(HUBBELL LOGO)
Date: January 24, 2008 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 FOURTH QUARTER, FULL YEAR RESULTS;
FOURTH QUARTER NET SALES UP 4%, EARNINGS OF $.82 PER DILUTED SHARE
ORANGE, CT. (January 24, 2008) -- Hubbell Incorporated (NYSE: HUBA, HUBB) today
reported operating results for the fourth quarter and full year ended December
31, 2007.
Net sales in the fourth quarter of 2007 rose by 4% to $614.7 million compared to
$589.0 million reported in the equivalent period of 2006. Net sales for the full
year rose 5% to $2.53 billion compared to $2.41 billion reported for 2006. The
acquisition of PCORE on October 1, 2007, contributed $7.0 million in sales to
the fourth quarter and full year 2007.
Net income in the fourth quarter rose by 64% to $48.0 million versus $29.2
million reported for the equivalent period of 2006. Earnings per diluted share
were 71% higher at $.82 compared to $.48 reported in the fourth quarter of 2006.
The fourth quarter of 2007 included adjustments to the provision for income
taxes resulting in a net benefit of $0.05 per diluted share primarily due to the
completion of an examination of the Company's 2004-2005 federal income tax
returns. However, this net benefit was more than offset by expenses recorded in
the 2007 fourth quarter of $0.07 per diluted share associated with workforce
reductions.
-continued-
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Reported net income for the full year 2007 rose by 32% to $208.3 million
compared to $158.1 million reported for 2006. Earnings per diluted share rose by
35% to $3.50 versus $2.59 reported for 2006.
Cash flow from operations in 2007 was $335.2 million compared to $139.9 million
in 2006. The improvement was primarily a result of better management of working
capital, particularly inventory, and improved profitability. Capital spending
decreased 36% to $55.9 million primarily as a result of completion of the new
Lighting facility early this year and lower implementation costs for the
enterprise-wide business system. During 2007 the Company repurchased
approximately 3.6 million shares of its common stock for $193.1 million compared
to 2.1 million shares for $95.1 million repurchased in 2006.
OPERATIONS REVIEW
"Hubbell's financial results in 2007 set new Company records," said Timothy H.
Powers, Chairman, President, and Chief Executive Officer. "We reported the
highest sales, net income, earnings per diluted share, and cash flow from
operations in Hubbell's 120 year history. These results are directly
attributable to the focus, hard work, and dedication of Hubbell's 12,000
employees.
"Our focus in 2007 was on three key objectives: price realization, cost
containment, and productivity improvement. These are the primary routes toward
the goal of returning Hubbell to its historic industry-leading profitability and
performance. Each of our businesses contributed to an outstanding year," Powers
said. "Each segment reported higher sales, higher operating profit, and higher
operating margin. The net effect was a 210 basis point improvement in Hubbell's
operating margin which represents substantial progress toward our goal."
-continued-
Page 2
SEGMENT REVIEW
The comments and year-over-year percentage comparisons in this segment review
are based on fourth quarter results in 2007 and 2006.
Electrical segment net sales were comparable to last year while operating profit
grew by 61% chiefly due to actions by each of the businesses in the segment to
improve price realization, contain costs, and drive productivity initiatives.
Wiring Systems reported higher sales but essentially flat operating profit as a
result of costs incurred related to the product quality issue that was resolved
early in the 2007 fourth quarter and charges associated with the workforce
reductions. Sales of products for harsh and hazardous applications rose by
double-digits and operating profit doubled. Hubbell Lighting reported increased
sales of commercial and industrial fixtures but, as expected, continuing
contraction of sales of residential fixtures. Despite the residential market
headwind, operating profit for the segment rose and operating margin increased
300 basis points. The negative impact of cost reduction actions in the 2007
fourth quarter was higher by approximately $2 million compared to special
charges in the 2006 fourth quarter.
Hubbell's Power Systems segment reported a 9% increase in sales and a 61%
increase in operating profit. Acquisitions accounted for approximately half of
the sales increase with price realization and incremental storm orders
comprising the balance. The segment successfully implemented productivity
initiatives and higher realized prices to achieve improved operating
performance. There continues to be a slowing in the core U.S. utility market
especially in distribution voltage product sales, but growth in transmission
products and international sales continued.
The Industrial Technology segment completed an exceptional year with its
strongest quarter. Sales rose by 25%, operating profit by 78% and operating
margin by 660 basis points. Favorable worldwide market conditions, realized
price increases, and productivity initiatives positively impacted the quarter.
With its high voltage instrumentation and specialty communication products
-continued-
Page 3
occupying a prominent position in global markets, the segment is benefiting from
growth around the world. In addition, the Austdac acquisition in the fourth
quarter of 2006 accounted for 5 percentage points of the sales increase.
SUMMARY AND OUTLOOK
"Our people were the foundation of our success in 2007," Powers added, "but
their achievements are not limited to a single year. We've pursued a series of
internal, multi-year initiatives, and that work is yielding results. We are
benefiting from our enterprise-wide business system across our domestic
operations, successfully restructured most of our Lighting operations, launched
the largest new product introduction in Hubbell's history, reduced our working
capital needs and made significant strides in implementing lean manufacturing
across the Company. The effect is that Hubbell is more capable, flexible and
efficient than the Company has ever been.
"Just as important is the fact that we're only beginning to realize the benefits
of all of our initiatives. Achieving that potential becomes increasingly
important in 2008 as demand in many of our markets is expected to slow.
"We will continue our focus on pricing, productivity, and cost control in 2008,"
Powers concluded. "Against a backdrop in 2008 of a slowing U.S. economy and a
continuing decline in the residential marketplace, we expect sales growth for
Hubbell of 4-6%, a 100 basis point improvement in operating margin, and an
increase in the effective tax rate to 30.5% resulting in earnings per diluted
share in the range of $3.70-$3.90. Cash flow from operations is expected to
approximate 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
-continued-
Page 4
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 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 2007 revenues of $2.5 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 5
HUBBELL INCORPORATED
Condensed Consolidated Statement of Income
(in millions, except per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------- ----------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
2007 2006 2007 2006
----------- ----------- ----------- --------
Net Sales $614.7 $589.0 $2,533.9 $2,414.3
Cost of goods sold 433.8 437.4 1,798.1 1,757.5
Selling & administrative expenses 112.3 106.2 436.4 415.6
Special charges -- 3.7 -- 7.3
------ ------ -------- --------
Operating Income 68.6 41.7 299.4 233.9
Operating income as a % of Net Sales 11.2% 7.1% 11.8% 9.7%
Interest expense, net (3.7) (3.1) (15.2) (10.3)
Other income (expense), net (0.7) (1.2) -- (2.1)
------ ------ -------- --------
Income Before Income Taxes 64.2 37.4 284.2 221.5
Provision for income taxes 16.2 8.2 75.9 63.4
------ ------ -------- --------
Net Income $ 48.0 $ 29.2 $ 208.3 $ 158.1
====== ====== ======== ========
Earnings Per Share:
Basic $ 0.83 $ 0.49 $ 3.54 $ 2.62
Diluted $ 0.82 $ 0.48 $ 3.50 $ 2.59
Average Shares Outstanding:
Basic 57.8 60.0 58.8 60.4
Diluted 58.6 60.8 59.5 61.1
HUBBELL INCORPORATED
Segment Information
(in millions)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------- ------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
2007 2006 2007 2006
----------- ----------- ----------- ----------
Net Sales
Electrical $388.7 $389.0 $1,639.9 $1,631.2
Power 159.6 146.8 636.6 573.7
Industrial Technology 66.4 53.2 257.4 209.4
------ ------ -------- --------
Total Net Sales $614.7 $589.0 $2,533.9 $2,414.3
====== ====== ======== ========
Operating Income
Electrical $ 30.8 $ 22.8 $ 151.0 $ 132.2
Special charges -- (3.7) -- (7.5)(1)
------ ------ -------- --------
Total Electrical 30.8 19.1 151.0 124.7
Power 23.2 14.4 97.3 75.8
Industrial Technology 14.6 8.2 51.1 33.4
------ ------ -------- --------
Total Operating Income $ 68.6 $ 41.7 $ 299.4 $ 233.9
====== ====== ======== ========
Operating Income as a % of Net Sales
Electrical 7.9% 4.9% 9.2% 7.6%
Power 14.5% 9.8% 15.3% 13.2%
Industrial Technology 22.0% 15.4% 19.9% 16.0%
Total 11.2% 7.1% 11.8% 9.7%
(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)
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------- -----------------
ASSETS
Cash and cash equivalents $ 77.5 $ 45.3
Short-term investments -- 35.9
Accounts receivable, net 332.4 354.3
Inventories, net 322.9 338.2
Deferred taxes and other 55.2 40.7
-------- --------
TOTAL CURRENT ASSETS 788.0 814.4
Property, plant and equipment, net 327.1 318.5
Investments 39.2 0.3
Goodwill 466.6 436.7
Intangible assets and other 242.5 181.6
-------- --------
TOTAL ASSETS $1,863.4 $1,751.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt $ 36.7 $ 20.9
Accounts payable 154.0 160.5
Accrued salaries, wages and employee benefits 58.6 49.2
Dividends payable 19.2 19.9
Accrued insurance 46.7 42.8
Other accrued liabilities 104.3 89.0
-------- --------
TOTAL CURRENT LIABILITIES 419.5 382.3
Long-term debt 199.4 199.3
Other non-current liabilities 161.9 154.4
-------- --------
TOTAL LIABILITIES 780.8 736.0
SHAREHOLDERS' EQUITY 1,082.6(1) 1,015.5
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,863.4 $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)
TWELVE MONTHS ENDED
DECEMBER 31
----------------------
(UNAUDITED)
2007 2006
----------- --------
Cash Flows From Operating Activities
Net Income $ 208.3 $ 158.1
Depreciation and amortization 60.2 55.4
Stock-based compensation expense 12.7 11.8
Deferred income taxes (3.7) 11.4
Changes in working capital 94.1 (103.7)
Contributions to defined benefit pension plans (28.4) (7.7)
Other, net (8.0) 14.6
------- -------
Net cash provided by operating activities 335.2 139.9
------- -------
Cash Flows From Investing Activities
Capital expenditures (55.9) (86.8)
Acquisition of businesses, net of cash acquired (52.9) (145.7)
Net change in investments (2.6) 163.8
Other, net 5.7 2.0
------- -------
Net cash used in investing activities (105.7) (66.7)
------- -------
Cash Flows From Financing Activities
Borrowings/repayments of debt 15.8 (8.9)
Payment of dividends (78.4) (80.1)
Acquisition of common shares (193.1) (95.1)
Proceeds from exercise of stock options 48.0 38.5
Other, net 7.3 6.0
------- -------
Net cash used in financing activities (200.4) (139.6)
------- -------
Effect of foreign exchange rate changes on cash
and cash equivalents 3.1 1.1
------- -------
Increase (decrease) in cash and cash equivalents 32.2 (65.3)
Cash and cash equivalents
Beginning of period 45.3 110.6
------- -------
End of period $ 77.5 $ 45.3
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