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 SEPTEMBER 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
November 7, 1995 were:
Class A ($.01 par value) 5,784,000
Class B ($.01 par value) 27,127,000
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HUBBELL INCORPORATED
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
September 30 , 1995 December 31, 1994
------------------- -----------------
ASSETS
- ------
Current Assets:
Cash and temporary cash investments $ 76,120 $ 38,865
Accounts receivable (net) 146,202 143,862
Inventories 234,004 224,088
Prepaid taxes 30,671 31,666
Other 3,719 6,425
--------- ----------
TOTAL CURRENT ASSETS 490,716 444,906
Property, Plant and Equipment (net) 201,133 201,968
Other Assets:
Investments 178,793 205,939
Purchase price in excess of net assets of companies acquired (net) 138,692 141,570
Property held as investment 8,271 10,027
Other 30,533 37,159
--------- ----------
$ 1,048,138 $1,041,569
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Commercial paper and bank borrowings $ 107,866 $ 139,350
Accounts payable 30,196 37,539
Accrued salaries, wages and employee benefits 28,712 26,287
Accrued income taxes 28,653 28,332
Dividends payable 15,487 13,494
Accrued restructuring charge 12,000 14,000
Other accrued liabilities 73,390 73,071
---------- ----------
TOTAL CURRENT LIABILITIES 296,304 332,073
Long-Term Debt 2,700 2,700
Other Non-Current Liabilities 83,013 84,876
Deferred Income Taxes 14,377 12,924
Shareholders' Equity 651,744 608,996
-------- ----------
$ 1,048,138 $1,041,569
=========== ==========
See notes to consolidated financial statements
2
3
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
NET SALES $286,968 $ 267,545 $ 860,408 $ 736,524
Cost of goods sold 200,573 189,206 609,530 515,908
------- ------- ------- -------
GROSS PROFIT 86,395 78,339 250,878 220,616
Selling & administrative expenses 43,408 41,998 128,768 118,645
------ ------ ------- ---------
OPERATING INCOME 42,987 36,341 122,110 101,971
------ ------ -------- ---------
OTHER INCOME (EXPENSE):
Investment income 3,988 3,411 12,221 10,831
Interest expense (1,949) (1,716) (6,532) ( 4,006)
Other income (expense), net (1,601) (655) (4,256) (1,843)
-------- ---------- --------- -----------
TOTAL OTHER INCOME, NET 438 1,040 1,433 4,982
-------- -------- -------- ----------
INCOME BEFORE INCOME TAXES 43,425 37,381 123,543 106,953
Provision for income taxes 11,725 10,092 33,357 28,877
-------- ------ ------- ----------
NET INCOME $ 31,700 $ 27,289 $90,186 $ 78,076
======== ======== ======= =========
EARNINGS PER SHARE $ 0.95 $ 0.82 $ 2.70 $ 2.34
========= ========= ========== ==========
See notes to consolidated financial statements.
3
4
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
CASH FLOWS FROM OPERATING ACTIVITIES 1995 1994
- ------------------------------------ ------------ --------------
Net income $ 90,186 $ 78,076
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 29,923 28,243
Deferred income taxes 2,448 2,299
Changes in assets and liabilities, net of the effect of business acquisitions:
(Increase)/Decrease in accounts receivable (2,340) (11,009)
(Increase)/Decrease in inventories (9,916) (11,841)
(Increase)/Decrease in other current assets 2,706 5,915
Increase/(Decrease) in current liabilities (excluding dividends payable) (4,275) 941
Increase/(Decrease) in restructuring accruals (7,726) 6,342
(Increase)/Decrease in other, net 9,921 2,554
------------ ----------
Net cash provided by operating activities 110,927 88,836
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of businesses (110,000)
Additions to property, plant and equipment (27,896) (39,460)
Purchase of non-current investments (6,147) (9,624)
Sale of non-current investments 36,693 50,606
Other, net 1,801 (821)
-------------- ----------
Net cash used in investing activities 4,451 (109,299)
--------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Payment of dividends (43,157) (39,134)
Commercial paper borrowings (repayments) (31,484) 48,180
Exercise of stock options 2,310 2,082
Acquisition of treasury shares (5,792) ---
--------- ------------
Net cash provided (used) in financing activities (78,123) 11,128
---------- ----------
Increase (Decrease) in cash and temporary cash investments 37,255 (9,335)
CASH AND TEMPORARY CASH INVESTMENTS
- -----------------------------------
Beginning of period 38,865 44,231
--------- --------
End of period $ 76,120 $ 34,896
========== =========
See notes to consolidated financial statements
4
5
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
1. Inventories are classified as follows: (in thousands)
SEPTEMBER 30, DECEMBER 31,
1995 1994
---- ----
Raw Material $ 83,085 $ 79,065
Work-in-Process 59,208 59,035
Finished Goods 144,315 135,042
-------- ----------
286,608 273,142
Excess of current
Production costs over
LIFO cost basis 52,604 49,054
------- -----------
$ 234,004 $ 224,088
========== ==========
2. Shareholders' Equity comprises: (in thousands)
SEPTEMBER 30, DECEMBER 31,
1995 1994
---- ----
Common Stock, $.01 par value:
-----------------------------
Class A-authorized 50,000,000 shares,
outstanding 5,797,220 and 5,895,097 shares $ 58 $ 59
Class B-authorized 150,000,000 shares,
outstanding 27,126,470 and 27,056,945 shares 271 271
Additional paid-in-capital 438,590 441,469
Retained earnings 220,030 176,994
Unrealized holding gains (losses) on securities --- (2,147)
Cumulative translation adjustments (7,205) (7,650)
------------- ---------
$ 651,744 $ 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 September 30, 1994 would have been $778,174,000 and
$79,135,000 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.
5
6
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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. Subsequent Event -- On October 3, 1995, the Company completed a public
debt offering. The offering consisted of $100,000,000 of 6 5/8% notes
due October 1, 2005. The proceeds from the offering were used to reduce
the oustanding amount of commercial paper.
6. 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.
7. The results of operations for the three and nine months period ended
September 30, 1995 and 1994 are not necessarily indicative of the results
to be expected for the full year.
6
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HUBBELL INCORPORATED
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
Consolidated net sales for the third quarter of 1995 increased by 7% 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 18% on the higher sales volume and the benefit of
improved operating efficiencies from the Company's restructuring program.
Year-to-date net sales and operating income increased by 17% and 20%,
respectively, on generally improved market conditions and the inclusion for the
full nine 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 third quarter increased 8% 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 9%
on higher sales which include a higher mix of lower margined products.
Year-to-date net sales and operating profits increased by 13% and 14%,
respectively, as sales during the third quarter continued to increase but at a
marginally lower rate than the first and second quarters.
For the quarter, High Voltage segment sales were essentially even with
last year as the higher sales of power cables, surge arresters and insulators
offset a decline in test and measurement equipment. Operating profits
increased 10% on higher operating volumes, benefits from the realignment of
administrative and sales functions within the segment, and improved
manufacturing efficiencies in power cables. Year-to-date sales increased 19%
and operating profits increased 13% 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 11% for the quarter on improved
shipments in almost all categories with especially strong improvements in
telecommunications and wire management products. Operating profits increased
34% on the improved sales volume of higher margined telecommunications products
and improved operating efficiencies. Year-to-date sales and operating profits
increased by over 20% on improved market conditions and the inclusion products
used in the building and maintenance of electric power and telephone lines.
On a year-to-date basis, sales through the Company's International based
subsidiaries increased 29% on the strong performance of the Canadian business
and inclusion of A.B. Chance's foreign operations. 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
SEPTEMBER 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 third quarter increased 16% and the
year-to-date comparisons also increased by 16%.
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 September 30, 1995, the restructuring accrual balance was
$20,213,000 of which $12,000,000 is classified as a current liability. Through
September 30, 1995, cumulative costs charged to the restructuring accrual were
$29,787,000 as follows (in thousands):
Personnel Plant & Equipment Costs
Costs Relocation Disposal Total
----- ---------- -------- -----
1993 $ 4,456 $ 2,794 $ --- $ 7,250
1994 7,550 2,036 5,225 14,811
1995 Y-T-D 3,166 3,118 1,442 7,726
------- ------ ------ -----
Cumulative $15,172 $ 7,948 $ 6,667 $29,787
======= ======== ========= =======
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
SEPTEMBER 30, 1995
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company's financial position remained strong
with working capital of $194.4 million and a current ratio of 1.7 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
during the second quarter of 1995 for $36.6 million which approximated carrying
value. Commercial paper borrowings have been reduced by $31.5 million since
December 31, 1994. The total of commercial paper and long term debt at
September 30, 1995, was 17.0% of shareholders equity. As referred to in the
subsequent event note, the Company issued on October 3, 1995, $100.0 million of
ten year notes with a coupon interest rate of 6 5/8%. The proceeds from the
offering were used to reduce the amount of outstanding commercial paper.
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 September
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: November 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
-------------
EXHIBIT
NO. DESCRIPTION
------- -----------
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
Net Income $ 31,700 $ 27,289 $ 90,186 $ 78,076
======== ======== ========= ========
Weighted average number of common shares
outstanding during the period 32,932 32,924 32,946 32,891
Common equivalent shares 463 343 396 400
--------- --------- -------- ---------
Average number of shares outstanding 33,395 33,267 33,342 33,291
======== ======= ======= ========
Earnings per Share $ 0.95 $ 0.82 $ 2.70 $ 2.34
========= ======== ======= =========
Share data for all periods has been adjusted to reflect the 5% stock dividend
paid on February 3, 1995.
11
5
1,000
9-MOS
DEC-31-1995
SEP-30-1995
76,120
0
152,006
5,804
234,004
490,716
423,794
222,661
1,048,138
296,304
0
329
0
0
651,415
1,048,138
860,408
860,408
609,530
609,530
0
964
6,532
123,543
33,357
90,186
0
0
0
90,186
2.70
2.70
