1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1995
/ / 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 7, 1995 were:
Class A ($.01 par value) 5,799,000
Class B ($.01 par value) 27,120,000
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HUBBELL INCORPORATED
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet
(Unaudited)
(in thousands)
June 30, 1995 December 31, 1994
------------- -----------------
ASSETS
Current Assets:
Cash and temporary cash investments $ 68,804 $ 38,865
Accounts receivable (net) 152,540 143,862
Inventories 229,985 224,088
Prepaid taxes 30,580 31,666
Other 4,020 6,425
---------- ----------
TOTAL CURRENT ASSETS 485,929 444,906
Property, Plant and Equipment (net) 200,333 201,968
Other Assets:
Investments 174,414 205,939
Purchase price in excess of net assets of companies acquired (net) 139,653 141,570
Property held as investment 8,114 10,027
Other 32,257 37,159
---------- ----------
$1,040,700 $1,041,569
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Commercial paper and bank borrowings $ 121,334 $ 139,350
Accounts payable 32,611 37,539
Accrued salaries, wages and employee benefits 27,839 26,287
Accrued income taxes 23,455 28,332
Dividends Payable 15,484 13,494
Accrued restructuring charge 12,000 14,000
Other accrued liabilities 69,962 73,071
---------- ----------
TOTAL CURRENT LIABILITIES 302,685 332,073
Long-Term Debt 2,700 2,700
Other Non-Current Liabilities 85,048 84,876
Deferred Income Taxes 12,249 12,924
Shareholders' Equity 638,018 608,996
---------- ----------
$1,040,700 $1,041,569
========== ==========
See notes to consolidated financial statements
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3
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
NET SALES $295,006 $261,935 $573,440 $468,979
Cost of goods sold 211,024 184,198 408,958 326,701
-------- -------- -------- --------
GROSS PROFIT 83,982 77,737 164,482 142,278
Selling & administrative expenses 43,179 42,546 85,359 76,647
-------- ------ -------- --------
OPERATING INCOME 40,803 35,191 79,123 65,631
-------- ------ -------- --------
OTHER INCOME (EXPENSE):
Investment income 4,230 3,553 8,233 7,420
Interest expense (2,370) (1,423) (4,583) (2,290)
Other income (expense), net (1,462) (625) (2,655) (1,188)
-------- -------- -------- --------
TOTAL OTHER INCOME, NET 398 1,505 995 3,942
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 41,201 36,696 80,118 69,573
Provision for income taxes 11,124 10,237 21,632 18,785
-------- -------- -------- --------
NET INCOME $ 30,077 $ 26,459 $ 58,486 $ 50,788
======== ======== ======== ========
EARNINGS PER SHARE $ 0.90 $ 0.79 $ 1.76 $ 1.53
======== ======== ======== ========
See notes to consolidated financial statements.
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HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
June 30,
--------
CASH FLOWS FROM OPERATING ACTIVITIES 1995 1994
-------- --------
Net income $ 58,486 $ 50,788
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 20,071 18,688
Deferred income taxes 411 1,993
Changes in assets and liabilities, net of the effect of business acquisitions:
(Increase)/Decrease in accounts receivable (8,678) (11,329)
(Increase)/Decrease in inventories (5,897) (10,158)
(Increase)/Decrease in other current assets 2,405 6,022
Increase/(Decrease) in current liabilities (excluding dividends payable) (11,359) 619
Increase/(Decrease) in restructuring accruals (5,435) (4,614)
(Increase)/Decrease in other, net 8,330 1,054
-------- ---------
Net cash provided by operating activities 58,334 53,063
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses --- (110,000)
Additions to property, plant and equipment (18,161) (26,445)
Purchase of non-current investments (1,860) (6,455)
Sale of non-current investments 36,635 50,606
Other, net 2,734 (312)
-------- ---------
Net cash used in investing activities 19,348 (92,606)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (27,673) (25,658)
Commercial paper borrowings (repayment) (18,016) 40,800
Exercise of stock options 1,790 1,528
Acquisition of treasury shares (3,844) ---
-------- ---------
Net cash provided (used) in financing activities (47,743) 16,670
-------- ---------
Increase (Decrease) in cash and temporary cash investments 29,939 (22,873)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 38,865 44,231
-------- ---------
End of period $ 68,804 $ 21,358
======== =========
See notes to consolidated financial statements
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
1. Inventories are classified as follows: (in thousands)
June 30, December 31,
1995 1994
---- ----
Raw Material $ 79,705 $ 79,065
Work-in-Process 59,580 59,035
Finished Goods 142,305 135,042
-------- --------
281,590 273,142
Excess of current
Production costs over
LIFO cost basis 51,605 49,054
-------- --------
$229,985 $224,088
======== ========
2. Shareholders' Equity comprises: (in thousands)
June 30, December 31,
1995 1994
---- ----
Common Stock, $.01 par value:
Class A-authorized 50,000,000 shares,
outstanding 5,831,381 and 5,895,097 shares $ 58 $ 59
Class B-authorized 150,000,000 shares,
outstanding 27,110,456 and 27,056,945 shares 271 271
Additional paid-in-capital 439,417 441,469
Retained earnings 205,817 176,994
Unrealized holding gains (losses) on securities (200) (2,147)
Cumulative translation adjustments (7,345) (7,650)
-------- --------
$638,018 $608,996
======== ========
3. On April 19, 1994, the Company acquired 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 and was recorded under the purchase method of
accounting. Accordingly, the results of operations for the acquired
business has been included in the consolidated statement of income
only from its acquisition date. Had the business been acquired on the
first day of 1994 unaudited proforma net sales and net income for the
year-to-date period ending June 30, 1994 would have been $510,630,000
and $51,847,000, respectively. The proforma results are not
necessarily indicative of the results that would have been obtained
had the acquisition occurred on January 1, 1994, nor are they
necessarily indicative of the results that may occur in the future.
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
4. Share data for all periods has been adjusted to reflect the 5% stock
dividend paid on February 3, 1995 to shareholders of record on
January 13, 1995.
5. 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.
6. The results of operations for the three and six months period ended
June 30, 1995 and 1994 are not necessarily indicative of the results
to be expected for the full year.
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HUBBELL INCORPORATED
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1995
RESULTS OF OPERATIONS
Consolidated net sales for the second quarter of 1995 increased by 13%
as substantially all operating units reported increases with particularly
strong growth for the Lighting, Industrial Controls, Ohio Brass, Pulsecom and
Premise Wiring businesses. The sales growth primarily reflects the improved
economic conditions in the United States and Canadian markets from a year
ago. Operating income increased 16% on the higher sales volume and the
benefit of improved operating efficiencies from the Company's restructuring
program which more than offset the increased costs for materials.
Year-to-date net sales and operating income increased by 22% and 21%,
respectively, on generally improved market conditions and the inclusion for
the full six months of 1995 of A.B. Chance which was acquired in April 1994.
The inclusion of A.B. Chance was approximately four percentage points of the
increases, respectively.
Low Voltage segment sales for the second quarter increased 12%
reflecting the improved market conditions in the United States and Canada.
While all product lines in the segment showed improvement, fluorescent
lighting and industrial controls were particularly strong. Operating profits
increased 8% on higher sales which include a higher mix of lower margined
products. Year-to-date net sales and operating profits increased by 13% and
11%, respectively, as sales during the second quarter continued to increase but
at a marginally lower rate than the first quarter.
For the quarter, High Voltage segment sales increased 5% on higher
sales of power cables, surge arresters and insulators and moderate
improvement in other product lines. Operating profits increased 9% on
higher sales volumes and benefits from the realignment of administrative and
sales functions within the segment. Year-to-date sales increased 29% and
operating profits increased 16% from the inclusion of A.B. Chance high voltage
products since its acquisition in April 1994, and moderate growth in all product
lines.
Other industry segment sales increased 18% for the quarter on improved
shipments in almost all categories with especially strong improvements in
telecommunications and wire management products. Operating profits increased
31% on the improved sales volume of higher margined telecommunications
products and improved operating efficiencies. Year-to-date sales and
operating profits increased by over 30% on improved market conditions and
inclusion, from the acquisition of A.B. Chance, products used in building and
maintenance of electric power and telephone lines.
On a year-to-date basis, sales through the Company's International
based subsidiaries increased 38% on the strong performance of the Canadian
business and inclusion of A.B. Chance's foreign operations which accounted
for ten percentage points of the increase. Sales from our subsidiaries in Asia
and Europe were slightly ahead of last year while Mexican shipments declined
due to the economic recession brought on by the devaluation of the peso.
Operating income increased on the higher sales volume and operating
efficiencies of the restructured Canadian operation. As a percentage of total
consolidated sales, International subsidiaries were 6% in 1995 and 1994 with
the Canadian market representing approximately 60% of international sales.
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HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1995
Interest income, year-to-date, increased as a result of higher interest
rates. Interest expense increased due to a higher average level of commercial
paper outstanding during the first three months of 1995 combined with higher
interest rates. The increase in other expenses is due to the costs associated
with the expansion of the corporate owned life insurance program to include the
A.B. Chance operations. The effective tax rate for 1995 is 27%. In the second
quarter of 1994, the effective tax rate was increased to 27% due to the impact
of the acquisition of A.B. Chance with its higher effective tax rate. The
Company's tax rate benefits from the lower taxes on earnings in its Puerto Rico
operations and continued emphasis on generating tax-exempt income. Net
income and earnings per share for the second quarter increased 14%,
respectively, while the year-to-date increase was 15%, respectively.
The Company's restructuring program is proceeding according to
management's plan. During the quarter, the second phase of capacity expansion
in Puerto Rico to accommodate plastic molding began; transfer of equipment and
operations into the new facility in Juarez, Mexico also began and consolidation
of warehousing and distribution operations is continuing. With the high level of
business activity, certain operational realignments have taken somewhat longer
than originally planned to minimize any adverse impact on customer service. At
June 30, 1995, the restructuring accrual balance was $22,504,000 of which
$12,000,000 is classified as current liability. Through June 30, 1995,
cumulative costs charged to the restructuring accrual were $27,496,000 as
follows (in thousands):
Personnel Plant & Equipment Total
Relocation Disposal
---------- --------
1993 $ 4,456 $2,794 $ --- $ 7,250
1994 7,550 2,036 5,225 14,811
1995 Y-T-D 2,650 1,566 1,219 5,435
------- ------ ------ -------
Cumulative $14,656 $6,396 $6,444 $27,496
======= ====== ====== =======
Personnel costs include non-cash charges for early retirement programs
which have been reclassified to the Company's pension liability -- $2,040,000
in 1995 and cumulatively $7,296,000 since inception of the restructuring
program.
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HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1995
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company's financial position remained strong
with working capital of $183.2 million and a current ratio of 1.6 to 1.
Net cash provided by operations was comparable to prior periods and
has been more than sufficient to fund increased working capital in support of
higher sales. Depreciation and amortization has increased reflecting the
acquisition of A.B. Chance and a higher level of depreciable assets. As
sales volumes increased, accounts receivable increased accordingly. To
support service levels, inventories have also increased.
Selected portfolio securities with low dividend yields were liquidated
for $36.6 million which approximated carrying value. Commercial paper
borrowings have been reduced by $18.0 million since December 31, 1994. The
total of commercial paper and long term debt at June 30, 1995, was 19.4% of
shareholders equity. On June 14, 1995, the Board of Directors increased the
common stock dividend per share to an annual rate of $1.88 or $.47 per
quarter, an increase of 9.3% over the former cash payment rate of $1.72 or
$.43 per quarter.
The Company believes that currently available cash, borrowing
facilities, and its ability to increase its credit lines if needed, combined
with internally generated funds should be more than sufficient to fund capital
expenditures as well as any increase in working capital that would be required
to accommodate a higher level of business activity.
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HUBBELL INCORPORATED
PART II -- OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
11. Computation of Earnings Per Share
27. Financial Data Schedule (Electronic filings only)
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the three months ended June 30,
1995.
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, 1995 /s/ Harry B. Rowell, Jr.
--------------- ----------------------------------------
Harry B. Rowell, Jr.
Executive Vice President
(Chief Financial and Accounting Officer)
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11
EXHIBIT INDEX
11. Computation of Earnings Per Share
27. Financial Data Schedule (Electronic filings only)
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,
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
Net Income $30,077 $26,459 $58,486 $50,788
======= ======= ======= =======
Weighted average number of common shares
outstanding during the period 32,954 32,900 32,953 32,876
Common equivalent shares 397 407 363 427
------- ------- ------- -------
Average number of shares outstanding 33,351 33,307 33,316 33,303
======= ======= ======= =======
Earnings per Share $ 0.90 $ 0.79 $ 1.76 $ 1.53
======= ======= ======= =======
Share data for all periods has been adjusted to reflect the 5% stock dividend
paid on February 3, 1995.
11
5
1,000
6-MOS
DEC-31-1995
JUN-30-1995
68,804
0
158,066
5,526
229,985
485,929
419,647
(219,314)
1,040,700
302,685
2,700
329
0
0
637,689
1,040,700
573,440
573,440
408,958
408,958
0
637
4,583
80,118
21,632
58,486
0
0
0
58,486
1.76
1.76
