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 MARCH 31, 1997
[ ] 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
May 7, 1997 were:
Class A ($.01 par value) 11,368,160
Class B ($.01 par value) 55,840,472
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HUBBELL INCORPORATED
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
March 31, 1997 December 31, 1996
-------------- -----------------
ASSETS
Current Assets:
Cash and temporary cash investments $ 119,145 $ 134,397
Accounts receivable (net) 186,712 172,351
Inventories 248,579 244,565
Prepaid taxes 29,075 30,162
Other 6,975 9,713
----------- ------------
TOTAL CURRENT ASSETS 590,486 591,188
Property, Plant and Equipment (net) 221,682 217,913
Other Assets:
Investments 170,964 170,372
Purchase price in excess of net assets of companies
acquired (net) 195,725 162,180
Property held as investment 10,580 7,970
Other 42,677 35,817
---------- ------------
$ 1,232,114 $ 1,185,440
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Commercial paper and notes $ 250 $ 18,635
Accounts payable 48,939 52,485
Accrued salaries, wages and employee benefits 25,122 26,486
Accrued income taxes 53,353 44,039
Dividends payable 17,476 17,177
Accrued restructuring charge 6,656 8,734
Other accrued liabilities 83,401 87,874
----------- ------------
TOTAL CURRENT LIABILITIES 235,197 255,430
Long-Term Debt 99,473 99,458
Other Non-Current Liabilities 76,207 74,736
Deferred Income Taxes 13,029 12,670
Shareholders' Equity 808,208 743,146
----------- ------------
$ 1,232,114 $ 1,185,440
=========== ===========
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
MARCH 31, 1997
--------------
1997 1996
--------- ---------
NET SALES $ 324,697 $ 304,600
Cost of goods sold 224,621 214,440
--------- ---------
GROSS PROFIT 100,076 90,160
Selling & administrative expenses 50,095 46,356
--------- ---------
OPERATING INCOME 49,981 43,804
--------- ---------
OTHER INCOME (EXPENSE):
Investment income 4,528 3,876
Interest expense (1,798) (2,100)
Other income (expense), net (855) (976)
--------- ---------
TOTAL OTHER INCOME, NET 1,875 800
--------- ---------
INCOME BEFORE INCOME TAXES 51,856 44,604
Provision for income taxes 15,557 12,935
--------- ---------
NET INCOME $ 36,299 $ 31,669
========= =========
EARNINGS PER SHARE $ 0.53 $ 0.47
========= =========
See notes to consolidated financial statements.
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4
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31, 1997
--------------
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
- ------------------------------------ ---- ----
Net income $ 36,299 $ 31,669
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 11,657 10,776
Deferred income taxes 1,087 779
Changes in assets and liabilities, net of the effect of business acquisitions:
(Increase)/Decrease in accounts receivable (9,759) (16,246)
(Increase)/Decrease in inventories (1,300) 6,564
(Increase)/Decrease in other current assets 2,859 145
Increase/(Decrease) in current operating liabilities (3,881) 14,013
Increase/(Decrease) in restructuring accruals (2,078) (2,118)
(Increase)/Decrease in other, net 284 1,903
------- --------
Net cash provided by operating activities 35,168 47,485
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses -- (31,365)
Additions to property, plant and equipment (9,797) (9,928)
Purchases of investments (4,015) (242)
Repayments and sales of investments 3,216 4,994
Other, net (842) 2,151
--------- ----------
Net cash used in investing activities (11,438) (34,390)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (17,177) (15,475)
Commercial paper and notes - borrowings (repayments) (18,385) --
Exercise of stock options 685 714
Acquisition of treasury shares (4,105) (1,641)
------- ----------
Net cash provided (used) in financing activities (38,982) (16,402)
-------- ---------
Increase (Decrease) in cash and temporary cash investments (15,252) (3,307)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 134,397 86,984
------- ---------
End of period $119,145 $ 83,677
======== =========
See notes to consolidated financial statements
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. Inventories are classified as follows: (in thousands)
MARCH 31, DECEMBER 31,
1997 1996
-------- --------
Raw Material $ 83,036 $ 81,321
Work-in-Process 72,243 71,388
Finished Goods 136,605 134,931
-------- --------
291,884 287,640
Excess of current
Production costs over
LIFO cost basis 43,305 43,075
-------- --------
$248,579 $244,565
======== ========
2. Shareholders' Equity comprises: (in thousands)
MARCH 31, DECEMBER 31,
1997 1996
--------- ---------
Common Stock, $.01 par value:
Class A-authorized 50,000,000 shares,
outstanding 11,368,160 and 11,446,120 shares $ 114 $ 115
Class B-authorized 150,000,000 shares
outstanding 55,831,715 and 54,612,590 shares 558 546
Additional paid-in-capital 485,212 438,285
Retained earnings 331,358 312,534
Unrealized holding gains (losses) on securities 83 212
Cumulative translation adjustments (9,117) (8,546)
--------- ---------
$ 808,208 $ 743,146
========= =========
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
3. On February 14, 1997, Hubbell acquired Fargo Manufacturing Company, Inc.
("Fargo") based in Poughkeepsie, New York. Fargo manufactures distribution
and transmission line products primarily for the electric utility market.
Each share of Fargo common stock was converted into a right to receive
shares or fractions thereof of Hubbell's Class B Common Stock and
accordingly 1,170,572 shares of Class B Common Stock were issued. The
acquisition of Fargo has been recorded under the purchase method of
accounting with a cost of $42,800,000 net of cash acquired.
On January 2, 1996, the Company acquired the assets of the Anderson
Electrical Connectors business ("Anderson"). Anderson manufactures
electrical connectors and associated hardware and tools for the electric
utility industry with manufacturing facilities in Alabama and Tennessee. On
January 31, 1996, the Company acquired all the outstanding stock of Gleason
Reel Corp. ("Gleason") based in Mayville, Wisconsin. Gleason manufactures
electric cable management products (including cable and hose reels,
protective steel and nylon cable tracks and cable festooning hardware) and
a line of ergonomic tool support systems. The businesses were acquired for
cash of $31,365,000 and notes of $18,635,000 that mature in one year and
were recorded under the purchase method of accounting.
The costs of the acquired businesses has been allocated to assets acquired
and liabilities assumed based on fair values with the residual amount
assigned to goodwill, which is being amortized over forty years. The
businesses have been included in the financial statements as of their
respective acquisition date and had no material effect on the Company's
financial position and reported earnings.
4. 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.
5. The results of operations for the three months ended March 31, 1997 and
1996 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
MARCH 31, 1997
FINANCIAL CONDITION
At March 31, 1997, the Company's financial position remained strong
with working capital of $355.3 million and a current ratio of 2.5 to 1. Total
borrowings at March 31, 1997, were $99.7 million, 12.3% of shareholders equity.
The net decline in cash and temporary cash investments of $15.3 million
for the three months ended March 31, 1997, reflects repayment of the short term
notes issued as part of the acquisition of Gleason Reel in 1996 and quarterly
dividend payment offset by cash provided from operating activities.
Net cash provided by operating activities reflects higher net income
and continued emphasis on working capital management. Accounts receivable
increased in line with higher sales. The decrease in current liabilities is due
to a lower level of accounts payable primarily due to a lower rate of inventory
purchases combined with payment of income taxes, insurance premiums and accrued
interest.
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.
RESULTS OF OPERATIONS
Consolidated net sales increased by 7% with strong growth for the Pulse
Communication, Canada and Mexico operations combined with the acquisition of
Fargo in 1997 along with Anderson and Gleason which were acquired in January
1996. The acquisitions contributed one percentage point of the sales increase.
Operating income increased 14% on higher sales and profitability improvement as
the Company entered into the final year of its restructuring program with net
operating margins rising to 15.4% from 14.4% in 1996.
Low Voltage segment sales increased 3% on higher shipments of generally
all products within the segment along with the inclusion of Gleason which was
acquired on January 31, 1996. Operating income increased in line with the higher
sales volume.
High Voltage segment sales increased 7% on continued growth for surge
arresters and insulators, higher shipments of power cable and the acquisition of
Fargo on February 14, 1997. Operating income increased more than 20% on improved
profitability and higher sales.
The Other industry segment sales increased 11% as all categories
reported higher sales with particularly strong increases for wire management
components, switch and outlet boxes and telecommunications products. Operating
income increased 20% on higher sales volumes and improved operating
efficiencies.
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HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1997
(CONTINUED)
Sales through the Company's International units increased by 20% on
continued growth of the Canadian and Mexican markets particularly for High
Voltage products. Operating income from International units increased more than
20% on the higher sales volume and continued profitability improvement of the
restructured Canadian and European operations.
The effective income tax rate for 1997 was 30% versus 29% in 1996. The
increase in the effective tax rate reflects a higher portion of domestic source
income which is due in part to the recently completed acquisition combined with
changes in tax regulations regarding corporate owned life insurance and Puerto
Rico investment income. Net income increased 15% and earnings per share
increased 13%, respectively. Earnings per share includes the impact of the
additional shares issued for the Fargo acquisition.
The Company's restructuring program is proceeding according to
management's plan. At March 31, 1997, the restructuring accrual balance was
$6,656,000. Through March 31, 1997, cumulative costs charged to the
restructuring accrual were $43,344,000 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 3,017 5,048 1,461 9,526
1996 2,223 6,642 814 9,679
1997 Y-T-D 539 1,185 354 2,078
------- ------- ------ -------
Cumulative $17,785 $17,705 $7,854 $43,344
======= ======= ====== =======
Personnel costs include non-cash charges for early retirement programs
which have been reclassified to the Company's pension liability totaling
$6,203,000 since inception of the restructuring program.
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HUBBELL INCORPORATED
PART II -- OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 5, 1997:
1. The following nine (9) individuals were elected directors of the Company
for the ensuing year to serve until the next Annual Meeting of Shareholders
of the Company and until their respective successors may be elected and
qualified:
NAME OF INDIVIDUAL VOTES FOR VOTES WITHHELD
------------------ --------- --------------
E. Richard Brooks 245,094,800 1,022,042
George W. Edwards, Jr. 245,183,372 933,470
Joel S. Hoffman 244,540,674 1,576,168
Horace G. McDonell 245,182,510 934,332
Andrew McNally IV 245,273,860 842,982
Daniel J. Meyer 245,123,206 933,636
G. Jackson Ratcliffe 245,285,116 831,726
John A. Urquhart 245,159,476 957,366
Malcolm Wallop 244,956,560 1,160,282
2. Price Waterhouse was ratified as independent accountants to examine the
annual financial statements for the Company for the year 1997 receiving
245,139,015 affirmative votes, being a majority of the votes cast on the
matter all voting as a single class, with 528,343 negative votes and
449,504 votes abstained.
3. The proposal relating to approval of an amendment to the Company's 1973
Stock Option Plan for Key Employees, which appears on pages 18 to 20 of the
proxy statement dated March 21, 1997, which proposal is incorporated herein
by reference, has been approved with 212,007,802 affirmative votes, being a
majority of the votes cast on the matter all voting as a single class, with
4,624,744 negative votes and 2,426,419 votes abstained.
4. The proposal relating to approval of the adoption of the Company's
Performance Unit Plan, which appears on pages 21 to 22 of the proxy
statement dated March 21, 1997, which proposal is incorporated herein by
reference, has been approved with 212,110,647 affirmative votes, being a
majority of the votes cast on the matter all voting as a single class, and
a majority of the aggregate votes of the outstanding shares having been
cast on the proposal, with 4,727,508 negative votes and 2,086,532 votes
abstained.
5. The shareholder proposal relating to Board inclusiveness, which appears on
pages 22 to 24 of the proxy statement dated March 21, 1997, which proposal
is incorporated herein by reference, has been rejected with 18,883,332
affirmative votes, being the affirmative vote of less than a majority of
the votes cast on the matter all voting as a single class, with 195,750,528
negative votes, being a majority of the votes cast on the matter all voting
as a single class, and 4,290,806 votes abstained.
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HUBBELL INCORPORATED
PART II -- OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
NUMBER DESCRIPTION
------ -----------
10b+ Hubbell Incorporated, 1973 Stock Option Plan For Key
Employees, as amended effective May 5, 1997. Exhibit A of the
registrant's proxy statement, dated March 21, 1997, filed on
March 27, 1997, is incorporated by reference.
10q+ Hubbell Incorporated Performance Unit Plan, effective January
1, 1997. Exhibit B of the registrant's proxy statement, dated
March 21, 1997, filed on March 27, 1997, is incorporated by
reference.
11. Computation of Earnings Per Share
27. Financial Data Schedule (Electronic filings only)
----------------
+ This exhibit constitutes a management contract, compensatory plan, or
arrangement.
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the three months ended March 31,
1997.
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: May 13, 1997 /s/ H.B. Rowell, Jr.
------------------- -----------------------------
Harry B. Rowell, Jr.
Executive Vice President
(Chief Financial and Accounting Officer)
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EXHIBIT 11
HUBBELL INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
---------
1997 1996
------- -------
Net Income $36,299 $31,669
======= =======
Weighted average number of common shares
outstanding during the period 67,200 65,908
Common equivalent shares 1,307 1,196
------- -------
Average number of shares outstanding 68,507 67,104
======= =======
Earnings per Share $ 0.53 $ 0.47
======= =======
11
5
1,000
3-MOS
DEC-31-1997
MAR-31-1997
119,145
0
193,280
6,568
248,579
590,486
471,945
250,263
1,232,114
235,197
99,473
673
0
0
807,535
1,232,114
324,697
324,697
224,621
224,621
1,875
334
1,798
51,856
15,557
36,299
0
0
0
36,299
0.53
0.53
