(HUBBELL LOGO)
Date: April 20, 2006 NEWS RELEASE
For Release: IMMEDIATELY
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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 FIRST QUARTER
SALES UP 18%, EARNINGS OF $.65 PER DILUTED SHARE
ORANGE, CT. (April 20, 2006) -- Hubbell Incorporated (NYSE: HUBA, HUBB) today
reported first quarter earnings per share of $.65, an increase of 41% compared
to $.46 in the first quarter of 2005. Sales in the quarter were $573.0 million,
an increase of 18% compared to sales of $487.6 million reported in the first
quarter of 2005. Net income of $39.7 million was 38% higher compared to $28.8
million in the first quarter of 2005.
Year-over-year sales and profit comparisons for the quarter include pre-tax
expense of $2.7 million or $.03 per diluted share for stock-based compensation
for the first quarter of 2006, a pre-tax charge of $4.6 million or $.05 per
diluted share for transactional expenses in the first quarter of 2005, and the
impact of acquisitions completed in the second and third quarters of 2005 which
contributed 3 percentage points of the net sales increase and approximately $.02
of diluted earnings per share.
Cash flow from operations was $16.5 million compared to $1.1 million in the
first quarter of 2005 primarily due to overall higher net income. Capital
expenditures increased quarter-over-quarter primarily due to investments in new
products. In addition during the first quarter, the Company repurchased 760,000
shares of its stock for $32.9 million.
-continued-
OPERATIONS REVIEW
"We are very pleased with our first quarter performance," said Timothy H.
Powers, Chairman, President, and Chief Executive Officer. "Most of Hubbell's
markets have been strong to start the year and our multi-year initiatives gained
traction. This was most apparent at the Power Systems and Industrial Technology
Segments where accomplishments in lean manufacturing, low cost sourcing, and
acquisitions leveraged positive trends in underlying markets.
"Positive market trends were also apparent in our Electrical Segment's markets,"
Powers added, "as sales rose by 11% and order input increased at an even greater
rate. As expected, and as we've noted in recent public presentations, the
Segment's margins were lower year-over-year principally in our Wiring Systems
and Lighting businesses resulting from production and delivery inefficiencies
and product outsourcing.
"Important for Hubbell's long-term growth was the third SAP implementation
completed in early April. Building on our experience in past `go-lives' -
especially the most recent success in the Lighting and Electrical Products
businesses - the Power Systems implementation is, thus far, working well. We now
have 75% of the Company `live' on the system. The final SAP implementation in
our domestic operations is scheduled for October 2006, at Industrial Technology
and the remaining Lighting operations."
SEGMENT REVIEW
Sales for the Electrical Segment were $391.1 million, an increase of 11% while
operating income was $31.4 million, comparable to last year. Each of the three
businesses in the Segment - Wiring Systems, Electrical Products and Lighting -
reported higher sales and double-digit rates of new order input. Each of the
three also reported steady progress in addressing specific issues that have
lowered profitability.
- At Wiring Systems, production and delivery inefficiencies are on
track for resolution over the next several months. At the same time,
the recently introduced metal raceway line has received good market
acceptance and is ahead of plan for sales.
- Hubbell Lighting reported volume improvements in both its stock and
project Commercial and Industrial fixtures businesses. All five
regions of the country reported higher sales. Residential
-continued-
fixture volume was also positive year-over-year despite the housing
market slowing moderately from its record pace of 2005. Business
integration and streamlining activities continued to impact
profitability in the quarter. Production transfers as well as office
relocations have resulted in costs of duplicate facilities,
increased logistics costs, and lower productivity levels. Production
transfers are expected to be substantially completed by year-end
2006.
- Hubbell Electrical Products continues to contend with material cost
increases - steel prices increased again on April 1 - but these
operations are effectively managing toward cost/price parity.
Selective selling price increases and a focus on internal
efficiencies and cost reductions are all contributing. The market
for harsh and hazardous application products was especially strong
during the quarter.
Sales for the Power Systems Segment rose by 34% to $132.3 million, operating
income nearly doubled to $20.5 million, and operating margin exceeded 15%.
Strong order input across all of the Segment's businesses reflected more robust
capital investments by the utility industry. Leveraging that volume growth into
substantially higher profitability was one of the Segment's operating
achievements. Lean manufacturing advances are helping to eliminate unnecessary
capacity internally while effective pricing actions to counter continued cost
increases remained in the forefront. The Segment's recent acquisition in Brazil
- - Delmar Manufacturing - also contributed to higher year-over-year sales and
operating profit.
The Industrial Technology Segment added another quarter of growth with sales of
$49.6 million up 40% and operating income of $8.7 million up by 78%. Every one
of the Segment's diverse businesses reported substantial increases in sales and
profit including two acquisitions completed in the second half of 2005 which
contributed approximately half of the sales increase. Particular strength was
noted in the offshore oil and energy markets and the global high voltage test
market. All are expected to exhibit continuing strength.
SUMMARY AND OUTLOOK
"The quarter exceeded our expectations throughout Hubbell's operations," Powers
added. "We anticipated lower margins in the first quarter in our Electrical
Segment as we began this year of peak investment and change. The Lighting
streamlining, a major new product introduction, and the domestic SAP
implementation
-continued-
are expected to be substantially completed this year. Each requires considerable
investment in time and money. Each should prove to be well worth the effort.
"We also expected continued strength in markets served by Power Systems and
Industrial Technology, and that was the case. Both Segments are demonstrating
their operating efficiencies by reaching our interim strategic goal of 15%+
operating margins. Those results are testimony to the effectiveness of our
initiatives.
"While the economic environment is generally positive, and our programs are on
schedule, much remains to be done in 2006. We have a final domestic SAP
implementation, more Lighting streamlining, and continuing challenges in
material and energy costs. As a result, we are maintaining our full year 2006
earnings per share guidance in the range of $2.60 to $2.80."
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", "should", "guidance", "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;
resolution of production and delivery inefficiencies; 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 system initiative
-continued-
and streamlining 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; competition; and other
factors described in our Securities and Exchange Commission filings, including
the "Business" and "Risk Factors" sections in the Annual Report on Form 10-K for
the year ended December 31, 2005.
Hubbell Incorporated is an international manufacturer of quality electrical and
electronic products for commercial, industrial, residential, utility, and
telecommunications markets. With 2005 revenues of $2.1 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
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
(IN MILLIONS, EXCEPT PER SHARE DATA)
----------- -----------
2006 2005
----------- -----------
NET SALES $ 573.0 $ 487.6
COST OF GOODS SOLD 414.5(1) 350.9
SELLING & ADMINISTRATIVE EXPENSES 99.1 92.4 (2)
SPECIAL CHARGES 1.5 1.9
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TOTAL OPERATING INCOME 57.9 42.4
OPERATING INCOME AS A % OF NET SALES 10.1% 8.7%
INTEREST EXPENSE, NET (1.9) (2.8)
OTHER INCOME, NET 0.3 0.1
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INCOME BEFORE INCOME TAXES 56.3 39.7
PROVISION FOR INCOME TAXES 16.6 10.9
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NET INCOME $ 39.7 $ 28.8
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EARNINGS PER SHARE:
BASIC $ 0.66 $ 0.47
DILUTED $ 0.65 $ 0.46
AVERAGE SHARES OUTSTANDING:
BASIC 60.5 61.5
DILUTED 61.2 62.7
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(1) 2006 COST OF GOODS SOLD INCLUDES SPECIAL CHARGES OF $0.2 FOR ELECTRICAL
SEGMENT STREAMLINING.
(2) 2005 SELLING & ADMINISTRATIVE EXPENSES INCLUDES $4.6 OF TRANSACTIONAL
EXPENSES IN SUPPORT OF THE COMPANY'S STRATEGIC GROWTH INITIATIVES.
HUBBELL INCORPORATED
SEGMENT INFORMATION
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
(IN MILLIONS)
----------- -----------
2006 2005
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NET SALES
ELECTRICAL $ 391.1 $ 353.4
POWER 132.3 98.7
INDUSTRIAL TECHNOLOGY 49.6 35.5
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TOTAL NET SALES $ 573.0 $ 487.6
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OPERATING INCOME
ELECTRICAL $ 33.1 $ 33.3
SPECIAL CHARGES (1.7) (1.9)
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TOTAL ELECTRICAL 31.4 31.4
POWER 20.5 10.7
INDUSTRIAL TECHNOLOGY 8.7 4.9
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SUBTOTAL 60.6 47.0
STOCK-BASED COMPENSATION (2.7) -
UNUSUAL ITEM - (4.6) (1)
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TOTAL OPERATING INCOME $ 57.9 $ 42.4
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- ----------
(1) 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
CONDENSED CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
(UNAUDITED)
MARCH 2006 DECEMBER 2005
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ASSETS
CASH AND CASH EQUIVALENTS $ 63.7 $ 110.6
SHORT-TERM INVESTMENTS 106.3 121.3
ACCOUNTS RECEIVABLE, NET 355.8 310.4
INVENTORIES, NET 259.3 237.1
DEFERRED TAXES AND OTHER 45.8 40.7
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TOTAL CURRENT ASSETS 830.9 820.1
PROPERTY, PLANT AND EQUIPMENT, NET 272.3 267.8
INVESTMENTS 85.4 78.8
GOODWILL 351.4 351.5
INTANGIBLE ASSETS AND OTHER 151.2 148.8
------------- -------------
TOTAL ASSETS $ 1,691.2 $ 1,667.0
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
SHORT-TERM DEBT $ 20.3 $ 29.6
ACCOUNTS PAYABLE 185.5 159.5
ACCRUED SALARIES, WAGES AND EMPLOYEE BENEFITS 34.8 41.4
ACCRUED INCOME TAXES 29.9 20.0
DIVIDENDS PAYABLE 20.0 20.2
OTHER ACCRUED LIABILITIES 95.9 89.8
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TOTAL CURRENT LIABILITIES 386.4 360.5
LONG-TERM DEBT 199.2 199.2
OTHER NON-CURRENT LIABILITIES 111.4 109.2
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TOTAL LIABILITIES 697.0 668.9
SHAREHOLDERS' EQUITY 994.2 998.1
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,691.2 $ 1,667.0
============= =============
HUBBELL INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
(IN MILLIONS)
----------- -----------
2006 2005
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 39.7 $ 28.8
DEPRECIATION AND AMORTIZATION 12.9 12.0
STOCK-BASED COMPENSATION 2.7 -
CHANGES IN WORKING CAPITAL (38.8) (44.1)
OTHER, NET - 4.4
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16.5 1.1
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CASH FLOWS FROM INVESTING ACTIVITIES
CAPITAL EXPENDITURES (17.2) (13.0)
ACQUISITION OF BUSINESS, NET OF CASH ACQUIRED - (5.5)
NET PROCEEDS FROM INVESTMENTS 8.1 18.9
OTHER, NET 0.6 1.5
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NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (8.5) 1.9
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
PAYMENT OF SHORT-TERM DEBT (9.1) -
PAYMENT OF DIVIDENDS (20.2) (20.2)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 6.1 12.3
ACQUISITION OF COMMON SHARES (32.9) -
OTHER, NET 1.1 -
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (55.0) (7.9)
----------- -----------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 0.1 (0.3)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (46.9) (5.2)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 110.6 139.9
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END OF PERIOD $ 63.7 $ 134.7
=========== ===========
CERTAIN PRIOR YEAR AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM WITH THE CURRENT
YEAR PRESENTATION.