FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2006
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-2958
HUBBELL INCORPORATED
(Exact name of registrant as specified in its charter)
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State of Connecticut
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06-0397030 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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584 Derby Milford Road, Orange, CT
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06477 |
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(Address of principal executive offices)
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(Zip Code) |
(203) 799-4100
(Registrants 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
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer þ Accelerated Filer o Non-Accelerated Filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number
of shares outstanding of the Class A Common Stock and
Class B Common Stock as of July 31, 2006 were 8,413,128 and
52,368,305, respectively.
HUBBELL INCORPORATED
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statement of Income
(unaudited)
(in millions, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30 |
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June 30 |
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2006 |
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2005 |
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2006 |
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2005 |
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Net sales |
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$ |
603.2 |
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$ |
520.5 |
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$ |
1,176.2 |
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$ |
1,008.1 |
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Cost of goods sold |
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437.5 |
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377.4 |
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852.0 |
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728.3 |
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Gross profit |
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165.7 |
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143.1 |
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324.2 |
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279.8 |
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Selling & administrative expenses |
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102.9 |
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88.0 |
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202.0 |
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180.4 |
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Special charges |
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1.4 |
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2.2 |
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2.9 |
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4.1 |
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Operating income |
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61.4 |
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52.9 |
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119.3 |
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95.3 |
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Interest expense, net |
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(2.2 |
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(2.8 |
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(4.1 |
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(5.6 |
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Other income, net |
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0.5 |
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0.8 |
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0.1 |
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Income before income taxes |
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59.7 |
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50.1 |
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116.0 |
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89.8 |
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Provision for income taxes |
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18.1 |
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14.4 |
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34.7 |
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25.3 |
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Net income |
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$ |
41.6 |
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$ |
35.7 |
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$ |
81.3 |
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$ |
64.5 |
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Earnings per share |
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Basic |
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$ |
0.68 |
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$ |
0.58 |
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$ |
1.34 |
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$ |
1.05 |
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Diluted |
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$ |
0.67 |
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$ |
0.58 |
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$ |
1.32 |
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$ |
1.04 |
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Average number of common shares outstanding |
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Basic |
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60.7 |
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61.0 |
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60.6 |
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61.2 |
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Diluted |
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61.6 |
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61.9 |
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61.4 |
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62.3 |
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Cash dividends per common share |
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$ |
0.33 |
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$ |
0.33 |
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$ |
0.66 |
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$ |
0.66 |
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See notes to unaudited condensed consolidated financial statements.
3
HUBBELL INCORPORATED
Condensed Consolidated Balance Sheet
(unaudited)
(in millions)
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June 30, 2006 |
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December 31, 2005 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
53.5 |
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$ |
110.6 |
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Short-term investments |
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21.3 |
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121.3 |
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Accounts receivable, net |
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377.1 |
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310.4 |
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Inventories, net |
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306.1 |
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237.1 |
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Deferred taxes and other |
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45.0 |
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40.7 |
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Total current assets |
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803.0 |
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820.1 |
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Property, Plant, and Equipment, net |
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298.3 |
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267.8 |
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Other Assets |
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Investments |
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58.6 |
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78.8 |
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Goodwill |
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413.8 |
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351.5 |
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Intangible assets and other |
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180.3 |
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148.8 |
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Total Assets |
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$ |
1,754.0 |
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$ |
1,667.0 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities |
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Short-term debt |
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$ |
8.8 |
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$ |
29.6 |
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Accounts payable |
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213.3 |
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159.5 |
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Accrued salaries, wages and employee benefits |
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41.6 |
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41.4 |
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Accrued income taxes |
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21.5 |
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20.0 |
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Dividends payable |
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20.1 |
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20.2 |
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Other accrued liabilities |
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102.4 |
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89.8 |
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Total current liabilities |
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407.7 |
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360.5 |
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Long-Term Debt |
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199.3 |
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199.2 |
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Other Non-Current Liabilities |
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113.4 |
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109.2 |
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Total Liabilities |
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720.4 |
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668.9 |
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Shareholders Equity |
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1,033.6 |
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998.1 |
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Total Liabilities and Shareholders Equity |
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$ |
1,754.0 |
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$ |
1,667.0 |
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See notes to unaudited condensed consolidated financial statements.
4
HUBBELL INCORPORATED
Condensed Consolidated Statement of Cash Flows
(unaudited)
(in millions)
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Six Months Ended |
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June 30 |
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2006 |
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2005 |
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Cash Flows from Operating Activities |
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Net income |
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$ |
81.3 |
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$ |
64.5 |
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Adjustments to reconcile net income to net cash provided by
operating activities: |
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Depreciation and amortization |
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26.9 |
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24.4 |
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Changes in deferred income taxes |
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(2.0 |
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1.4 |
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Stock-based compensation expense |
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5.4 |
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Changes in assets and liabilities: |
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Increase in accounts receivable |
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(54.6 |
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(11.0 |
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Increase in inventories |
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(58.3 |
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(11.7 |
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Increase (decrease) in current liabilities |
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56.3 |
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(15.4 |
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Changes in other assets and liabilities, net |
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2.1 |
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5.3 |
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Tax benefit from exercise of stock options |
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(3.6 |
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Contribution to domestic pension plans |
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(10.0 |
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Other, net |
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0.1 |
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3.2 |
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Net cash provided by operating activities |
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53.6 |
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50.7 |
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Cash Flows from Investing Activities |
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Acquisition of businesses, net of cash acquired |
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(118.0 |
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(5.5 |
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Capital expenditures |
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(38.1 |
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(28.6 |
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Purchases of available-for-sale investments |
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(102.4 |
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(113.1 |
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Proceeds from sale of available-for-sale investments |
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222.6 |
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219.1 |
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Purchases of held-to-maturity investments |
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(0.4 |
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Other, net |
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1.3 |
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2.9 |
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Net cash (used in) provided by investing activities |
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(35.0 |
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74.8 |
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Cash Flows from Financing Activities |
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Payment of short-term debt |
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(20.9 |
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Payment of dividends |
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(40.1 |
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(40.5 |
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Proceeds from exercise of stock options |
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23.5 |
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14.7 |
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Tax benefit from exercise of stock options |
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3.6 |
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Acquisition of common shares |
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(42.5 |
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(45.5 |
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Net cash used in financing activities |
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(76.4 |
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(71.3 |
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Effect of foreign exchange rate changes on cash and cash equivalents |
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0.7 |
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(0.8 |
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(Decrease) increase in cash and cash equivalents |
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(57.1 |
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53.4 |
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Cash and cash equivalents |
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Beginning of period |
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110.6 |
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139.9 |
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End of period |
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$ |
53.5 |
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$ |
193.3 |
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See notes to unaudited condensed consolidated financial statements.
5
HUBBELL INCORPORATED
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Hubbell Incorporated
(Hubbell, the Company, or registrant) have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly, they do not include
all of the information and footnotes required by accounting principles generally accepted in the
United States of America (U.S.) for complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair statement of the results of the periods presented
have been included. Operating results for the six months ended June 30, 2006 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2006.
The balance sheet at December 31, 2005 has been derived from the audited financial statements
at that date but does not include all of the information and footnotes required by accounting
principles generally accepted in the U.S. for complete financial statements.
Book overdraft cash balances have been reflected in Accounts payable beginning in the fourth
quarter of 2005. Classification of prior year amounts in the Condensed Consolidated Statement of
Cash Flows has been revised to conform to the current year presentation. Certain other prior year
amounts in the Condensed Consolidated Statement of Cash Flows have been reclassified to conform
with the current year presentation.
For further information, refer to the consolidated financial statements and footnotes thereto
included in the Hubbell Incorporated Annual Report on Form 10-K for the year ended December 31,
2005.
Recent Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109 (FIN
48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of the tax position taken or expected to be taken in a tax
return and provides guidance related to classification and disclosure matters. FIN 48 is effective
for the Company beginning on January 1, 2007. The Company is currently evaluating the impact that
this pronouncement may have on future financial statements and related notes to financial
statements.
2. Business Acquisition
On June 1, 2006, the Company completed the purchase of 100 percent of the outstanding common
stock of Strongwell Lenoir City, Inc. for $118.5 million in cash. Strongwell Lenoir City, Inc.
(renamed Hubbell Lenoir City, Inc.) has been added to the Power segment and the results of
operations after June 1, 2006 are included in the Condensed Consolidated Statement of Income. The
acquired business has manufacturing facilities in Lenoir City, TN and San Jose, CA. Hubbell Lenoir
City, Inc. designs and manufactures precast polymer concrete products used to house underground
equipment including handholes, enclosures, equipment pads and
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transformer pads under the brand names QUAZITE® and SPLITT-PAD® and also has a line of surface
drain products sold under the brand names POLYCAST®, POLYVENT®, and DURAGUARD®. These products are
sold to the electrical utility and telecommunications industries. Hubbell Lenoir City, Inc.
complements the existing product lines of the Power segment and shares a similar customer base to
the existing businesses within the Power segment.
The acquisition price of Hubbell Lenoir City, Inc. is subject to an audited balance sheet as
of the closing date which has not been finalized. Therefore, the acquisition price is subject to
adjustment. The Company is in the process of finalizing valuations of certain intangible assets and
adjusting the historical cost basis of assets and liabilities to fair value and, as a result, the
allocation of the purchase price is preliminary. The following table summarizes the preliminary
estimated fair values of the assets acquired and liabilities assumed on June 1, 2006, in millions.
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Total purchase price including transaction expenses |
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$ |
118.5 |
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Fair value allocated to assets acquired |
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36.2 |
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Fair value of
liabilities assumed |
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(6.2 |
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Amounts allocated to intangible assets |
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28.9 |
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Amount allocated to goodwill |
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59.6 |
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The fair value allocated to net assets acquired primarily relates to inventory and fixed
assets. Intangible assets identified consist of $21 million of tradenames and $7.9 million of
customer lists. The tradenames are being amortized over a period of 30 years and customer lists are
being amortized over a period of 10 years. The excess of purchase price over the fair values of
assets acquired, liabilities assumed and identifiable intangible assets has been allocated to
goodwill. All of the goodwill is expected to be deductible for tax purposes.
In the first quarter of 2005, the Company completed the purchase of certain assets and
assumption of certain liabilities of a foundation anchoring business hereinafter referred to as
Atlas for $5.5 million in cash, including fees and expenses and net of cash acquired. Atlas is a
designer and manufacturer of helical and push pier anchors which are sold to dealers and installers
throughout the U.S. and complements the product offering of the Companys Power segment.
3. Stock-Based Compensation
On January 1, 2006, the Company adopted SFAS 123 (R), Share-Based Payment (SFAS 123 (R)).
The standard requires expensing the value of all share-based payments, including stock options and
similar awards, based upon the awards fair value measurement on the grant date. SFAS 123 (R)
revises SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), and supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). SFAS 123 (R) is
supplemented by Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No.
107, Share-Based Payment. SAB No. 107 expresses the SEC staffs views regarding the interaction
between SFAS 123(R) and certain rules and regulations including the valuation of share-based
payment arrangements.
As of June 30, 2006, the Company had various stock-based awards outstanding which were issued
to certain executives and other key employees. The Company will recognize the cost of these awards
on a straight line attribution basis over their respective vesting periods, net of estimated
forfeitures. The Company adopted the modified prospective transition method as outlined in SFAS 123
(R) and, therefore, prior year amounts have not been restated.
7
In 2005, the Company issued restricted stock awards, performance based stock awards and stock
appreciation rights (SARs) on the Companys Class B Common Stock pursuant to the Hubbell
Incorporated 2005 Incentive Award Plan. In 2004 and 2003, the Company granted stock option awards
on the Companys Class B Common Stock under its stock option plan to certain employees. In the
second quarter of 2006, the Company issued a total of 2,800 shares of restricted stock. For the
three months ended June 30, 2006, the Company recognized total pretax stock-based compensation
expense of $2.7 million, which was recorded in Selling & administrative expense in the Condensed
Consolidated Statement of Income. For the first six months of 2006, total pretax stock-based
compensation expense of $5.4 million was recorded, of which $5.1 million was recorded in Selling &
administrative expense and $0.3 million was recorded in Cost of goods sold in the Condensed
Consolidated Statement of Income. In addition, $0.1 million has been capitalized in Inventory in
the Condensed Consolidated Balance Sheet as of June 30, 2006. Of the total $5.4 million of pretax
stock-based compensation expense recorded in the first six months of 2006, $3.3 million relates to
the expensing of stock options which would not have been expensed but for the adoption of SFAS 123
(R). Total stock-based compensation expense in the three and six months ended June 30, 2006 reduced
both basic and diluted earnings per share by $.03 and $.05, respectively, compared to the same
periods in the prior year.
For the first six months of 2006, the Company recorded $2.1 million of income tax benefit
related to stock-based compensation expense. The income tax benefit has been recorded as a deferred
tax asset in Deferred taxes and other in the Condensed Consolidated Balance Sheet. As of June 30,
2006, there was $16.3 million, pretax, of total unrecognized compensation cost related to
non-vested share-based compensation arrangements. This cost is expected to be recognized ratably
through November 2008.
The
Company may issue up to 5.9 million shares of Class B
Common Stock in settlement of stock options, restricted stock, performance shares, or SARs in accordance with the
Hubbell Incorporated 2005 Incentive Award Plan. The Companys policy is to issue new shares for
settlement of any stock-based awards.
Each of the compensation arrangements is discussed below.
Restricted Stock
The restricted stock granted to date is not transferable and is subject to forfeiture in the
event of the recipients termination of employment prior to vesting. The restricted stock will
generally vest in one-third increments on each anniversary of the date of grant or completely upon
a change in control, termination of employment by reason of death or disability or in certain other
instances. Recipients are entitled to receive dividends and voting rights on their restricted stock
regardless of vesting. The weighted average fair value of the 2005 restricted stock grants was
$49.07 per share. The fair values are measured using the average between the high and low trading
prices of the Companys Class B Common Stock on the measurement date. At December 31, 2005, the
Company had 130,376 shares of restricted stock outstanding of which 4,408 shares have
been forfeited and none have vested in the first six months of 2006. In the second quarter of 2006,
the Company issued 350 shares to each of the eight non-management members of its Board of Directors
for a total of 2,800 shares. These shares vest over a one year period on the date of the next
Annual Meeting, which is scheduled for May 2007. A total of 128,768 non-vested shares remain
outstanding as of June 30, 2006.
8
Stock Appreciation Rights
The SARs granted to date entitle the recipient to the difference between the fair market value
of the Companys Class B Common Stock on the date of exercise and the grant price as determined
using the average between the high and the low trading prices of the Companys Class B Common Stock
on the measurement date. This amount is payable in shares of the
Companys Class B Common Stock. One-third of the SARs vest and become exercisable each year on the
anniversary of the grant date and expire ten years after the grant date. At December 31, 2005 the
Company had 504,239 SARs outstanding at a grant price of $49.76, of which none are
vested as of June 30, 2006 and 17,424 have been forfeited. A total of 486,815 SARs remain
outstanding as of June 30, 2006.
The fair value of the SARs was measured using the Black-Scholes option pricing model. The
following table summarizes the assumptions used in applying the Black-Scholes option pricing model
to determine the 2006 expense with respect to SARs. Expected volatilities are based on historical
volatilities of the Companys stock, and other factors. The Company uses historical data as well as
other factors to estimate exercise behavior and employee termination. The expected term of SARs
granted is based upon historical trends of stock option behavior as well as future projections. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the
expected term of the award.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Avg. |
|
|
|
|
|
|
|
|
|
|
|
|
Risk Free |
|
|
|
|
|
Grant Date |
|
|
|
|
Dividend |
|
Expected |
|
Interest |
|
Expected |
|
Fair Value |
|
|
|
|
Yield |
|
Volatility |
|
Rate |
|
Option Term |
|
Per Option |
|
|
2005 SARs |
|
|
2.65 |
% |
|
|
23.5 |
% |
|
|
4.26 |
% |
|
6 years |
|
$11.10 |
|
Performance Shares
The performance shares granted to date vest and become deliverable based upon satisfaction of
performance criteria established by the Companys Compensation Committee. The criteria are based
upon the Companys cumulative growth in earnings per share compared to a peer group of the Standard
& Poors Electrical Equipment Index over a three-year period. Performance at target will result in
vesting and issuance of the performance shares. Performance below or above target can result in
payment in the range of 0%-250% of the number of shares granted. Performance shares are issued on
the third anniversary of the date of grant assuming the performance measures have been met. The
fair value of the performance shares is $46.23, which was measured using the average between the
high and low trading prices of the Companys Class B Common Stock on the measurement date,
discounted for the non-payment of dividends during the requisite period. At December 31, 2005, the
Company had 35,178 performance based shares outstanding of which none have vested and
none have been forfeited as of June 30, 2006. The Company estimates that the performance criteria
is probable of being satisfied at 100% of the target number of shares granted.
Stock Option Awards
The Company granted options to officers and other key employees to purchase the Companys
Class B Common Stock in previous years. Options issued in 2004 and 2003 were partially vested
on January 1, 2006, the effective date of SFAS 123(R). All options granted had an exercise price
equal to the market value of the underlying common stock on date of grant. These option awards
generally vest annually over a three-year period and expire after ten years.
9
Stock
option activity for the six months ended June 30, 2006 is set
forth below (shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Number of |
|
|
Average |
|
|
|
Shares |
|
|
Exercise Price |
|
Outstanding at December 31, 2005 |
|
|
5,942 |
|
|
$ |
39.04 |
|
Granted |
|
|
|
|
|
|
|
|
Exercised |
|
|
(724 |
) |
|
$ |
36.96 |
|
Forfeited |
|
|
(127 |
) |
|
$ |
38.51 |
|
Canceled or expired |
|
|
(8 |
) |
|
$ |
46.80 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2006 |
|
|
5,083 |
|
|
$ |
39.34 |
|
The aggregate intrinsic value of stock option exercises during the first six months of
2006 was $9.8 million. The aggregate intrinsic value of all outstanding stock option awards at June
30, 2006 was $42.2 million, of which $37.1 million relates to
awards that are fully vested.
The following table sets forth information related to options outstanding at June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
Number of Shares |
|
Average Remaining |
|
|
Weighted Average |
|
(in thousands) |
|
Contractual Term |
|
|
Exercise Price |
|
957 |
|
2 years |
|
$ |
42.91 |
|
1,051 |
|
5 years |
|
$ |
27.47 |
|
3,075* |
|
8 years |
|
$ |
42.29 |
|
|
|
|
|
|
|
|
|
5,083 |
|
|
|
|
|
$ |
39.34 |
|
|
|
|
* |
|
949 of these shares are not vested as of June 30, 2006. |
The following table illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of SFAS No. 123, for stock options in the prior
year (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2005 |
|
|
June 30, 2005 |
|
Net income, as reported |
|
$ |
35.7 |
|
|
$ |
64.5 |
|
Deduct: Total
stock-based employee
compensation expense
determined under fair value
based method, net of related
tax effects |
|
|
(1.6 |
) |
|
|
(3.1 |
) |
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
34.1 |
|
|
$ |
61.4 |
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic as reported |
|
$ |
0.58 |
|
|
$ |
1.05 |
|
|
|
|
|
|
|
|
Basic pro forma |
|
$ |
0.56 |
|
|
$ |
1.00 |
|
|
|
|
|
|
|
|
Diluted as reported |
|
$ |
0.58 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
Diluted pro forma |
|
$ |
0.55 |
|
|
$ |
0.99 |
|
|
|
|
|
|
|
|
Cash received from option exercises was $23.5 million and $14.7 million for the first six
months of 2006 and 2005, respectively. The Company recorded a realized tax benefit from the
exercise of stock options of $3.6 million for the six month period ended June 30, 2006 which has
been included in Cash Flows From Financing
10
Activities in the Condensed Consolidated Statement of Cash Flows as prescribed by SFAS 123(R).
The Company recorded a realized tax benefit from the exercise of stock options of $4.1 million for
the six month period ended June 30, 2005 which has been included in Other, net within Cash Flows
From Operating Activities in the Condensed Consolidated Statement of Cash Flows.
4. Inventories
Inventories are comprised of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Raw Material |
|
$ |
100.7 |
|
|
$ |
83.0 |
|
Work-in-Process |
|
|
69.7 |
|
|
|
53.6 |
|
Finished Goods |
|
|
193.3 |
|
|
|
151.6 |
|
|
|
|
|
|
|
|
|
|
|
363.7 |
|
|
|
288.2 |
|
Excess of FIFO over LIFO cost basis |
|
|
(57.6 |
) |
|
|
(51.1 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
306.1 |
|
|
$ |
237.1 |
|
|
|
|
|
|
|
|
5. Earnings Per Share
The following table sets forth the computation of earnings per share for the three and six
months ended June 30, 2006 and 2005 (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Net income |
|
$ |
41.6 |
|
|
$ |
35.7 |
|
|
$ |
81.3 |
|
|
$ |
64.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstandingBasic |
|
|
60.7 |
|
|
|
61.0 |
|
|
|
60.6 |
|
|
|
61.2 |
|
Potential dilutive shares |
|
|
0.9 |
|
|
|
0.9 |
|
|
|
0.8 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding Diluted |
|
|
61.6 |
|
|
|
61.9 |
|
|
|
61.4 |
|
|
|
62.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.68 |
|
|
$ |
0.58 |
|
|
$ |
1.34 |
|
|
$ |
1.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.67 |
|
|
$ |
0.58 |
|
|
$ |
1.32 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There
were 0.9 million anti-dilutive common stock equivalents outstanding for the three
and six months ended June 30, 2006, respectively. In addition,
0.5 million SARs were excluded from the
calculation of diluted earnings per share as the effect would be
anti-dilutive. For the three months ended June 30, 2005 there
were 1.4 million anti-dilutive common stock equivalents outstanding. There were no anti-dilutive
common stock equivalents outstanding for the six months ended June 30, 2005.
11
6. Goodwill and Other Intangible Assets
Changes
in the carrying amounts of goodwill for the six months ended June 30, 2006, by segment,
were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
|
Electrical |
|
|
Power |
|
|
Technology |
|
|
Total |
|
Balance December 31, 2005 |
|
$ |
175.9 |
|
|
$ |
122.1 |
|
|
$ |
53.5 |
|
|
$ |
351.5 |
|
Acquisitions |
|
|
|
|
|
|
59.7 |
|
|
|
|
|
|
|
59.7 |
|
Translation adjustments |
|
|
2.0 |
|
|
|
0.6 |
|
|
|
|
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2006 |
|
$ |
177.9 |
|
|
$ |
182.4 |
|
|
$ |
53.5 |
|
|
$ |
413.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included above in acquisitions is $59.6 million of goodwill from the acquisition of
Hubbell Lenoir City, Inc.
The Companys policy is to perform its annual impairment testing in the second quarter of each
year, unless circumstances dictate the need for more frequent assessments. In 2006, this testing
resulted in implied fair values for each reporting unit which exceeded the reporting units
carrying value, including goodwill. Consequently, there were no impairments of goodwill. Similarly,
there were no impairments of indefinite-lived intangible assets.
Identifiable intangible assets are recorded in Intangible assets and other in the Condensed
Consolidated Balance Sheet and at June 30, 2006 include approximately $21.5 million of
indefinite-lived intangible assets not subject to amortization and $52.7 million of intangibles
with definite lives that are being amortized and are presented net of accumulated amortization of
$5.4 million. Amortization expense is expected to be approximately $3.7 million per year over the
next two years and $3.4 million for the three years thereafter. Indefinite-lived intangible assets
primarily represent tradenames related to the Lighting Corporation of America (LCA) acquisition.
Definite-lived intangible assets primarily represent trademarks, customer lists and patents of
which $28.9 million relates to the acquisition of Hubbell Lenoir City, Inc (see Note 2).
12
7. Shareholders Equity
Shareholders equity is comprised of the following (in millions, except share and per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Common stock, $.01 par value: |
|
|
|
|
|
|
|
|
Class A authorized 50,000,000 shares;
outstanding 8,414,911 and 9,127,960 shares |
|
$ |
0.1 |
|
|
$ |
0.1 |
|
Class B authorized 150,000,000 shares;
outstanding 52,377,557 and 51,962,990 shares |
|
|
0.5 |
|
|
|
0.5 |
|
Additional paid-in capital |
|
|
249.4 |
|
|
|
267.2 |
|
Retained earnings |
|
|
790.2 |
|
|
|
749.1 |
|
Unearned compensation |
|
|
|
|
|
|
(8.0 |
) |
Accumulated other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
Pension liability adjustment |
|
|
(4.1 |
) |
|
|
(4.1 |
) |
Cumulative translation adjustment |
|
|
(1.2 |
) |
|
|
(5.4 |
) |
Cash flow hedge loss |
|
|
(0.8 |
) |
|
|
(1.0 |
) |
Unrealized loss on investments |
|
|
(0.5 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
Total Accumulated other comprehensive loss |
|
|
(6.6 |
) |
|
|
(10.8 |
) |
|
|
|
|
|
|
|
Total Shareholders equity |
|
$ |
1,033.6 |
|
|
$ |
998.1 |
|
|
|
|
|
|
|
|
8. Comprehensive Income
Total comprehensive income and its components are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Net income |
|
$ |
41.6 |
|
|
$ |
35.7 |
|
|
$ |
81.3 |
|
|
$ |
64.5 |
|
Foreign currency translation adjustments |
|
|
4.7 |
|
|
|
(3.5 |
) |
|
|
4.2 |
|
|
|
(6.4 |
) |
Unrealized loss on investments, net of tax |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
(0.2 |
) |
|
|
|
|
Cash flow hedge gain, net of tax |
|
|
|
|
|
|
0.3 |
|
|
|
0.2 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
46.4 |
|
|
$ |
32.6 |
|
|
$ |
85.5 |
|
|
$ |
58.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Special Charges
Special charges in the second quarter of 2006 and 2005 reflect pretax expenses of $1.4 million
and $2.7 million, respectively. Included in the second quarter of 2005 is $0.5 million of inventory
write-downs which were recorded in Cost of goods sold in the Condensed Consolidated Statement of
Income. Special charges for the first six months of 2006 and 2005 reflect pretax expense of $3.1
million and $4.6 million, respectively. Included in the first six months of 2006 and 2005 are $0.2
million and $0.5 million, respectively, of inventory write-downs which were recorded in Cost of
goods sold in the Condensed Consolidated Statement of Income. These charges were the result of
actions taken in connection with the programs discussed below, all within the Electrical segment.
13
Lighting Business Integration and Rationalization Program
The Companys ongoing lighting business integration and rationalization program (the Program
or Lighting Program) was initiated in 2002 following the Companys acquisition of LCA and relates
to both the integration and rationalization of the Companys acquired and legacy lighting
operations. The Program consists of a series of actions related to the consolidation of
manufacturing, sales and administrative functions occurring throughout the commercial and
industrial lighting fixture business and the relocation of the manufacturing and assembly of
commercial lighting fixture products to low cost countries.
The 2006 second quarter charge consisted of $1.0 million of severance and related benefit
costs and $0.4 million of transition and integration costs. The 2005 second quarter special charge
consisted of $1.0 million of severance costs, $0.2 million of inventory write-downs and $0.6
million of facility exit costs. Special charges in the first six months of 2006 consisted of $2.0
million of severance and related benefits, $0.9 million of transition and integration costs, and
$0.2 million of inventory write-downs related to product rationalizations. Special charges recorded
in the first six months of 2005 consisted of $1.9 million of severance costs, $1.6 million of exit
and integration costs and $0.2 million of inventory write-downs. The current year severance costs
are being recorded as a result of actions initiated in 2005 and in the first quarter of 2006. The
severance costs are being recorded ratably over the affected employees remaining service period
following the announcement of the programs. A total reduction of approximately 580 employees is
expected to occur as a result of actions related to these programs,
of which approximately 290
employees have left the Company as of June 30, 2006.
Closure of a Wiring Device Factory
In the second quarter of 2004, the Company announced plans to close a wiring device factory in
Puerto Rico. The factory closed during the second quarter of 2005 and production activities were
transferred to existing facilities or outsourced. In the second quarter of 2005, the Company
recorded $0.9 million of special charges, of which $0.6 million was related to facility closure and
$0.3 million was for inventory write-downs. Approximately 220 employees were affected by this
closure. All employees have left the Company and the remaining severance was paid in the first
quarter of 2006.
The following table sets forth activity with respect to special charges for the six months
ended June 30, 2006 and the status of amounts accrued at June 30, 2006 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued |
|
|
|
Balance at |
|
|
2006 |
|
|
2006 Cash |
|
|
Non-cash |
|
|
Balance at |
|
|
|
12/31/05 |
|
|
Provision |
|
|
Expenditures |
|
|
Write-downs |
|
|
6/30/06 |
|
Lighting Business Integration
and Rationalization Program: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory write-downs |
|
$ |
|
|
|
$ |
0.2 |
|
|
$ |
|
|
|
$ |
(0.2 |
) |
|
$ |
|
|
Employee termination costs |
|
|
3.8 |
|
|
|
2.0 |
|
|
|
(0.4 |
) |
|
|
|
|
|
|
5.4 |
|
Exit and integration costs |
|
|
|
|
|
|
0.9 |
|
|
|
(0.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8 |
|
|
|
3.1 |
|
|
|
(1.3 |
) |
|
|
(0.2 |
) |
|
|
5.4 |
|
Wiring Device Factory Closure: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
|
0.3 |
|
|
|
|
|
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4.1 |
|
|
$ |
3.1 |
|
|
$ |
(1.6 |
) |
|
$ |
(0.2 |
) |
|
$ |
5.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
10. Segment Information
The following table sets forth financial information by business segment (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
|
Net Sales |
|
|
Operating Income |
|
|
as a % of Net Sales |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electrical |
|
$ |
419.2 |
|
|
$ |
376.4 |
|
|
$ |
38.7 |
|
|
$ |
35.2 |
|
|
|
|
|
|
|
|
|
Special charges |
|
|
|
|
|
|
|
|
|
|
(1.4 |
) |
|
|
(2.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Electrical |
|
|
419.2 |
|
|
|
376.4 |
|
|
|
37.3 |
|
|
|
32.5 |
|
|
|
8.9 |
% |
|
|
8.6 |
% |
Power |
|
|
134.3 |
|
|
|
109.9 |
|
|
|
19.0 |
|
|
|
16.2 |
|
|
|
14.1 |
% |
|
|
14.7 |
% |
Industrial Technology |
|
|
49.7 |
|
|
|
34.2 |
|
|
|
7.8 |
|
|
|
4.2 |
|
|
|
15.7 |
% |
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
603.2 |
|
|
|
520.5 |
|
|
|
64.1 |
|
|
|
52.9 |
|
|
|
10.6 |
% |
|
|
10.2 |
% |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
(2.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
603.2 |
|
|
$ |
520.5 |
|
|
$ |
61.4 |
|
|
$ |
52.9 |
|
|
|
10.2 |
% |
|
|
10.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electrical |
|
$ |
810.3 |
|
|
$ |
729.8 |
|
|
$ |
71.8 |
|
|
$ |
68.5 |
|
|
|
|
|
|
|
|
|
Special charges |
|
|
|
|
|
|
|
|
|
|
(3.1 |
) |
|
|
(4.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Electrical |
|
|
810.3 |
|
|
|
729.8 |
|
|
|
68.7 |
|
|
|
63.9 |
|
|
|
8.5 |
% |
|
|
8.8 |
% |
Power |
|
|
266.6 |
|
|
|
208.6 |
|
|
|
39.5 |
|
|
|
26.9 |
|
|
|
14.8 |
% |
|
|
12.9 |
% |
Industrial Technology |
|
|
99.3 |
|
|
|
69.7 |
|
|
|
16.5 |
|
|
|
9.1 |
|
|
|
16.6 |
% |
|
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
1,176.2 |
|
|
|
1,008.1 |
|
|
|
124.7 |
|
|
|
99.9 |
|
|
|
10.6 |
% |
|
|
9.9 |
% |
Unusual item |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.6 |
) |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
(5.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,176.2 |
|
|
$ |
1,008.1 |
|
|
$ |
119.3 |
|
|
$ |
95.3 |
|
|
|
10.1 |
% |
|
|
9.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unusual item in 2005 of $4.6 million, pretax, represents transactional expenses
consisting of legal, accounting and consulting fees incurred in support of the Companys strategic
growth initiatives. These costs are included in Selling and administrative expenses and are not
allocated to any one business segment for management reporting purposes.
Stock-based compensation expense reflects all costs recorded in the three and six months ended
June 30, 2006. The Company does not allocate this amount to segments for management reporting
purposes.
15
11. Pension and Other Benefits
The following table sets forth the components of pension and other benefits cost for the three
and six months ended June 30, (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
Three Months |
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
Ended |
|
|
Six Months Ended |
|
|
Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
|
June 30 |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Components of net
periodic benefit cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
4.8 |
|
|
$ |
4.0 |
|
|
$ |
9.6 |
|
|
$ |
7.9 |
|
|
$ |
0.1 |
|
|
$ |
|
|
|
$ |
0.2 |
|
|
$ |
0.1 |
|
Interest cost |
|
|
8.0 |
|
|
|
7.1 |
|
|
|
16.0 |
|
|
|
14.2 |
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
1.0 |
|
|
|
1.1 |
|
Expected return on plan
assets |
|
|
(9.8 |
) |
|
|
(8.2 |
) |
|
|
(19.6 |
) |
|
|
(16.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior
service cost |
|
|
(0.3 |
) |
|
|
0.1 |
|
|
|
(0.2 |
) |
|
|
0.2 |
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Amortization of actuarial
losses |
|
|
1.0 |
|
|
|
0.4 |
|
|
|
1.9 |
|
|
|
0.8 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3.7 |
|
|
$ |
3.4 |
|
|
$ |
7.7 |
|
|
$ |
6.7 |
|
|
$ |
0.6 |
|
|
$ |
0.6 |
|
|
$ |
1.3 |
|
|
$ |
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer Contributions
The Company expects to contribute between $15-$20 million to its domestic, defined benefit
pension plans and $5-$7 million to its international plans in 2006. As of June 30, 2006 the Company
has made no significant contributions to these plans.
12. Guarantees
The Company accrues for costs associated with guarantees when it is probable that a liability
has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred
is accrued based on an evaluation of currently available facts and, where no amount within a range
of estimates is more likely, the minimum is accrued.
As of June 30, 2006, the Company had six individual forward exchange contracts outstanding,
each for the purchase of $1.0 million U.S. dollars which expire ratably each month through December
2006. These contracts were entered into in order to hedge the exposure to fluctuating rates of
foreign currency exchange on inventory purchases. These contracts have been designated as cash flow
hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended.
The Company offers a product warranty which covers defects on most of its products. These
warranties primarily apply to products that are properly used for their intended purpose, installed
correctly, and properly maintained. The Company generally accrues estimated warranty costs at the
time of sale. Estimated warranty expenses are based upon historical information such as past
experience, product failure rates, or the number of units to be repaired or replaced. Adjustments
are made to the product warranty cost accrual as claims are incurred or as historical experience
indicates. The product warranty cost accrual is reviewed for reasonableness on a quarterly basis
and is adjusted as additional information regarding expected warranty costs becomes
16
known. Changes in the accrual for product warranties in the first six months of 2006 are set
forth below (in millions):
|
|
|
|
|
Balance at December 31, 2005 |
|
$ |
3.8 |
|
Provision |
|
|
0.7 |
|
Expenditures |
|
|
(0.7 |
) |
|
|
|
|
Balance at June 30, 2006 |
|
$ |
3.8 |
|
|
|
|
|
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary of Business Strategy
A more detailed description of the objectives to our business strategy is included in our
Annual Report on Form 10-K for the year ended December 31, 2005.
Our business strategy continues to incorporate the following objectives:
|
|
Transformation of business processes. The Company is committed to a
long-term initiative of applying lean process improvement techniques
throughout the enterprise to eliminate waste and improve efficiency
and reliability. |
|
|
|
Lighting integration and cost reduction. We continue to execute a
multi-year program to rationalize our lighting business. Actions
include facility consolidations, workforce reductions and product
rationalizations. |
|
|
|
Global sourcing. We continue to focus on expanding our global product
and component sourcing and supplier cost reduction program through
consolidation of suppliers, utilization of reverse auctions, and
partnering with vendors to shorten lead times, improve quality and
delivery and reduce costs. |
|
|
|
Acquisitions in our core markets. We continue to seek potential
acquisitions that would enhance our core electrical component
businesses wiring systems, lighting fixtures and controls, rough-in
electrical products, and utility products. |
|
|
|
Working capital efficiency. We continue to focus on improving our
working capital efficiency which emphasizes improved inventory
management, faster collection of accounts receivable and negotiation
of more favorable supplier payment terms. |
|
|
|
Common, enterprise-wide information system. A multi-year program is
underway to provide a common information system to meet the needs of
our business. SAP software has been installed at approximately 75% of
the Company, excluding recent acquisitions, with another go-live
scheduled for October 2006 which will substantially complete the
domestic implementation.
|
17
OUTLOOK
Our outlook for 2006 in key areas is as follows:
Markets and Sales
We anticipate overall conditions to remain positive throughout 2006 in most of our major end
use markets. Non-residential construction markets are expected to continue to outpace the levels of
construction spending experienced in 2005. U.S. manufacturing utilization levels have resulted in
higher spending on maintenance, repair and overhaul activities at many of the nations factories.
Domestic utility markets are expected to move at or above the level of growth in the overall
economy. Residential market activity is expected to soften throughout the remainder of 2006 due in
part to higher mortgage interest rates, although we anticipate modest growth in this portion of our
business as a result of new product introductions and increased market share. The outlook for our
markets assumes no shocks to the economy occur which dampen consumer spending and business investments.
Commodity costs remain highly volatile, with global demand driving higher prices for core
commodities including oil, steel, copper, aluminum and zinc. We will attempt to recover higher
costs in these areas with increases in selling prices, as has been the case throughout 2004-2005.
We currently expect overall sales growth in 2006 versus 2005 to be in a range of 12%-14%. Sales
increases compared to 2005 are expected to be broad based, with each of our three segments
contributing. The full year impact of acquisitions is expected to contribute 3-4 percentage points
of the overall sales increase, with price increases accounting for
approximately two percentage
points.
Operating Results
Full year 2006 operating profit margin is expected to be at the level of margins reported in
2005 of 10.8%. The impact of expensing stock-based compensation in 2006 is expected to decrease
operating profit margins by approximately one-half of a percentage point. In addition, supply chain
and production inefficiencies in our Electrical segment, SAP
implementation costs and spending on investments in new product
development, are all expected to lower operating margins in 2006. Lastly, we expect that the
pricing actions taken in 2005 and the first half of 2006 as well as additional planned increases
will fall short of offsetting higher levels of raw material commodity costs and higher energy
related costs. Overall, commodity and energy costs are expected to remain volatile and further
increases in these costs in 2006 may also not be fully offset with
price increases. In addition to higher volume levels, several key
initiatives are expected to increase operating margins including savings from actions completed
within the Lighting Program, expansion of global product sourcing initiatives and lean process
improvement projects.
We expect to continue to integrate and streamline our operations, particularly within our
Lighting business. These actions are expected to result in full year charges being recorded in 2006
related to severance, business integration costs and asset write-downs to consolidate operations at
amounts near the $11 million of special charges recorded for the full year 2005. Amounts actually
recorded in 2006 will depend on the nature and timing of when plans are finalized and approved.
Our business information system initiative is expected to facilitate consolidation of business
support processes. We estimate total 2006 expenses directly related to the implementation of our
SAP enterprise-wide
18
information system will be in a range of $8-$10 million and capitalized costs will be in a
range of $8-$10 million. In addition, non-cash amortization expenses associated with capitalization
will approximate $8 million.
Taxation
We estimate the effective tax rate in 2006 will be approximately 30.0% compared with 23.5%
reported in 2005. The increase is primarily due to the absence of a tax settlement recorded in
2005, which lowered the rate in that year by approximately five percentage points, and an
anticipated higher level of U.S. taxable income at comparably higher tax rates. In addition,
Congress has yet to renew the R&D tax credit that expired on December 31, 2005, and as such we have
not recognized a benefit this year that had been reflected in the prior year effective tax rate.
Earnings Per Share
Overall, diluted earnings per share is currently expected to be in the range of $2.75-$2.90,
including the impact of special charges and stock-based compensation expense.
Cash Flow
We expect an increase in working capital requirements to support higher sales levels.
Capital spending in 2006 is expected to be approximately $10-$15 million higher than
the $73.4 million spent in 2005 primarily as a result of the construction of our new lighting
headquarters facility and other strategic
initiatives. We expect total share repurchases in 2006 to approximate $70 million, however, total
repurchases may vary depending upon the level of financing and investing activities, and the market
performance of the Companys shares. Cash flow provided by operating activities is estimated to be
$180-$210 million. Free cash flow (defined as cash flow from operations less capital spending) in
2006 is expected to range from $100-$125 million.
Growth
Our growth strategy contemplates acquisitions in our core businesses. This is evidenced by
our 2005 acquisitions as well as the acquisition of Hubbell Lenoir City, Inc.
in the second quarter of 2006. Hubbell Lenoir City, Inc. is expected to contribute $70-$80 million
to Power segment sales on a full year basis with operating margins at or above the Power segment
average. The rate and extent to which appropriate acquisition opportunities become available,
acquired companies are integrated and anticipated cost savings are achieved can affect our future
results.
19
Summary of Consolidated Results
In millions, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30 |
|
|
Six Months Ended June 30 |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
2006 |
|
|
Net sales |
|
|
2005 |
|
|
Net sales |
|
|
2006 |
|
|
Net sales |
|
|
2005 |
|
|
Net sales |
|
Net sales |
|
$ |
603.2 |
|
|
|
|
|
|
$ |
520.5 |
|
|
|
|
|
|
$ |
1,176.2 |
|
|
|
|
|
|
$ |
1,008.1 |
|
|
|
|
|
Cost of goods sold |
|
|
437.5 |
|
|
|
72.5 |
% |
|
|
377.4 |
|
|
|
72.5 |
% |
|
|
852.0 |
|
|
|
72.4 |
% |
|
|
728.3 |
|
|
|
72.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
165.7 |
|
|
|
27.5 |
% |
|
|
143.1 |
|
|
|
27.5 |
% |
|
|
324.2 |
|
|
|
27.6 |
% |
|
|
279.8 |
|
|
|
27.8 |
% |
Selling & administrative expenses |
|
|
102.9 |
|
|
|
17.1 |
% |
|
|
88.0 |
|
|
|
16.9 |
% |
|
|
202.0 |
|
|
|
17.2 |
% |
|
|
180.4 |
|
|
|
17.9 |
% |
Special charges |
|
|
1.4 |
|
|
|
0.2 |
% |
|
|
2.2 |
|
|
|
0.4 |
% |
|
|
2.9 |
|
|
|
0.2 |
% |
|
|
4.1 |
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
61.4 |
|
|
|
10.2 |
% |
|
|
52.9 |
|
|
|
10.2 |
% |
|
|
119.3 |
|
|
|
10.1 |
% |
|
|
95.3 |
|
|
|
9.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted |
|
$ |
0.67 |
|
|
|
|
|
|
$ |
0.58 |
|
|
|
|
|
|
$ |
1.32 |
|
|
|
|
|
|
$ |
1.04 |
|
|
|
|
|
Net Sales
Net sales for the second quarter of 2006 increased 16% versus the second quarter of 2005. The
majority of the year-over-year increase is due to stronger end user demand as a result of improved
economic conditions in most of our served markets. The impact of acquisitions accounted
for 4 percentage points of the sales increase in the second quarter. We estimate that selling price
increases accounted for approximately 1 percentage point of the
year-over-year increase in quarterly sales.
Net sales for the first six months of 2006 increased 17% compared to the same period of 2005. The
majority of the increase is a result of favorable conditions in most of our major end use markets.
Acquisitions and, to a lesser extent, selling price increases contributed approximately 5
percentage points of the six month increase. Currency translation had no material impact on sales
in the second quarter or in the first six months of 2006 versus the comparable periods of 2005.
Sales to the retail and residential market increased approximately 13% in the second quarter
of 2006 compared to the same period in 2005 primarily resulting from increased market share and new
product introductions. Residential sales represented approximately 14% of the Companys
consolidated net sales for the first six months of 2006.
Gross Profit
The consolidated gross profit margin in the second quarter of 2006 of 27.5% was unchanged from
the second quarter of 2005. On a year-to-date basis, 2006 gross profit margin declined slightly to 27.6%
compared to 27.8% for the first six months of 2005. Production and delivery inefficiencies and
higher costs were experienced in certain of our Electrical and Power segment businesses in both the
quarter and year-to-date results compared to the prior year. Further, higher year-over-year costs
throughout each segment in the areas of commodity raw materials, transportation and utilities
negatively impacted gross profit margins by 2-3 percentage points. These items were substantially
offset by increased sales volume in 2006 compared to 2005, price increases, lower product costs
from strategic sourcing initiatives and completed actions within our Lighting Program.
Selling & Administrative (S&A) Expenses
S&A expenses increased in the second quarter and first six months of 2006 versus the
comparable periods in 2005 primarily due to higher selling and commission expenses associated with
increased sales, expenses associated with new product launches and stock-based compensation cost.
As a percentage of sales, S&A
20
expenses were higher in the second quarter of 2006 versus the second quarter of 2005 primarily
due to higher expense costs associated with the SAP implementation, stock-based compensation and
costs associated with new product development. However, for the first six months of 2006, S&A
expenses as a percent of sales declined year-over-year despite the impact of stock-based
compensation due to higher sales and efforts to manage costs. In addition, the prior year included
S&A costs associated with an unusual item consisting of $4.6 million, pretax, of transactional
expenses in support of our strategic growth initiatives.
Special Charges
Special charges recorded in the second quarter of 2006 of $1.4 million consist of $1.0 million
of severance costs and $0.4 million of exit and integration costs. The 2005 special charges
recorded in the second quarter of 2005 of $2.7 million consist of $1.0 million of severance, $1.2
million of integration costs including facility closing costs and $0.5 million of inventory
write-downs. Special charges recorded for the first six months of 2006 and 2005 were $3.1 million
and $4.6 million, respectively, the components of which are summarized below. All charges recorded
in 2006 pertain to actions associated with the Lighting Program. The second quarter charge in 2005
includes $0.9 million of costs related to the Wiring device factory closure. The remaining 2005
charges pertain to the Lighting Program. Both programs are discussed below.
The following table summarizes activity with respect to special charges for the six months
ending June 30, 2006 and 2005 (in millions):
CATEGORY OF COSTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility Exit and |
|
Inventory |
|
|
Lighting Business
Integration and Rationalization Program |
|
Severance &Benefits |
|
Integration |
|
Write-Downs* |
|
Total |
2006 |
|
$ |
2.0 |
|
|
$ |
0.9 |
|
|
$ |
0.2 |
|
|
$ |
3.1 |
|
2005 |
|
|
1.9 |
|
|
|
1.6 |
|
|
|
0.2 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wiring Device Factory Closure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
$ |
|
|
|
$ |
0.6 |
|
|
$ |
0.3 |
|
|
$ |
0.9 |
|
|
|
|
* |
|
Included in Cost of goods sold |
Lighting Business Integration and Rationalization Program
The integration and streamlining of our lighting operations is a multi-year initiative.
Individual projects within the Program consist of factory, office and warehouse closures, personnel
realignments, and costs to streamline and combine product offerings. Total costs from the start of
the Program in 2002 through the expected completion of the substantial components of the Program in
late 2006 are expected to approximate $60 million. From inception of the Program through June 30,
2006 approximately $49 million has been spent. In addition, capital expenditures of $45-$55 million
are forecast, of which $32 million has been spent. State and local tax incentives are expected to
be available to offset certain of these costs. Program costs related to severance, asset
impairments, and facility closures in conjunction with exit activities are generally reflected as
21
Special charges within the Condensed Consolidated Statement of Income. Inventory write-downs
related to exit activities are recorded as a component of Cost of goods sold. Other costs
associated with the Program are recorded as Cost of goods sold or Selling & administrative expenses
depending on the nature of the cost.
The Program is comprised of three phases. Phase I began in 2002 soon after the LCA acquisition
was completed. The Company is currently in its third and final phase of the Program which consists
of the consolidation and relocation of administrative functions and manufacturing activities of
commercial lighting facilities within the U.S. and Mexico. See further detail of these actions in
the Companys Annual Report on Form 10-K for the year ending December 31, 2005.
Closure
of a Wiring Device Factory
In the
second quarter of 2004, the Company announced plans to close a Wiring device factory in
Puerto Rico. The factory closed during the second quarter of 2005 and production activities have
been transferred to existing facilities or outsourced. In the second quarter of 2005, the Company
recorded $0.9 million of special charges, of which
$0.6 million was related to facility closure costs and
$0.3 million was for inventory write-downs.
Other Income/Expense
In the second quarter and first six months of 2006, interest expense, net in the Condensed
Consolidated Statement of Income decreased versus the comparable periods in 2005. Interest expense
was lower in the second quarter and first six months of 2006 versus the comparable periods of 2005
due to a lower level of fixed rate indebtedness in 2006 compared to 2005 as we repaid $100 million
of senior notes upon maturity in October 2005. In the second quarter and first six months of 2006,
investment income decreased compared to the second quarter and first six months of 2005
due to lower average investment balances partially offset by higher average interest rates
received on cash and investments. The lower average investment balances are due to the funding of
several acquisitions in 2005 and, to a lesser extent, the Hubbell Lenoir City, Inc. acquisition in
June 2006, as well as higher share repurchases.
Income Taxes
The effective tax rate for the second quarter of 2006 was 30.3% compared to 28.7% in the
second quarter of 2005. The increase in the effective tax rate in the second quarter of 2006 versus
the comparable period of 2005 reflects a higher year-over-year annual effective tax rate estimate
as a result of anticipated higher U.S.-based taxable income in 2006 which carries a higher tax rate
than the majority of the Companys non-U.S. income. The effective tax rate for the first
six months of 2006 was 29.9% compared to 28.2% in the first six months of 2005. In addition,
Congress has yet to renew the R&D tax credit that expired on December 31, 2005, and as such we have
not recognized a benefit this year that had been reflected in the prior year effective tax rate.
Net Income and Earnings Per Share
Net income and diluted earnings per share increased in the second quarter and first six months
of 2006 compared to the second quarter and first six months of 2005 primarily due to higher sales
and higher operating income, lower interest expense and lower special charges. Average shares
outstanding-basic have decreased year-over-year by approximately 0.6 million shares due to shares
repurchased under our stock repurchase program in excess of employee stock option exercises.
22
Segment Results
Electrical
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
(In millions) |
|
(In millions) |
Net sales |
|
$ |
419.2 |
|
|
$ |
376.4 |
|
|
$ |
810.3 |
|
|
$ |
729.8 |
|
Operating income |
|
|
37.3 |
|
|
|
32.5 |
|
|
|
68.7 |
|
|
|
63.9 |
|
Operating margins |
|
|
8.9 |
% |
|
|
8.6 |
% |
|
|
8.5 |
% |
|
|
8.8 |
% |
Electrical segment sales increased 11% in both the second quarter and first six months of
2006 versus the comparable periods in 2005. The sales growth was broad based. Each of the
businesses within the segment wiring systems, electrical products and lighting fixtures
experienced year-over-year increases in the second quarter and
in the first six months of 2006. Selling price increases in
both the second quarter and first six months of 2006 accounted for approximately one percentage
point of the increase versus the comparable periods of 2005.
Lighting fixture sales represented in excess of 50% of total net sales reported in the
Electrical segment in both the second quarter and first six months of both 2006 and 2005. Sales of
lighting fixtures increased in both the commercial and industrial (C&I) and residential markets.
Residential product shipments increased as a result of higher new product sales and market share
gains. The C&I lighting business was favorably impacted by higher levels of commercial construction
throughout the U.S. generating increases in lighting fixture project sales.
Sales of wiring systems in the second quarter and for the first six months of 2006 were higher
versus the comparable prior year periods, consistent with the segments overall percentage net sales
increase, as demand in both industrial and commercial markets improved. Rough-in
electrical products sales in the second quarter and first six months increased modestly from the previous
year. Although commercial construction markets have strengthened, competition remains intense.
Sales of harsh and hazardous products increased in both the second quarter and first six months
year-over-year by amounts in excess of the segment average primarily due to higher oil and gas
project shipments related to strong market conditions worldwide and the favorable impact of an
acquisition completed in the third quarter of 2005.
Operating income improved both in the quarter and year-to-date versus the comparable periods
of the prior year primarily due to higher sales. Special charges in the second quarter and first
six months of 2006 were $1.4 million and $3.1 million
compared to $2.7 million and $4.6 million in
the second quarter and first six months of 2005, respectively. Operating margin in the segment was
higher in the second quarter of 2006 versus the second quarter of 2005 primarily due to higher
average margins on the incremental sales, offset by higher commodity costs in excess of selling
price increases, higher project costs related to new product launches and increased freight and
utility costs resulting from record high oil prices. Operating margin in the segment was lower in
the first six months of 2006 versus the comparable period of 2005
despite higher sales and volumes primarily
due to production and delivery inefficiencies, higher costs associated with new products and
the SAP implementation as well as higher commodity raw material, freight and utility
costs.
In our lighting business, operating margins improved in the second quarter and first six
months of 2006 versus the comparable periods of 2005 as a result of higher volume and cost savings
associated with actions
23
completed under the streamlining Program, offset by inefficiencies associated with plant
moves. Our wiring systems business reported lower operating profit margin in the second quarter and
first six months of 2006 versus the comparable periods of 2005 due to commodity cost increases,
higher transportation and production costs, due in part to supply
chain and plant inefficiencies, and increased costs associated with the launch of new products. Margins in our harsh
and hazardous products business were lower year-over-year, despite higher sales, due to commodity
cost increases in excess of selling price increases. Overall, the segment incurred higher S&A
expenses year-over-year due to new product initiatives and increased SAP implementation costs.
Power
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
(In millions) |
|
(In millions) |
Net sales |
|
$ |
134.3 |
|
|
$ |
109.9 |
|
|
$ |
266.6 |
|
|
$ |
208.6 |
|
Operating income |
|
|
19.0 |
|
|
|
16.2 |
|
|
|
39.5 |
|
|
|
26.9 |
|
Operating margins |
|
|
14.1 |
% |
|
|
14.7 |
% |
|
|
14.8 |
% |
|
|
12.9 |
% |
Net sales in the Power segment increased 22% and 28%, respectively, in the second quarter
and first six months of 2006 versus the comparable periods in 2005. The increase in both the
quarter and first six months was primarily due to higher levels of utility spending
including line upgrades and transmission projects facilitated by higher levels of economic activity
in the U.S. and favorable weather conditions. The acquisition of Delmar in the third quarter of
last year as well as the Hubbell Lenoir City, Inc acquisition completed in the second quarter of
2006 accounted for just over half of the sales increase in the quarter and over one-third of the
increase on a year to-date basis in 2006 versus 2005. Operating margins decreased in the second
quarter of 2006 compared to the second quarter of 2005 as a result of commodity cost increases in
excess of realized selling price increases and higher costs due to the SAP implementation.
Operating margins increased in the first six months of 2006 compared to the comparable period of
2005 as a result of the increase in volume, an improved mix of higher margin products, productivity
improvements from strategic sourcing and the favorable impact of acquisitions.
Industrial Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
(In millions) |
|
(In millions) |
Net sales |
|
$ |
49.7 |
|
|
$ |
34.2 |
|
|
$ |
99.3 |
|
|
$ |
69.7 |
|
Operating income |
|
|
7.8 |
|
|
|
4.2 |
|
|
|
16.5 |
|
|
|
9.1 |
|
Operating margins |
|
|
15.7 |
% |
|
|
12.3 |
% |
|
|
16.6 |
% |
|
|
13.1 |
% |
Net sales in the Industrial Technology segment increased 45% and 42%, respectively, in
the second quarter and first six months of 2006 versus the comparable periods in 2005. The increase
in both the quarter and first six months was primarily due to the improvement in industrial
activity as evidenced by higher manufacturing output and rising capacity utilization rates. All
businesses within the segment reported double-digit increases in year-over-year sales. In addition,
two acquisitions in the third quarter of 2005 in our industrial controls business accounted for
over one third of the segment sales increase in the quarter and close to 50% of the six month
increase versus the comparable period of 2005. Operating margins improved significantly in the
second quarter
24
and for the first six months of 2006 versus the comparable periods in 2005 as a result of
increased volume, a more favorable industrial product mix and cost savings associated with
outsourcing and other productivity improvements.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
|
2006 |
|
|
2005 |
|
|
|
(In Millions) |
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
53.6 |
|
|
$ |
50.7 |
|
Investing activities |
|
|
(35.0 |
) |
|
|
74.8 |
|
Financing activities |
|
|
(76.4 |
) |
|
|
(71.3 |
) |
Effect of foreign exchange rate changes on cash and cash equivalents |
|
|
0.7 |
|
|
|
(0.8 |
) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
$ |
(57.1 |
) |
|
$ |
53.4 |
|
|
|
|
|
|
|
|
Cash provided by operating activities for the six months ended June 30, 2006 increased
from the comparable period in 2005. Higher operating cash flow
reflects higher net income and non-cash stock-based compensation
cost, offset by higher working capital. Within working
capital, inventory increased in the first six months of 2006 primarily as a result of a higher
level of purchases to support the increased sales. Accounts receivable increased in the first six
months of 2006 compared to the first six months of 2005 as a result of the increased sales volume
in the first six months of 2006 versus the comparable period in 2005. Days sales outstanding in
accounts receivable at June 30, 2006 were level with days sales outstanding at June 30, 2005.
Current liabilities increased in the first six months of 2006 primarily due to higher inventory
purchases which resulted in higher accounts payable balances, and lower annual incentive and
employee bonus payouts.
Investing activities used cash of $35.0 million in the first six months of 2006 compared to
cash provided by investing activities of $74.8 million in the first six months of 2005 primarily as
a result of a business acquisition, as well as higher capital expenditures. Net cash used for
financing activities increased $5.1 million in the first six months of 2006 when compared to the
same period in 2005 primarily as a result of payments made on
short-term debt in 2006, partially offset by
higher proceeds from exercises of stock options.
Investments in the Business
We define investment in our business to include both normal expenditures required to maintain
the operations of our equipment and facilities as well as expenditures in support of our strategic
initiatives.
In the first six months of 2006, we recorded a total of $43.4 million of capital expenditures
of which $35.0 million was additions to property, plant and equipment and $8.4 million was
capitalized software primarily in connection with the enterprise-wide business system initiative.
Included in the $43.4 million of capital expenditures were $5.3 million of accrued amounts not yet
expended, resulting in total cash capital expenditures of $38.1 million.
We continue to invest in process improvement through our long-term lean initiatives. We have
been actively
25
engaged in the lean program for several years although we still consider ourselves in the
early part of this initiative. We expect benefits from this investment will improve our operating
results primarily in the form of increased productivity at our businesses.
In June 2005, our Board of Directors approved a stock repurchase program which authorized the
repurchase of up to $60 million of the Companys Class A and Class B common stock. Stock
repurchases are being implemented through open market and privately negotiated transactions. The
timing of such transactions depends on a variety of factors, including market conditions. As of
June 30, 2006, approximately $3.3 million remains for the repurchase of shares under this program.
In February 2006, the Board of Directors approved an additional stock repurchase program and
authorized the purchase of up to $100 million of the Companys Class A and Class B common stock to
be completed over a three year period. The repurchase program will be implemented upon completion
of the $60 million repurchase program announced in June 2005. As of June 30, 2006, a total of
$103.3 million remains authorized for future repurchases under the combined programs. We have spent
$42.5 million on the repurchase of common shares in the first six months of 2006.
On
August 3, 2006, in connection with our previously announced
stock repurchase program, we established a prearranged repurchase plan (the 10b5-1 Plan) intended to comply with the
requirements of Rule 10b5-1 and Rule 10b-18 under the Securities and Exchange Act of 1934, as
amended, (the Act).
The
10b5-1 Plan will facilitate the ongoing repurchase of our Class A and
Class B common stock under our
repurchase programs by permitting us to repurchase shares during
times when we
otherwise might be prevented from doing so under insider trading laws or because of self-imposed
trading blackout periods. Pursuant to the 10b5-1 Plan, a broker appointed by the Company will have
the authority to repurchase, without further direction from the Company, up to 750,000 shares of
our Class A common stock and up to 750,000 shares of our Class B common stock
during the period commencing on August 4, 2006 and expiring on August
3, 2007, subject to conditions
specified in the 10b5-1 Plan and unless earlier terminated. There is no guarantee as to the number
of shares that will be repurchased under the plan, and we may terminate the plan at any
time. Depending upon market conditions, we also expect to continue to conduct discretionary
repurchases in privately negotiated transactions during our normal trading windows.
Debt to Capital
Net Debt, as disclosed below is a non-GAAP measure that may not be comparable to definitions
used by other companies. We consider Net Debt to be more appropriate than Total Debt for measuring
our financial leverage as it better measures our ability to meet our funding needs.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
(In Millions) |
|
Total Debt |
|
$ |
208.1 |
|
|
$ |
228.8 |
|
Total Shareholders Equity |
|
|
1,033.6 |
|
|
|
998.1 |
|
|
|
|
|
|
|
|
Total Capital |
|
$ |
1,241.7 |
|
|
$ |
1,226.9 |
|
|
|
|
|
|
|
|
Debt to Total Capital |
|
|
17 |
% |
|
|
19 |
% |
Cash and Investments |
|
$ |
133.4 |
|
|
$ |
310.7 |
|
Net Debt (Total debt less cash and investments) |
|
$ |
74.7 |
|
|
$ |
(81.9 |
) |
The ratio of debt to total capital at June 30, 2006 decreased to 17% compared with 19% at
December 31,
26
2005 primarily due to payments made on short-term debt. Net debt has increased in the first
six months of 2006 due to the decrease in cash and investments as the Company used cash and
investments to complete the Hubbell Lenoir City, Inc. acquisition.
At June 30, 2006 and December 31, 2005, Long-term debt in our Condensed Consolidated Balance
Sheet consisted of $200 million, excluding unamortized discount, of senior notes which mature in
2012. These notes are fixed rate indebtedness, are not callable and are only subject to accelerated
payment prior to maturity if we fail to meet certain non-financial covenants, all of which were met
at June 30, 2006. The most restrictive of these covenants limits our ability to enter into
mortgages and sale-leasebacks of property having a net book value in excess of $5 million without
the approval of the Note holders.
At June 30, 2006, Short-term debt in our Condensed Consolidated Balance Sheet consisted of a
$4.8 million money market loan issued by our U.K. subsidiary and $4 million of borrowings against
our credit facility. The money market loan represents a line of credit to borrow up to 5 million
pounds sterling entered into by our U.K. subsidiary (US $ equivalent at June 30, 2006 of $9.1
million). At June 30, 2006 we had $196 million of available borrowings under our $200 million
committed bank credit facility. Borrowings under credit agreements generally are available with an
interest rate equal to the prime rate or at a spread over the London Interbank Offered Rate.
Although not the principal source of liquidity, we believe our credit facilities are capable
of providing significant financing flexibility at reasonable rates of interest. However, a
significant deterioration in the results of our operations or cash flows, leading to deterioration
in financial condition, could either increase our borrowing costs or restrict our ability to
borrow. We have not entered into any other guarantees, commitments or obligations that could give
rise to material unexpected cash requirements.
Liquidity
We measure liquidity on the basis of our ability to meet short-term and long-term operational
funding needs, fund additional investments, including acquisitions, and make dividend payments to
shareholders. Significant factors affecting the management of liquidity are cash flows from
operating activities, capital expenditures, cash dividend payments, stock repurchases, access to
bank lines of credit and our ability to attract long-term capital with satisfactory terms.
Internal cash generation together with currently available cash and investments, available
borrowing facilities and an ability to access credit lines if needed, are expected to be sufficient
to fund operations, the current rate of cash dividends, capital expenditures, and any increase in
working capital that would be required to accommodate a higher level of business activity. We
actively seek to expand by acquisition as well as through the growth of our current businesses.
While a significant acquisition may require additional debt and/or equity financing, we believe
that we would be able to obtain acquisition financing based on our favorable historical earnings
performance and strong financial position.
Critical Accounting Policies
A summary of our significant accounting policies is included in Managements Discussion and
Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form
10-K for the year ended December 31, 2005. We believe that the application of these policies on a
consistent basis enables us to provide
27
the users of our financial statements with useful and reliable information about operating
results and financial condition. There have been no changes to these policies since December 31,
2005.
We are required to make estimates and judgments in the preparation of our financial statements
that affect the reported amounts of assets and liabilities, revenues and expenses and related
disclosures. We continually review these estimates and their underlying assumptions to ensure they
are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a
significant impact on our financial results.
Forward-Looking Statements
Some of the information included in this Managements Discussion and Analysis of Financial
Condition and Results of Operations, and elsewhere in this Form 10-Q, contain forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995. These include
statements about capital resources, performance and results of operations and are based on our
reasonable current expectations. In addition, all statements regarding anticipated growth or
improvement in operating results, or anticipated market and economic
conditions, are forward
looking. Forward-looking statements may be identified by the use of words or phrases, such as
believe, expect, anticipate, intend, depend, should, plan, estimated, could,
may, subject to, continues, growing, prospective, forecast, projected, purport,
might, if, contemplate, potential, pending, target, goals, scheduled, will likely
be, and variations thereof and similar terms. Discussions of strategies, plans or intentions often
contain forward-looking statements. Factors, among others, that could cause our actual results and
future actions to differ materially from those described in forward-looking statements include, but
are not limited to:
|
|
|
Changes in demand for our products, changes in market conditions, or product
availability adversely affecting sales levels. |
|
|
|
|
Changes in markets or competition adversely affecting realization of price
increases. |
|
|
|
|
The amounts of net cash expenditures, benefits, including available state and
local tax incentives, the timing of actions and impact of personnel reductions in connection
with the ongoing lighting business integration and rationalization program and other special
charges. |
|
|
|
|
Failure to achieve projected levels of efficiencies, cost savings and cost
reduction measures, including those expected as a result of our lean initiative and
strategic sourcing plans. |
|
|
|
|
The amounts of cash expenditures, benefits and the timing of actions in
connection with our enterprise-wide business system implementation. |
|
|
|
|
Availability and costs of raw materials, purchased components, energy and freight. |
|
|
|
|
Changes in expected levels of operating cash flow and uses of cash. |
|
|
|
|
General economic and business conditions in particular industries or markets. |
28
|
|
|
Failure to achieve expected benefits of process improvements and other lean
initiatives as a result of changes in strategy or level of investments made. |
|
|
|
|
Regulatory issues, changes in tax laws or changes in geographic profit mix
affecting tax rates and availability of tax incentives. |
|
|
|
|
A major disruption in one of our manufacturing or distribution facilities or
headquarters, including the impact of plant consolidations, relocations and the construction
of a new lighting headquarters. |
|
|
|
|
Impact of productivity improvements on lead times, quality and delivery of product. |
|
|
|
|
Future levels of indebtedness and capital spending. |
|
|
|
|
Anticipated future contributions and assumptions with respect to pensions. |
|
|
|
|
Adjustments to product warranty accruals in response to claims incurred,
historical experiences and known costs. |
|
|
|
|
Unexpected costs or charges, certain of which might be outside of our control. |
|
|
|
|
Changes in strategy, economic conditions or other conditions outside of our
control affecting anticipated future global product sourcing levels. |
|
|
|
|
Intense or new competition in the markets in which we compete. |
|
|
|
|
Ability to carry out future acquisitions and strategic investments in our core
businesses and costs relating to acquisitions and acquisition integration costs. |
|
|
|
|
Future repurchases of common stock under our common stock repurchase program. |
|
|
|
|
Changes in customers credit worthiness adversely affecting the ability to
continue business relationships with major customers. |
|
|
|
|
The outcome of environmental, legal and tax contingencies or costs compared to
amounts provided for such contingencies. |
|
|
|
|
Adverse changes in foreign currency exchange rates and the potential use of
hedging instruments to hedge the exposure to fluctuating rates of foreign currency exchange
on inventory purchases. |
|
|
|
|
And other factors described in our SEC filings, including the Business section
and Risk Factors section in the Annual Report on Form 10-K for the year ended December 31,
2005. |
Any such forward-looking statements are not guarantees of future performances and actual
results, developments and business decisions may differ from those contemplated by such
forward-looking statements.
29
The Company disclaims any duty to update any forward-looking statement, all of which are
expressly qualified by the foregoing, other than as required by law.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the operation of its business, the Company has exposures to fluctuating foreign currency
exchange rates, availability of purchased finished goods and raw
materials, changes in raw material prices, foreign sourcing issues, and
interest rates. As noted throughout Managements Discussion and Analysis, we have seen significant
increases in the cost of certain metals used in our products, along with higher energy and freight
costs. In addition, the Companys procurement strategy continues to emphasize an increased level of
purchases from international locations, primarily China and India, which subjects the Company to
increased political and foreign currency exchange risk. Changes in the Chinese governments policy
regarding the value of the Chinese currency versus the U.S. dollar has not had any significant
impact on our financial condition, results of operations or cash flows. However, strengthening of
the Chinese currency could increase the cost of the Companys products procured from this country.
There has been no significant change in the Companys strategies to manage these exposures during
the first six months of 2006. For a complete discussion of the Companys exposure to market risk,
refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the
Companys Annual Report on Form 10-K for the year ending December 31, 2005.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms, and that such information
is accumulated and communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There
are inherent limitations to the effectiveness of any system of disclosure controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide reasonable
assurance of achieving their control objectives.
The Company carried out an evaluation, under the supervision and with the participation of
management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of the Companys disclosure controls and procedures pursuant to
Exchange Act Rules 13a-15(f) and 15d-15(f), as of the end of the period covered by this report on
Form 10-Q. Based upon that evaluation, each of the Chief Executive Officer and Chief Financial
Officer concluded that, as of June 30, 2006, the Companys disclosure controls and procedures were
effective.
In April 2006, the Company implemented another phase of a multi-year program to implement a
fully integrated suite of SAP application software. The implementation has involved changes to
certain internal controls over financial reporting. The Company has reviewed each system as it is
being implemented and the controls affected by the new system and made appropriate changes to
affected internal controls as necessary. There have been no changes in the Companys internal
control over financial reporting that occurred during the Companys most recently completed quarter
that have materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.
30
PART II OTHER INFORMATION
ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors from those disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2005.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
In
June 2005, the Companys Board of Directors approved a stock repurchase program and
authorized the repurchase of up to $60 million of the Companys Class A and Class B common stock.
Stock repurchases under the June 2005 program are being implemented through open market and
privately negotiated transactions. The timing of such transactions depends on a variety of factors,
including market conditions. In addition, in February 2006 the Board of Directors approved an
additional stock repurchase program and authorized the purchase of up to $100 million of the
Companys Class A and Class B common stock to be completed over a three year period. The repurchase
program will be implemented upon completion of the $60 million repurchase program announced in June
2005, the status of which is listed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Dollar Value of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Shares |
|
|
|
Total |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
Shares |
|
|
that May Yet Be |
|
|
|
Number of |
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Purchased as |
|
|
Purchased |
|
|
|
Class A |
|
|
|
|
|
|
Class B |
|
|
|
|
|
|
Part of Publicly |
|
|
Under |
|
|
|
Shares |
|
|
Average |
|
|
Shares |
|
|
Average |
|
|
Announced |
|
|
the 2005 |
|
|
|
Purchased |
|
|
Price Paid per |
|
|
Purchased |
|
|
Price Paid per |
|
|
Program |
|
|
Program |
|
Period |
|
(000s) |
|
|
Class A Share |
|
|
(000s) |
|
|
Class B Share |
|
|
(000s) |
|
|
(000s) |
|
Total for the quarter ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,900 |
|
April 2006 |
|
|
1 |
|
|
$ |
48.53 |
|
|
|
|
|
|
$ |
|
|
|
|
1 |
|
|
|
12,850 |
|
May 2006 |
|
|
82 |
|
|
|
48.19 |
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
8,900 |
|
June 2006 |
|
|
25 |
|
|
|
45.36 |
|
|
|
95 |
|
|
|
47.24 |
|
|
|
120 |
|
|
|
3,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for the quarter ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006 |
|
|
108 |
|
|
$ |
47.53 |
|
|
|
95 |
|
|
$ |
47.24 |
|
|
|
203 |
|
|
$ |
3,300 |
|
On
August 3, 2006, in connection with its previously announced stock repurchase program,
the Company established the 10b5-1 Plan intended to comply with the
requirements of Rule 10b5-1 and Rule 10b-18 under the Act.
The
10b5-1 Plan will facilitate the ongoing repurchase of the
Companys Class A and Class B common stock under its
repurchase programs during times when it otherwise
might be prevented from doing so under insider trading laws or because of self-imposed trading
blackout periods. Pursuant to the 10b5-1 Plan, a broker appointed by Hubbell will have the
authority to repurchase, without further direction from the Company, up to 750,000 shares of Class A common stock and up to 750,000 shares of Class B common stock during the period
commencing on August 4, 2006 and expiring on August 3, 2007, subject to conditions specified in the 10b5-1
Plan and unless earlier terminated. There is no guarantee as to the number of shares that
31
will be
repurchased under the plan, and the Company may terminate the plan at any time. Depending
upon market conditions, the Company also expects to continue to conduct discretionary repurchases in
privately negotiated transactions during its normal trading windows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 1, 2006:
1. |
|
The following nine (9) individuals were elected directors of the Company for the ensuing year
to serve until the next Annual Meeting of Shareholders of the Company and until their
respective successors may be elected and qualified, each Director being elected by plurality
vote: |
|
|
|
|
|
|
|
|
|
Name of Individual |
|
Votes For |
|
Votes Withheld |
E. Richard Brooks |
|
|
199,219,205 |
|
|
|
2,640,376 |
|
George W. Edwards, Jr. |
|
|
199,231,089 |
|
|
|
2,628,492 |
|
Joel S. Hoffman |
|
|
199,440,955 |
|
|
|
2,418,626 |
|
Andrew McNally IV |
|
|
197,850,958 |
|
|
|
4,008,623 |
|
Daniel J. Meyer |
|
|
199,432,171 |
|
|
|
2,427,410 |
|
Timothy H. Powers |
|
|
199,511,032 |
|
|
|
2,348,549 |
|
G. Jackson Ratcliffe |
|
|
199,391,935 |
|
|
|
2,467,646 |
|
Richard J. Swift |
|
|
199,953,488 |
|
|
|
1,906,093 |
|
Daniel S. Van Riper |
|
|
199,919,594 |
|
|
|
1,939,987 |
|
2. |
|
PricewaterhouseCoopers LLP was ratified as independent registered public accountants to
examine the annual financial statements for the Company for the year 2006 receiving
200,572,331 affirmative votes, being a majority of the votes cast on the matter all voting as
a single class, with 1,003,838 negative votes and 283,412 abstained. |
3. |
|
The proposal relating to reapproval of the Companys Senior Executive Incentive Compensation
Plan, which appeared on pages 29 to 31 of the proxy statement, dated March 15, 2006, which
proposal is incorporated herein by reference, has been approved with 193,954,891 affirmative
votes, being a majority of the votes cast on the matter all voting as a single class (and
representing a majority of the votes entitled to be cast), with 6,758,982 negative votes and
1,145,708 votes abstained. |
32
ITEM 6. EXHIBITS
EXHIBITS
|
|
|
Number |
|
Description |
31.1*
|
|
Certification of Chief Executive Officer Pursuant to Item
601(b)(31) of Regulation S-K, as Adopted Pursuant to Section 302 of
the Sarbanes Oxley Act of 2002. |
|
31.2*
|
|
Certification of Chief Financial Officer Pursuant to Item
601(b)(31) of Regulation S-K, as Adopted Pursuant to Section 302 of
the Sarbanes Oxley Act of 2002. |
|
32.1*
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
SarbanesOxley Act of 2002. |
|
32.2*
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes
Oxley Act of 2002. |
33
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
HUBBELL INCORPORATED |
|
|
|
Dated: August 4, 2006 |
|
|
|
|
|
/s/ David G. Nord
|
|
/s/ Gregory F. Covino |
|
|
|
David G. Nord
|
|
Gregory F. Covino |
Senior Vice President and Chief Financial Officer
|
|
Vice President, Controller |
|
|
(Chief Accounting Officer) |
34
EX-31.1
Exhibit 31.1
I, Timothy H. Powers, Chairman of the Board, President and Chief Executive Officer of Hubbell
Incorporated, certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Hubbell Incorporated (the
registrant). |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and |
|
|
d) |
|
Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
5. |
|
The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
August 4, 2006
|
|
|
/s/ Timothy H. Powers
Timothy H. Powers
Chairman of the Board, President and Chief Executive Officer
|
|
|
EX-31.2
Exhibit 31.2
I, David G. Nord, Senior Vice President and Chief Financial Officer of Hubbell Incorporated,
certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Hubbell Incorporated (the
registrant). |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and |
|
|
d) |
|
Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
5. |
|
The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
August 4, 2006
|
|
|
/s/ David G. Nord
David G. Nord
Senior Vice President and Chief Financial Officer
|
|
|
EX-32.1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hubbell Incorporated (the Company) on Form 10-Q for
the period ending June 30, 2006 as filed with the Securities and Exchange Commission on the date
hereof (the Report), I, Timothy H. Powers, Chairman of the Board, President and Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:
(1) |
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of
the Securities Exchange Act of 1934, as amended; and |
|
(2) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
|
|
|
/s/ Timothy H. Powers
Timothy H. Powers
Chairman of the Board, President and Chief Executive Officer
August 4, 2006
|
|
|
A signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.
EX-32.2
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Hubbell Incorporated (the Company) on Form 10-Q for
the period ending June 30, 2006 as filed with the Securities and Exchange Commission on the date
hereof (the Report), I, David G. Nord, Senior Vice President and Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley
Act of 2002, that:
(1) |
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of
the Securities Exchange Act of 1934, as amended; and |
(2) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
|
|
|
/s/ David G. Nord
David G. Nord
Senior Vice President and Chief Financial Officer
August 4, 2006
|
|
|
A signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.