[HUBBELL COMPANY LOGO]
Date: January 19, 2006 NEWS RELEASE
For Release: IMMEDIATELY DRAFT (1/18/06@5:10PM)
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HUBBELL INCORPORATED
584 Derby-Milford Road
P. O. Box 549
Orange, CT 06477
203-799-4100
Contact: Thomas R. Conlin
HUBBELL REPORTS HIGHER RESULTS IN
FOURTH QUARTER, FULL YEAR 2005
ORANGE, CT. (January 19, 2006) -- Hubbell Incorporated (NYSE: HUBA, HUBB) today
reported improved operating results for the fourth quarter and full year ended
December 31, 2005.
Sales in the fourth quarter of 2005 rose 7% to $535.7 million compared to
$499.7 million reported in the equivalent period of 2004. Sales for the full
year rose 6% to $2.11 billion compared to $1.99 billion reported for 2004.
Acquisitions completed in the second and third quarters of 2005 contributed
approximately 3 points and 1 point to the fourth quarter and annual percentage
increases, respectively.
Net income in the fourth quarter of 2005 was 9% higher at $52.1 million versus
the $47.8 million reported last year. Diluted earnings per share rose by 9% to
$.84 as compared to $.77 reported in the fourth quarter of 2004. Both periods
included items that affect the quarter-over-quarter comparison:
o The fourth quarter of 2005 included a benefit of $.18 per diluted
share related to the completion of federal tax audits for 2002 and
2003 while the fourth quarter of 2004 included a benefit of $.16 per
share for completion of audits through 2001.
-continued-
o The fourth quarter of 2005 included special charges of $5.1 million,
pre-tax, or $.05 per diluted share versus fourth quarter 2004
special charges of $2.8 million, pre-tax, or $.03 per diluted share
for costs related to Electrical Segment streamlining.
o The fourth quarter of 2005 included a benefit of $4.9 million,
pre-tax, or $.05 per diluted share from the sale of a building in
the Electrical Segment.
Net income for the full year 2005 was 7% higher at $165.1 million compared to
$154.7 million reported last year. Diluted earnings per share were 6% higher at
$2.67 versus $2.51 reported for 2004. Included in these results were:
o In 2005, special charges of $10.9 million, pre-tax, or $.12 per
share versus 2004 special charges of $16.7 million, pre-tax, or $.18
per share for Electrical Segment streamlining expenses.
o In addition to the building sale gain, 2005 included transactional
expenses of $4.6 million, pre-tax, or $.05 per diluted share
recorded in the first quarter in support of the Company's strategic
growth initiatives.
Cash flow from operations in 2005 was $186.7 million compared to $184.1 million
for the prior year. Cash provided by operations was primarily driven by lower
working capital levels offset by the timing of tax payments. Capital spending
increased to $73.4 million compared with $39.1 million in the prior year due to
higher investments in new equipment, new product support and capitalized Hubbell
2006 business system costs.
OPERATIONS REVIEW
"This past year was especially challenging," said Timothy H. Powers, Chairman,
President, and Chief Executive Officer. "Non-residential construction -
Hubbell's largest single market -- had lower volume year-over-year through much
of 2005, and finished flat to 2004. The effort to recover higher costs of raw
materials and energy through product pricing continued throughout the year.
These factors negatively impacted the Electrical Segment resulting in flat sales
and lower operating profit year-over-year."
"Hubbell's market diversity provided balance to our results," Powers added. "The
Power Systems Segment had an 18% sales increase and more than 60% higher
operating profits in 2005 versus the prior year. The
-continued-
Segment's position as a leading supplier to North American utilities and a
rapidly growing international business both contributed to the year's success.
Similarly, Hubbell Industrial Technology recorded another strong year with sales
up by 17% and operating profits up by 39%."
"We remained focused on our strategic initiatives and made progress in each.
Specifically, our lean manufacturing initiative contributed to higher profit
results at Power Systems and Industrial Technology. In addition, acceleration of
new product development brought Hubbell's largest product introduction in years
with 450 sku's of a new metal raceway product family. The Hubbell 2006 business
system initiative accomplished another successful `go-live' during the year with
half of the Company now on-line with this new business system. Streamlining in
our Electrical Segment, low cost country sourcing, and acquisition initiatives
also advanced during 2005."
SEGMENT REVIEW
The comments and year-over-year percentage comparisons in this segment review
are based on fourth quarter results in 2005 and 2004.
Electrical Segment sales were even with 2004 but operating profit declined by
16%. Operating profit in 2005 included the gain on the building sale offset by
special charges. Wiring Systems businesses reported modestly higher sales in the
U.S. and Canada across most product categories, but total operating profit
declined due to higher costs and factory inefficiencies. In addition, the
Segment experienced soft order input from non-residential construction markets
affecting sales and operating profits within commercial and industrial lighting
fixture and rough-in products. Positive performances continued at operations
supplying products for harsh and hazardous applications as well as in
residential lighting fixtures.
Hubbell's Power Systems Segment reported a 25% increase in sales and a doubling
of operating profit from growing demand both domestically and internationally.
Continuing orders from utilities in storm-affected areas and contributions from
acquisitions represented approximately one-half of the volume increase. The
profit performance was a result of multiple factors including: higher volume,
price realization, acquisition contributions, and higher productivity.
The Industrial Technology Segment reported another very solid performance with
revenue and operating profit increasing by 32% and 49%, respectively. A strong
industrial economy especially in the basic materials sector supplied by this
Segment formed the basis for success. More technology-oriented products
-continued-
such as high voltage test and instrumentation as well as specialty
communications equipment also turned in higher results with double-digit
improvements in sales and operating profits.
SUMMARY AND OUTLOOK
"While some markets were not as strong in 2005 as we expected, and we had
continuing challenges in meeting our internal goals at some businesses, the
Company's performance in 2005 improved over our very strong 2004 results,"
Powers added.
"Just as important to 2005 was another year of achievement in our strategic
initiatives: lean, restructuring, low cost sourcing, our new enterprise-wide
business system, accelerating new product development, and others. As we make
improvements through these initiatives, we identify new opportunities to further
improve our productivity levels and processes."
"Some of these initiatives are moving toward completion over the next year.
Hubbell 2006 -- our new business system -- has two implementation stages
scheduled: April and October of 2006. Once these are completed, Hubbell's
investment is expected to return savings in 2007 and beyond. Streamlining
actions within Hubbell's Lighting operations will be substantially complete in
2006 providing another source of improving profitability."
"The economic environment in 2006 is expected to be generally positive," Powers
concluded, "with most of our base markets forecast to grow by low to mid-single
digits including non-residential construction, utility, and industrial
components. Residential construction appears to be the principal market where
contraction is likely. As a result, we expect another year of growth for Hubbell
with sales increasing by 5-7% and earnings per share for 2006 in the range of
$2.60 to $2.80 including approximately $.11 per diluted share for stock-based
compensation and a forecasted tax rate of 29.5%."
-continued-
Certain statements contained herein may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These include statements about capital resources, performance and results of
operations and are based on the Company's reasonable current expectations. These
statements may be identified by the use of forward-looking words or phrases such
as "may", "potential", "plan", "could", "expect", "expected", "uncertain",
"goal", "probably", "likely", "forecast", and variations thereof and similar
terms. Such forward-looking statements involve numerous assumptions, known and
unknown risks, uncertainties and other factors which may cause actual and future
performance or achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to:
achieving sales levels to fulfill revenue expectations; unexpected costs or
charges, certain of which may be outside the control of the Company; expected
benefits of process improvement and other lean initiatives; the effect and costs
of the ongoing Hubbell 2006 business information system initiative and
restructuring programs; the availability and costs of raw materials and
purchased components; realization of price increases; the ability to achieve
projected levels of efficiencies and cost reduction measures; ability to
integrate acquisitions with our core business and forecast future sales
accretion; general economic and business conditions; and competition; and other
factors described in our Securities and Exchange Commission filings, including
the "Business" Section in the Annual Report on Form 10-K for the year ended
December 31, 2004.
Hubbell Incorporated is an international manufacturer of quality electrical and
electronic products for commercial, industrial, residential, utility, and
telecommunications markets. With 2005 revenues of $2.11 billion, Hubbell
Incorporated operates manufacturing facilities in North America, Puerto Rico,
Mexico, Italy, Switzerland, Brazil, and the United Kingdom, participates in a
joint venture in Taiwan, and maintains sales offices in Singapore, Hong Kong,
South Korea, People's Republic of China, and the Middle East. The corporate
headquarters is located in Orange, CT.
# # # # #
(Financial Schedules are Attached.)
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
(UNAUDITED) (UNAUDITED) (UNAUDITED)
2005 2004 2005 2004
--------------- --------------- -------------- --------------
NET SALES $ 535.7 $ 499.7 $ 2,104.9 $ 1,993.0
Cost of goods sold 384.7 358.2 1,509.9 (1) 1,431.1 (1)
--------------- --------------- -------------- --------------
Gross Profit 151.0 141.5 595.0 561.9
Selling & administrative expenses 87.7 (2) 86.6 357.9 (2)(3) 333.9
Special charges 5.1 2.8 10.3 15.4
--------------- --------------- -------------- --------------
Total Operating Income 58.2 52.1 226.8 212.6
INVESTMENT INCOME 2.5 2.9 9.5 6.5
Interest expense (3.9) (5.2) (19.3) (20.6)
Other expense, net (1.2) (1.4) (1.3) (1.2)
--------------- --------------- -------------- --------------
Total Other Expense, net (2.6) (3.7) (11.1) (15.3)
--------------- --------------- -------------- --------------
Income Before Income Taxes 55.6 48.4 215.7 197.3
Provision for income taxes (4) 3.5 0.6 50.6 42.6
--------------- --------------- -------------- --------------
NET INCOME $ 52.1 $ 47.8 $ 165.1 $ 154.7
=============== =============== ============== ==============
Earnings Per Share - Diluted $ 0.84 $ 0.77 $ 2.67 $ 2.51
=============== =============== ============== ==============
Average Shares Outstanding - Diluted 61.7 62.1 61.8 61.6
(1) Full year Cost of goods sold includes special charges of $0.7 and $1.3 for
2005 and 2004, respectively, related to Electrical Segment streamlining.
(2) Fourth quarter and full year Selling & administrative expenses includes $4.9
of gain on sale of a building.
(3) 2005 full year Selling & administrative expenses includes $4.6 of
transactional expenses in support of the Company's strategic growth initiatives.
(4) 2005 and 2004 fourth quarter and full year Provision for income taxes
includes benefits of $10.8 and $10.2, respectively, for completion of IRS
examinations.
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF EARNINGS BY SEGMENT
(in millions, except per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
(UNAUDITED) (UNAUDITED) (UNAUDITED)
2005 2004 2005 2004
NET SALES
Electrical $ 370.4 $ 369.9 $ 1,496.8 $ 1,476.8
Power 120.4 95.9 455.6 386.2
Industrial Technology 44.9 33.9 152.5 130.0
---------------- --------------- ---------------- ----------------
Total Net Sales $ 535.7 $ 499.7 $ 2,104.9 $1,993.0
================ =============== ================ ================
Operating Income
Electrical $ 38.1 (1) $ 41.9 $ 153.1 (1) $ 173.4
Special charges (5.1) (2.8) (10.9) (16.7)
---------------- --------------- ---------------- ----------------
Total Electrical 33.0 39.1 142.2 156.7
Power 19.4 9.1 68.8 41.2
Industrial Technology 5.8 3.9 20.4 14.7
---------------- --------------- ---------------- ----------------
Subtotal 58.2 52.1 231.4 212.6
Unusual item - - (4.6) (2) -
---------------- --------------- ---------------- ----------------
Total Operating Income 58.2 52.1 226.8 212.6
---------------- --------------- ---------------- ----------------
(1) Fourth quarter and full year 2005 includes $4.9 of gain on sale of a
building, included in Selling & administrative expenses.
(2) 2005 Unusual item of $4.6 represents transactional expenses in support of
the Company's strategic growth initiatives, included in Selling & administrative
expenses.
HUBBELL INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in millions)
(UNAUDITED)
DECEMBER 2005 DECEMBER 2004
--------------------- ---------------------
ASSETS
ASSETS
Cash and cash equivalents $ 111.6 $ 139.9
Short-term investments 121.3 215.6
Accounts receivable (net) 310.4 288.5
Inventories (net) 237.1 216.1
Deferred taxes and other 40.7 46.3
--------------------- ---------------------
TOTAL CURRENT ASSETS 821.1 906.4
Property, plant and equipment (net) 267.8 261.8
Investments 78.8 65.7
Goodwill 351.5 326.6
Intangible assets and other 148.8 95.9
--------------------- ---------------------
TOTAL ASSETS $ 1,668.0 $ 1,656.4
===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term debt $ 29.6 $ 99.9
Accounts payable 159.5 146.1
Accrued salaries, wages and employee benefits 41.4 46.8
Accrued income taxes 19.6 24.4
Dividends payable 20.2 20.2
Other accrued liabilities 89.8 85.9
--------------------- ---------------------
TOTAL CURRENT LIABILITIES 360.1 423.3
Long-term debt 199.2 199.1
Other non-current liabilities 109.2 89.7
--------------------- ---------------------
TOTAL LIABILITIES 668.5 712.1
SHAREHOLDERS' EQUITY 999.5 944.3
--------------------- ---------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,668.0 $ 1,656.4
===================== =====================
Certain prior year amounts have been reclassified to conform with the current
year presentation.
HUBBELL INCORPORATED
CONDENSED CONSOLIDATED CASH FLOWS FROM OPERATING ACTIVITIES
AND SUPPLEMENTARY CASH FLOW INFORMATION
(in millions)
TWELVE MONTHS ENDED
DECEMBER 31
(UNAUDITED)
--------------- ---------------
2005 2004
--------------- ---------------
OPERATING ACTIVITIES
Net Income $ 165.1 $ 154.7
Depreciation and amortization 52.7 48.9
Non-cash special charges 1.9 8.3
Changes in working capital (26.5) (37.1)
Contribution to domestic, qualified, defined benefit pension plans (28.0) (25.0)
Other, net 21.5 34.3
--------------- ---------------
Net cash provided by operating activities 186.7 184.1
Supplementary Cash Flow Information
Capital expenditures $ (73.4) $ (39.1)
Acquisition of businesses (54.3) -
Acquisition of common shares (62.7) (6.2)
Borrowings under short-term bank loans 29.6 -
Repayment of senior notes (100.0) -
Certain prior year amounts have been reclassified to conform with the current
year presentation.