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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, 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
August 5, 1997 were:
Class A ($.01 par value) 11,295,510
Class B ($.01 par value) 55,921,999
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HUBBELL INCORPORATED
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
June 30, 1997 December 31, 1996
------------- -----------------
ASSETS
Current Assets:
Cash and temporary cash investments $ 117,487 $ 134,397
Accounts receivable (net) 191,123 172,351
Inventories 259,734 244,565
Prepaid taxes 27,189 30,162
Other 6,811 9,713
---------- ----------
TOTAL CURRENT ASSETS 602,344 591,188
Property, Plant and Equipment (net) 226,043 217,913
Other Assets:
Investments 166,387 170,372
Purchase price in excess of net assets of companies acquired (net) 195,377 162,180
Property held as investment 9,968 7,970
Other 43,081 35,817
---------- ----------
$1,243,200 $1,185,440
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Commercial paper and notes $ 2,950 $ 18,635
Accounts payable 51,789 52,485
Accrued salaries, wages and employee benefits 29,077 26,486
Accrued income taxes 36,698 44,039
Dividends payable 19,506 17,177
Accrued restructuring charge 2,807 8,734
Other accrued liabilities 83,378 87,874
---------- ----------
TOTAL CURRENT LIABILITIES 226,205 255,430
Long-Term Debt 99,489 99,458
Other Non-Current Liabilities 77,400 74,736
Deferred Income Taxes 12,481 12,670
Shareholders' Equity 827,625 743,146
---------- ----------
$1,243,200 $1,185,440
========== ==========
See notes to consolidated financial statements
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HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1997 1996 1997 1996
--------- --------- --------- ---------
NET SALES $ 352,898 $ 328,927 $ 677,595 $ 633,527
Cost of goods sold 241,680 229,881 466,301 444,321
--------- --------- --------- ---------
GROSS PROFIT 111,218 99,046 211,294 189,206
Selling & administrative expenses 53,659 48,710 103,754 95,066
--------- --------- --------- ---------
OPERATING INCOME 57,559 50,336 107,540 94,140
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Investment income 4,313 3,990 8,841 7,866
Interest expense (1,785) (2,139) (3,583) (4,240)
Other income (expense), net (923) (1,840) (1,778) (2,815)
--------- --------- --------- ---------
TOTAL OTHER INCOME, NET 1,605 11 3,480 811
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 59,164 50,347 111,020 94,951
Provision for income taxes 17,749 14,601 33,306 27,536
--------- --------- --------- ---------
NET INCOME $ 41,415 $ 35,746 $ 77,714 $ 67,415
========= ========= ========= =========
EARNINGS PER SHARE $ 0.60 $ 0.53 $ 1.13 $ 1.00
========= ========= ========= =========
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, 1997
-------------
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
- ------------------------------------ ---- ----
Net income $ 77,714 $ 67,415
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 25,039 21,923
Deferred income taxes 2,353 217
Changes in assets and liabilities, net of the effect of business acquisitions:
(Increase)/Decrease in accounts receivable (14,170) (23,921)
(Increase)/Decrease in inventories (11,825) 7,973
(Increase)/Decrease in other current assets 3,106 697
Increase/(Decrease) in current operating liabilities (15,582) 16,628
Increase/(Decrease) in restructuring accruals (5,927) (4,971)
(Increase)/Decrease in other, net 2,559 4,136
--------- ---------
Net cash provided by operating activities 63,267 90,097
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses (3,077) (31,365)
Additions to property, plant and equipment (24,802) (19,018)
Purchases of investments (4,296) (417)
Repayments and sales of investments 7,980 8,821
Other, net (30) 2,657
--------- ---------
Net cash used in investing activities (24,225) (39,322)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (34,653) (30,968)
Commercial paper and notes - borrowings (repayments) (15,685) --
Redemption of industrial development bonds -- (2,700)
Exercise of stock options 1,926 923
Acquisition of treasury shares (7,540) (2,950)
--------- ---------
Net cash provided (used) in financing activities (55,952) (35,695)
--------- ---------
Increase (Decrease) in cash and temporary cash investments (16,910) 15,080
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 134,397 86,984
--------- ---------
End of period $ 117,487 $ 102,064
========= =========
See notes to consolidated financial statements
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. Inventories are classified as follows: (in thousands)
JUNE 30, DECEMBER 31,
1997 1996
---- ----
Raw Material $ 89,491 $ 81,321
Work-in-Process 73,801 71,388
Finished Goods 140,171 134,931
-------- --------
303,463 287,640
Excess of current
Production costs over
LIFO cost basis 43,729 43,075
-------- --------
$259,734 $244,565
======== ========
2. Shareholders' Equity comprises: (in thousands)
JUNE 30, DECEMBER 31,
1997 1996
--------- ---------
Common Stock, $.01 par value:
Class A-authorized 50,000,000 shares,
outstanding 11,307,010 and 11,446,120 shares $ 113 $ 115
Class B-authorized 150,000,000 shares
outstanding 55,909,728 and 54,612,590 shares 559 546
Additional paid-in-capital 483,016 438,285
Retained earnings 353,267 312,534
Unrealized holding gains (losses) on securities 26 212
Cumulative translation adjustments (9,356) (8,546)
--------- ---------
$ 827,625 $ 743,146
========= =========
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 $43,100,000 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 and six months ended June 30, 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
JUNE 30, 1997
FINANCIAL CONDITION
At June 30, 1997, the Company's financial position remained strong with
working capital of $376.1 million and a current ratio of 2.7 to 1. Total
borrowings at June 30, 1997, were 102.4 million, 12.4% of shareholders equity.
The net decline in cash and temporary cash investments of $16.9 million
for the six months ended June 30, 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 purchase rate of
materials 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% for the second quarter and
year-to-date with strong growth for the Pulse Communication, Premise Wiring,
Canada and Mexico operations combined with the acquisition of Fargo in 1997.
Operating income for the quarter and first six months 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 a full percentage
point over 1996.
Low Voltage segment sales increased 5% in the quarter and 4%
year-to-date on higher shipments of generally all products within the segment.
Operating income increased 10% and 7%, respectively, on higher sales and
improved operating efficiencies in restructured units.
High Voltage segment sales increased by 8% for the quarter and first
six months on continued growth for surge arresters, insulators, cut-outs and
related hardware combined with the acquisition of Fargo on February 14, 1997.
Operating income increased more than 20% on higher sales, improved profitability
and the inclusion of Fargo.
The Other industry segment sales rose by 10% for the respective periods
as all units reported higher shipments with particularly strong increases for
telecommunications and wire management products. Operating profits increased in
line with sales.
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HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1997
(CONTINUED)
Sales through the Company's International units increased by 20% for
the quarter and first six months on continued growth of the Canadian and Mexican
markets particularly for High Voltage products. Operating income from
International units for the comparative periods increased more than 40% 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 acquisitions 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 June 30, 1997, the restructuring accrual balance was
$2,807,000. Through June 30, 1997, cumulative costs charged to the restructuring
accrual were $47,193,000 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 1,702 2,224 2,001 5,927
------- ------- ------ -------
Cumulative $18,948 $18,744 $9,501 $47,193
======= ======= ====== =======
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.
NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings
Per Share" was issued in February 1997 and is effective for financial
statements issued after December 15, 1997; earlier application is not
permitted. The statement required the presentation of basic earnings per share
based on average shares issued and outstanding and diluted earnings per share
which reflects the potential dilution that could occur from the exercise or
conversion of instruments into common stock. The Company's currently reported
earnings per share are determined on a basis that is similar to the diluted
computation of SFAS No. 128 and will not be materially different.
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HUBBELL INCORPORATED
PART II -- OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
NUMBER DESCRIPTION
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 six months ended June 30,
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: August 8, 1997 /s/Harry B. Rowell, Jr.
----------------------------------------
Harry B. Rowell, Jr.
Executive Vice President
(Chief Financial and Accounting Officer)
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EXHIBIT INDEX
NUMBER 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1997 1996 1997 1996
------- ------- ------- -------
Net Income $41,415 $35,746 $77,714 $67,415
======= ======= ======= =======
Weighted average number of common shares
outstanding during the period 67,217 65,915 67,217 65,915
Common equivalent shares 1,704 1,188 1,497 1,182
------- ------- ------- -------
Average number of shares outstanding 68,921 67,103 68,714 67,097
======= ======= ======= =======
Earnings per Share $ 0.60 $ 0.53 $ 1.13 $ 1.00
======= ======= ======= =======
10
5
1,000
6-MOS
DEC-31-1997
JUN-30-1997
117,487
0
198,775
7,652
259,734
602,344
485,795
259,752
1,243,200
226,205
99,489
0
0
672
826,953
1,243,200
677,595
677,595
466,301
466,301
3,480
642
3,583
111,020
33,306
77,714
0
0
0
77,714
1.13
1.13
