01—Abstract
Summary
Summary of the 10-K filed March 20, 2002. Cited figures are marked; the original filing is the authoritative source.
Hubbell Incorporated's 2001 results reflected a sharp sales downturn.
Net sales fell to $1,312.2 milliona from $1,424.1 million, and operating income dropped to $56.5 million from $184.5 million, with net income of $48.3 million ($0.82 diluted EPS) versus $138.2 million ($2.25) in 2000. The results include a fourth-quarter special charge of $56.3 million, offset by a $3.3 million reversal, and a total 2001 streamlining plan with a cumulative expected cost of $62.0 million, which management expects to provide $20 million in annual savings once complete. Management cites widespread economic weakness and the post-September 11 slowdown, with Electrical Segment sales down 10%, Power Segment sales down 10%, and Industrial Technology Segment sales up 14% (helped by the GAI-Tronics acquisition).
Cash generation was strong. Operating cash flow rose to $199.3 millionb from $123.8 million, driven by inventory and receivables reductions, and total borrowings were reduced to $167.5 million from $359.2 million. Share repurchases were suspended, with no purchases under the $300 million authorization expected in 2002.
Subsequent to year-end, Hubbell agreed to acquire USI's LCA Group, Inc. for $250.0 millionc in cash, subject to the Hart-Scott-Rodino waiting period, and completed the acquisition of Hawke Cable Glands Limited in March 2002. The company expects its effective tax rate to return to 23% in 2002 from the 13.4% recorded for 2001, and it expects to finance the LCA acquisition through commercial paper and additional indebtedness. The filing reports no material pending legal proceedings.
02—Key points
Key Highlights
- Net sales declined to $1,312.2 million in 2001 from $1,424.1 million in 2000, with the filing attributing the decline to widespread economic weakness and the period following the September 11 terrorist events.
- Net income fell to $48.3 million ($0.82 diluted EPS) from $138.2 million ($2.25 diluted EPS), reflecting a fourth-quarter special charge and lower operating income of $56.5 million versus $184.5 million.
- A 2001 streamlining plan carries a cumulative expected charge of $62.0 million, with $56.3 million recorded in 2001 and $5.7 million expected in 2002; management expects $20 million in annual savings once complete.
- Operating cash flow reached $199.3 million, described as an all-time high, while total borrowings were reduced to $167.5 million from $359.2 million.
- Hubbell agreed in March 2002 to acquire USI's LCA Group, Inc. for $250.0 million in cash, subject to closing conditions including Hart-Scott-Rodino clearance.
- Stock repurchases were suspended; no purchases were made under the $300 million authorization from December 2000, and none are anticipated in 2002.
- Electrical and Power Segment sales each declined 10%, while Industrial Technology Segment sales increased 14% due to the GAI-Tronics acquisition.
03—Questions
Frequently Asked Questions
Why did Hubbell's net income fall so sharply in 2001?
Net income fell to $48.3 million from $138.2 million, driven by lower sales (down 8% to $1,312.2 million), a fourth-quarter special charge of $56.3 million related to the streamlining plan, and the absence of the 2000 gain on the DSL asset sale. Management also cited unabsorbed fixed manufacturing costs and a higher share of lower-margin sales.
What is the status of the streamlining plan and what savings does it provide?
The 2001 streamlining and cost reduction plan is expected to cost $62.0 million in total, including facility closures covering about 600,000 square feet, workforce reductions, outsourcing, and product line exits. Substantially all actions are scheduled for completion by December 31, 2002, and the plan should provide $20 million in ongoing annual savings.
How is Hubbell funding the pending LCA acquisition?
The filing states that Hubbell expects to finance the $250.0 million LCA acquisition through indebtedness under its existing commercial paper program and additional indebtedness, which may include loans or debt securities. The acquisition is subject to Hart-Scott-Rodino waiting period expiration or early termination and other closing conditions.
What does the company expect for its tax rate and cash flow in 2002?
Hubbell expects to return to a 23% effective tax rate in 2002, compared with 13.4% in 2001. The company expects inventory reduction to contribute up to $30 million in operating cash flow, and states that internal cash generation, though not expected to match the 2001 record, should be sufficient to fund operations, dividends, capital expenditures and working capital needs.
04—Continue