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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number I-2958
HUBBELL INCORPORATED
(Exact name of registrant as specified in its charter)
STATE OF CONNECTICUT 06-0397030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
584 DERBY MILFORD ROAD, ORANGE, CT 06477
(Address of principal executive offices) (Zip Code)
(203) 799-4100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
--- ---
The number of shares of registrant's classes of common stock outstanding as
of May 4, 1998 were:
Class A ($.01 par value) 11,050,000
Class B ($.01 par value) 55,270,000
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HUBBELL INCORPORATED
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
March 31, 1998 December 31, 1997
-------------- -----------------
ASSETS
Current Assets:
Cash and temporary cash investments $ 51,271 $ 75,217
Accounts receivable (net) 200,308 191,027
Inventories 282,672 275,886
Prepaid taxes 28,854 30,179
Other 15,593 23,864
---------- ----------
TOTAL CURRENT ASSETS 578,698 596,173
Property, Plant and Equipment (net) 262,201 251,933
Other Assets:
Investments 209,338 205,578
Purchase price in excess of net assets of companies acquired (net) 188,340 190,514
Property held as investment 11,153 11,249
Other 28,695 29,337
---------- ----------
$1,278,425 $1,284,784
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Commercial paper and notes $ -- $ 250
Accounts payable 60,324 60,909
Accrued salaries, wages and employee benefits 32,027 34,069
Accrued income taxes 48,578 38,338
Dividends payable 19,427 19,483
Accrued consolidation and streamlining charge 14,000 14,000
Other accrued liabilities 79,395 89,252
---------- ----------
TOTAL CURRENT LIABILITIES 253,751 256,301
Long-Term Debt 99,535 99,519
Other Non-Current Liabilities 95,468 95,810
Deferred Income Taxes 2,923 2,898
Shareholders' Equity 826,748 830,256
---------- ----------
$1,278,425 $1,284,784
========== ==========
See notes to consolidated financial statements
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HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31, 1998
----------------------------
1998 1997
-------- --------
NET SALES $339,741 $324,697
Cost of goods sold 235,291 224,621
-------- --------
GROSS PROFIT 104,450 100,076
Selling & administrative expenses 51,322 50,095
-------- --------
OPERATING INCOME 53,128 49,981
-------- --------
OTHER INCOME (EXPENSE):
Investment income 4,103 4,528
Interest expense (1,713) (1,798)
Other income (expense), net (501) (855)
-------- --------
TOTAL OTHER INCOME, NET 1,889 1,875
-------- --------
INCOME BEFORE INCOME TAXES 55,017 51,856
Provision for income taxes 15,130 15,557
-------- --------
NET INCOME $39,887 $36,299
======== ========
EARNINGS PER SHARE - BASIC $0.60 $0.54
======== ========
EARNINGS PER SHARE - DILUTED $0.58 $0.53
======== ========
See notes to consolidated financial statements.
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HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31, 1998
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES 1998 1997
- ----------------------------------- ---- ----
Net income $39,887 $36,299
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 12,689 11,657
Deferred income taxes 1,350 1,087
Changes in assets and liabilities, net of the effect of business acquisitions:
(Increase)/Decrease in accounts receivable (9,281) (9,759)
(Increase)/Decrease in inventories (6,786) (1,300)
(Increase)/Decrease in other current assets 15,619 2,859
Increase/(Decrease) in current operating liabilities (2,646) (3,881)
Increase/(Decrease) in consolidation and streamlining accrual (587) (2,078)
(Increase)/Decrease in other, net 1,139 284
-------- --------
Net cash provided by operating activities 51,384 35,168
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of businesses (7,347) --
Additions to property, plant and equipment (21,793) (9,797)
Purchases of investments (8,861) (4,015)
Repayments and sales of investments 5,101 3,216
Other, net 1,107 (842)
-------- --------
Net cash used in investing activities (31,793) (11,438)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Payment of dividends (19,483) (17,177)
Commercial paper and notes - borrowings (repayments) (250) (18,385)
Exercise of stock options 684 685
Acquisition of treasury shares (24,488) (4,105)
-------- --------
Net cash provided (used) in financing activities (43,537) (38,982)
-------- --------
Increase (Decrease) in cash and temporary cash investments (23,946) (15,252)
CASH AND TEMPORARY CASH INVESTMENTS
- -----------------------------------
Beginning of period 75,217 134,397
-------- --------
End of period $51,271 $119,145
======== ========
See notes to consolidated financial statements
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. Inventories are classified as follows: (in thousands)
MARCH 31, DECEMBER 31,
1998 1997
---- ----
Raw Material $ 96,762 $ 96,455
Work-in-Process 81,671 74,284
Finished Goods 148,358 148,939
-------- --------
326,791 319,678
Excess of current
Production costs over
LIFO cost basis 44,119 43,792
-------- --------
$282,672 $275,886
======== ========
2. Shareholders' Equity comprises: (in thousands)
MARCH 31, DECEMBER 31,
1998 1997
---- ----
Common Stock, $.01 par value:
Class A-authorized 50,000,000 shares,
outstanding 11,113,678 and 11,146,062 shares $ 111 $ 111
Class B-authorized 150,000,000 shares,
outstanding 55,567,983 and 55,880,945 shares 556 559
Additional paid-in-capital 448,523 472,729
Retained earnings 387,347 366,887
Unrealized holding gains (losses) on securities 85 86
Cumulative translation adjustments (9,874) (10,116)
-------- --------
$826,748 $830,256
======== ========
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HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
3. During the first quarter of 1998, the Company acquired two product lines and
associated assets for a cash purchase price of $7,347,000. On February 14, 1997,
Hubbell acquired Fargo Manufacturing Company, Inc. ("Fargo") based in
Poughkeepsie, New York. Fargo manufactures distribution and transmission line
products primarily for the electric utility market. Each share of Fargo common
stock was converted into a right to receive shares or fractions thereof of
Hubbell's Class B Common Stock and accordingly 1,170,572 shares of Class B
Common Stock were issued. The acquisition of Fargo has been recorded under the
purchase method of accounting with a cost of $43,100,000 net of cash acquired.
Additionally, three product lines and associated assets were acquired during
1997 for $21,130,000 in cash.
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 had no material effect on the Company's financial position and reported
earnings.
4. The following table sets forth the computation of earnings per share for the
three months ended March 31, (in thousands except per share data):
Three Months Ended
March 31
Net Income $39,887 $36,299
Weighted average number of
common shares outstanding
during the period 66,851 66,824
Common equivalent shares 2,050 1,683
------- -------
Average number of shares
outstanding 68,901 68,507
Earnings per share:
Basic $ 0.60 $ 0.54
Diluted $ 0.58 $ 0.53
5. In the opinion of management, the information furnished in Part I--
Financial Information on Form 10-Q reflects all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
statements for the periods indicated.
6. The results of operations for the three months ended March 31, 1998 and 1997
are not necessarily indicative of the results to be expected for the full year.
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HUBBELL INCORPORATED
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1998
FINANCIAL CONDITION
-------------------
At March 31, 1998, the Company's financial position remained strong with
working capital of $324.9 million and a current ratio of 2.3 to 1. Total
borrowings at March 31, 1998, were $99.5 million, 12.0% of shareholders equity.
The net decline in cash and temporary cash investments of $23.9 million
for the three months ended March 31, 1998, reflects the following: expenditures
for plant and equipment as part of the consolidation and streamlining
initiative, the acquisition of treasury shares under the Company's $300 million
share repurchase program, and quarterly dividend payment offset by cash
provided from operating activities.
Net cash provided by operating activities reflects higher net income and a
reduction in other current assets. Accounts receivable increased in line with
higher sales. The increase in inventories is to provide adequate stock to
maintain customer service levels during relocation of manufacturing operations.
The Company believes that currently available cash, borrowing facilities,
and its ability to increase its credit lines if needed, combined with
internally generated funds should be more than sufficient to fund capital
expenditures as well as any increase in working capital that would be required
to accommodate a higher level of business activity.
RESULTS OF OPERATIONS
---------------------
Consolidated net sales increased by 5% on improved shipments of wiring
devices, lighting and electrical products, combined with the acquisition of
Fargo in 1997 and five product line additions (three in 1997 and two in 1998).
Operating income increased 6% on higher sales and profitability improvement with
net operating margins rising to 15.6% from 15.4% in 1997.
Low Voltage segment sales increased 6% on higher shipments of generally all
products within the segment along with the inclusion of acquired product lines
in 1998 and 1997. Operating income increased in line with the higher sales
volume.
High Voltage segment sales increased by 2% as the acquisition of Fargo on
February 14, 1997 was offset by lower sales in the Asian markets. Operating
income increased more than 10% on improved profitability and higher sales.
The Other industry segment sales increased 5% as all categories reported
higher sales with particularly strong increases for wire management components.
Operating income increased 5% on the higher sales volumes.
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HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1998
(CONTINUED)
Sales through the Company's International units increased 7% on continued
growth of the Canadian and Mexican markets. Operating income from International
units increased more than 10% on the higher sales volume and continued
profitability improvement of the Canadian and European operations.
The effective income tax rate for 1998 was 27.5% versus 30% in 1997. The
decrease in the effective tax rate reflects a higher level of tax benefit from
Puerto Rico operations . Net income increased 10% and diluted earnings per share
increased 9%, respectively.
The Company's consolidation and streamlining program is proceeding
according to management's plan. At March 31, 1998, the accrual balance was
$31,122,000. Through March 31, 1998, cumulative costs charged to the
consolidation and streamlining accrual were $13,500,000 as follows (in
thousands):
Employee Asset Exist Other
Benefits Disposals Costs Costs Total
-------- --------- ----- ----- -----
1997 Streamlining Charge $15.6 $18.0 $6.1 $4.9 $44.6
Amounts Utilized in 1997 (.6) (7.3) (0.1) (4.9) (12.9)
Amounts Utilized in 1998 (.3) (0.1) (0.2) -- (.6)
------ ------ ----- ----- ------
Remaining Reserve $14.7 $10.6 $5.8 $-- $31.1
====== ====== ===== ===== ======
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HUBBELL INCORPORATED
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
NUMBER DESCRIPTION
27. Financial Data Schedule (Electronic filings only)
- --------------------------------------
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the three months ended
March 31, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUBBELL INCORPORATED
Dated: May 11, 1998 /s/ H.B. Rowell, Jr.
--------------------------
Harry B. Rowell, Jr.
Executive Vice President
(Chief Financial and Accounting Officer)
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5
1,000
3-MOS
DEC-31-1998
MAR-31-1998
51,271
0
208,273
7,965
282,672
578,698
538,338
276,137
1,278,425
253,751
99,535
0
0
667
826,081
1,278,425
339,741
339,741
235,291
235,291
1,889
108
1,713
55,017
15,130
39,887
0
0
0
39,887
0.60
0.58
AMOUNT REPORTED IS EPS BASIC.
