01—Abstract
Summary
Summary of the 10-K filed February 19, 2010. Cited figures are marked; the original filing is the authoritative source.
Hubbell Incorporated reported 2009 net sales of $2,355.6 milliona, down from $2,704.4 million in 2008, as broad-based market weakness and a 17% volume decline hit results.
Operating income fell to $294.7 millionb from $346.0 million, and net income attributable to Hubbell declined to $180.1 million from $222.7 million. Diluted EPS was $3.15 versus $3.93 in 2008. Segment results show the Electrical segment (70% of 2009 revenue) with operating income of $163.7 million and a 9.9% operating margin, while the Power segment (30% of revenue) grew operating income to $131.0 million and expanded its operating margin to 18.6%.
The company completed the $355.2 millionc cash acquisition of Burndy Americas on October 2, 2009, which added connectors, cable accessories and tooling to the Electrical segment and contributed $44.9 million to fourth-quarter net sales. Operating cash flow rose to $397.7 million from $319.2 million, aided by working capital reductions, and total debt was steady at $497.2 million. Debt to total capitalization improved to 28% from 33%, and Hubbell shareholders' equity increased to $1,298.2 million, largely due to an October 2009 equity issuance that netted $122.0 million.
For 2010, management expects net sales roughly flat with 2009, with non-residential construction forecast to decline about twenty percent, a 32.5% tax rate, free cash flow approximately equal to net income, and Burndy expected to be accretive. In February 2010 the Board raised the quarterly dividend from $0.35 to $0.36d per share.
02—Key points
Key Highlights
- Net sales declined to $2,355.6 million in 2009 from $2,704.4 million in 2008, with a 17% volume decline cited as the main driver.
- Diluted EPS was $3.15 in 2009 versus $3.93 in 2008; net income attributable to Hubbell was $180.1 million versus $222.7 million.
- Burndy Americas was acquired for $355.2 million in cash on October 2, 2009, adding connectors and tooling to the Electrical segment.
- Power segment operating margin improved to 18.6% from 15.9%, while Electrical segment operating margin fell to 9.9% from 11.6%.
- Operating cash flow increased to $397.7 million from $319.2 million, with working capital providing $126.9 million.
- Debt to total capitalization improved to 28% from 33%, and total debt remained at $497.2 million.
- The quarterly dividend was increased from $0.35 to $0.36 per share, effective with the April 9, 2010 payment; management expects 2010 net sales roughly equal to 2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Hubbell kept $0.08.
- Revenue$2.36B100.0%
- Cost of revenue−$1.63B69.2%
- Gross profit$725.9M30.8%
- Operating costs−$431.2M18.3%
- Operating income$294.7M12.5%
- Interest, other & tax−$114.6M4.9%
- Net income$180.1M7.6%
Where FY2009 revenue went
$2.36B- Cost of revenue: $1.63B, 69% of revenue
- SG&A: $431.2M, 18% of revenue
- Net income: $180.1M, 7.6% of revenue
- Interest, other & tax: $114.6M, 4.9% of revenue
Kept 7.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 19, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $2.36B$2.70B | −12.9% |
| Cost of Revenue | $1.63B$1.90B | −14.3% |
| Gross Profit | $725.90M$803.40M | −9.6% |
| SG&A Expenses | $431.20M$457.40M | −5.7% |
| Operating Income | $294.70M$346.00M | −14.8% |
| Interest Expense | $30.90M$27.40M | +12.8% |
| Net Income | $180.10M$222.70M | −19.1% |
| EPS (Basic) | $3.16$3.96 | −20.2% |
| EPS (Diluted) | $3.15$3.93 | −19.8% |
| Shares Outstanding (Basic) | 56.80M— | — |
| Shares Outstanding (Diluted) | 57.00M— | — |
05—Questions
Frequently Asked Questions
Why did Hubbell's sales and earnings decline in 2009?
The filing attributes the decline to broad-based weakness in its served markets, particularly non-residential construction, residential housing and industrial activity. Net sales fell 13% on a 17% volume decline, partly offset by acquisitions and price increases. Operating income dropped 15% and net income attributable to Hubbell fell 19%.
How did the Burndy acquisition affect Hubbell's 2009 results?
Hubbell paid $355.2 million in cash, net of cash acquired, for Burndy Americas on October 2, 2009. Burndy contributed $44.9 million to fourth-quarter net sales, while its earnings were not material to consolidated results. Management expects Burndy to be accretive to 2010 earnings and to add about six percentage points of incremental net sales in 2010.
What is Hubbell's outlook for 2010?
Management expects approximately the same level of net sales in 2010 as in 2009. It forecasts non-residential construction to decline by about twenty percent, expects utility transmission and distribution to grow modestly, and anticipates industrial markets to improve. The company also expects a 2010 tax rate of about 32.5% and free cash flow approximately equal to net income.
What does Hubbell's dual-class share structure mean for investors?
Class A common stock carries 20 votes per share versus one vote for Class B. As of December 31, 2009, Class A holders held approximately 73% of the voting power while representing approximately 12% of total equity value. The Hubbell Trust and Roche Trust together held about 49% of Class A stock, giving them substantial influence over board elections and major transactions.
How strong is Hubbell's balance sheet and capital position?
Total debt was $497.2 million at year-end 2009, consisting of senior notes due 2012 and 2018, and cash and investments totaled $286.6 million, leaving net debt of $210.6 million. Debt to total capitalization was 28%, and the company was in compliance with its credit facility covenants. Its $350 million revolving credit facility was undrawn at year-end 2009.
06—Continue