Ex 99.1
(HUBBELL LOGO)
Date: July 20, 2006 NEWS RELEASE
For Release: IMMEDIATELY
HUBBELL INCORPORATED
584 Derby-Milford Road
P. O. Box 549
Orange, CT 06477
203-799-4100
Contact: Thomas R. Conlin
HUBBELL REPORTS SECOND QUARTER
SALES UP 16%, EARNINGS OF $.67 PER DILUTED SHARE
ORANGE, CT. (July 20, 2006) -- Hubbell Incorporated (NYSE: HUBA, HUBB) today
reported earnings per share of $.67, an increase of 16% compared to $.58
reported in the second quarter of 2005.
Sales for the quarter were $603.2 million, an increase of 16% over sales of
$520.5 million reported for the second quarter of 2005. Net income of $41.6
million was 17% higher compared to $35.7 million reported for the second quarter
of 2005.
For the first six months of 2006, sales were $1,176.2 million, an increase of
17% over the same period last year. Net income for the first six months was
$81.3 million or $1.32 per diluted share compared to $64.5 million or $1.04 per
diluted share, an increase of 27% in diluted earnings per share over last year's
first six months.
The Strongwell-Lenoir City acquisition completed on June 1, 2006, and
acquisitions completed in 2005 contributed four percentage points of the
year-over-year sales comparison for both the second quarter and first half of
2006, and contributed to higher operating profit. Profit comparisons also
include $2.7 million or $.03 per diluted share for stock-based compensation
costs recorded in the second quarter of 2006, and $5.4 million or $.05 per
diluted share recorded for the first half of 2006.
Cash flow from operations was $46.0 million in the first six months of 2006
compared to $50.7 million in the first half of 2005 including the impact of
higher working capital requirements in support of the significant
-continued-
volume growth in 2006. Capital expenditures were $38.1 million in the first six
months of 2006 compared to $28.6 in the same period of the prior year with the
increase primarily due to spending on the new Lighting headquarters. In
addition, the Company repurchased approximately 963,000 shares of its stock
during the first six months of 2006 for $42.5 million.
OPERATIONS REVIEW
"Hubbell reported another quarter of solid performance," said Timothy H. Powers,
Chairman, President, and Chief Executive Officer. "We continue to see strength
in most of our markets including commercial construction, maintenance and repair
applications, and in utility products. Only residential construction appears to
be declining as interest rate increases have had an impact.
"Two other factors in the quarter deserve note," Powers added. "First, as we
progress through this peak year of initiatives and change, Electrical segment
profitability is beginning the improvement that we predicted. Our production and
delivery inefficiencies are being steadily resolved contributing to improved
operating margin percentages despite SAP implementation and new product launch
costs.
"Secondly, we completed our third SAP implementation encompassing the Power
Systems segment and a number of additional Lighting operating units. The
implementation went well and, though the higher costs associated with the
implementation at Power Systems slightly reduced its operating margins for the
quarter, we now have 75% of the Company 'live' on the system. The next
implementation, scheduled for October 2006, will substantially complete the
domestic implementation."
SEGMENT REVIEW
Sales for the Electrical segment were 11% higher at $419.2 million while
operating income rose by 15% to $37.3 million. Each of the three businesses
within the segment -- Wiring Systems, Lighting, and Electrical Products -- had
higher sales compared to the equivalent period of the prior year with Wiring
Systems and Lighting reporting double-digit comparisons. Most of the diverse
markets served by the segment continued to exhibit positive trends with good
order input. Operating profits reflect improved manufacturing production and
efficiency levels due to higher volumes, offset by a continuation of the issues
noted in the first quarter including new product investments in Wiring Systems,
higher costs associated with SAP, and raw material, freight and energy cost
increases throughout the segment.
-continued-
As expected, delivery performance and manufacturing efficiency improved during
the quarter, particularly at the Wiring Systems facilities. Improvements in
manufacturing efficiency within the fluorescent lighting fixture business were
made on schedule toward our goal of year-end resolution. Sales and marketing
personnel were added for the Wiring Systems metal raceway product line which
continued to exceed sales expectations since its introduction in late 2005.
Additional investments were made for development, tooling, and marketing for new
product introductions.
SAP implementation costs were higher in the quarter as the core design of the
system has been completed and more of the costs incurred are recorded as expense
versus capital, including support for current users.
Lastly, the segment experienced significantly higher costs in each business for
materials including steel, aluminum, copper, and zinc and components ranging
from lighting ballasts to brass connectivity devices. During the quarter,
selling price increases were announced and implemented to counter these and
other cost increases which, although not a meaningful benefit to this quarter's
results, are expected to begin to mitigate these higher costs in the third
quarter.
The Power Systems segment reported sales of $134.3 million, a 22% increase over
the prior year while operating profit rose by 17% to $19.0 million. The
Strongwell-Lenoir City acquisition completed on June 1, 2006, and the Delmar
acquisition in Brazil completed in July 2005, added $14 million in sales and
nearly $3 million in operating profit to the segment's results in the quarter.
The second quarter also included additional costs associated with the SAP
implementation and cost increases for materials in excess of price realization.
The Industrial Technology segment added another quarter of exceptional growth
with sales up by 45%, operating profit up by more than 85%, and operating margin
rising by over three percentage points to 15.7%. Strength in the segment's
industrial markets, a leading position in specialty communications products, and
2005 acquisitions -- which contributed more than one-third of sales growth - -
all contributed to the segment's record results.
SUMMARY AND OUTLOOK
"We're pleased with our performance during the quarter, not only in our results,
but also in our accomplishments. We've reduced our supply chain difficulties at
Wiring Systems, moved forward as
-continued-
scheduled in addressing production issues within the fluorescent lighting
fixture operations, and completed the third SAP implementation," Powers said.
"With the exception of residential construction, our markets remain positive,
and we expect to continue to leverage our growth on that strength through the
second half of 2006. Accordingly, we are raising our projection for 2006 for
year-over-year sales growth to a range of 12-14%. Commodity and energy costs
remain a continuing challenge and we have our next SAP implementation scheduled
for October. Considering all of these factors and our actions to manage each, we
are also raising our guidance for 2006 fully diluted earnings per share to a
range of $2.75 to $2.90."
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", "projection", "guidance", "potential", "plan", "could", "expect",
"expected", "uncertain", "goal", "probably", "likely", and others. 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; general economic
and business conditions; 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, 2005.
-continued-
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
joint ventures in Taiwan and China, 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 JUNE 30 SIX MONTHS ENDED JUNE 30
(IN MILLIONS, (IN MILLIONS,
EXCEPT PER SHARE DATA) EXCEPT PER SHARE DATA)
-------------------------- ------------------------
2006 2005 2006 2005
------ ------ -------- --------
NET SALES $603.2 $520.5 $1,176.2 $1,008.1
COST OF GOODS SOLD 437.5 377.4(1) 852.0(1) 728.3(1)
SELLING & ADMINISTRATIVE
EXPENSES 102.9 88.0 202.0 180.4(2)
SPECIAL CHARGES 1.4 2.2 2.9 4.1
------ ------ -------- --------
TOTAL OPERATING INCOME 61.4 52.9 119.3 95.3
OPERATING INCOME AS A %
OF NET SALES 10.2% 10.2% 10.1% 9.5%
INTEREST EXPENSE, NET (2.2) (2.8) (4.1) (5.6)
OTHER INCOME, NET 0.5 -- 0.8 0.1
------ ------ -------- --------
INCOME BEFORE INCOME TAXES 59.7 50.1 116.0 89.8
PROVISION FOR INCOME TAXES 18.1 14.4 34.7 25.3
------ ------ -------- --------
NET INCOME $ 41.6 $ 35.7 $ 81.3 $ 64.5
====== ====== ======== ========
EARNINGS PER SHARE:
BASIC $ 0.68 $ 0.58 $ 1.34 $ 1.05
DILUTED $ 0.67 $ 0.58 $ 1.32 $ 1.04
AVERAGE SHARES OUTSTANDING:
BASIC 60.7 61.0 60.6 61.2
DILUTED 61.6 61.9 61.4 62.3
(1) COST OF GOODS SOLD INCLUDES SPECIAL CHARGES OF $0.2 FOR YEAR-TO-DATE 2006 AND $0.5
FOR THE SECOND QUARTER AND YEAR-TO-DATE 2005 RELATED TO 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 JUNE 30 SIX MONTHS ENDED JUNE 30
(IN MILLIONS) (IN MILLIONS)
-------------------------- ------------------------
2006 2005 2006 2005
------ ------ -------- --------
NET SALES
ELECTRICAL $419.2 $376.4 $ 810.3 $ 729.8
POWER 134.3 109.9 266.6 208.6
INDUSTRIAL TECHNOLOGY 49.7 34.2 99.3 69.7
------ ------ -------- --------
TOTAL NET SALES $603.2 $520.5 $1,176.2 $1,008.1
====== ====== ======== ========
OPERATING INCOME
ELECTRICAL $ 38.7 $ 35.2 $ 71.8 $ 68.5
SPECIAL CHARGES (1.4) (2.7) (3.1) (4.6)
------ ------ -------- --------
TOTAL ELECTRICAL 37.3 32.5 68.7 63.9
POWER 19.0 16.2 39.5 26.9
INDUSTRIAL TECHNOLOGY 7.8 4.2 16.5 9.1
------ ------ -------- --------
SUBTOTAL 64.1 52.9 124.7 99.9
STOCK-BASED COMPENSATION (2.7) -- (5.4) --
UNUSUAL ITEM -- -- -- (4.6)(1)
------ ------ -------- --------
TOTAL OPERATING INCOME $ 61.4 $ 52.9 $ 119.3 $ 95.3
------ ------ -------- --------
(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)
JUNE DECEMBER
2006 2005
-------- --------
ASSETS
CASH AND CASH EQUIVALENTS $ 48.4 $ 110.6
SHORT-TERM INVESTMENTS 21.3 121.3
ACCOUNTS RECEIVABLE, NET 377.1 310.4
INVENTORIES, NET 306.1 237.1
DEFERRED TAXES AND OTHER 45.0 40.7
-------- --------
TOTAL CURRENT ASSETS 797.9 820.1
PROPERTY, PLANT AND EQUIPMENT, NET 298.3 267.8
INVESTMENTS 58.6 78.8
GOODWILL 411.3 351.5
INTANGIBLE ASSETS AND OTHER 180.3 148.8
-------- --------
TOTAL ASSETS $1,746.4 $1,667.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
SHORT-TERM DEBT $ 8.8 $ 29.6
ACCOUNTS PAYABLE 205.7 159.5
ACCRUED SALARIES, WAGES AND EMPLOYEE BENEFITS 41.6 41.4
ACCRUED INCOME TAXES 21.5 20.0
DIVIDENDS PAYABLE 20.1 20.2
OTHER ACCRUED LIABILITIES 102.4 89.8
-------- --------
TOTAL CURRENT LIABILITIES 400.1 360.5
LONG-TERM DEBT 199.3 199.2
OTHER NON-CURRENT LIABILITIES 113.4 109.2
-------- --------
TOTAL LIABILITIES 712.8 668.9
SHAREHOLDERS' EQUITY 1,033.6 998.1
-------- --------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $1,746.4 $1,667.0
======== ========
HUBBELL INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30
(IN MILLIONS)
------------------------
2006 2005
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 81.3 $ 64.5
DEPRECIATION AND AMORTIZATION 26.9 24.4
STOCK-BASED COMPENSATION 5.4 --
TAX BENEFIT FROM EXERCISE OF STOCK OPTIONS (3.6) --
CHANGES IN WORKING CAPITAL (66.2) (36.7)
CONTRIBUTION TO DOMESTIC, QUALIFIED, DEFINED BENEFIT PENSION PLANS -- (10.0)
OTHER, NET 2.2 8.5
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 46.0 50.7
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
CAPITAL EXPENDITURES (38.1) (28.6)
ACQUISITION OF BUSINESS, NET OF CASH ACQUIRED (115.7) (5.5)
NET PROCEEDS FROM INVESTMENTS 119.8 106.0
OTHER, NET 1.5 2.9
------ ------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (32.5) 74.8
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
PAYMENT OF SHORT-TERM DEBT (20.9) --
PAYMENT OF DIVIDENDS (40.1) (40.5)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 23.5 14.7
ACQUISITION OF COMMON SHARES (42.5) (45.5)
TAX BENEFIT FROM EXERCISE OF STOCK OPTIONS 3.6 --
------ ------
NET CASH USED IN FINANCING ACTIVITIES (76.4) (71.3)
------ ------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 0.7 (0.8)
------ ------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (62.2) 53.4
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 110.6 139.9
------ ------
END OF PERIOD $ 48.4 $193.3
====== ======
CERTAIN PRIOR YEAR AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM WITH THE CURRENT
YEAR PRESENTATION.