580,659 $557,660 ========= ========= 6 -- 6 -- HUBBELL INCORPORATED Notes to Consolidated Financial Statements June 30, 1994 (unaudited) Presented below is the unaudited pro forma combined balance sheet of Hubbell Incorporated and A. B. Chance Industries, Inc. as of March 31, 1994 and combined summary of operations as if the transaction had occurred as of the beginning of 1993 (in 000's except per share): In preparing the unaudited pro forma combined balance sheet and summary of operations, adjustments were made to the historical financial statements to reflect the reduction in the securities portfolio and investment income; increase in short-term borrowing and interest expense; amortization of the estimated goodwill of $76 million over 40 years; the repayment of existing debt of A. B. Chance Industries, Inc.; and other estimated purchase accounting entries. The pro forma statements are not indicative of the results that would have been obtained if the operations would have been combined during 1993, nor are they necessarily indicative of the results that may occur in the future.
A.B.CHANCE PRO HUBBELL INDUSTRIES FORMA INCORPORATED INC. ADJUSTMENTS COMBINED ------------ ---------- ----------- -------- ASSETS - - --------------------- Accounts Receivable $117,019 $ 22,284 $ (741) $138,562 Inventories 183,566 26,539 (1,400) 208,705 Other Current Assets 80,416 2,549 (24,228) 58,737 Property, Plant, and Equipment (Net) 153,049 29,593 399 183,041 Investments 249,556 -- (30,000) 219,556 Goodwill 65,696 32,997 42,948 141,641 Other Assets 46,934 2,797 (1,125) 48,606 -------- -------- --------- -------- TOTAL $896,236 $116,759 $(14,147) $998,848 ======== ======== ========= ======== LIABILITIES AND COMMON SHAREHOLDERS' EQUITY - - ------------------------------------------- Notes Payable $ 99,200 $ -- $ 45,000 $144,200 Other Current Liabilities 142,940 30,508 12,768 186,216 Long-Term Debt 2,700 62,264 (62,264) 2,700 Other Liabilities and Deferred Taxes 81,580 6,736 7,600 95,916 Common Shareholders' Equity 569,816 17,251 (17,251) 569,816 -------- -------- --------- -------- TOTAL $896,236 $116,759 $(14,147) $998,848 ======== ======== ========= ======== SUMMARY OF OPERATIONS - - --------------------- 1994 YEAR-TO-DATE Net Sales $429,530 $ 81,100 $ -- $510,630 Income Before Income Taxes $ 68,123 $ 4,840 $ (1,191) $ 71,772 Net Income $ 50,068 $ 2,865 $ (1,086) $ 51,847 Earnings Per Share $ 1.58 $ -- $ -- $ 1.63 1993 FULL YEAR Net Sales $832,423 $156,830 $ -- $989,253 Income Before Income Taxes $ 81,494 $ 7,114 $ 2,664 $ 91,272 Net Income $ 66,306 $ 4,058 $ 1,063 $ 71,427 Earnings Per Share $ 2.10 $ -- $ -- $ 2.26 7 -- 7 -- HUBBELL INCORPORATED ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS June 30, 1994 Results of Operations Consolidated net sales for the second quarter of 1994 increased 24% over the comparable period in 1993 due to the inclusion of A. B. Chance Industries, Inc. and improved sales at the Wiring Device, Industrial Controls, Premise Wiring, and Ohio Brass operations partially offset by lower activity at the Pulse Communications subsidiary. Operating income increased only 14% since a significant portion of the increased sales volume was in lower margined products and the reduction in profit contribution from the Pulse Communications subsidiary. Year-to-date reflects similar results with increases of 15% in net sales and 8% in operating income. Low Voltage segment sales increased 7% and 5% for the quarter and year-to-date periods on higher shipments of wiring device, lighting, and industrial control products as demand in the industrial and commercial markets improved. Segment operating income increased in line with the higher sales volumes. Sales of the High Voltage segment more than doubled for the quarter and increased more than 60% year-to-date due to the inclusion of A. B. Chance Industries, Inc. and higher sales of insulators and surge arresters while demand for power cable remained flat. Operating income increased at approximately one-half the rate of growth in sales volume reflecting the lower-margined products of the acquired business. Other Industry segment sales increased 4% for the quarter and 6% year-to-date on improved shipments of enclosures, fittings, switch and outlet boxes, and wire management products which offset the lower sales of telecommunication products. Segment operating income was essentially even with last year reflecting the impact of the reduced shipment of the higher-margined telecommunications products. Due to changed market conditions, the Company has reduced the scope of its development program for telecommunication products and the Pulse Communications subsidiary and Raynet Corporation have agreed to terminate their joint development project. Interest expense increased reflecting a higher level of short-term borrowings which have been utilized by the Company to maintain its long-term investment positions which have a current yield higher than the cost of short-term funds. The effective tax rate for 1994 was 27% versus 26% in 1993 due to the acquisition of A. B. Chance Industries, Inc. Net income and earnings per share increased by more than 5% for the second quarter, while on a year-to-date basis the rate of increase was more than 3%, respectively. Liquidity and Capital Resources At June 30, 1994, notes payable of $131.9 million and long-term debt of $2.7 million were 23.2% of shareholders' equity. Working capital was $98.9 million and the current ratio was 1.3 to 1.0. 8 -- 8 -- HUBBELL INCORPORATED PART II -- OTHER INFORMATION ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K EXHIBITS 11. Computation of Earnings Per Share. REPORTS ON FORM 8-K A report on Form 8-K, pertaining to the April 19, 1994 acquisition of A. B. Chance Industries, Inc., was filed with the Securities and Exchange Commission on April 29, 1994. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUBBELL INCORPORATED Dated: August 10, 1994 /s/ Harry B. Rowell, Jr. ---------------- ---------------------------------------- Harry B. Rowell, Jr. Executive Vice President (Chief Financial and Accounting Officer) 9 EXHIBIT INDEX EXHIBIT DESCRIPTION - - ------- ----------- 11 Computation of Earnings Per Share
1 Exhibit 11 HUBBELL INCORPORATED Computation of Earnings Per Share (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, ------------------- -------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Net Income $26,459 $25,010 $50,788 $49,036 ======= ======= ======= ======= Weighted average number of common shares outstanding during the year 31,333 31,211 31,310 31,202 Common equivalent shares 388 434 407 432 ------- ------- ------- ------- Average number of shares outstanding 31,721 31,645 31,717 31,634 ======= ======= ======= ======= Earnings per share $0.83 $0.79 $1.60 $1.55 ======= ======= ======= =======