[Hubbell Logo Here]
Date: October 25, 2007 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 THIRD QUARTER RESULTS:
SALES OF $652.7 MILLION, EARNINGS OF $1.10 PER DILUTED SHARE
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ORANGE, CT. (October 25, 2007) -- Hubbell Incorporated (NYSE: HUBA, HUBB) today
reported its operating results for the third quarter ended September 30, 2007.
Net sales in the third quarter were $652.7 million, an increase of 1% over the
level reported in the third quarter of 2006. Net income rose by 37% to $65.3
million and earnings per diluted share increased by 41% to $1.10 as compared to
$47.6 million and $.78, respectively, reported in the third quarter of 2006. A
lower tax rate benefitted earnings per diluted share by $.09 in the third
quarter of 2007 compared to the third quarter of 2006, primarily related to
favorable benefits from foreign operations and the finalization of our recently
filed 2006 federal tax return.
For the first nine months of 2007, net sales were $1.92 billion, an increase of
5% over the $1.83 billion reported for the same period last year. Net income for
the first nine months was $160.3 million, an increase of 24% compared to the
$128.9 million reported for the first nine months of 2006. Earnings per diluted
share of $2.68 improved 28% from $2.10 per diluted share reported for the same
period of 2006.
-continued-
Page 1
Acquisitions completed in 2006 contributed 1% of the sales increase in the third
quarter and 3% of the sales increase in the nine months' results. Taken
together, these acquisitions were accretive to profits in both 2007 periods.
Cash flow from operations was $221.2 million in the first nine months of 2007
compared to $82.9 million in the equivalent period of 2006. The increase is
primarily due to improved working capital performance, particularly inventory,
and higher profitability. Capital expenditures were $44.6 million in the first
nine months compared to $67.1 million in the equivalent period of 2006. In
addition, the Company has repurchased approximately 3.3 million shares of its
common stock for $173.5 million during the first nine months of 2007 compared to
1.7 million shares repurchased for $74.4 million during the first nine months of
2006.
On October 1, 2007, the Company acquired PCORE Electric Company, Inc. ("PCORE"),
which will join Hubbell's Power Systems segment. Based in LeRoy, NY, PCORE is a
leading manufacturer of high voltage condenser bushings used in the electric
utility infrastructure. With sales in 2006 of approximately $25 million, PCORE
is expected to be modestly accretive in 2008.
OPERATIONS REVIEW
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"At the beginning of 2007, we announced that our focus throughout the year would
be on price realization, cost containment, and productivity improvements," said
Timothy H. Powers, Chairman, President, and Chief Executive Officer of Hubbell.
"These are the three primary routes through which we plan to return Hubbell to
its historic levels of industry-leading profitability and performance. Our
reported results demonstrate that we have been effective in pursuing the
achievement of those goals.
-continued-
Page 2
"Our third quarter results built upon our improvements in the first two
quarters. More significant was Hubbell's profit performance which showed
substantial increases in net income and earnings per diluted share
year-over-year on sales which were similar with the prior year.
"Each of our business segments reported higher operating profit margins
year-over-year to provide a 240 basis point improvement for the Company as a
whole: net operating margin of 13.6% for the third quarter of 2007 compared to
11.2% for the same period in 2006.
"Our markets are generally consistent with our expectations. Order volume from
customers in non-residential construction and most industrial maintenance and
repair end-use markets continued at positive comparisons to the prior year.
Residential construction is still contracting and will likely continue to show
negative comparisons throughout next year. Some observers, concerned with the
continuing decline in residential markets, credit market uncertainties, and
other macro-indicators, have discussed an increased risk of further economic
slowing next year. That remains to be seen, but we will continue our focus on
price realization, cost containment, and improving productivity."
SEGMENT REVIEW
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The comments and year-over-year percentages in this segment review are based on
third quarter results in 2007 and 2006.
Electrical segment net sales were essentially flat with 2006 chiefly because of
continuing contraction of residential construction. As in the previous two
quarters of 2007, wiring systems reported positive sales comparisons versus the
prior year although the rates of improvement were more moderate in the third
quarter due in part to a quality issue related to a product which we believe was
resolved in October. Sales of products for harsh and hazardous applications
remained strong in the quarter. Even with the residential market downturn and
somewhat softer demand in other markets, the segment
-continued-
Page 3
reported a 25% improvement in operating profit and a 240 basis point increase in
operating profit margin.
Hubbell's Power Systems segment reported 2% lower net sales as softer demand
mainly from the distribution segment of the utility market, continued in the
third quarter. Multiple factors contributed to the reduction in demand: higher
than normal product inventories in the channel, no significant storm activity,
and residual effect of the soft housing market. Despite the softness in demand,
our focus on price realization and productivity resulted in a 6% increase in
operating profit for the segment.
The Industrial Technology segment had another quarter of excellent performance
with net sales up by 16%, operating profit 47% higher, and operating profit
margin 430 basis points above the prior year. An acquisition accounted for
three-quarters of the sales increase and approximately one-third of the
operating profit increase. With approximately half of its sales made
internationally, the segment is benefiting from strong economies overseas
providing strong demand for products in specialty communications, and industrial
and reel applications.
SUMMARY AND OUTLOOK
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"We've improved our operating profit margin in each sequential quarter so far in
2007," Powers added. "Up 310 basis points in the first quarter 2007 versus the
fourth quarter 2006, another 200 basis points in the second quarter, and an
additional 140 basis points in the third. We've accomplished that even with the
rapid decline of the residential market which is one of the largest single
markets which Hubbell serves.
-continued-
Page 4
"This accomplishment is the direct result of our initiatives over the past three
years: implementing our unified business system at most domestic operations,
restructuring of Hubbell Lighting, the extension of lean concepts, and
accelerated new product development. As a result of the strong third quarter
2007, we are revising our projections for the full year 2007: net sales are
expected to increase in the range of 5-6% above 2006 and earnings per diluted
share are now projected to be in the range of $3.35 -- $3.45. In addition, we
are striving to achieve operating profit margin improvement of 200 basis points.
We also expect full year operating cash flow, net of capital spending, to exceed
net income."
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. In
addition, all statements regarding anticipated growth or improvement in
operating results, anticipated market conditions, and economic recovery are
forward-looking. These statements may be identified by the use of
forward-looking words or phrases such as "progress", "leading", "achieving",
"continuing growth", "continues", "primarily", "plan", "expect", "anticipated,"
"expected", "expectations," "should continue", "striving", "uncertain", "goal",
"projected", "expected", "will likely", "forecast", "believe", 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 expected benefit
and effect of the 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
-continued-
Page 5
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, 2006.
Hubbell Incorporated is an international manufacturer of quality electrical and
electronic products for commercial, industrial, residential, utility, and
telecommunications markets. With 2006 revenues of $2.4 billion, Hubbell
Incorporated operates manufacturing facilities in the U.S., Canada, Puerto Rico,
Mexico, Italy, Switzerland, Brazil, Australia and the United Kingdom,
participates in joint ventures in Taiwan and the People's Republic of China, and
maintains sales offices in Singapore, Hong Kong, South Korea, the People's
Republic of China, Mexico, and the Middle East. The corporate headquarters is
located in Orange, CT.
# # # # #
(Financial Schedules are Attached.)
Page 6
HUBBELL INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
2007 2006 2007 2006
----------- ----------- ----------- -----------
NET SALES $652.7 $649.0 $1,919.2 $1,825.3
COST OF GOODS SOLD 458.1 468.1 1,364.3 1,320.1
SELLING & ADMINISTRATIVE EXPENSES 105.7 107.3 324.1 309.4
SPECIAL CHARGES - 0.7 - 3.6
----------- ----------- ----------- -----------
TOTAL OPERATING INCOME 88.9 72.9 230.8 192.2
OPERATING INCOME AS A % OF NET SALES 13.6% 11.2% 12.0% 10.5%
INTEREST EXPENSE, NET (3.5) (3.1) (11.5) (7.2)
OTHER INCOME (EXPENSE), NET 0.3 (1.6) 0.7 (0.8)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 85.7 68.2 220.0 184.2
PROVISION FOR INCOME TAXES 20.4 20.6 59.7 55.3
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NET INCOME $ 65.3 $ 47.6 $ 160.3 $ 128.9
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EARNINGS PER SHARE:
BASIC $ 1.12 $ 0.79 $ 2.71 $ 2.13
DILUTED $ 1.10 $ 0.78 $ 2.68 $ 2.10
AVERAGE SHARES OUTSTANDING:
BASIC 58.3 60.3 59.1 60.5
DILUTED 59.2 61.1 59.9 61.3
HUBBELL INCORPORATED
SEGMENT INFORMATION
(IN MILLIONS)
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
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2007 2006 2007 2006
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NET SALES
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ELECTRICAL $430.3 $431.8 $1,251.2 $1,242.2
POWER 156.3 160.3 477.0 426.9
INDUSTRIAL TECHNOLOGY 66.1 56.9 191.0 156.2
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TOTAL NET SALES $652.7 $649.0 $1,919.2 $1,825.3
=========== ========== =========== ===========
OPERATING INCOME
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ELECTRICAL $ 50.9 $ 41.4 $ 120.2 $ 109.4
SPECIAL CHARGES - (0.7) - (3.8)(1)
----------- ---------- ----------- -----------
TOTAL ELECTRICAL 50.9 40.7 120.2 105.6
POWER 24.6 23.1 74.1 61.4
INDUSTRIAL TECHNOLOGY 13.4 9.1 36.5 25.2
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TOTAL OPERATING INCOME $ 88.9 $ 72.9 $ 230.8 $ 192.2
=========== ========== =========== ===========
OPERATING INCOME AS A % OF NET SALES
- ------------------------------------
ELECTRICAL 11.8% 9.4% 9.6% 8.5%
POWER 15.7% 14.4% 15.5% 14.4%
INDUSTRIAL TECHNOLOGY 20.3% 16.0% 19.1% 16.1%
TOTAL 13.6% 11.2% 12.0% 10.5%
(1) 2006 SPECIAL CHARGES INCLUDES $0.2 CHARGED TO COST OF GOODS SOLD.
THE 2006 SEGMENT OPERATING INCOME RESULTS HAVE BEEN ADJUSTED TO REFLECT THE
INCLUSION OF STOCK-BASED COMPENSATION, CONSISTENT WITH THE 2007 PRESENTATION.
HUBBELL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(IN MILLIONS)
(UNAUDITED)
SEPTEMBER 30, 2007 DECEMBER 31, 2006
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ASSETS
CASH AND CASH EQUIVALENTS $ 86.5 $ 45.3
SHORT-TERM INVESTMENTS - 35.9
ACCOUNTS RECEIVABLE, NET 421.2 354.3
INVENTORIES, NET 316.2 338.2
DEFERRED TAXES AND OTHER 49.7 40.7
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TOTAL CURRENT ASSETS 873.6 814.4
PROPERTY, PLANT AND EQUIPMENT, NET 322.5 318.5
INVESTMENTS 36.9 0.3
GOODWILL 444.7 436.7
INTANGIBLE ASSETS AND OTHER 191.7 181.6
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TOTAL ASSETS $1,869.4 $1,751.5
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LIABILITIES AND SHAREHOLDERS' EQUITY
SHORT-TERM DEBT $ 69.3 $ 20.9
ACCOUNTS PAYABLE 188.7 163.9
ACCRUED SALARIES, WAGES AND EMPLOYEE BENEFITS 56.8 49.2
DIVIDENDS PAYABLE 19.1 19.9
ACCRUED INSURANCE 51.5 42.8
OTHER ACCRUED LIABILITIES 96.0 85.6
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TOTAL CURRENT LIABILITIES 481.4 382.3
LONG-TERM DEBT 199.4 199.3
OTHER NON-CURRENT LIABILITIES 170.8 154.4
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TOTAL LIABILITIES 851.6 736.0
SHAREHOLDERS' EQUITY 1,017.8(1) 1,015.5
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,869.4 $1,751.5
================== =================
(1) 2007 SHAREHOLDERS' EQUITY INCLUDES AN INCREASE OF $4.7 IN CONNECTION WITH
THE COMPANY'S ADOPTION ON JANUARY 1, 2007 OF FINANCIAL ACCOUNTING STANDARDS
BOARD ("FASB") INTERPRETATION NO. 48, "ACCOUNTING FOR UNCERTAINTY IN INCOME
TAXES - AN INTERPRETATION OF FASB STATEMENT NO. 109".
HUBBELL INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED) (UNAUDITED)
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2007 2006
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CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 160.3 $ 128.9
DEPRECIATION AND AMORTIZATION 44.8 41.2
STOCK-BASED COMPENSATION EXPENSE 8.1 8.2
DEFERRED INCOME TAXES (9.1) 5.4
CHANGES IN WORKING CAPITAL 38.4 (108.7)
CONTRIBUTION TO DOMESTIC PENSION PLANS (15.0) -
OTHER, NET (6.3) 7.9
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NET CASH PROVIDED BY OPERATING ACTIVITIES 221.2 82.9
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CASH FLOWS FROM INVESTING ACTIVITIES
CAPITAL EXPENDITURES (44.6) (67.1)
ACQUISITION OF BUSINESSES, NET OF CASH ACQUIRED (2.9) (117.4)
NET CHANGE IN INVESTMENTS (0.5) 164.9
OTHER, NET 3.9 2.3
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NET CASH USED IN INVESTING ACTIVITIES (44.1) (17.3)
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CASH FLOWS FROM FINANCING ACTIVITIES
BORROWINGS/REPAYMENTS OF DEBT 48.4 (16.0)
PAYMENT OF DIVIDENDS (59.3) (60.2)
ACQUISITION OF COMMON SHARES (173.5) (74.4)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 40.2 24.5
OTHER, NET 6.0 3.8
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NET CASH USED IN FINANCING ACTIVITIES (138.2) (122.3)
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EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2.3 1.0
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 41.2 (55.7)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 45.3 110.6
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END OF PERIOD $ 86.5 $ 54.9
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