01—Abstract
Summary
Summary of the 10-K filed February 19, 2015. Cited figures are marked; the original filing is the authoritative source.
Hubbell Incorporated's 2014 results show net sales of $3,359.4 milliona, up from $3,183.9 million in 2013, with operating income of $517.4 million (15.4% of sales, versus 15.9% in 2013) and net income attributable to Hubbell of $325.3 million, or $5.48 diluted EPS.
The filing attributes the sales growth to acquisitions, which added four percentage points, and to volume, which added two; price realization was flat. Gross margin declined to 33.0% from 33.6%, driven by unfavorable business and product mix, higher material costs, and cost inflation in excess of productivity. Cash from operations was $391.5 millionb, and year-end cash and equivalents were $653.9 million against total debt of $599.0 million.
The Electrical segment generated $2,398.2 millionc of net sales (operating margin 14.1%, down from 15.1%), while the Power segment generated $961.2 million (operating margin 18.7%, up from 18.1%). Seven acquisitions were completed in 2014 for $183.8 million net of cash acquired, and three more were completed in January 2015 for approximately $126 million. For 2015, management expects net sales to rise five to seven percent and diluted EPS of $5.35 to $5.55, including about $0.25 of restructuring costs, and it expects the Harsh and Hazardous product line to decline 15 to 20 percent.
The Company also raised its quarterly dividend to $0.56d per share from $0.50 and approved a new $300 million share repurchase program, with $229.5 million remaining at year-end. Investors should note the dual-class structure: holders of Class A stock, which carries 20 votes per share, held approximately 74% of the voting power as of December 31, 2014. The Company settled the Powerweb Energy litigation in the fourth quarter of 2014 without exceeding amounts previously reserved.
02—Key points
Key Highlights
- Net sales rose to $3,359.4 million in 2014 from $3,183.9 million in 2013, with acquisitions adding four percentage points and volume two percentage points.
- Operating margin fell to 15.4% from 15.9%, and gross profit margin declined to 33.0% from 33.6%, citing mix, material costs and inflation in excess of productivity.
- Diluted EPS was $5.48 in 2014 compared with $5.47 in 2013; net income attributable to Hubbell was $325.3 million.
- Electrical segment operating margin declined to 14.1% from 15.1%, while Power segment operating margin improved to 18.7% from 18.1%.
- 2015 outlook calls for net sales growth of five to seven percent and diluted EPS of $5.35 to $5.55, including about $0.25 of restructuring and related costs.
- Quarterly dividend increased to $0.56 per share from $0.50; a new $300 million repurchase program was approved in October 2014, with approximately $229.5 million remaining at December 31, 2014.
- Total debt was $599.0 million against total Hubbell shareholders' equity of $1,927.1 million, and the $500 million revolving credit facility was undrawn at year-end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Hubbell kept $0.10.
- Revenue$3.36B100.0%
- Cost of revenue−$2.25B67.0%
- Gross profit$1.11B33.0%
- Operating costs−$591.6M17.6%
- Operating income$517.4M15.4%
- Interest, other & tax−$192.1M5.7%
- Net income$325.3M9.7%
Where FY2014 revenue went
$3.36B- Cost of revenue: $2.25B, 67% of revenue
- SG&A: $591.6M, 18% of revenue
- Net income: $325.3M, 9.7% of revenue
- Interest, other & tax: $192.1M, 5.7% of revenue
Kept 9.7% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 19, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $3.36B$3.18B | +5.5% |
| Cost of Revenue | $2.25B$2.11B | +6.5% |
| Gross Profit | $1.11B$1.07B | +3.6% |
| SG&A Expenses | $591.60M$562.90M | +5.1% |
| Operating Income | $517.40M$507.60M | +1.9% |
| Interest Expense | $31.20M$30.80M | +1.3% |
| Net Income | $325.30M$326.50M | −0.4% |
| EPS (Basic) | $5.51$5.51 | 0.0% |
| EPS (Diluted) | $5.48$5.47 | +0.2% |
| Shares Outstanding (Basic) | 58.80M59.10M | −0.5% |
| Shares Outstanding (Diluted) | 59.20M59.60M | −0.7% |
05—Questions
Frequently Asked Questions
How did Hubbell perform financially in 2014?
Net sales were $3,359.4 million, up from $3,183.9 million in 2013. Operating income was $517.4 million, and net income attributable to Hubbell was $325.3 million, or $5.48 per diluted share, compared with $5.47 in 2013. Operating margin declined to 15.4% from 15.9%.
What is management's outlook for 2015?
The Company expects net sales to increase five to seven percent, with acquisitions contributing five to six percent, and expects diluted EPS of $5.35 to $5.55 including about $0.25 of restructuring costs. Harsh and Hazardous product sales are expected to fall fifteen to twenty percent due to weakness in energy-related markets. Free cash flow is expected to be about 90% of net income.
What acquisitions did Hubbell complete?
In 2014 the Company completed seven acquisitions for $183.8 million net of cash acquired, including Powerohm, Litecontrol, PenCell, Reuel, RigPower and RFL. In January 2015 it completed three acquisitions (Acme Electric, Turner Electric and EC&M) for an aggregate cash price of approximately $126 million.
How is shareholder voting power structured?
Class A Common Stock carries 20 votes per share, and Class B carries one vote per share. As of December 31, 2014, Class A holders held approximately 74% of the voting power while representing approximately 13% of total equity value, and the Hubbell Trust and Roche Trust together held about 49% of Class A stock.
What capital returns did Hubbell make to shareholders?
Dividends declared were $2.06 per share in 2014 versus $1.85 in 2013, and the quarterly rate was raised to $0.56 from $0.50. The Company spent $35.0 million under the September 2011 repurchase program in 2014 and repurchased Class B shares totaling $105.5 million in cash for the year, and approximately $229.5 million remained authorized under the October 2014 program at year-end.
06—Continue