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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File No. 1-2958
HUBBELL INCORPORATED
(Exact name of Registrant as specified in its charter)
CONNECTICUT 06-0397030
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
584 Derby Milford Road, Orange, Connecticut 06477-4024
(Address of principal executive offices) (Zip Code)
(203) 799-4100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of Exchange on which Registered
Class A Common - $.01 par value (20 votes per share) New York Stock Exchange
Class B Common - $.01 par value (1 vote per share) New York Stock Exchange
Class A Common Stock Purchase Rights New York Stock Exchange
Class B Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 13, 1998 was $3,066,491,000. The
number of shares outstanding of the Class A Common Stock and Class B Common
Stock as of March 13, 1998 was 6,148,000 and 55,358,000, respectively.
Documents Incorporated by Reference
The definitive proxy statement for the proposed annual meeting of
stockholders to be held on May 4, 1998, filed with the Commission on March
25, 1998 - Part III.
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* Calculated by excluding all shares held by executive Officers and
Directors of Registrant and the Roche Trust, the Hubbell Trust and the
Harvey Hubbell Foundation, without conceding that all such persons are
"affiliates" of registrant for purpose of the Federal Securities Laws.
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PART I
Item 1. Business
Hubbell Incorporated (herein referred to as "Hubbell", the "Company" or the
"registrant", which references shall include its divisions and subsidiaries as
the context may require) was founded as a proprietorship in 1888, and was
incorporated in Connecticut in 1905. Hubbell manufactures and sells high quality
electrical and electronic products for a broad range of commercial, industrial,
telecommunications, and utility applications. Hubbell products are now
manufactured or assembled by twenty-two divisions and subsidiaries in the United
States, Canada, Puerto Rico, Mexico, the United Kingdom and Singapore. Hubbell
also participates in joint ventures with partners in South America, Germany and
Taiwan, and maintains sales offices in Malaysia, Mexico, Hong Kong, South Korea,
and the Middle East.
Hubbell is primarily engaged in the engineering, manufacture and sale of
electrical and electronic products. These products can be divided into three
general segments: products primarily used in low-voltage applications, products
primarily used in high-voltage applications and products that either are not
directly related to the electrical business, or, if related, cannot be clearly
classified on a voltage application basis. Hubbell defines "low-voltage" as
being 600 volts and less and "high-voltage" as greater than 600 volts. Reference
is made to page 42 for information relative to Industry Segment and Geographic
Area Information for 1997, 1996 and 1995.
PRODUCTS USED IN LOW-VOLTAGE APPLICATIONS
Electrical Wiring Devices
Hubbell manufactures and sells highly durable and reliable wiring devices which
are supplied principally to industrial, commercial and institutional customers.
These products, comprising several thousand catalog items, include plugs,
receptacles (including surge suppressor units), wall outlets, connectors,
adapters, floor boxes and switches (including passive infrared and ultrasonic
motion switches). Pin-and-sleeve devices built to IEC (International
Electrotechnical Commission) standards have incorporated improved water and
dust-tight construction and impact resistance. Switch and receptacle wall plates
feature proprietary thermoplastic materials offering high impact resistance and
durability, and are available in a variety of colors. Delivery systems,
including nonmetallic surface raceway systems for power, data and communications
distribution, provide efficiency and flexibility in both initial installation
and remodeling application. Hubbell also sells wiring devices for use in certain
environments requiring specialized products, such as multi-pin connectors and
cable assemblies for connection of sensors in processing lines and electric cord
reels and modular cable protection systems, and ground fault circuit interrupter
units for commercial and industrial applications. Some of the ground fault units
contain a number of outlets to which electrically-powered equipment may be
simultaneously connected for ground fault protection. Ground fault units
interrupt the circuit to which they are connected when a fault to ground is
detected to protect the user from potentially lethal shock.
Bryant electrical wiring devices include plugs, connectors, receptacles,
switches (including motion sensing switches), lampholders, control switches,
pendants, weatherproof enclosures, and wall plates, which are sold to a separate
market segment of industrial and commercial customers, utilizing its own sales
and marketing organization.
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Hubbell maintains operations in the United Kingdom, Singapore, Canada and Mexico
which sell a variety of wiring device products similar to those produced in the
United States. Most of the wiring device products sold by these operations are
manufactured in the United States and Puerto Rico.
Lighting Fixtures
Hubbell Lighting, Inc. manufactures and sells lighting fixtures and accessories
for both indoor and outdoor applications in the United States, Canada, Mexico,
United Kingdom, Singapore and elsewhere internationally. Hubbell Lighting has
three basic classifications of products: Outdoor, Industrial and Commercial. The
Outdoor products include floodlights, landscape lights, roadway lights and
poles, which are used to illuminate athletic and recreational fields, service
stations, outdoor display signs, parking lots, roadways and streets, security
areas, shopping centers and similar areas. In addition, a line of decorative
outdoor fixtures is sold for use in residences, parking lots, gardens and
walkways. The Industrial products include fixtures used to illuminate factories,
work spaces, and similar areas, including specialty requirements such as paint
rooms, clean rooms and warehouses. The Commercial products include fluorescent,
emergency and exit, and recessed and track fixtures which are used for offices,
schools, hospitals, retail stores, and similar applications. The fixtures use
high-intensity discharge lamps, such as mercury-vapor, high-pressure
sodium-vapor, and metal-halide lamps, as well as quartz, fluorescent and
incandescent lamps, all of which are purchased from other sources. Hubbell
Lighting also manufactures a broad range of track and down lighting fixtures and
accessories sold under the Marco trademark. Hubbell Lighting also has a line of
Life Safety products, fixtures and related components which are used in
specialized safety applications.
Industrial Controls
Hubbell Industrial Controls, Inc. manufactures and sells a variety of heavy-duty
electrical and radio control products which have broad application in the
control of industrial equipment and processes. These products range from
standard and specialized industrial control components to combinations of
components that control industrial manufacturing processes. Standard products
include motor speed controls, pendant-type push-button stations, power and
grounding resistors and overhead crane controls. Hubbell Industrial Controls,
Inc. also manufactures and sells a line of transfer switches used to direct
electrical supply from alternate sources and a line of fire pump control
products used in fire control systems. Industrial controls are also manufactured
and sold in the United Kingdom by Hubbell, Ltd. Products sold by this subsidiary
are used in motor control applications and include fuse switches, contactors and
solid state timers.
Gleason Reel Corp., manufactures and sells industrial-quality cable management
products including electric cable and hose reels, protective steel and nylon
cable tracks (cable and hose carriers), cable festooning hardware, highly
engineered container crane reels and festoons for the international market, slip
rings, and a line of ergonomic tool support systems (workstation accessories and
components such as balancers, retractors, torque reels and column, tool support,
boom and jib kits).
Special Application Products
Killark products include weatherproof and hazardous location products suitable
for standard, explosion proof and other hostile area applications, consisting of
fittings, enclosures, lighting fixtures, distribution equipment, motor controls,
plugs and receptacles. Hazardous locations are those areas where a potential for
explosion and fire exists due to the presence of flammable gasses, vapors, dust
or easily
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ignitable fibers and include such places as refineries, petro-chemical plants,
grain elevators and processing areas.
Sales and Distribution of Low-Voltage Products
A majority of Hubbell's low-voltage products are stock items and are sold
through distributors, home centers and lighting showrooms. A portion of these
products, primarily industrial controls, are sold directly to the customer.
Special application products are sold primarily through wholesale distributors
to contractors, industrial customers and original equipment manufacturers.
Hubbell maintains a sales organization to assist potential users with the
application of certain products to their specific requirements. Hubbell also
maintains regional offices in the United States which work with architects,
engineers, industrial designers, original equipment manufacturers and electrical
contractors for the design of electrical systems to meet the specific
requirements of industrial and commercial users. Hubbell is also represented by
sales representatives for its lighting fixtures, electrical wiring devices, and
industrial controls product lines. The sales of low-voltage products accounted
for approximately 40% of Hubbell's total revenue in 1997, 41% in 1996 and 44% in
1995.
PRODUCTS USED IN HIGH-VOLTAGE APPLICATIONS
Insulated Wire and Cable
The Kerite Company manufactures and sells premium quality, high performance,
insulated power cable for application in critical circuits of electric utilities
and major industrials. This product line utilizes proprietary insulation systems
and unique designs to meet the increasingly demanding specifications of its
customers. Applications include generating plants, underground and underwater
transmission and distribution systems, petrochemical and pharmaceutical plants
and mines. Kerite also produces specially-designed cable for supplying power to
submersible pumps in oil wells. This cable is designed to offer increased
service life in the extreme temperature and corrosive conditions encountered in
these adverse environments. The Kerite Company also manufactures accessories for
splicing and terminating cable ends.
Electrical Transmission and Distribution Products
The Ohio Brass Company manufactures a complete line of polymer insulators and
high-voltage surge arresters used in the construction of electrical transmission
and distribution lines and substations. The Ohio Brass Company's primary focus
in this product area is its Hi*LiteXL and Veri*Lite polymer insulator lines and
its polymer based surge arrester lines. Electrical transmission products,
primarily suspension insulators, are used in the expansion and upgrading of
electrical transmission capability.
A. B. Chance Company ("Chance") manufactures and sells products used in the
electrical transmission, distribution and telecommunications industries,
including overhead and underground electrical apparatus such as (a) distribution
switches (to control and route the flow of power through electrical lines); (b)
cutouts, sectionalizers, and fuses (to protect against faults and over-current
conditions on power distribution systems); and (c) Epoxirod(R) insulator systems
(pole framing and conductor accessories).
Anderson Electrical Products, Inc. manufactures and sells electrical connectors
and associated hardware including pole line, line and tower hardware,
compression crimping tools and accessories,
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mechanical and compression connectors, suspension clamps, terminals, supports,
couplers, and tees for utility distribution and transmission systems and
substations, and industry.
Fargo Mfg. Company, Inc. ("Fargo") manufactures distribution and transmission
products, principally for the utility industry. Fargo's distribution products
include electrical connectors, line splices, dead ends, hot line taps, formed
wire products, wildlife protectors, and various associated products, and its
transmission products include splices, sleeves, connectors, dead ends, spacers
and dampers. Fargo's products also consist of original equipment and resale
products including substation fittings for cable, tube and bus as well as
underground enclosures, wrenches, hydraulic pumps and presses, and coatings.
High Voltage Test and Measurement Equipment
Hipotronics, Inc. manufactures and sells a broad line of high voltage test and
measurement systems to test materials and equipment used in the generation,
transmission and distribution of electricity. In addition, Hipotronics
manufactures test equipment and high voltage power supplies for use in the
electrical and electronic industries. Principal products include AC/DC hipot
testers and megohmmeters, cable fault location systems, oil testers and DC
hipots, impulse generators and digital measurement systems, AC series resonant
and corona detection systems, DC test sets and power supplies, variable
transformers, voltage regulators, and motor and transformer test sets.
Sales and Distribution of High-Voltage Products
Sales of high-voltage products are made through distributors and directly to
users such as electric utilities, mining operations, industrial firms, and
engineering and construction firms engaged in electric transmission projects.
Hipotronics' products are sold primarily by direct sales to its customers in the
United States and in foreign countries through its sales engineers and
independent sales representatives. While Hubbell believes its sales in this area
are not materially dependent upon any customer or group of customers, a decrease
in purchases by public utilities does affect this category. The sale of
high-voltage products accounted for approximately 24% of Hubbell's total revenue
in 1997, 23% in 1996 and 20% in 1995.
PRODUCTS NOT CLASSIFIED ON A VOLTAGE BASIS
Outlet Boxes, Enclosures and Fittings
Raco products consist of steel and plastic boxes used at outlets, switch
locations and junction points as well as a broad line of fittings for the
electrical industry, including rigid conduit fittings, EMT (thinwall) fittings
and other metal conduit fittings. Raco products also include a complete
electrical nonmetallic family of products including conduit tubing, fittings and
outlet boxes, and a variety of electrical box products manufactured under the
Bell trademark, with an emphasis on weather-resistant types suitable for outdoor
application. The weatherproof lines include a full assortment of boxes, covers,
combination devices, lampholders, and lever switches.
The major markets for Raco products include industrial, commercial and
residential construction, the do-it-yourself market, the export market, and the
original equipment manufacturer market. Raco products are sold primarily through
distributors and in some retail and hardware outlets.
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Wiegmann products include a full-line of fabricated steel enclosures such as
rainproof and dust-tight panels, consoles and cabinets, wireway and electronic
enclosures. These products are used to enclose and protect electrical
conductors, terminations, instruments, distribution equipment and controls.
Wiegmann products are primarily sold through distributors to industrial
customers and original equipment manufacturers.
In addition to its other products, Hubbell Canada Inc. manufactures a line of
quality nonmetallic plastic switch and outlet boxes configured for the Canadian
residential construction market.
Killark products consist of quality standard and special application enclosures
and fittings including hazardous location products for use in installations such
as chemical plants, pipelines, grain elevators, coal handling facilities and
refineries. These products include conduit raceway fittings, junction boxes,
enclosures, lighting fixtures and standard and custom controls. Killark products
also participate in the maintenance and repair, commercial and industrial
construction segments of the domestic electrical construction materials market.
Killark products are sold primarily through electrical distributors to
contractors, industrial customers and original equipment manufacturers.
Voice and Data Signal Processing Equipment
Pulse Communications, Inc. designs and manufactures a line of voice and data
signal processing equipment primarily for use by the telephone and
telecommunications industry. Customers of this product line include various
telecommunications companies, the Regional Bell Operating Companies, independent
telephone companies, competitive local exchange carriers, and companies with
private networks. These products are sold primarily by direct sales to its
customers in the United States and in foreign countries through Pulse
Communications, Inc.'s sales personnel and sales representatives under the
Pulsecom trademark.
Premise Wiring products consist of components designed, manufactured or sold for
use in local area networks (LANs)/telecommunications applications supporting
high speed data signals, voice and power requirements. Primary products include
work station modular jacks, faceplates, surface housings, modular furniture
plates, cross connect patch panels, connectorized cable assemblies, punch down
blocks, free standing racks, enclosures and other products used for
installation, testing and distribution of LANs. Products support unshielded,
shielded and fiber optic media types servicing applications in commercial,
institutional and industrial environments. These products are represented
worldwide through a direct sales organization and by selected, independent
telecommunications representatives, primarily sold through datacom, electrical
and catalog distribution channels.
Holding Devices
Kellems products include a line of Kellems(R) grips used to pull, support and
relieve stress in elongated items such as cables, electrical cords, hoses and
conduits. The grips are made of wire mesh in a range of sizes and strengths to
accommodate differing needs. The mesh part of the grip is designed to tighten
around the surface of the items under tension. Kellems products also include a
line of cord connectors designed to prevent electrical conductors from pulling
away from electrical terminals to which the conductors are attached, and wire
management products including flexible, non-metallic conduit and fittings and
non-metallic surface raceway products used in wiring and cable harness
installations. These products are sold primarily through distributors.
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Construction Materials/Tools
Chance manufactures and sells (a) line construction materials, including anchors
used to hold overhead power and communications lines erect, for tower,
streetlight pole, pipeline, and apparatus foundation support, and a variety of
farm, home and construction anchoring, tie-back and holding applications; (b)
pole line hardware, including galvanized steel fixtures and extruded plastic
materials used in overhead and underground line construction and connectors, and
other accessories for making high voltage connections and linkages; (c)
construction tools and accessories for building overhead and underground power
and telephone lines; and (d) hot-line tools (all types of tools mounted on
insulated poles used to maintain energized high voltage lines) and other safety
equipment. These products are sold through distributors and directly to electric
utilities.
The sale of products not classified on a voltage basis accounted for
approximately 36% of Hubbell's total revenue in 1997, 1996 and 1995.
INFORMATION APPLICABLE TO ALL GENERAL CATEGORIES
International Operations
Hubbell Ltd. in the United Kingdom manufactures and/or sells fuse switches,
contactors, solid state timers, selected wiring device products, premise wiring
products, specialized control gear, and chart recording products.
Hubbell Canada Inc. and Hubbell de Mexico, S.A. de C.V. currently manufacture
and/or market wiring devices, premise wiring products, lighting fixtures, grips,
fittings, plastic outlet boxes, hazardous location products and electrical
transmission and distribution products. Industrial control products are sold in
Canada through an independent sales agent.
Harvey Hubbell S.E. Asia Pte. Ltd. assembles and/or markets wiring devices,
premise wiring products, lighting fixtures, hazardous location products,
electrical transmission and distribution products and cable.
Hubbell also manufactures lighting products, weatherproof outlet boxes, and
fittings in Juarez, Mexico. Hubbell also has interests in various other
international operations such as joint ventures in South America, India, Germany
and Taiwan. Hubbell also has sales offices in Malaysia, Hong Kong, South Korea
and the Middle East.
As a percentage of total sales, international shipments from foreign
subsidiaries were 6% in 1997, 1996 and 1995, with the Canadian market
representing approximately 60% of the total.
Raw Materials
Principal raw materials used in the manufacture of Hubbell products include
steel, brass, copper, aluminum, bronze, plastics, phenolics, elastomers and
petrochemicals. Hubbell also purchases certain electrical and electronic
components, including solenoids, lighting ballasts, printed circuit boards,
integrated circuit chips and cord sets, from a number of suppliers. Hubbell is
not materially dependent upon any one supplier for raw materials used in the
manufacture of its products and equipment and, at the present time, raw
materials and components essential to its operation are in adequate supply.
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Patents
Hubbell has approximately 862 active United States and foreign patents covering
many of its products, which expire at various times. While Hubbell deems these
patents to be of value, it does not consider its business to be dependent upon
patent protection. Hubbell licenses under patents owned by others, as may be
needed, and grants licenses under certain of its patents.
Working Capital
Hubbell maintains sufficient inventory to enable it to provide a high level of
service to its customers. The inventory levels, payment terms and return
policies are in accord with the general practices of the electrical products
industry and standard business procedures.
Backlog
Backlog of orders believed to be firm at December 31, 1997 and 1996 were
approximately $77,800,000 and $93,300,000 respectively. Most of the backlog is
expected to be shipped in the current year. Although this backlog is important,
the majority of Hubbell's revenues result from sales of inventoried products or
products that have short periods of manufacture.
Competition
Hubbell experiences substantial competition in all categories of its business,
but does not compete with the same companies in all its product categories. The
number and size of competitors vary considerably depending on the product line.
Hubbell cannot specify with exactitude the number of competitors in each product
category or their relative market position. However, some of its competitors are
larger companies with substantial financial and other resources. Hubbell
considers product performance, reliability, quality and technological innovation
as important factors relevant to all areas of its business and considers its
reputation as a manufacturer of quality products to be an important factor in
its business. In addition, product price and other factors can affect Hubbell's
ability to compete.
Environment
Compliance with Federal, State and local provisions regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, is not believed to have any material effect upon the financial or
competitive position of Hubbell.
Employees
As of December 31, 1997, Hubbell had approximately 8,800 full-time employees,
including salaried and hourly personnel. Approximately 41% of Hubbell's United
States employees are represented by ten labor unions. Hubbell considers its
labor relations to be satisfactory.
Item 2. Properties
A list of Hubbell's material manufacturing facilities, classified by segment is
included on Page 43 hereof under Industry Segment and Geographical Area
Information.
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Item 3. Legal Proceedings
There are no material pending legal proceedings to which Hubbell or any of its
subsidiaries is a party or of which any of their property is the subject, other
than ordinary and routine litigation incident to their business.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
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PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The Company's Class A and Class B common stocks are principally traded on the
New York Stock Exchange under the symbols "HUBA" and "HUBB". The following
tables provide information on market prices, dividends declared and number of
common shareholders.
Market Prices (Dollars Per Share) Common A Common B
- --------------------------------- -------- --------
Years Ended December 31, High Low High Low
- ------------------------ ---- --- ---- ---
1997-First quarter 40 3/4 37 1/2 45 1/8 41
1997-Second quarter 43 1/8 38 3/4 46 1/2 41 3/4
1997-Third quarter 46 7/16 42 3/4 49 3/16 45
1997-Fourth quarter 47 3/16 42 3/8 50 1/2 43 15/16
1996-First quarter 32 1/2 30 3/8 35 1/8 31 3/4
1996-Second quarter 33 1/4 30 1/8 36 31 3/4
1996-Third quarter 33 7/8 30 7/8 37 7/8 33 1/4
1996-Fourth quarter 39 1/8 32 3/4 43 3/4 36 3/8
Dividends Declared (Cents Per Share) Common A Common B
- ------------------------------------ -------- --------
Years Ended December 31, 1997 1996 1997 1996
- ------------------------ ---- ---- ---- ----
First quarter 26 24 26 24
Second quarter 29 26 29 26
Third quarter 29 26 29 26
Fourth quarter 29 26 29 26
Number of Common Shareholders
- -----------------------------
At December 31, 1997 1996 1995 1994 1993
- --------------- ---- ---- ---- ---- ----
Class A 1,242 1,285 1,308 1,327 1,405
Class B 5,339 5,359 5,521 5,354 5,628
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Item 6. Selected Financial Data
The following summary should be read in conjunction with the consolidated
financial statements and notes contained herein (dollars in thousands, except
per share amounts).
OPERATIONS, YEARS ENDED DECEMBER 31, 1997 1996 1995 1994 1993
- ------------------------------------ ---- ---- ---- ---- ----
Net sales $ 1,378,831 1,297,381 1,143,126 1,013,700 832,423
Gross profit $ 430,444 392,351 339,948 305,020 262,931
Special charge $ (52,000)(1) -- -- -- (50,000)(2)
Operating income $ 171,645 197,536 164,960 140,583 70,241
Provision for income taxes $ 49,850 57,809 45,099 39,402 15,188
Net Income $ 130,318(1) 141,532 121,934 106,533 66,306(2)
Return on sales 9.5% 10.9% 10.7% 10.5% 8.0%
Return on common shareholders' average equity 16.6% 20.1% 19.1% 18.3% 12.1%
Return on average total capital 15.5% 18.4% 18.5% 18.2% 12.0%
Earnings Per Share:
Basic $ 1.94(1) 2.15 1.85 1.62 1.01(2)
Diluted $ 1.89(1) 2.10 1.83 1.60 1.00(2)
Cash dividends declared per common share $ 1.13 1.02 .92 .81 .78
Additions to property, plant, and equipment $ 60,594 39,132 38,228 53,178 25,123
Depreciation and amortization $ 43,215 39,253 36,240 34,011 30,098
FINANCIAL POSITION, AT YEAR-END
Working capital $ 339,872 335,758 305,168 112,833 131,875
Current ratio 2.3 to 1 2.3 to 1 2.6 to 1 1.3 to 1 1.6 to 1
Property, plant and equipment (net) $ 251,933 217,913 204,190 201,968 154,621
Total assets $ 1,284,784 1,185,440 1,057,245 1,041,569 874,298
Long-term debt $ 99,519 99,458 102,096 2,700 2,700
Common shareholders' equity:
Total $ 830,256 743,146 667,338 608,996 557,660
Per share $ 12.06 11.05 10.00 9.24 8.50
NUMBER OF EMPLOYEES, AT YEAR-END 8,801 8,178 7,410 7,405 5,885
(1) In the fourth quarter of 1997, the Company recorded a special charge of
$52,000,000 which reduced net income by $32,200,000 or $0.47 per share.
Excluding the special charge, net earnings from operations would have been
$162,518,000 or $2.36 per share-diluted.
(2) In the fourth quarter of 1993, Hubbell recorded a restructuring charge for
consolidation of manufacturing and distribution operations and other
productivity programs which reduced net income by $31,000,000, $0.46 per
share. Excluding the restructuring charge, net earnings from operations
would have been $97,306,000, $1.46 per share.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
Management views liquidity on the basis of the Company's ability to meet
operational needs, fund additional investments, including acquisitions, and make
dividend payments to shareholders. At December 31, 1997, the Company's financial
condition remained strong with working capital of $339.9 million and a current
ratio of 2.3 to 1.
Operating cashflow reflects higher working capital requirements to support
increased sales, growth in international markets and to adequately fund
requirements of the acquired businesses during 1997. Net income, after adjusting
for the non-cash special charge, increased in line with sales growth and
improved operating efficiencies. The increase in depreciation and amortization
is due to a higher level of depreciable assets and the acquisition of businesses
in 1997 and 1996. The increase in accounts receivable reflects the Company's
continued growth, especially into markets with payment cycles that are longer
than its traditional electrical wholesale market. A portion of the increase in
inventories is to provide adequate stock to maintain customer service levels
during relocation of manufacturing operations. The decline in current
liabilities is principally due to payment of interest and taxes.
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. Additionally, three product lines and
associated assets were acquired during 1997 for $21.1 million in cash. During
1996, the Company acquired the Anderson Electrical Products business
("Anderson") and the Gleason Reel Corporation ("Gleason"). The purchase prices
of these businesses were immaterial to the Company's financial position at
December 31, 1997 and 1996. Cash utilized in other investing activities was in
line with the Company's historic patterns. While no significant commitments had
been made at December 31, 1997, the Company anticipates that capital
expenditures will approximate $70.0 million annually during the next three
years. This level of expenditure reflects the historical capital investment
pattern plus the normal capital requirements of acquired businesses together
with the capital investment portion of the Company's streamlining initiative
(refer to Special Charge).
Financing activities in 1997 reflect the thirty-seventh consecutive annual
increase in the dividend rate and repayment of $18.3 million of short-term
notes. On December 10, 1997, the Board of Directors approved the repurchase of
up to $300 million of the Company's Class A and Class B common stock.
Implementation of the program through open market purchases and privately
negotiated transactions began in mid-December, 1997. During 1995, the Company
realigned its financial structure with the issuance of ten-year notes. The
proceeds from the note offering along with internal funds were used to pay down
the Company's outstanding commercial paper. At December 31, 1997, total
borrowings of $99.8 million were 12.0% of shareholder's equity compared to 15.9%
in 1996.
The Company believes that currently available cash, available 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, share repurchases as well as any increase in working capital that
would be required to accommodate a higher level of business activity. The
Company actively seeks to expand by acquisition as well as through the growth of
its present businesses. While a significant acquisition may require additional
borrowings, the Company believes it would be able to obtain financing based on
its favorable historical earnings performance and strong financial position.
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RESULTS OF OPERATIONS
1997 Compared to 1996
Consolidated net sales increased by more than 6% reflecting a general
improvement across all businesses with particularly strong growth for Premise
Wiring, Canada and Mexico combined with the acquisition of Fargo and three
product line additions. The acquired businesses contributed approximately two
points of the growth in sales. Operating income for 1997 includes a special
charge of $52.0 million ($32.2 million after-tax or $.47 per share), comprised
of $44.6 million for streamlining initiatives and a $7.4 million asset
impairment write-down. Excluding the special charge, operating income increased
13% on higher sales volume and improved operating efficiencies from the
Company's 1993 restructuring program. The improvement in operating efficiencies
is reflected in the increase in net operating margins in 1997 to 16.2% compared
to 15.2% in 1996.
Low Voltage segment sales increased 4% on generally higher shipment of all
products within the segment and additions of product lines in the Bryant
business unit. Segment operating income before the special charge increased more
than 6% on the higher sales and profitability improvement in restructured units.
High Voltage segment sales increased by 8% on growth of surge arresters,
insulators, cut-outs and related hardware within the North American markets
combined with the acquisition of Fargo on February 14, 1997. Before the special
charge operating income increased 27% on higher sales, improved profitability
and business acquisitions (approximately twelve points of the increase).
The Other Industry segment sales rose by more than 7% as all units reported
higher shipments with particularly strong increases for wire management
products. Before the special charge, segment operating income increased 16% on
higher sales volume and improved operating efficiencies.
Sales through the Company's international subsidiaries increased 12% reflecting
continued growth in the Canadian and Mexican markets particularly for High
Voltage segment products. Operating income, before the special charge, increased
28% on higher sales volume which included a higher portion of products for
electric utilities. Export sales from United States operations were essentially
even with the previous year as the general increase in most product sales was
offset by lower demand for high voltage test and measurement equipment. Total
sales into the international market represented 14% of sales in 1997 and 1996.
The Canadian market represents approximately 60% of total international sales
followed by Latin America, Europe and Asia respectively.
Corporate expenses increased 5% in line with revenue growth. Investment income
increased 8% on a higher average level of investable funds combined with higher
yields. Interest expense was 13% lower due to the repayment of the Gleason
acquisition notes and a lower level of commercial paper borrowings. The decrease
in other expenses reflects a lower level of expenses associated with the
Company's corporate owned life program. The effective tax rate was 27.7% in 1997
and 29% in 1996. The decline in the effective tax rate is a result of the
decline in pre-tax income following the special charge. The Company's tax rate
benefits from lower taxes on earnings in its Puerto Rico operations, utilization
of corporate owned life insurance and continued emphasis on generating
tax-exempt income.
15
Page 15
RESULTS OF OPERATIONS
1996 Compared to 1995
Consolidated net sales increased more than 13% due to higher shipments by Pulse
Communications, Industrial Controls, Ohio Brass and Premise Wiring combined with
the acquisition of Anderson Electric Products, Inc., and Gleason Reel
Corporation in January 1996. The acquisitions contributed approximately six
points of the increase. Operating income increased by more than 18% on higher
sales volume, improved operating efficiencies from the Company's restructuring
program and the impact of the acquired businesses. The improvement in operating
efficiencies is reflected in the increase in net operating margins in 1996 to
15.2% from 14.4% in 1995 and 13.9% in 1994.
Low Voltage segment sales increased 7% as a result of higher shipments of
industrial controls, wiring device products and the inclusion of Gleason Reel.
Operating income increased 13% on higher sales volume, improved operating
efficiencies and the inclusion of Gleason Reel since its acquisition, which
represented four points of the increase.
High Voltage segment sales increased 28% on higher sales of test and measurement
equipment, electrical transmission and distribution products combined with the
sales of Anderson products. The inclusion of Anderson contributed approximately
twenty-one points of the increase. The segment's operating income increased in
line with sales.
The Other industry segment sales increased 13% as most units reported higher
sales with particularly strong increases for telecommunication and wire
management products. Operating income increased 23% over last year due to the
growth in sales which included an increased proportion of higher margin
telecommunication products combined with operating efficiencies.
Direct sales to customers by the Company's International subsidiaries were 11%
higher than 1995 while operating income increased 25% reflecting the improved
profitability of the restructured Canadian and European operations.
Additionally, export sales directly to customers or through electric wholesalers
from United States operations increased 32%. Total sales into the international
market represented 14% of sales in 1996 and 13% in 1995. The Canadian market
represents approximately 60% of total international sales followed by Europe,
Latin America and Asia, respectively.
Corporate expenses increased 8%, a rate below the rate of revenue growth and
consisted primarily of normal salary and benefit increases. Investment income
increased 2% as the average level of investment funds were lower than in 1995
due to the purchase of Anderson and Gleason while investment yields were higher.
Interest expense was essentially even with last year as the average level of
borrowings was lower which offsets the increase in interest rates. The increase
in other expenses net is primarily due to charges for the corporate owned life
insurance program. The effective tax rate was 29% in 1996 and 27% in 1995 and
1994. The increase in the tax rate reflects a higher portion of domestic source
income which is due in part to the acquisitions combined with changes in tax
regulations with regards to investment income earned in Puerto Rico. The
Company's tax rate benefits from lower taxes on earnings in its Puerto Rico
operations, utilization of corporate owned life insurance and continued emphasis
on generating tax-exempt income. Net income increased 16% while earnings per
share increased 15% due to a higher average number of shares outstanding.
16
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Special Charge
Operating income for 1997 includes a special charge of $52.0 million ($32.2
million after-tax or $.47 per share), comprised of $44.6 million for
consolidation and streamlining initiatives and a $7.4 million asset impairment
write-down.
The Company's consolidation and streamlining initiatives were undertaken to
optimize the organization and cost structure primarily within the electrical and
utility products businesses. As part of this initiative, the Company will expand
its manufacturing facilities by 300,000 square feet in Mexico, add an additional
63,000 square feet to its Canadian facility and construct a 270,000 square foot
warehouse and distribution facility for its utility products business. Combined
with the consolidation of other manufacturing and office facilities, these
programs will result in the relocation of approximately 2,000 jobs and closure
of 5 current facilities. After an approximate three year implementation period,
the annual savings and cost avoidance could be as much as $25.0 million. As
shown in the table below, the Company has accrued $15.6 million of employee
termination costs, $24.1 million of plant and equipment disposal costs, and $4.9
million of other costs. The $4.9 million of other costs are related to 1997
workforce and production redeployment costs which are being expensed as
incurred. Redeployment costs will approximate $7.0 million per year in 1998 and
1999. The accounting treatment for the program costs has been made in accordance
with the guidelines contained in the Emerging Issues Task Force ("EITF") Issue
No. 94-3.
The components of the consolidation and streamlining charge and related reserve
balances remaining at December 31, 1997 were (in millions):
Employee Asset Exit Other
Benefits Disposals Costs Costs Total
1997 Streamlining Charge $ 15.6 $ 18.0 $ 6.1 $ 4.9 $ 44.6
Amounts Utilized in 1997 (0.6) (7.3) (0.1) (4.9) (12.9)
------- ------- ------ ------- -------
Remaining Reserve $ 15.0 $ 10.7 $ 6.0 $ -- $ 31.7
======= ======= ====== ======= =======
The $7.4 million asset impairment write-down relates to the high voltage
business and consists of a partial goodwill write-down determined in accordance
with the Company's accounting policy under FAS 121.
The restructuring program which the Company began in late 1993 was completed
during 1997. The program addressed the consolidation of manufacturing
facilities, realignment of warehousing and distribution activities, and
reductions in labor force primarily within the lighting and wiring products
businesses. The restructuring charge included personnel costs (severence and
post-employment benefits), plant and equipment relocation and asset disposals
totaling $50,000,000. Costs charged against the restructuring accrual were
$8,734,000 in 1997, $9,679,000 in 1996, $9,526,000 in 1995, $14,811,000 in 1994
and $7,250,000 in 1993. The cumulative expenditure represents personnel costs of
$20,590,000, plant and equipment relocation of $21,849,000, and asset disposals
of $7,561,000. Personnel costs included non-cash charges of $6,203,000 for early
retirement programs which were reclassified to the Company's pension liability.
17
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Market Risks
In the operation of its business, the Company has market risk exposures to
foreign currency exchange rates, raw material prices and interest rates. Each of
these risks and the Company's strategies to manage the exposure is discussed
below.
The Company manufactures its products in the United States, Canada, Mexico and
United Kingdom and sells products in those markets as well as through sales
offices in Southeast Asia and the Middle East. International sales were 14% of
the Company's sales in 1997 and 1996. The Canadian market represents 60%, Mexico
16%, United Kingdom 15% and all other areas 9% of the total international sales.
As such, the Company's operating results could be affected by changes in foreign
currency exchange rates or weak economic conditions in the foreign markets in
which the Company distributes its products. To manage this exposure, the Company
closely monitors the working capital requirements of its international units and
to the extent possible will maintain their monetary assets in U.S. dollar
instruments. The Company views this exposure as not being material to its
operating results and, therefore, does not actively hedge its foreign currency
risk.
Raw materials used in the manufacture of the Company's products include steel,
brass, copper, aluminum, bronze, plastics, phenolics, elastomers and
petrochemicals as well as purchased electrical and electronic components. The
Company's financial results could be affected by the availability and changes in
prices of materials. The Company closely monitors its inventory requirements and
utilizes multiple suppliers. Historically, the Company has been able to recover
general material cost increases through price increases. The Company is not
materially dependent upon any single material or supplier and does not actively
hedge or use derivative instruments in the management of its inventories.
The financial results of the Company are subject to risk from interest rate
fluctuations to the extent that there is a difference between the amount of the
Company's interest-earning assets and the amount of interest-bearing
liabilities. The principal objective of the Company's investment management
activities is to maximize net investment income while maintaining acceptable
levels of interest rate and liquidity risk and facilitating the funding needs of
the Company. As part of its investment management, the Company may use
derivative financial products such as interest rate hedges and interest rate
swaps. During the two years ended December 31, 1997 there were no derivative
positions.
18
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The following table presents information related to interest risk sensitive
instruments by maturity at December 31, 1997 (dollars in millions):
Fair
Value
1998 1999 2000 2001 2002 Thereafter Total 12/31/97
Assets
Available-for-sale
Investments $ 1.3 $ 3.6 $ 4.3 $ 1.4 $ 0.7 $ 0.7 $ 12.0 $ 12.1
Avg. Interest Rate 4.3% 4.0% 4.3% 4.2% 5.3% 4.4% -- --
Held-to-maturity
Investments $ 49.7 $ 4.2 $ 2.0 $ 9.0 $ 9.7 $ 118.7 $ 193.3 $ 199.2
Avg. Interest Rate 5.1% 6.3% 7.8% 6.5% 7.6% 6.9% -- --
Liabilities
Commercial Paper &
Short-Term Borrowings $ (0.2) -- -- -- -- -- $ (0.2) $ (0.2)
Avg. Interest Rate 6.0% -- -- -- -- -- -- --
Long-Term Debt -- -- -- -- -- $ (99.5) $ (99.5) $ (101.6)
Avg. Interest Rate -- -- -- -- -- 6.7% -- --
As described in its Accounting Policies, the Company may use derivative
financial instruments only if they are matched with a specific asset or
liability. The Company does not speculate or use leverage when trading a
financial derivative product. There were no derivative transactions during 1997.
Inflation
In times of inflationary cost increases, the Company has historically been able
to maintain its profitability by improvements in operating methods and cost
recovery through price increases. In large measure the reported operating
results have absorbed the effects of inflation since the Company's predominant
use of the LIFO method of inventory accounting generally has the effect of
charging operating results with costs (except for depreciation) that reflect
current price levels.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the Year 1900 rather than the Year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
During 1995, the Company established a task force to assess the impact the Year
2000 could have on the Company's operations and its relationship with customers
and vendors and to develop appropriate action plans. The action plans address
the required modification or replacement of software and equipment utilized in
the Company's operations along with a timetable and estimated costs. Also, the
action plans address the impact that third party's Year 2000 issues may have on
the Company. Cost for replacement of software
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and equipment are capitalized in accordance with Company policies while costs of
modifications are expensed as incurred. At this time, corrective actions have
progressed in accordance with the action plan for the Company's internal systems
and the incurred and estimated costs based on available information are not
material. However, there can be no guarantee that the systems of other companies
on which the Company relies will be corrected in a timely fashion, or that a
failure to convert by another company would not have a materially adverse effect
on the Company.
Forward-Looking Statements
Certain statements made in the discussion and analysis of Liquidity and Capital
Resources, Results of Operations and Special Charge are forward-looking. In
particular the projected levels of capital expenditures, project expenses and
anticipated savings relating to the consolidation, streamlining and
reorganization programs are forward-looking and are based on the Company's
reasonable current expectations. In connection with the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Company is hereby
identifying important factors that could cause actual results to differ
materially from those contained in the specified statements.
The Company is currently implementing a program of consolidation, streamlining
and reorganization, primarily within its utility and electrical products
businesses. The risks and uncertainties that may affect the level of capital
expenditures, expenses and anticipated savings for this program include but are
not limited to; (1) timely completion of facility construction in accordance
with current estimates; (2) timely delivery and installation of manufacturing
equipment; (3) training and hiring of new employees and retraining of existing
employees for different processes; (4) start-up of manufacturing and
distribution processes in a cost-effective and high quality manner; (5)
maintaining customer service levels during the transition; and (6) absence of
labor disputes during implementation of the program.
20
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Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Hubbell Incorporated
In our opinion, the consolidated financial statements listed in the index on
page 53 present fairly, in all material respects, the financial position of
Hubbell Incorporated and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Stamford, Connecticut
January 21, 1998
21
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Hubbell Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET
At December 31, (Dollars in thousands)
ASSETS 1997 1996
- ------ ---- ----
CURRENT ASSETS
Cash and temporary cash investments $ 75,217 $ 134,397
Accounts receivable less allowances of $5,713
in 1997 and $4,866 in 1996 191,027 172,351
Inventories 275,886 244,565
Prepaid taxes 30,179 30,162
Other 23,864 9,713
---------- ----------
Total current assets 596,173 591,188
---------- ----------
PROPERTY, PLANT, AND EQUIPMENT, AT COST
Land 13,839 13,342
Buildings 121,507 122,646
Machinery and equipment 382,735 308,249
---------- ----------
518,081 444,237
Less-Accumulated depreciation 266,148 226,324
---------- ----------
251,933 217,913
---------- ----------
OTHER ASSETS
Investments 205,578 170,372
Purchase price in excess of net assets of
companies acquired, less accumulated amortization
of $24,668 in 1997 and $19,433 in 1996 190,514 162,180
Property held as investment 11,249 7,970
Other 29,337 35,817
---------- ----------
436,678 376,339
---------- ----------
$1,284,784 $1,185,440
========== ==========
See notes to consolidated financial statements.
22
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Hubbell Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET
At December 31, (Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
- ------------------------------------ ---- ----
CURRENT LIABILITIES
Commercial paper and other borrowings $ 250 $ 18,635
Accounts payable 60,909 52,485
Accrued salaries, wages and employee benefits 34,069 26,486
Accrued income taxes 38,338 44,039
Dividends payable 19,483 17,177
Accrued consolidation and streamlining charge 14,000 8,734
Other accrued liabilities 89,252 87,874
----------- -----------
Total current liabilities 256,301 255,430
----------- -----------
LONG-TERM DEBT 99,519 99,458
----------- -----------
OTHER NON-CURRENT LIABILITIES 95,810 74,736
----------- -----------
DEFERRED INCOME TAXES 2,898 12,670
----------- -----------
COMMON SHAREHOLDERS' EQUITY
Common Stock, par value $.01
Class A - authorized 50,000,000 shares, outstanding
11,146,062 and 11,446,120 shares 111 115
Class B - authorized 150,000,000 shares, outstanding
55,880,945 and 54,612,590 shares 559 546
Additional paid-in capital 472,729 438,285
Retained earnings 366,887 312,534
Cumulative translation adjustments (10,116) (8,546)
Unrealized gain (loss) on investments 86 212
----------- -----------
Total common shareholders' equity 830,256 743,146
----------- -----------
$ 1,284,784 $ 1,185,440
=========== ===========
See notes to consolidated financial statements.
23
Page 23
Hubbell Incorporated and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
Years Ended December 31, 1997 1996 1995
- ------------------------ ---- ---- ----
NET SALES $ 1,378,831 $ 1,297,381 $ 1,143,126
Cost of goods sold 948,387 905,030 803,178
----------- ----------- -----------
GROSS PROFIT 430,444 392,351 339,948
Special Charge 52,000 -- --
Selling & administrative expenses 206,799 194,815 174,988
----------- ----------- -----------
OPERATING INCOME 171,645 197,536 164,960
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Investment income 18,299 16,852 16,485
Interest expense (7,323) (8,416) (8,499)
Other income (expense), net (2,453) (6,631) (5,913)
----------- ----------- -----------
TOTAL OTHER INCOME, NET 8,523 1,805 2,073
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 180,168 199,341 167,033
Provision for income taxes 49,850 57,809 45,099
----------- ----------- -----------
NET INCOME $ 130,318 $ 141,532 $ 121,934
=========== =========== ===========
EARNINGS PER SHARE:
Basic $ 1.94 $ 2.15 $ 1.85
Diluted $ 1.89 $ 2.10 $ 1.83
See notes to consolidated financial statements.
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Hubbell Incorporated and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31, 1997 1996 1995
- ------------------------ ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 130,318 $ 141,532 $ 121,934
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 43,215 39,253 36,240
Deferred income taxes (11,529) (1,406) 2,592
Special Charge 52,000 -- --
Expenditures for streamlining, consolidation and restructuring (9,478) (9,679) (9,526)
Changes in assets and liabilities, net of the effects of business
acquisitions:
(Increase) Decrease in accounts receivable (13,513) (20,701) 3,097
(Increase) Decrease in inventories (27,298) 1,269 (12,296)
(Increase) Decrease in other current assets (14,176) (4,747) 1,410
Increase (Decrease) in current liabilities (3,445) 36,893 6,088
(Increase) Decrease in other, net 2,476 6,788 3,047
--------- --------- ---------
Net cash provided by operating activities 148,570 189,202 152,586
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of non-current investments (50,830) (9,765) (13,602)
Repayment of principal, maturity and sale of
non-current investments 15,421 15,246 47,401
Acquisition of businesses, net of cash acquired (21,130) (32,470) --
Additions to property, plant and equipment (60,594) (39,132) (38,228)
Other, net 14,833 (8,075) 2,121
--------- --------- ---------
Net cash used in investing activities (102,300) (74,196) (2,308)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowing (repayment) (18,385) -- (139,350)
Long-term borrowing (repayment) -- (2,700) 99,396
Payment of dividends (73,659) (65,269) (58,644)
Acquisition of treasury shares (21,799) (5,573) (6,642)
Exercise of stock options 8,393 5,949 3,081
Other, net -- -- --
--------- --------- ---------
Net cash used in financing activities (105,450) (67,593) (102,159)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS (59,180) 47,413 48,119
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 134,397 86,984 38,865
--------- --------- ---------
End of period $ 75,217 $ 134,397 $ 86,984
========= ========= =========
See notes to consolidated financial statements.
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Hubbell Incorporated and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share amounts)
Class A Class B Additional Cumulative Unrealized
For the three years ended Common Common Paid-In Retained Translation Gain (Loss) Comprehensive
December 31, 1997 Stock Stock Capital Earnings Adjustments on Investments Income
- ----------------- ------- ------- ---------- -------- ----------- --------------- -------------
BALANCE AT DECEMBER 31, 1994 $ 59 $ 271 $ 441,469 $176,994 $ (7,650) $ (2,147)
Net income 121,934 $121,934
Translation adjustments (1,626) (1,626)
Unrealized gain on investments 2,221 2,221
--------
Comprehensive Income $122,529
========
Exercise of stock options 3,729
Acquisition of treasury shares (1) (7,290)
Cash dividends declared
($.92 per share) (60,625)
-------- ------- --------- -------- --------- --------
BALANCE AT DECEMBER 31, 1995 $ 58 $ 271 $ 437,908 $238,303 $ (9,276) $ 74
Net income 141,532 $141,532
Translation adjustments 730 730
Unrealized gain on investments 138 138
--------
Comprehensive Income $142,400
========
Exercise of stock options 5 14,286
Acquisition of treasury shares (3) (13,909)
Cash dividends declared
($1.02 per share) (66,971)
Stock split 2-for-1 57 273 (330)
-------- ------- --------- -------- --------- --------
BALANCE AT DECEMBER 31, 1996 $ 115 $ 546 $ 438,285 $312,534 $ (8,546) $ 212
Net income 130,318 $130,318
Translation adjustments (1,570) (1,570)
Unrealized (loss) on investments (126) (126)
--------
Comprehensive Income $128,622
========
Exercise of stock options 3 11,518
Acquisition of treasury shares (4) (2) (27,499)
Shares issued for Fargo acquisition 12 50,425
Cash dividends declared (75,965)
($1.13 per share)
-------- ------- --------- -------- --------- --------
BALANCE AT DECEMBER 31, 1997 $ 111 $ 559 $ 472,729 $366,887 $ (10,116) $ 86
======== ======= ========= ======== ========= ========
See notes to consolidated financial statements
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Hubbell Incorporated and Subsidiaries
STATEMENT OF ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include all subsidiaries; all significant
intercompany balances and transactions have been eliminated. Investments in
joint ventures are accounted for by using the equity method. Certain
reclassifications, which were not significant, have been made in prior period
financial statements to conform to the 1997 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities and disclosures, if any, of
contingent assets and liabilities at the date of the financial statements.
Similarly, estimates and assumptions are required for the reporting of revenues
and expenses. Actual results could differ from the estimates that were used.
Foreign Currency Translation
The assets and liabilities of international subsidiaries are translated to U.S.
dollars at exchange rates in effect at the end of the year, and income and
expense items are translated at average rates of exchange in effect during the
year. The effects of exchange rate fluctuations on the translated amounts of
foreign currency assets and liabilities are included as translation adjustments
in shareholders' equity. Gains and losses from foreign currency transactions are
included in income of the period.
Cash and Temporary Cash Investments
Temporary cash investments consist of liquid investments with maturities of
three months or less when purchased. The carrying value of cash and temporary
cash investments approximates fair value because of their short maturities.
Investments
Investments in debt and equity securities are classified by individual security
into one of three separate categories: trading, available-for-sale or
held-to-maturity. Trading investments are bought and held principally for the
purpose of selling them in the near term and are carried at fair market value.
Adjustments to the carrying value of trading investments are included in current
earnings. Available-for-sale investments are intended to be held for an
indefinite period but may be sold in response to events reasonably expected in
the future. These investments are carried at fair value with adjustments
recorded in shareholders' equity net of tax. Investments which the Company has
the positive intent and ability to hold to maturity are classified as
held-to-maturity and carried at amortized cost.
Inventories
Inventories are stated at the lower of cost or market. The cost of substantially
all domestic inventories, 83% of total inventory value, is determined on the
basis of the last-in, first-out (LIFO) method of inventory accounting. The cost
of foreign inventories and certain domestic inventories is determined on the
basis of the first-in, first-out (FIFO) method of inventory accounting.
27
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Property, Plant, and Equipment
Property, plant, and equipment are depreciated over their estimated useful
lives, principally using accelerated methods.
Purchase Price in Excess of Net Assets of Companies Acquired
The cost of companies acquired in excess of the amount assigned to net assets is
being amortized on a straight-line basis over a 40 year period.
Impairment of Long-Lived Assets
Long-lived assets, including goodwill, are evaluated for financial impairment
when events or changes in circumstances indicate that the carrying amount of
such assets may not be fully recoverable. Recoverability is evaluated by
measuring the carrying amount of the assets against the estimated undiscounted
cashflow associated with them. Long-lived assets to be disposed of are valued at
the lower of their carrying amount or fair value less cost to sell.
Deferred Income Taxes
Deferred income taxes are recognized for the tax consequence of differences
between the financial statement carrying amounts and tax bases of assets and
liabilities by applying the currently enacted statutory tax rates. The effect of
a change in statutory tax rates is recognized in income in the period that
includes the enactment date. Federal income taxes have not been provided on the
undistributed earnings of the Company's international subsidiaries as the
Company has reinvested all of these earnings indefinitely.
Retirement Benefits
The Company's policy is to fund pension costs within the ranges prescribed by
applicable regulations. In addition to providing pension benefits, in some
circumstances the Company provides health care and life insurance benefits for
retired employees. The Company's policy is to fund these benefits through
insurance premiums or as actual expenditures are made.
Earnings Per Share
Earnings per share is based on reported income and the weighted average number
of shares of common stock outstanding (basic) and the total of common stock
outstanding and common stock equivalents (diluted).
Stock-Based Compensation
In October 1995, FAS No. 123 - "Accounting for Stock-Based Compensation" was
issued. FAS No. 123 permits, but does not require, a fair value based method of
accounting for employee stock option and performance plans which results in
compensation expense being recognized in the results of operations when awards
are granted. The Company plans to continue to use the current intrinsic value
based method of accounting for such plans where compensation expense is measured
as the excess, if any, of the quoted market price of the Company's stock at the
measurement date over the exercise price. However, as required by FAS No. 123,
the Company will provide pro forma disclosure of net
28
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income and earnings per share in the notes to the consolidated financial
statements as if the fair value based method of accounting has been applied.
Comprehensive Income
As shown in the Statement of Changes in Shareholders' Equity, comprehensive
income is a measure of net income and all other changes in equity of the Company
that result from recognized transactions and other events of the period other
than transactions with shareholders. The other changes in equity are comprised
of the change in Cumulative Translation Adjustments for foreign currency items
and Unrealized Gain (Loss) on investments held for sale.
Derivatives
The Company, to limit financial risk in the management of its assets,
liabilities and debt may use derivative financial products such as: foreign
currency hedges, commodity hedges, interest rate hedges and interest rate swaps.
All derivative financial instruments must be matched with an existing Company
asset or liability. Market value gains or losses on the derivative financial
instrument are recognized in income when the effects of the related price
changes of the related asset or liability are recognized or at the time the
derivative instrument is closed. The Company does not speculate or use leverage
when trading a financial derivative product. There were no material derivative
transactions, individually or in total, for the three years ended December 31,
1997.
29
Page 29
Hubbell Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Special Charge
Net Operating profit for 1997 includes a special charge of $52.0 million ($32.2
million after-tax or $.47 per share), comprised of $44.6 million for
streamlining initiatives and a $7.4 million asset impairment write-down.
The Company's streamlining initiatives were undertaken to optimize the
organization and cost structure primarily within the electrical and utility
products businesses. These programs will result in the relocation of
approximately 2,000 jobs and closure of 5 facilities. As shown in the table
below, the Company has accrued $15.6 million of employee termination costs,
$24.1 million of plant and equipment disposal costs, and $4.9 million of other
costs. The $4.9 million of other costs are related to 1997 workforce and
production redeployment costs which are being expensed as incurred.
The components of the streamlining charge and related reserve balances remaining
at December 31, 1997 were (in millions):
Employee Asset Exit Other
Benefits Disposals Costs Costs Total
1997 Streamlining Charge $15.6 $18.0 $ 6.1 $ 4.9 $ 44.6
Amounts Utilized in 1997 (0.6) (7.3) (0.1) (4.9) (12.9)
----- ----- ----- ----- ------
Remaining Reserve $15.0 $10.7 $ 6.0 $ -- $ 31.7
===== ===== ===== ===== ======
The $7.4 million asset impairment write-down relates to the high voltage
business and consists of a partial goodwill write-down determined in accordance
with the Company's accounting policy under FAS 121.
The restructuring program which the Company began in late 1993 was completed
during 1997. The program addressed the consolidation of manufacturing
facilities, realignment of warehousing and distribution activities, and
reductions in labor force primarily with the lighting and wiring products
business. The restructuring charge included personnel costs (severence and
post-employment benefits), plant and equipment relocation and asset disposals
totaling $50,000,000. Costs charged against the restructuring accrual were
$8,734,000 in 1997, $9,679,000 in 1996, $9,526,000 in 1995, $14,811,000 in 1994
and $7,250,000 in 1993. The cumulative expenditure represents personnel costs of
$20,590,000, plant and equipment relocation of $21,849,000, asset disposals of
$7,561,000. Personnel costs included non-cash charges of $6,203,000 for early
retirement programs which were reclassified to the Company's pension liability.
30
Page 30
Acquisitions
On February 14, 1997, Hubbell acquired Fargo Manufacturing Company, Inc.
("Fargo") based in Poughkeepsie, New York. Fargo manufacturers 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. Additionally, three product lines and associated assets were acquired
during 1997 for $21,130,000 in cash.
On January 2, 1996, the Company acquired the Anderson Electrical Products
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 cable management products
(including electric cable and hose reels, protective steel and nylon cable
tracks and cable festooning hardware) and a line of ergonomic tool support
systems. Additionally, during 1996, the Company completed two minor acquisitions
which broadened its product lines -- a Canadian manufacturer of power poles for
commercial applications and a manufacturer of fault detection systems for power
cables. The businesses were acquired for cash of $32,470,000 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 have 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
represented approximately 2% of 1997 and 5% of 1996 net sales with no material
effect on the Company's reported earnings.
In connection with the above acquisitions, liabilities were assumed as follows
(in thousands):
1997 1996
---- ----
Fair value of assets acquired including goodwill $ 73,584 $ 59,812
Issuance of short term notes -- (18,635)
Issuance of Class B Common Stock (43,100) --
Cash paid for businesses, net of cash acquired (21,130) (32,470)
-------- --------
Liabilities assumed $ 9,354 $ 8,707
======== ========
31
Page 31
INVESTMENTS
Investments consist primarily of mortgage-backed securities, U.S. Treasury
Notes, common and preferred stocks. Investments which are available-for-sale are
stated at market values based on current quotes while investments which are
being held-to-maturity are stated at amortized cost. There were no securities
during 1997 and 1996 that were classified as trading investments. Certain
portfolio securities that are affected by changes in interest rates may be
hedged with futures contracts for U.S. Treasury notes and bonds. Market value
gains and losses on the futures contracts are recognized in income when the
effects of the related price changes in the value of the hedged securities are
recognized. At December 31, 1997 there were no open futures contracts.
The following tables set forth selected data with respect to the Company's
long-term investments at December 31, (in thousands):
1997
--------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
---- ----- ------ ----- -----
AVAILABLE-FOR-SALE
INVESTMENTS
Common & Preferred Stocks $ 175 $ 78 $ (74) $ 179 $ 179
Federal National Mortgage
Assoc. Securities (FNMA) -- -- -- -- --
Mortgage-backed Securities -- -- -- -- --
U.S. Treasury Notes & Municipal
Bonds 12,041 116 (11) 12,146 12,146
--------- ------- -------- --------- ---------
Total Available-For-Sale
Investments $ 12,216 $ 194 $ (85) $ 12,325 $ 12,325
========= ======= ======== ========= =========
HELD-TO-MATURITY
INVESTMENTS
Federal National Mortgage
Assoc. Securities (FNMA) $ 88,374 $ 4,878 $ (1,110) $ 92,142 $ 88,374
Gov't. National Mortgage
Assoc. Securities (GNMA) 29,968 2,150 (449) 31,669 29,968
Mortgage-backed securities 17,021 265 -- 17,286 17,021
U.S. Treasury Notes & Municipal
Bonds 57,888 487 (315) 58,060 57,888
--------- ------- -------- --------- ---------
Total Held-To-Maturity Investments $ 193,251 $ 7,780 $ (1,874) $ 199,157 $ 193,251
========= ======= ======== ========= =========
1996
--------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Carrying
Cost Gains Losses Value Value
---- ----- ------ ----- -----
AVAILABLE-FOR-SALE
INVESTMENTS
Common & Preferred Stocks $ 395 $ 147 $ (161) $ 381 $ 381
Federal National Mortgage
Assoc. Securities (FNMA) -- -- -- -- --
Mortgage-backed Securities 1,031 287 -- 1,318 1,318
U.S. Treasury Notes & Municipal
Bonds 11,484 65 (24) 11,525 11,525
--------- ------- -------- --------- ---------
Total Available-For-Sale
Investments $ 12,910 $ 499 $ (185) $ 13,224 $ 13,224
========= ======= ======== ========= =========
HELD-TO-MATURITY
INVESTMENTS
Federal National Mortgage
Assoc. Securities (FNMA) $ 94,599 $ 1,833 $ (4,419) $ 92,013 $ 94,599
Gov't. National Mortgage
Assoc. Securities (GNMA) 30,181 1,752 (638) 31,295 30,181
Mortgage-backed securities 17,021 293 (25) 17,289 17,021
U.S. Treasury Notes & Municipal
Bonds 15,347 20 (9) 15,358 15,347
--------- ------- -------- --------- ---------
Total Held-To-Maturity Investments $ 157,148 $ 3,898 $ (5,091) $ 155,955 $ 157,148
========= ======= ======== ========= =========
32
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INVESTMENTS CONT'D.
Contractual maturities of investments in debt securities available-for-sale
and held-to-maturity at December 31, 1997 were as follows (in thousands):
U.S. Treasury
Mortgage Backed Notes &
FNMA GNMA Securities Municipal Bonds
---- ---- ---------- ---------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- ----- ---- -----
AVAILABLE-FOR-SALE INVESTMENTS
Due within 1 year $ -- $ -- $ -- $ -- $ -- $ -- $ 1,254 $ 1,244
After 1 but within 5 years -- -- -- -- -- -- 10,086 10,200
After 5 but within 10 years -- -- -- -- -- -- 701 702
After 10 years -- -- -- -- -- -- -- --
------- --------- ------- ------- ------- ------- ------- -------
TOTAL $ -- $ -- $ -- $ -- $ -- $ -- $12,041 $12,146
======= ========= ======= ======= ======= ======= ======= =======
HELD-TO-MATURITY INVESTMENTS
Due within 1 year $ -- $ -- $ -- $ -- $ 9,921 $10,186 $39,785 $39,785
After 1 but within 5 years -- -- 802 866 7,100 7,100 16,992 17,155
After 5 but within 10 years 2,367 2,444 13,224 14,108 -- -- 1,111 1,120
After 10 years 86,007 89,698 15,942 16,695 -- -- -- --
------- --------- ------- ------- ------- ------- ------- -------
TOTAL $88,374 $ 92,142 $29,968 $31,669 $17,021 $17,286 $57,888 $58,060
======= ========= ======= ======= ======= ======= ======= =======
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Inventories
Inventories are classified as follows at December 31, (in thousands):
1997 1996
---- ----
Raw material $ 96,455 $ 81,321
Work-in-process 74,284 71,388
Finished goods 148,939 134,931
-------- --------
319,678 287,640
Excess of current production costs over LIFO cost basis 43,792 43,075
-------- --------
Total $275,886 $244,565
======== ========
The financial accounting basis for the LIFO inventories of acquired companies
exceeds the tax basis by approximately $29,775,000 at December 31, 1997.
Income Taxes
The following table sets forth selected data with respect to the Company's
income tax provisions for the years ended December 31, (in thousands):
1997 1996 1995
---- ---- ----
Income before income taxes:
United States $176,051 $ 192,931 $ 163,093
International 4,117 6,410 3,940
-------- --------- ---------
Total $180,168 $ 199,341 $ 167,033
======== ========= =========
Provisions for income taxes:
Federal $ 54,154 $ 49,071 $ 35,306
State 6,324 7,040 5,492
International 901 3,104 1,709
Deferred (11,529) (1,406) 2,592
--------- ---------- ----------
Total $ 49,850 $ 57,809 $ 45,099
======== ========== =========
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Page 34
The principal items making up the deferred tax provisions are set forth in the
following table for the years ended December 31, (in thousands):
1997 1996 1995
---- ---- ----
Transactions of leasing subsidiary $ (1,305) $ (1,383) $ (1,016)
Special charge (14,813) -- --
Restructuring reserve 3,319 3,678 3,620
Depreciation 690 (1,221) 1,478
Other, net 580 (2,480) (1,490)
-------- -------- --------
Total $(11,529) $ (1,406) $ 2,592
======== ======== ========
The components of the net deferred tax (asset) liability at December 31, (in
thousands) were as follows:
1997 1996
---- ----
Deferred tax assets:
Inventory $ 3,627 $ 3,257
Pensions 14,840 11,321
Postretirement and postemployment benefits 9,081 11,143
Accrued consolidation and streamlining charge 12,039 --
Accrued restructuring charge -- 3,319
Accrued liabilities 39,148 42,912
Miscellaneous other 7,858 5,047
--------- ---------
Total deferred tax asset 86,593 76,999
--------- ---------
Deferred tax liabilities:
Property, plant, and equipment 24,919 24,024
Leasing subsidiary 15,480 16,785
LIFO inventories of acquired businesses 11,315 11,250
Miscellaneous other 7,598 7,448
--------- ---------
Total deferred tax liability 59,312 59,507
--------- ---------
Net deferred tax (asset) liability $ (27,281) $ (17,492)
========= =========
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Page 35
Deferred taxes are classified in the financial statements as a net short-term
deferred tax asset of $30,179,000 and a net long-term deferred tax liability of
$2,898,000.
At December 31, 1997, United States income taxes had not been provided on
approximately $10,900,000 of undistributed international earnings. Payments of
income taxes were $62,413,000 in 1997, $45,706,000 in 1996 and $39,836,000 in
1995.
The consolidated effective income tax rates varied from the United States
federal statutory income tax rate for the years ended December 31, as follows:
1997 1996 1995
---- ---- ----
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 2.0 2.3 2.3
Partially tax-exempt income (2.4) (2.5) (5.2)
Non-taxable income from
Puerto Rico operations (8.4) (6.6) (6.5)
Other, net 1.5 .8 1.4
----- ----- -----
Consolidated effective income tax rate 27.7% 29.0% 27.0%
==== ===== =====
Other Non-Current Liabilities
Other Non-Current Liabilities consists of the following at December 31, (in
thousands):
1997 1996
---- ----
Pensions $ 34,617 $ 33,045
Other postretirement benefits 20,779 21,074
Accrued consolidation and streamlining charge 17,682 --
Other, net 22,732 20,617
-------- --------
Total $ 95,810 $ 74,736
======== ========
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Pension Benefits
The Company and its subsidiaries have a number of non-contributory defined
benefit pension plans and defined contribution plans covering substantially all
employees. The pension plans provide pension benefits that are based on a
combination of years of service and either compensation levels or specified
dollar amounts.
The following table sets forth the components of pension cost for the years
ended December 31, (in thousands):
1997 1996 1995
---- ---- ----
Benefits earned $ 8,865 $ 8,222 $ 6,634
Increase in present value of
benefits earned in prior years 15,316 14,096 13,181
Actual return on plan assets (28,135) (20,408) (34,970)
Deferred gain 12,753 7,501 21,520
Amortization of actuarial gains and
losses and prior service cost (212) 43 (2,808)
-------- -------- --------
Net Pension Cost $ 8,587 $ 9,454 $ 3,557
======== ======== ========
ASSUMPTIONS USED IN DETERMINING PENSION COST:
Discount rate 7.5% 7.25% 8.5%
Long-term rate of compensation increase 4.0% 4.0% 5.0%
Expected long-term rate of return
on plan assets 8.5% 8.25% 9.5%
Pension expense as a percent of payroll was 3.5% in 1997, 4.1% in 1996 and 1.9%
in 1995.
37
Page 37
The following table sets forth the retirement plans' status and the pension
liability recognized in the Company's balance sheet at December 31, (in
thousands):
Plans Where Assets Exceed Plans Where Accumulated
Accumulated Benefits Benefits Exceed Assets
-------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
ESTIMATED FUNDS REQUIRED TO PROVIDE FOR FUTURE
PAYMENT OF:
Benefits based on service to date and present
pay levels:
Vested $ 157,187 $ 146,249 $ 35,215 $ 21,955
Non-vested 8,458 8,801 2,587 1,815
--------- --------- --------- ---------
Accumulated benefit obligation 165,645 155,050 37,802 23,770
Additional amounts related to projected pay increases 24,385 20,560 9,891 7,424
--------- --------- --------- ---------
Projected benefit obligation 190,030 175,610 47,693 31,194
--------- --------- --------- ---------
ASSETS AVAILABLE FOR BENEFITS:
Plan assets (market value) 201,226 190,732 16,833 5,775
Company assets (recorded liability) 15,157 12,814 24,884 23,106
--------- --------- --------- ---------
Total Assets 216,383 203,546 41,717 28,881
--------- --------- --------- ---------
ASSETS IN EXCESS OF (LESS THAN)
PROJECTED BENEFIT OBLIGATION $ 26,353 $ 27,936 $ (5,976) $ (2,313)
========= ========= ========= =========
Consisting of:
Unrecognized net asset (obligation) at transition $ 3,050 $ 3,711 $ (42) $ 0
Unrecognized actuarial gain (loss) since transition $ 24,402 $ 25,395 $ (5,823) $ (2,100)
Unrecognized prior service costs incurred
since transition $ (1,099) $ (1,170) $ (111) $ (213)
The projected benefit obligations were determined using discount rates of 7.0%
for 1997 and 7.5% for 1996 and assumed average long-term rate of compensation
increase of 4% for 1997 and 1996.
At December 31, 1997, approximately $115,710,000 of plan assets were invested in
common stocks, including Hubbell Incorporated common stock with a market value
of $16,558,000. The balance of plan assets are invested in short term money
market accounts, government and corporate bonds.
Postretirement Benefits Other Than Pensions
The Company and its subsidiaries have a number of health care and life insurance
benefit plans covering eligible employees who reached retirement age while
working for the Company, providing they retired prior to 1992. These benefits
were discontinued in 1991 for substantially all future retirees, with the
exception of the A.B. Chance Company which was acquired in 1994 and Anderson
Electrical Products, Inc. which was acquired in 1996.
For retirees prior to 1992, some of the plans provide for retiree contributions,
which are periodically increased. The plans anticipate future cost-sharing
changes that are consistent with the Company's past practices. The plans are
funded either on a monthly premium basis or as benefits become due.
At December 31, 1997, the recorded liability for providing these postretirement
benefits was based on a 7.25% discount rate and assumed health care cost trend
rate of 10.0% declining to 5.5% over ten years. The costs recognized for
providing these benefits in 1997, 1996 and 1995 were $1,400,000, $1,600,000 and
$1,300,000 respectively.
38
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Commercial Paper, Other Borrowings and Long-Term Debt
The following table sets forth the components of the Company's debt structure at
December 31, (in thousands):
1997 1996
------------------------------------- ---------------------------------------
COMMERCIAL COMMERCIAL
PAPER AND PAPER AND
OTHER LONG-TERM OTHER LONG-TERM
BORROWINGS DEBT TOTAL BORROWINGS DEBT TOTAL
---------- ---- ----- ---------- ---- -----
Balance at year end $ 250 $ 99,519 $ 99,769 $ 18,635 $ 99,458 $ 118,093
Highest aggregate month-end balance $ 124,744 $ 135,151
Average borrowings during the year $ 6,743 $ 99,491 $ 106,234 $ 22,920 $ 100,546 $ 123,466
Weighted average interest rate:
At year end 6.00% 6.72% 6.72% 6.00% 6.72% 6.61%
Paid during the year 5.71% 6.72% 6.66% 5.76% 6.78% 6.59%
Interest paid for commercial paper, bank borrowings, and long-term debt totaled
$7,191,000 in 1997, $8,072,000 in 1996 and $7,181,000 in 1995. The Company
maintains various bank credit agreements primarily to support commercial paper
borrowings. At December 31, 1997, the Company had total unused bank credit
agreements of $50 million. The expiration date for these bank credit agreements
is September 27, 1999. Borrowings under credit agreements generally are
available at the prime rate or at a surcharge over the London Interbank Offered
Rate (LIBOR). Annual commitment fee requirements to support availability of
credit agreements at December 31, 1997 total approximately $30,000. In January,
1996, short term notes of $18,635,000 with an interest rate of 6%, were issued
as part of the purchase price for Gleason Reel Corp. In January, 1997,
$18,385,000 of these notes were repaid leaving an unpaid balance of $250,000 as
of December 31, 1997. This remaining balance was repaid in January, 1998.
Long-term debt consists of ten year non-callable notes due in 2005 at a face
value of $100,000,000 and a fixed interest rate of 6 5/8%.
39
Page 39
Leases
Total rental expense under operating leases was $7,400,000 in 1997, $6,800,000
in 1996 and $6,600,000 in 1995.
The minimum annual rentals on non-cancelable, long-term, operating leases in
effect at December 31, 1997 will approximate $2,600,000 in 1998, $2,100,000 in
1999, and will decline thereafter.
Research, Development and Engineering
Expenses for new product development and ongoing improvement of existing
products were $19,000,000 in 1997, $14,200,000 in 1996 and $12,400,000 in 1995.
Financial Instruments
Concentration of Credit Risks: Financial instruments which potentially subject
the Company to concentration of credit risks consist of trade receivables and
temporary cash investments. The Company grants credit terms in the normal course
of business to its customers. Due to the diversity of its product lines, the
Company has a diverse customer base including electrical distributors and
wholesalers, electric utilities, equipment manufacturers, electrical
contractors, telephone operating companies and retail and hardware outlets. As
part of its ongoing procedures, the Company monitors the credit worthiness of
its customers. Bad debt write-offs have historically been minimal. The Company
places its temporary cash investments with financial institutions and limits the
amount of exposure to any one institution.
Fair Value: The carrying amounts reported in the consolidated balance sheets for
cash and temporary cash investments, receivables, commercial paper and bank
borrowings, accounts payable and accruals approximate their fair values given
the immediate or short-term maturity of these financial investments.
The fair value of investment securities and long term debt are as follows (in
thousands):
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
Investments
Available-for-sale $ 12,325 $ 12,325 $ 13,224 $ 13,224
Held-to-maturity $ 193,251 $ 199,157 $ 157,148 $ 155,955
Long-Term Debt $ (99,519) $(101,646) $ (99,458) $ (97,710)
Fair value is based on quoted market prices for the same or similar securities.
40
Page 40
Capital Stock
Share activity in the Company's preferred and common stocks is set forth below
for the three years ended December 31, 1997:
Preferred Stock Common Stock
--------------- ------------
Class A Class B
------- -------
OUTSTANDING AT DECEMBER 31, 1994 -- 5,895,097 27,056,945
Exercise of stock options 15,596 101,089
Acquisition of treasury shares (124,378) (18,809)
----------- ----------- -----------
OUTSTANDING AT DECEMBER 31, 1995 -- 5,786,315 27,139,225
Exercise of stock options 53,314 528,370
Acquisition of treasury shares (141,864) (285,307)
2-for-1 stock split 5,748,355 27,230,302
----------- ----------- -----------
OUTSTANDING AT DECEMBER 31, 1996 -- 11,446,120 54,612,590
Exercise of stock options 62,748 344,565
Acquisition of Fargo -- 1,170,572
Acquisition of treasury shares (362,806) (246,782)
----------- ----------- -----------
OUTSTANDING AT DECEMBER 31, 1997 -- 11,146,062 55,880,945
Treasury shares are retired when acquired and the purchase price is charged
against par value and additional paid-in capital. Voting rights per share: Class
A Common - twenty; Class B Common - one. In addition, the Company has 5,891,097
authorized shares of preferred stock; none are outstanding.
The Company has a Shareholder Rights Plan under which holders of Class A Common
Stock have Class A Rights and holders of Class B Common Stock have Class B
Rights. These Rights become exercisable after a specified period of time only if
a person or group of affiliated persons acquires beneficial ownership of 20
percent or more of the outstanding Class A Common Stock of the Company or
announces or commences a tender or exchange offer that would result in the
offeror acquiring beneficial ownership of 30 percent or more of the outstanding
Class A Common Stock of the Company. Once exercisable, the Rights would entitle
their registered holders to purchase, for each common share held, one share of
the Company's Class A Common Stock or Class B Common Stock, as the case may be,
at a price of $49.362 per share, subject to adjustment to prevent dilution. Upon
the occurrence of certain events or transactions specified in the Rights
Agreement, a holder of Rights applicable to one share is entitled to receive for
an exercise price of $49.362 per share owned, a number of shares of the
Company's Class A Common Stock or Class B Common Stock, as the case may be, or
an acquiring corporation's common stock, having a market value equal to twice
the exercise price. The Rights may be redeemed by the Company for one cent per
Right prior to the tenth day after a person or group of affiliated persons has
acquired 20 percent or more of the outstanding Class A Common Stock of the
Company. The Rights expire on December 31, 1998, unless earlier redeemed by the
Company.
Shares of common stock were reserved at December 31, 1997 as follows:
Exercise of stock purchase rights 67,027,007
Exercise of outstanding stock options 5,166,788
Future grant of stock options 3,377,039
Distribution of performance units 221,638
-----------
Total (Class A, 12,187,074; Class B, 63,605,398) 75,792,472
41
Page 41
Stock Options
The Company has granted to officers and key employees options to purchase the
Company's Class A and Class B Common Stock and the Company may grant to officers
and key employees options to purchase the Company's Class B Common Stock at not
less than 100% of market prices on the date of grant with a ten year term and a
three year vesting period. Stock option activity for the three years ended
December 31, 1997 is set forth below:
Number Option price per Weighted
of shares share range Average
--------- ----------- -------
OUTSTANDING AT DECEMBER 31, 1994 4,011,764 $ 9.54 - $27.00 $23.52
Granted 759,800 $32.06 $32.06
Exercised (233,370) $ 9.54 - $27.00 $15.98
Canceled or expired (34,310) $25.15 - $27.00 $25.93
---------
OUTSTANDING AT DECEMBER 31, 1995 4,503,884 $10.95 - $32.06 $24.10
Granted 796,000 $41.69 $41.69
Exercised (581,684) $10.95 - $32.06 $24.50
Canceled or expired (37,100) $25.15 - $32.06 $27.93
---------
OUTSTANDING AT DECEMBER 31, 1996 4,681,100 $10.95 - $41.69 $27.68
Granted 946,400 $47.13 $47.13
Exercised (407,421) $10.95 - $32.06 $28.38
Canceled or expired (53,291) $21.25 - $32.06 $25.31
---------
OUTSTANDING AT DECEMBER 31, 1997 5,166,788 $13.82 - $47.13 $31.18
At December 31, 1997, outstanding options were comprised of 999,265 shares
exercisable with an average remaining life of three years and an average price
of $19.66 (range $13.82 - $23.39); 2,203,584 shares exercisable with an average
remaining life of seven years and an average price of $27.24 (range $25.15 -
$32.06); and 1,963,938 shares not vested with an average remaining life of nine
years and an average price of $43.13 (range $32.06 - $47.13).
On May 5, 1997 shareholders approved a performance unit plan for employees who
are primarily responsible in an administrative or executive capacity for the
direction of the functions or operation of the Company and its subsidiaries. The
performance units, which were awarded in the Company's Class B Common Stock, are
based on achieving targeted earnings per share growth over the three-year period
commencing January 1, 1997 and ending December 31, 1999. Participants may
receive from 0 to 200 percent of the award grant depending upon whether the
average annual compounded earnings per share growth is (a) below the 10% mark
(no award), (b) 10% to 12.4% (100% of award), (c) 12.5% to 14.9% (150% of
award), and (d) 15% and above (200% of award). The maximum number of shares that
could be issued under the plan is 221,638.
The pro forma compensation expense for stock options and weighted average fair
value has been estimated using the Black-Scholes option-pricing model with the
following assumptions: dividend yield of 2.5%, expected volatility of 13%, risk
free interest rate of 6.0% and an expected term of seven years. Using this model
pro forma net income for 1997 would be reduced by $2.7 million, for 1996 by $1.2
million and for 1995 by $0.1 million from reported amounts. The pro forma effect
on earnings per share would be immaterial. The weighted average fair value of
options granted in 1997, 1996 and 1995 was $10.26, $9.38 and $7.22,
respectively. The fair value of a performance unit was $39.50. These pro forma
disclosures may not be representative of the effects on reported net income for
future years since options vest over several years and options granted prior to
1995 are not considered.
42
Page 42
Earnings Per Share
The following table sets forth the computation of earnings per share for the
three years ended December 31, (in thousands except per share data):
1997 1996 1995
---- ---- ----
Net Income $130,318 $141,532 $121,934
Weighted average number of common
shares outstanding during the year (basic) 67,083 65,938 65,852
Common equivalent shares 1,760 1,314 892
-------- -------- --------
Average number of shares outstanding (diluted) 68,843 67,252 66,744
======== ======== ========
Earnings per share:
Basic $ 1.94 $ 2.15 $ 1.85
Diluted $ 1.89 $ 2.10 $ 1.83
Industry Segment and Geographic Area Information
Nature of Operations
Hubbell Incorporated was founded as a proprietorship in 1888, and was
incorporated in Connecticut in 1905. For over a century, Hubbell has
manufactured and sold high quality electrical and electronic products for a
broad range of commercial, industrial, telecommunications and utility
applications. Since 1961, Hubbell has expanded its operations into other areas
of the electrical industry and related fields. Hubbell products are now
manufactured or assembled by twenty-two divisions and subsidiaries in the United
States, Canada, Puerto Rico, Mexico, United Kingdom and Singapore. Hubbell also
participates in joint ventures with partners in South America, Germany and
Taiwan, and maintains sales offices in Malaysia, Mexico, Hong Kong, South Korea
and the Middle East.
The Company is primarily engaged in the engineering, manufacture and sale of
electrical and electronic products. These products can be divided into three
general segments: products primarily used in low-voltage applications, products
primarily used in high-voltage applications and products that either are not
directly related to the electrical business, or, if related, cannot be clearly
classified on a voltage application basis. At December 31, 1997, these segments
were comprised as follows:
Low Voltage products are in the range of 600 volts or less, are sold principally
to distributors and represent stock items of standard and special application
wiring device products, lighting fixtures, low voltage industrial controls and
cable management products.
High Voltage products are in the more than 600 volt range, are sold through
distributors, independent sales representatives and directly to customers by
sales engineers. Segment products are comprised of test and measurement
equipment, wire and cable, electrical transmission and distribution products
such as insulators, surge arresters, switches, cutouts, sectionalizers, fuses
connectors and related hardware.
43
Page 43
The Other segment consists of products not classified on a voltage basis. This
segment includes standard and special application cabinets and enclosures,
fittings, switch and outlet boxes, wire management components and systems,
construction materials and tools for building and maintenance of overhead and
underground power and telephone lines, data transmission and telecommunications
equipment and components for voice and data signals. Segment products are sold
to customers in a wide range of markets including industrial, commercial and
residential construction; hardware and home center outlets; original equipment
manufacturers; electric and telephone utilities.
On a geographic basis, the Company defines "international" as operations and
subsidiaries based outside of the United States and its possessions. Sales of
international units were 6% of total sales in 1997, 1996 and 1995 with the
Canadian market representing approximately 60% of the total. Net assets of
international subsidiaries were 5% of the consolidated total in 1997, 5% in 1996
and 4% in 1995. Export sales directly to customers or through electric
wholesalers from the United States operations were $105,000,000 in 1997,
$98,900,000 in 1996 and $75,000,000 in 1995.
The Company's principal manufacturing facilities are located in the following
areas, classified by segment:
Approximate Floor
Segment Location No. of Facilities Area in Square Feet
------- -------- ----------------- -------------------
Low Voltage Segment Connecticut 1 140,000
Ohio 1 76,900
Puerto Rico 3* 256,000 (1)
Tennessee 1 250,000
Virginia 1 321,300
North Carolina 1 62,000 (2)
Georgia 1 130,000
Mexico 1 40,000 (2)
High Voltage Segment Connecticut 1 503,000
New York 3 274,000
Ohio 1 92,000
South Carolina 1 353,000
Missouri 1* 746,000
Puerto Rico 1 135,565 (2)
Other Segment Connecticut 1 67,400
Illinois 1 165,000
Indiana 1 320,000
Missouri 1** 234,400
Virginia 1 138,000
Mexico 1 170,000
North Carolina 1 81,000 (3)
Alabama 2 322,000
Tennessee 1 77,000 (2)
Wisconsin 1 94,000 (4)
- ----------------------------------
(1) 96,500 square feet leased
(2) Leased
(3) 35,000 square feet leased
(4) 20,000 square feet leased
* Some products are classified in the Other Segment
** Some products are classified in the Low Voltage Segment
44
Page 44
Additionally, the Company owns or leases warehouses and distribution centers
containing approximately 792,500 square feet. The Company believes its
manufacturing and warehousing facilities are adequate to carry on its business
activities.
As of December 31, 1997, the Company has approximately 8,800 full-time
employees, including salaried and hourly personnel. Approximately 32% of the
employees are represented by labor unions. During the next twelve months there
are four union contracts due for renegotiation.
Financial Information
Financial information by industry segment and geographic area for the three
years ended December 31, 1997, is summarized below (in thousands). When reading
the data the following items should be noted:
- - Net sales comprise sales to unaffiliated customers - intersegment and
inter-area sales are immaterial.
- - Segment operating income consists of net sales less operating expenses.
General corporate expenses, interest expense, and other income, have not
been allocated to segments.
- - General corporate assets not allocated to segments are principally cash
and investments.
45
Page 45
INDUSTRY SEGMENT 1997 1996 1995
---- ---- ----
NET SALES:
Low Voltage $ 555,949 $ 532,664 $ 497,428
High Voltage 321,949 299,320 234,052
Other 500,933 465,397 411,646
----------- ----------- -----------
Total $ 1,378,831 $ 1,297,381 $ 1,143,126
=========== =========== ===========
OPERATING INCOME:
Low Voltage $ 116,670 $ 109,897 $ 96,965
Special Charge (6,000) -- --
High Voltage 41,350 32,581 25,040
Special Charge (25,000) -- --
Other 82,300 70,921 57,630
Special Charge (21,000) -- --
----------- ----------- -----------
Segment Total $ 188,320 $ 213,399 $ 179,635
General corporate expenses (16,675) (15,863) (14,675)
Interest expense (7,323) (8,416) (8,499)
Investment and other income, net 5,846 10,221 10,572
----------- ----------- -----------
Income before income taxes $ 180,168 $ 199,341 $ 167,033
=========== =========== ===========
ASSETS:
Low Voltage $ 303,667 $ 286,485 $ 262,399
High Voltage 325,035 246,808 204,821
Other 279,998 264,234 248,336
General Corporate 376,084 387,913 341,689
----------- ----------- -----------
Total $ 1,284,784 $ 1,185,440 $ 1,057,245
=========== =========== ===========
CAPITAL EXPENDITURES:
Low Voltage $ 18,668 $ 13,980 $ 16,845
High Voltage 26,997 12,424 8,546
Other 14,557 11,988 12,349
General Corporate 372 740 488
----------- ----------- -----------
Total $ 60,594 $ 39,132 $ 38,228
=========== =========== ===========
DEPRECIATION AND AMORTIZATION:
Low Voltage $ 15,939 $ 14,541 $ 14,407
High Voltage 13,042 11,210 9,148
Other 13,360 12,577 11,753
General Corporate 874 925 932
----------- ----------- -----------
Total $ 43,215 $ 39,253 $ 36,240
=========== =========== ===========
46
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GEOGRAPHIC AREA
1997 1996 1995
---- ---- ----
NET SALES:
United States $ 1,290,566 $ 1,218,333 $ 1,072,267
International 88,265 79,048 70,859
----------- ----------- -----------
Total $ 1,378,831 $ 1,297,381 $ 1,143,126
=========== =========== ===========
OPERATING INCOME:
United States $ 224,716 $ 201,219 $ 169,890
Special Charge (51,100) -- --
International 15,604 12,180 9,745
Special Charge (900) -- --
----------- ----------- -----------
Total $ 188,320 $ 213,399 $ 179,635
=========== =========== ===========
ASSETS:
United States $ 1,220,809 $ 1,125,137 $ 1,007,276
International 63,975 60,303 49,969
----------- ----------- -----------
Total $ 1,284,784 $ 1,185,440 $ 1,057,245
=========== =========== ===========
Quarterly Financial Data (Unaudited)
The table below sets forth summarized quarterly financial data for the years
ended December 31, 1997 and 1996 (in thousands, except per share amounts):
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
- ---- ------- ------- ------- -------
Net Sales $324,697 $352,898 $351,765 $349,471
Gross Profit $100,076 $111,218 $108,043 $111,107
Net Income $ 36,299 $ 41,415 $ 41,657 $ 10,947
Earnings Per Share:
Basic $ 0.54 $ 0.62 $ 0.62 $ 0.16
Diluted $ 0.53 $ 0.60 $ 0.60 $ 0.16
1996
- ----
Net Sales $304,600 $328,927 $332,770 $331,084
Gross Profit $ 90,160 $ 99,046 $ 99,786 $103,359
Net Income $ 31,669 $ 35,746 $ 36,979 $ 37,138
Earnings Per Share:
Basic $ 0.48 $ 0.55 $ 0.56 $ 0.56
Diluted $ 0.47 $ 0.53 $ 0.55 $ 0.55
47
Page 47
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Information relative to Executive Officers appears on Page 50 of this
report.
Item 10. Directors and Executive Officers of the Registrant (1)
Item 11. Executive Compensation (1)
Item 12. Security Ownership of Certain Beneficial Owners and Management (1)
Item 13. Certain Relationships and Related Transactions (1)
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
1. Financial Statements and Schedules
Financial statements and schedules listed in the Index to Financial Statements
and Schedules appearing on Page 53 are filed as part of this Annual Report on
Form 10-K.
2. Exhibits
Number Description
3a Restated Certificate of Incorporation, as amended effective
through May 13, 1996. Exhibit A of the registrant's proxy
statement, dated March 22, 1996 and filed on March 27, 1996,
is incorporated by reference.
3b By-Laws, Hubbell Incorporated, as amended on March 11, 1997.
3c Rights Agreement, dated as of December 13, 1988, between
Hubbell Incorporated and Manufacturers Hanover Trust Company
(now known as Chase Mellon Shareholder Services, L.L.C.) as
Rights Agent (incorporated by reference to Exhibit 6 to the
registrant's Registration Statement on Form 8-A, dated March
3, 1992, and filed on March 4, 1992).
- --------------
(1) The definitive proxy statement for the annual meeting of shareholders to be
held on May 4, 1998, filed with the Commission on March 25, 1998, pursuant to
Regulation 14A, is incorporated herein by reference.
48
Page 48
2. Exhibits - Continued
Number Description
4a Instruments with respect to the 1996 issue of long-term debt
have not been filed as exhibits to this Annual Report on
Form 10-K as the authorized principal amount on such issue
does not exceed 10% of the total assets of the registrant
and its subsidiaries on a consolidated basis; registrant
agrees to furnish a copy of each such instruments to the
Commission upon request.
10a+* Hubbell Incorporated Supplemental Executive Retirement Plan,
as amended and restated effective January 1, 1998.
10b(1)+ 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.
10c+ Description of the Hubbell Incorporated, Post Retirement
Death Benefit Plan for Participants in the Supplemental
Executive Retirement Plan, as amended effective May 1, 1993.
Exhibit 10c of the registrant's report on Form 10-Q for the
second quarter, 1993, filed on August 12, 1993, is
incorporated herein by reference.
10f Hubbell Incorporated Deferred Compensation Plan for
Directors, as amended and restated effective June 20, 1991.
Exhibit 10f of the registrant's report on Form 10-Q for the
second quarter, 1991, filed on August 7, 1991, is
incorporated by reference.
10g+ Hubbell Incorporated Incentive Compensation Plan, as amended
effective January 1, 1996. Exhibit B of the registrant's
proxy statement, dated March 22, 1996 and filed on March 27,
1996, is incorporated by reference.
10h Hubbell Incorporated Key Man Supplemental Medical Insurance,
as amended and restated effective December 9, 1986. Exhibit
10h of the registrant's report on Form 10-K for the year
1987, filed on March 25, 1988, is incorporated by reference.
10i Hubbell Incorporated Retirement Plan for Directors, as
amended and restated effective March 13, 1990. Exhibit 10i
of the registrant's report on Form 10-K for the year 1989,
filed on March 26, 1990, is incorporated by reference.
10l+ Employment Agreement, dated March 28, 1989 (effective
January 1, 1989), between Hubbell Incorporated and G.
Jackson Ratcliffe, Chairman of the Board, President and
Chief Executive Officer. Exhibit 10l of the registrant's
report on Form 10-K for the year 1988, filed on March 29,
1989, is incorporated by reference.
- ---------------
+ This exhibit constitutes a management contract, compensatory plan, or
arrangement
* Filed hereunder
49
Page 49
2. Exhibits - Continued
Number Description
10m+ Employment Agreement, dated March 28, 1989 (effective January
1, 1989), between Hubbell Incorporated and Vincent R.
Petrecca, Executive Vice President. Exhibit 10m of the
registrant's report on Form 10-K for the year 1988, filed on
March 29, 1989, is incorporated by reference.
10n+ Employment Agreement, dated March 28, 1989 (effective January
1, 1989), between Hubbell Incorporated and Harry B. Rowell,
Jr., Executive Vice President. Exhibit 10n of the registrant's
report on Form 10-K for the year 1988, filed on March 29,
1989, is incorporated by reference.
10o+ Hubbell Incorporated Policy for Providing Severance Payments
to Key Managers, as amended and restated effective September
9, 1993. Exhibit 10o of the registrant's report on Form 10-Q
for the third quarter, 1993, filed on November 10, 1993, is
incorporated by reference.
10p+ Hubbell Incorporated Senior Executive Incentive Compensation
Plan, effective January 1, 1996. Exhibit C of the registrant's
proxy statement, dated March 22, 1996 and filed on March 27,
1996, 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.
21 Listing of significant subsidiaries.
27 Exhibit 27 Financial Data Schedule (Electronic filings only)
3. Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
December 31, 1997.
- -------------------
+ This exhibit constitutes a management contract, compensatory plan, or
arrangement
50
Page 50
Executive Officers of the Registrant
Name Age(1) Present Position Business Experience
---- ------ ---------------- -------------------
G. Jackson Ratcliffe 61 Chairman of the Board, President President and Chief Executive
and Chief Executive Officer Officer since January 1, 1988;
Chairman of the Board since 1987;
Executive Vice President -
Administration 1983-1987; Senior
Vice President-Finance and Law
1980-1983; Vice President, General
Counsel and Secretary 1974-1980.
Vincent R. Petrecca 57 Executive Vice President Present position since January 1,
1988; Group Vice President
1984-1987; Vice President and
General Manager of the Wiring
Device Division 1981-1984; Vice
President and General Manager of
the Lighting Division 1976-1981.
Harry B. Rowell, Jr. 56 Executive Vice President Present position since January 1,
1988; Group Vice President
1985-1987; Vice President
Corporate Development and Planning
1979-1985.
Thomas H. Pluff 50 Group Vice President Present position since March 1989.
Richard W. Davies 51 Vice President, General Counsel Present position since January
and Secretary 1, 1996; General Counsel since
1987; Secretary since 1982;
Assistant Secretary 1980-1982;
Assistant General Counsel
1974-1987.
James H. Biggart, Jr. 45 Vice President and Treasurer Present position since January 1,
1996; Treasurer since 1987;
Assistant Treasurer 1986-1987;
Director of Taxes 1984-1986.
There is no family relationship between any of the above-named executive
officers.
- --------------------------
(1) As of March 13, 1998
51
Page 51
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ G. J. Ratcliffe 3/10/98
---------------------------------------------- -------
G. J. Ratcliffe Date
Chairman of the Board, President, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By /s/ G. J. Ratcliffe 3/10/98
---------------------------------------------- -------
G. J. Ratcliffe Date
Chairman of the Board, President, Chief
Executive Officer and Director
By /s/ H. B. Rowell, Jr. 3/10/98
---------------------------------------------- -------
H. B. Rowell, Jr. Date
Executive Vice President
(Chief Financial and Accounting Officer)
By /s/ E. R. Brooks 3/10/98
---------------------------------------------- -------
E. R. Brooks Date
Director
By /s/ G. W. Edwards, Jr. 3/10/98
---------------------------------------------- -------
G. W. Edwards, Jr. Date
Director
By /s/ J. S. Hoffman 3/10/98
---------------------------------------------- -------
J. S. Hoffman Date
Director
By /s/ H. G. McDonell 3/10/98
---------------------------------------------- -------
H. G. McDonell Date
Director
52
Page 52
By /s/ A. McNally IV 3/10/98
---------------------------------------------- -------
A. McNally IV Date
Director
By /s/ D. J. Meyer 3/10/98
---------------------------------------------- -------
D. J. Meyer Date
Director
By /s/ J. A. Urquhart 3/10/98
---------------------------------------------- -------
J. A. Urquhart Date
Director
By /s/ M. Wallop 3/10/98
---------------------------------------------- -------
M. Wallop Date
Director
53
Page 53
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Form 10-K for
Financial Statements 1997, Page:
Report of Independent Accountants...............................20
Consolidated Balance Sheet at December 31, 1997 and 1996........21
Consolidated Statement of Income for the three years
ended December 31, 1997.........................................23
Consolidated Statement of Cash Flows for the three years
ended December 31, 1997.........................................24
Consolidated Statement of Changes in Shareholders' Equity
for the three years ended December 31, 1997.....................25
Statement of Accounting Policies................................26
Notes to Consolidated Financial Statements......................29
Financial Statement Schedule
Report of Independent Accountants
on Financial Statement Schedule.................................54
Valuation and Qualifying Accounts and Reserves
(Schedule VIII).................................................55
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
54
Page 54
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Hubbell Incorporated
Our audits of the consolidated financial statements referred to in our report
dated January 21, 1998, appearing on page 20 of this Form 10-K also included an
audit of the Financial Statement Schedule listed in the index on page 53. In our
opinion, the Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
Price Waterhouse LLP
Stamford, Connecticut
January 21, 1998
55
Page 55
HUBBELL INCORPORATED Schedule VIII
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(In thousands)
Reserves deducted in the balance sheet from the assets to which they apply:
Additions Deductions -
Balance at charged Acquisition uncollectible Balance
beginning to costs of accounts at end
of period and expenses businesses written off of period
--------- ------------ ----------- ------------- ---------
Allowances for doubtful
accounts receivable:
Year 1995 $ 4,760 $ 693 $ 0 $(1,119) $ 4,334
Year 1996 $ 4,334 $ 1,157 $ 126 $ (751) $ 4,866
Year 1997 $ 4,866 $ 1,359 $ 176 $ (688) $ 5,713
56
Exhibit Index
-------------
Number Description
3a Restated Certificate of Incorporation, as amended effective
through May 13, 1996. Exhibit A of the registrant's proxy
statement, dated March 22, 1996 and filed on March 27, 1996,
is incorporated by reference.
3b By-Laws, Hubbell Incorporated, as amended on March 11, 1997.
3c Rights Agreement, dated as of December 13, 1988, between
Hubbell Incorporated and Manufacturers Hanover Trust Company
(now known as Chase Mellon Shareholder Services, L.L.C.) as
Rights Agent (incorporated by reference to Exhibit 6 to the
registrant's Registration Statement on Form 8-A, dated March
3, 1992, and filed on March 4, 1992).
4a Instruments with respect to the 1996 issue of long-term debt
have not been filed as exhibits to this Annual Report on
Form 10-K as the authorized principal amount on such issue
does not exceed 10% of the total assets of the registrant
and its subsidiaries on a consolidated basis; registrant
agrees to furnish a copy of each such instruments to the
Commission upon request.
10a+* Hubbell Incorporated Supplemental Executive Retirement Plan,
as amended and restated effective January 1, 1998.
10b(1)+ 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.
10c+ Description of the Hubbell Incorporated, Post Retirement
Death Benefit Plan for Participants in the Supplemental
Executive Retirement Plan, as amended effective May 1, 1993.
Exhibit 10c of the registrant's report on Form 10-Q for the
second quarter, 1993, filed on August 12, 1993, is
incorporated herein by reference.
10f Hubbell Incorporated Deferred Compensation Plan for
Directors, as amended and restated effective June 20, 1991.
Exhibit 10f of the registrant's report on Form 10-Q for the
second quarter, 1991, filed on August 7, 1991, is
incorporated by reference.
10g+ Hubbell Incorporated Incentive Compensation Plan, as amended
effective January 1, 1996. Exhibit B of the registrant's
proxy statement, dated March 22, 1996 and filed on March 27,
1996, is incorporated by reference.
10h Hubbell Incorporated Key Man Supplemental Medical Insurance,
as amended and restated effective December 9, 1986. Exhibit
10h of the registrant's report on Form 10-K for the year
1987, filed on March 25, 1988, is incorporated by reference.
10i Hubbell Incorporated Retirement Plan for Directors, as
amended and restated effective March 13, 1990. Exhibit 10i
of the registrant's report on Form 10-K for the year 1989,
filed on March 26, 1990, is incorporated by reference.
57
10l+ Employment Agreement, dated March 28, 1989 (effective
January 1, 1989), between Hubbell Incorporated and G.
Jackson Ratcliffe, Chairman of the Board, President and
Chief Executive Officer. Exhibit 10l of the registrant's
report on Form 10-K for the year 1988, filed on March 29,
1989, is incorporated by reference.
10m+ Employment Agreement, dated March 28, 1989 (effective January
1, 1989), between Hubbell Incorporated and Vincent R.
Petrecca, Executive Vice President. Exhibit 10m of the
registrant's report on Form 10-K for the year 1988, filed on
March 29, 1989, is incorporated by reference.
10n+ Employment Agreement, dated March 28, 1989 (effective January
1, 1989), between Hubbell Incorporated and Harry B. Rowell,
Jr., Executive Vice President. Exhibit 10n of the registrant's
report on Form 10-K for the year 1988, filed on March 29,
1989, is incorporated by reference.
10o+ Hubbell Incorporated Policy for Providing Severance Payments
to Key Managers, as amended and restated effective September
9, 1993. Exhibit 10o of the registrant's report on Form 10-Q
for the third quarter, 1993, filed on November 10, 1993, is
incorporated by reference.
10p+ Hubbell Incorporated Senior Executive Incentive Compensation
Plan, effective January 1, 1996. Exhibit C of the registrant's
proxy statement, dated March 22, 1996 and filed on March 27,
1996, 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.
21 Listing of significant subsidiaries.
27 Exhibit 27 Financial Data Schedule (Electronic filings only)
3. Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
December 31, 1997.
- -------------------
+ This exhibit constitutes a management contract, compensatory plan, or
arrangement
1
EXHIBIT 10A
HUBBELL INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Restated and Amended, Effective January 1, 1998
2
HUBBELL INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Table of Contents
Article Title Page(s)
------- ----- -------
I Purpose 1
II Definitions 1 - 3
III Effective Date 3
IV Eligibility 3
V Retirement Benefits 4 - 6
VI Payment of Retirement Benefits 6 - 8
VII Disability Benefit 8
VIII Death Benefit 8 - 10
IX Funding 10
X Plan Administration 11
XI Amendment and Termination 11
XII Miscellaneous Provisions 11 - 14
XIII Change of Control 14 - 18
3
ARTICLE I
PURPOSE
1.1 The purpose of this Supplemental Executive Retirement Plan (the
"Plan") is to provide monthly supplemental retirement income for a
select group of officers and other key employees of Hubbell
Incorporated (the "Employer"). It is intended to provide a
retirement benefit which supplements the retirement benefit payable
under the Hubbell Incorporated Retirement Plan for Salaried
Employees and other such pension plans of Hubbell Incorporated and
its subsidiaries as deemed appropriate by the Board of Directors in
its sole and absolute discretion.
ARTICLE II
DEFINITIONS
2.1 "Accrued Deferred Vested Retirement Benefit" means the benefit
described in Article 5.4.
2.2 "Accrued Vested Participant" means a Participant who has been
credited with ten (10) or more years of Service.
2.3 "Average Earnings" means the annual average of the Participant's
Earnings for any three (3) calendar years in his last ten (10)
years of Service which produce the highest such average.
2.4 "Board of Directors" means the Board of Directors of Hubbell
Incorporated.
2.5 "Compensation Committee" means the Compensation Committee of the
Board of Directors.
2.6 "Early Retirement" means retirement under this Plan at a
Participant's election, between the ages of 55 and 65.
- 1 -
4
2.7 "Earnings" means, with respect to a particular calendar year, the
total of (a) cash earnings paid to a Participant in the form of
base salary, (b) awards in respect of the prior calendar year
(regardless of when paid) under the incentive compensation plan
(annual bonus) by his Employer, and (c) any amount by which an
Employee's base salary and annual bonus awards are reduced under
any 401(k) plan or any flexible benefit plans under the Internal
Revenue Code Sections 125 and 129 maintained by the Employer,
during the respective calendar year.
2.8 "Employee" means a person who is employed by the Employer on a
regular, full-time basis.
2.9 "Employer" means Hubbell Incorporated, and its successor, and any
of its subsidiaries so designated by the Board of Directors.
2.10 "Key Executive" means (a) (i) any Officer elected prior to May 1,
1993 and (ii) any other Employee who was so designated by the
Compensation Committee prior to May 1, 1993, and (b) any Officer or
other Employee who is so designated by the Compensation Committee
on or after May 1, 1993 and as to who the Compensation Committee
has not withdrawn such designation.
2.11 "Normal Retirement" means retirement by a Participant under this
Plan on the first day of the month coinciding with or next
following his 65th birthday.
2.12 "Officer" means the individual elected by the Board of Directors as
provided in Article IV of the By-Laws of Hubbell Incorporated to
any of the following offices: Chairman of the Board, President,
Executive Vice President, Senior Vice President, Group Vice
President, Vice President, Treasurer, Controller, or Secretary of
Hubbell Incorporated.
2.13 "Participant" means a Key Executive.
- 2 -
5
2.14 "Plan" means the Hubbell Incorporated Supplemental Executive
Retirement Plan.
2.15 "Postponed Retirement" means the Participant's actual retirement
date after Normal Retirement.
2.16 "Service" means a Participant's entire period of employment with
the Employer as an Officer and such other period of employment with
the Employer as a Key Executive as designated and determined by the
Compensation Committee.
2.17 "Spouse" shall mean the person to whom the Participant was lawfully
married for at least one (1) year on the Participant's actual date
of retirement (early, normal, postponed or disability, as the case
may be) or termination from the Employer.
2.18 "Total Disability" means the Compensation Committee's determination
that a Participant is totally and permanently disabled and can no
longer perform his duties as a Key Executive of the Employer.
ARTICLE III
EFFECTIVE DATE
3.1 This Plan shall be effective as of April 1, 1980.
ARTICLE IV
ELIGIBILITY
4.1 Key Executives shall continue to be Participants until their
Service with the Employer is terminated or they are no longer
entitled to retirement or deferred vested benefits under this Plan,
whichever is later. A Participant who has been credited with ten
(10) or more years of Service becomes an Accrued Vested Participant
eligible for an Accrued Deferred Vested Retirement Benefit. If a
Participant is no longer a Key Executive, but remains an Employee,
his accrued Service as a Participant shall not be forfeited.
- 3 -
6
ARTICLE V
RETIREMENT BENEFITS
5.1 Normal Retirement Benefit. A Participant's Normal Retirement
Benefit under this Plan, computed as a straight life annuity, shall
equal (a) minus (b), where:
(a) Equals - Six (6%) percent multiplied times the number of
full years of a Key Executive's Service.
In no event shall the percentage of benefit credit calculated under
this Article 5.1(a) exceed sixty (60%) percent. The appropriate
percentage of benefit credit calculated under this Article 5.1(a)
shall then be multiplied by the Participant's Average Earnings.
(b) Equals - The benefits, if any, available from the
following sources:
(i) any defined benefit pension plan or defined
contribution plan of the Employer which is
qualified under Section 401 of the Internal
Revenue Code (excluding, however: (a) any
ancillary benefits such as Medical or Transitional
Supplements in the defined benefit pension plans,
and (b) any 401(k) plan maintained by the
Employer);
(ii) any top-hat excess pension plan of the Employer;
and
(iii) any retirement benefits so designated and defined
by the Compensation Committee through a special
arrangement with the Employer.
For purposes of determining the benefits available from any
qualified defined benefit pension plan or qualified defined
contribution plan of the Employer, it shall be assumed that the
Participant commenced receiving his benefits under such plan on the
fifteenth day of the month commencing after his actual retirement
date.
- 4 -
7
5.2 Early Retirement Benefit. A Participant who elects to retire on or
after age 55 shall be entitled to an early retirement benefit
commencing on the date described in Article 6.1 hereof. The annual
amount of the Early Retirement Benefit payable to a Participant who
elects Early Retirement shall be an amount computed in accordance
with Article 5.1 hereof except that the Early Retirement Benefit
shall be based upon the Participant's years of Service up to his
actual Early Retirement Date (the first day of any month elected by
the Participant between the date the Participant attains age 55 and
the date he attains age 65), with the amount reduced by
three-tenths of one percent (3/10%) for each complete month by
which the commencement date of his Early Retirement Benefit
precedes his attainment of age 62 and by an additional two-tenths
of one percent (2/10%) for each complete month by which the
commencement date of his Early Retirement Benefit precedes his 60th
birthday, provided, however, the Compensation Committee may, in its
sole discretion, waive, in whole or in part, said early retirement
reduction factors and, for purposes of determining the benefits
available from any qualified defined benefit pension plan or
qualified defined contribution plan of the Employer, it shall be
assumed that the Participant commenced receiving his benefits under
such plan on the earliest date the Participant could have retired
under such plan.
5.3 Postponed Retirement. A Participant's Postponed Retirement Benefit
under this Plan shall be the same amount that would have been
payable had the Participant retired on his Normal Retirement Date.
For purposes of determining the benefits available from any
qualified defined benefit pension plan or qualified defined
contribution plan of the Employer, it shall be assumed that the
Participant commenced receiving his benefits under such plan on the
fifteenth day of the month commencing after his actual retirement
date.
5.4 Accrued Deferred Vested Retirement Benefit. Subject to Article 12.4
and 12.5 hereof, an Accrued Vested Participant whose employment
with the Employer
- 5 -
8
terminates on or after September 12, 1984, other than by normal,
early, postponed, or disability retirement or death shall, if he
has then completed ten (10) or more full years of Service, be
entitled to a non-forfeitable Accrued Deferred Vested Retirement
Benefit commencing on the date described in Article 6.1 hereof. The
annual amount of the Accrued Deferred Vested Retirement Benefit
payable to an Accrued Vested Participant shall be computed in
accordance with Article 5.1 hereof except that the Accrued Deferred
Vested Retirement Benefit shall be based upon the Accrued Vested
Participant's Service as of the date of his termination of
employment, with the amount reduced by three-tenths of one percent
(3/10%) for each complete month by which the commencement date of
his Accrued Deferred Vested Retirement Benefit precedes his Normal
Retirement Date and by an additional two-tenths of one percent
(2/10%) for each complete month by which the commencement date of
his Accrued Deferred Vested Retirement Benefit precedes his 60th
birthday, provided, however, the Compensation Committee may, in its
sole discretion, waive, in whole or in part, said reduction factors
and, for purposes of determining the benefits available from any
qualified defined benefit pension plan or qualified defined
contribution plan of the Employer, it shall be assumed that the
Participant commenced receiving his benefits under such plan on the
first date that the Participant could have received deferred vested
retirement benefits under such plan.
ARTICLE VI
PAYMENT OF RETIREMENT BENEFITS
6.1 Payment of Benefits.
(a) Except as set forth in Section 6.1(b) below, all
retirement benefits hereunder shall be payable in monthly
installments (on the fifteenth day of the month) equal to
one-twelfth (1/12th) of the annual amounts determined
under this
- 6 -
9
Plan. A Participant's retirement benefit, if any,
hereunder shall be payable for the life of the
Participant, commencing (a) for normal, postponed or
disability retirements, on the fifteenth day of the month
commencing after his actual retirement date, (b) for Early
Retirement, on the fifteenth day of the month commencing
after the Participant's actual Early Retirement date and
(c) for an Accrued Vested Participant, on the fifteenth
day of the month commencing after the first date that the
Accrued Vested Participant may receive deferred vested
retirement benefits under the applicable defined benefit
pension plan (qualified under Section 401(a) of the
Internal Revenue Code of 1986) maintained by the Employer,
or any successor defined benefit pension plan. The
Participant's last payment of retirement benefits
hereunder shall be made on the fifteenth day of the month
in which he dies unless the Participant has an eligible
surviving Spouse at his date of death, in which case
survivor benefit payments shall be made to said Spouse in
accordance with Article VIII hereof.
(b) In the case of a Participant who has attained age 61, he
may elect, by giving written notice to the Compensation
Committee at least one year prior to his Early Retirement
at or after age 62, Normal Retirement or Postponed
Retirement, to receive any applicable retirement and death
benefit otherwise payable under Section 5 and Section 8.2
hereof in the form of a lump sum. Such lump sum shall be
payable as soon as practicable after the Participant's
retirement date, and calculated as follows:
(i) Interest rate: Interest payable on 10-year U.S.
Treasury notes as of the October 1 preceding the
Participant's retirement date.
(ii) Mortality Table: The Mortality Table being
utilized by the Hubbell Incorporated Retirement
Plan for Salaried Employees as of the October 1
preceding the Participant's retirement date.
- 7 -
10
6.2 Payments Rounded to Next Higher Full Dollar. Each monthly payment
which is computed in accordance with this Plan will, if not in
whole dollars, be increased to the next whole dollar. Such rounding
shall be made after applying any applicable reduction factors.
ARTICLE VII
DISABILITY BENEFIT
7.1 Disability Benefit. If a Participant is deemed by the Compensation
Committee to have incurred a Total Disability, he shall receive a
disability retirement benefit hereunder commencing on the fifteenth
day of the month commencing after the date he is deemed by the
Compensation Committee to be so disabled. The annual amount of the
Participant's Disability Retirement Benefit hereunder shall be
computed as in Article 5.1 hereof, but assuming that the
Participant has been employed with the Employer until his Normal
Retirement Date at the last rate of his Earnings in effect at the
time he was deemed by the Compensation Committee to be permanently
and totally disabled.
7.2 Medical Examination. Any Participant retired for Total Disability
may be required by the Compensation Committee to submit to a
medical examination at any time prior to his 65th birthday, but not
more than once each year, to determine whether the Participant is
eligible for continuance of the Disability Retirement Benefit
provided hereunder.
ARTICLE VIII
DEATH BENEFIT
8.1 Pre-Retirement Death Benefit.
(a) If an Accrued Vested Participant or a former Accrued
Vested Participant whose benefit has not yet commenced
dies, and he is survived by a spouse
- 8 -
11
to whom he was married throughout the one-year period
ending on the date of his death, such spouse shall be
entitled to receive a spouse's benefit described herein,
payable in the amount and manner prescribed in subsections
(b) and (c) of this Section 8.1.
(b) The spouse's benefit is an annuity for the life of the
spouse in an amount which is equal to the benefit the
spouse would have received under a joint and survivor
annuity that provided the spouse on the date of death of
the Participant an annual pension equal to 50 percent of
the Participant's annual pension if:
(i) the Participant had retired on the day before his
death, in the case of a Participant who dies after
he is eligible for retirement, or
(ii) the Participant had separated from service with
the Employer on the date of his death, survived to
his earliest retirement date, retired on such
date, and died on the day after such date, in the
case of a Participant who dies before he is
eligible for retirement.
(c) Payments of spouse's benefit shall commence as of the
later of (i) the first day of the month, following the
Participant's death; or (ii) the month following the date
the Participant would have attained the earliest age on
which he could have retired, provided the spouse survives
to that date.
(d) For purposes of computing the spouse's benefit, actuarial
factors shall be used as are then applicable under the
Hubbell Incorporated Retirement Plan for Salaried
Employees.
8.2 Post-Retirement Death Benefit. Unless such individual has elected
to receive his benefit in a lump sum pursuant to Section 6.1(b), if
a Participant or Accrued Vested Participant dies while receiving
retirement benefits under this Plan, a death benefit equal to fifty
(50%) percent of the retirement benefit which the Participant or
- 9 -
12
Accrued Vested Participant was receiving under this Plan
immediately prior to his death shall be paid to his eligible
surviving Spouse, if any. If, as of the date of the Participant's
or Accrued Vested Participant's death, his eligible surviving
Spouse, if any, is ten (or more) years younger than the Participant
or Accrued Vested Participant, then the death benefit payable to
said eligible surviving Spouse shall be actuarially reduced
pursuant to the actuarial factors then applicable under the Hubbell
Incorporated Retirement Plan for Salaried Employees.
Notwithstanding anything contained herein to the contrary, in no
event shall an eligible surviving Spouse receive in any year under
this Plan more than the excess (if any) of thirty-three and
one-third percent (33-1/3%) of the Participant's or Accrued Vested
Participant's Average Earnings over the aggregate value (as
determined by the Compensation Committee) of benefits receivable in
such year under the Hubbell Incorporated Retirement Plan for
Salaried Employees and any defined benefit pension plan or defined
contribution plan of the Employer which is qualified under Section
401(a) of the Internal Revenue Code (excluding, however: (a) any
ancillary benefits such as Medical or Transitional Supplements in
the defined benefit pension plans, and (b) any 401(k) plan
maintained by the Employer). Payments of said death benefit to the
surviving Spouse shall commence to be paid on the fifteenth day of
the month coinciding with or next following the Participant's or
Accrued Vested Participant's death and shall continue until the
Spouse dies.
ARTICLE IX
FUNDING
9.1 The Employer may enter into a trust agreement creating an
irrevocable grantor trust for the holding of cash and/or annuity
contracts for pension benefits accrued by the Participants under
the Plan. Any assets of such trust shall be subject to the claims
of creditors of the Employer to the extent set forth in the trust.
- 10 -
13
ARTICLE X
PLAN ADMINISTRATION
10.1 The general administration of this Plan and the responsibility for
carrying out the provisions hereof shall be vested in the
Compensation Committee. The Compensation Committee may adopt,
subject to the approval of the Board of Directors, such rules and
regulations as it may deem necessary for the proper administration
of this Plan, and its decision in all matters shall be final,
conclusive, and binding.
ARTICLE XI
AMENDMENT AND TERMINATION
11.1 The Board of Directors of the Employer reserves in its sole and
exclusive discretion the right at any time and from time to time to
amend this Plan in any respect or terminate this Plan without
restriction and without the consent of any Participant, Accrued
Vested Participant, or Spouse, provided, however, that no amendment
or termination of this Plan shall impair the right of any
Participant, Accrued Vested Participant, or Spouse to receive
benefits earned and accrued hereunder prior to such amendment or
termination. The Board of Directors shall not terminate this Plan
solely to accelerate benefits earned and accrued hereunder. Any
amounts not currently payable to a Participant, Accrued Vested
Participant or Spouse shall revert to the Employer in the event of
termination of the Plan.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 No Guarantee of Employment. Nothing contained herein shall be
deemed to give any individual the right to be retained in the
service of the Employer or to interfere
- 11 -
14
with the rights of the Employer to discharge any individual at any
time, with or without cause.
12.2 Non-Alienation of Benefits. No retirement benefit payable hereunder
may be assigned, pledged, mortgaged or hypothecated and, to the
extent permitted by law, no such retirement benefit shall be
subject to legal process or attachment for the payment of any
claims against any person entitled to receive the same.
Notwithstanding any provision herein to the contrary, the Employer
may, as the Compensation Committee in its sole and absolute
discretion shall determine, offset any amount to be paid to a
Participant, Accrued Vested Participant, or Spouse hereunder in
order to recoup amounts that have been misappropriated by such
Participant or Accrued Vested Participant or in order to reimburse
amounts that have been advanced to such Participant or Accrued
Vested Participant for expense accounts or similar circumstances
and that remain outstanding upon termination of employment.
12.3 Payment to Incompetents. If a Participant or Accrued Vested
Participant entitled to receive any retirement benefit payments
hereunder is deemed by the Compensation Committee or is adjudged by
a court of competent jurisdiction to be legally incapable of giving
valid receipt and discharge for such retirement benefit, such
payments shall be paid to such person or persons as the
Compensation Committee shall designate or to the duly appointed
guardian. Such payments shall, to the extent made, be deemed a
complete discharge for such payments under this Plan.
12.4 Loss of Benefits. At the sole discretion of the Compensation
Committee, and after written notice to the Participant, Accrued
Vested Participant, or his Spouse as beneficiary, rights to receive
any retirement benefit under this Plan may be forfeited, suspended,
reduced or terminated in cases of gross misconduct by the
Participant or Accrued Vested Participant which is reasonably
deemed to be prejudicial to the
- 12 -
15
interests of the Employer or a subsidiary of the Employer,
including but not limited to the utilization or disclosure of
confidential information for gain or otherwise.
12.5 Noncompetition. A Participant and Accrued Vested Participant shall
forfeit for himself and his Spouse any and all retirement benefits
pursuant to this Plan if said Participant or Accrued Vested
Participant violates the notice provision of the next paragraph
hereof or anywhere in the United States or outside of the United
States, directly or indirectly, owns, manages, operates, joins or
controls, or participates in the ownership, management, operation
or control of, or becomes a director or an employee of, or a
consultant to, any person, firm, or corporation which competes with
the Employer; provided, however, that the provisions of this
Article 12.5 shall not apply to investments by the Participant or
Accrued Vested Participant in shares of stock traded on a national
securities exchange or on the national over-the-counter market
which shall have an aggregate market value, at the time of
acquisition, of less than two (2%) percent of the outstanding
shares of such stock.
A Participant and Accrued Vested Participant shall be obligated to
give the Employer at least sixty (60) days' prior written notice,
registered or certified mail, postage prepaid, addressed to the
Secretary, Hubbell Incorporated, 584 Derby Milford Road, Orange,
Connecticut, 06477, of his intention, directly or indirectly, to
own, manage, operate, join or control, or participate in the
ownership, management, operation or control of, or become a
director or an employee of, or a consultant to, any person, firm,
or corporation, following which, within a period of sixty (60) days
from its receipt of such notice, the Employer will mail to the
Participant or Accrued Vested Participant by registered or
certified mail, postage prepaid, a statement of its opinion as to
whether said intention of the Participant or Accrued Vested
Participant violates this Article 12.5.
- 13 -
16
12.6 Withholding. Payments made by the Employer under this Plan to any
Participant, Accrued Vested Participant, or Spouse shall be subject
to withholding as shall, at the time for such payment, be required
under any income tax or other laws, whether of the United States or
any other jurisdiction.
12.7 Expenses. All expenses and costs in connection with the operation
of this Plan shall be borne by the Employer.
12.8 Governing Law. The provisions of this Plan will be construed
according to the laws of the State of Connecticut, excluding the
provisions of any such laws that would require the application of
the laws of another jurisdiction.
12.9 Gender and Number. The masculine pronoun wherever used herein shall
include the feminine gender and the feminine the masculine and the
singular number as used herein shall include the plural and the
plural the singular unless the context clearly indicates a
different meaning.
12.10 Titles and Heading. The titles to articles and headings of sections
of this Plan are for convenience of reference only and in case of
any conflict, the text of the Plan, rather than such titles and
headings, shall control.
ARTICLE XIII
CHANGE OF CONTROL
13.1 The provisions of Section 13.3 shall become effective immediately
upon the occurrence of a Change of Control (as defined in Section
13.2(a)).
13.2 (a) "Change of Control" - shall mean any one of the following:
(i) Continuing Directors no longer constitute at least
2/3 of the Directors;
(ii) any person or group of persons (as defined in Rule
13d-5 under the Securities Exchange Act of 1934),
together with its affiliates, becomes
- 14 -
17
the beneficial owner, directly or indirectly, of
twenty (20%) percent or more of the voting power
of the then outstanding securities of the Employer
entitled to vote for the election of the
Employer's directors; provided that this Article
XIII shall not apply with respect to any holding
of securities by (A) the trust under a Trust
Indenture dated September 2, 1957 made by Louie E.
Roche, (B) the trust under a Trust Indenture dated
August 23, 1957 made by Harvey Hubbell, and (C)
any employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended) maintained by
the Employer or any affiliate of the Employer;
(iii) the approval by the Employer's stockholders of the
merger or consolidation of the Employer with any
other corporation, the sale of substantially all
of the assets of the Employer or the liquidation
or dissolution of the Employer, unless, in the
case of a merger or consolidation, the incumbent
Directors in office immediately prior to such
merger or consolidation will constitute at least
2/3 of the Directors of the surviving corporation
of such merger or consolidation and any parent (as
such term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934) of such
corporation; or
(iv) at least 2/3 of the incumbent Directors in office
immediately prior to any other action proposed to
be taken by the Employer's stockholders determine
that such proposed action, if taken, would
constitute a change of control of the Employer and
such action is taken.
(b) "Continuing Director" shall mean any individual who is a
member of the Employer's Board of Directors on December 9,
1986 or was designated (before such person's initial
election as a Director) as a Continuing Director by 2/3 of
the then Continuing Directors.
- 15 -
18
(c) "Director" shall mean any individual who is a member of
the Employer's Board of Directors on the date the action
in question was taken.
13.3 (a) Section 2.10 is deleted and the following is inserted in
lieu thereof:
"'Key Executive' means (a) (i) any Officer elected
prior to May 1, 1993 and (ii) any other Employee
who was so designated by the Compensation
Committee prior to May 1, 1993, and (b) any
Officer or other Employee who is so designated by
the Compensation Committee on or after May 1,
1993."
(b) Section 2.18 is deleted and the following is inserted in
lieu thereof:
"'Totally and Permanently Disabled' shall mean,
with reference to a Participant hereunder, that as
a result of bodily or mental injury or disease,
whether occupational or non-occupational in
origin, as determined by competent medical
authority selected by the Participant or by such
Participant's representative, he is wholly and
permanently prevented from engaging for
remuneration or profit in any occupation or
employment for which he is reasonably suited by
education, training and experience."
(c) The remainder of Section 5.2 is deleted after "attains age
65)" on the eighth line of page 5.
(d) The remainder of Section 5.4 is deleted after "date of his
termination of employment" on the ninth line on page 6.
(e) The first sentence of Section 6.1(b) is deleted and the
following is inserted in lieu thereof:
"In the case of a Participant who has attained age
62, any applicable retirement and death benefit
otherwise payable under Section 5 and
- 16 -
19
Section 8.2 shall be paid in a lump sum; provided
that a Participant may elect, by giving written
notice to the Compensation Committee at least one
year prior to his Early Retirement, Normal
Retirement or Postponed Retirement, to receive any
such benefit without regard to the provisions of
this Section 6.1(b)."
(f) In the first sentence of Section 7.1, the phrase "If a
Participant is deemed by the Compensation Committee to
have incurred a Total Disability" is deleted and in lieu
thereof is inserted the phrase "If a Participant becomes
Totally and Permanently Disabled". Section 7.2 is deleted.
(g) Section 10.1 is deleted and the following is inserted in
lieu thereof:
"The Plan shall be administered by the
Compensation Committee which shall have full
authority to interpret the Plan, to establish
rules and regulations relating to the Plan, to
determine the criteria for eligibility to
participate in the Plan, to select Participants in
the Plan, and to make all other determinations and
take all other actions necessary or appropriate
for the proper administration of the Plan. No
member of the Compensation Committee shall be
eligible to participate in the Plan."
(h) The remainder of Section 12.2 is deleted beginning with
"Notwithstanding any provision herein" on the fifth line
of Section 12.2 on page 12.
(i) In Section 12.3, all references to "Compensation
Committee" are deleted and in lieu thereof is inserted the
term "Trustee".
(j) Section 12.4 is deleted.
(k) Section 12.5 is deleted.
(l) New Section 12.11 is inserted as follows:
- 17 -
20
"Notwithstanding any other provisions of the Plan to the
contrary:
(i) the accrued benefit hereunder of any Participant
as of the date of a Change of Control may not be
reduced;
(ii) any Service accrued by a Participant as of the
date of a Change of Control cannot be reduced;
(iii) no amendment or action of the Compensation
Committee which affects any Participant is valid
and enforceable without the prior written consent
of such Participant; and
(iv) no termination of the Plan shall have the effect
of reducing any benefits accrued under the Plan
prior to such termination."
Adopted by the Board of Directors on March 11, 1980 and amended on
September 11, 1984, December 9, 1986, December 19, 1990, December 18, 1991,
December 16, 1992, May 1, 1993, December 11, 1996, and December 10, 1997.
- 18 -
1
Exhibit 21
HUBBELL INCORPORATED
AND SUBSIDIARIES
LISTING OF SIGNIFICANT SUBSIDIARIES
State or Other Percentage
Jurisdiction of Owned By
Incorporation Registrant
------------- ----------
Anderson Electrical Products, Inc. Delaware 100%
The Kerite Company Connecticut 100%
Hubbell, Ltd. England 100%
Hubbell Canada Inc. Canada 100%
The Ohio Brass Company Delaware 100%
Hubbell Incorporated (Delaware) Delaware 100%
Hubbell Industrial Controls, Inc. Delaware 100%
Gleason Reel Corp. Delaware 100%
Harvey Hubbell Caribe, Inc. Delaware 100%
Hubbell Lighting, Inc. Connecticut 100%
Pulse Communications, Inc. Virginia 100%
Hipotronics, Inc. Delaware 100%
A. B. Chance Industries, Inc. Delaware 100%
Fargo Mfg. Company, Inc. New York 100%
5
1,000
12-MOS
DEC-31-1997
DEC-31-1997
75,217
0
196,740
5,713
275,886
596,173
518,081
266,148
1,284,784
256,301
99,519
0
0
670
829,586
1,284,784
1,378,831
1,378,831
948,387
948,387
0
967
7,323
180,168
49,850
130,318
0
0
0
130,318
1.94
1.89
