01—Abstract
Summary
Summary of the 10-K filed February 18, 2016. Cited figures are marked; the original filing is the authoritative source.
Hubbell Incorporated's 2015 Form 10-K reports net sales of $3.39 billiona, up slightly from $3.36 billion in 2014, with acquisitions adding three percentage points and foreign currency reducing sales by two percentage points.
Operating income fell to $474.6 millionb from $517.4 million, and operating margin declined to 14.0% from 15.4%. Results included $38.9 million of Restructuring and Related Costs and $19.7 million of Reclassification Costs. Net income attributable to Hubbell was $277.3 million, or $4.77 per diluted share, versus $5.48 in 2014.
Excluding restructuring and reclassification costs, adjusted earnings per diluted share were $5.52c, compared with $5.54 in 2014. The most significant corporate event was the December 23, 2015 reclassification of the dual-class common stock into a single class, which required $200.7 million of Class A Cash Consideration at $28.00 per Class A share. A shareholder lawsuit challenging the reclassification was amended on February 1, 2016, and the defendants intend to move to dismiss it.
Cash and cash equivalents fell to $343.5 milliond from $653.9 million, and total debt rose to $644.1 million from $596.3 million, with $48.2 million of short-term debt including commercial paper. Shareholders' equity declined to $1.74 billion from $1.93 billion.
For 2016, management expects end markets to be flat in aggregate, with oil and gas markets projected to decline roughly fifteen to twenty percent, and anticipates earnings of $5.20 to $5.40 per diluted share, including approximately $0.35 of restructuring costs. The company plans up to $250 million of share repurchases and acquisitions, including Lyall for approximately $130.0 million and Electric Motion Company for approximately $43.0 million, both completed in early 2016.
02—Key points
Key Highlights
- Net sales of $3,390.4 million rose slightly from $3,359.4 million in 2014; acquisitions added three percentage points while foreign currency reduced sales by two percentage points.
- GAAP operating income declined to $474.6 million (14.0% margin) from $517.4 million (15.4% margin), with $38.9 million of Restructuring and Related Costs recorded in 2015.
- Net income attributable to Hubbell was $277.3 million, or $4.77 per diluted share, versus $325.3 million, or $5.48 per diluted share, in 2014; adjusted diluted EPS was $5.52 versus $5.54.
- Dual-class common stock was reclassified into a single class on December 23, 2015, with $200.7 million paid as Class A Cash Consideration of $28.00 per share.
- 2016 guidance calls for earnings of $5.20 to $5.40 per diluted share and up to $250 million of share repurchases.
- Cash and cash equivalents decreased to $343.5 million, and total debt increased to $644.1 million, including $48.2 million of short-term debt.
- Backlog at December 31, 2015 was approximately $319.4 million, compared with $333.7 million a year earlier.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Hubbell kept $0.08.
- Revenue$3.39B100.0%
- Cost of revenue−$2.30B67.8%
- Gross profit$1.09B32.2%
- Operating costs−$617.2M18.2%
- Operating income$474.6M14.0%
- Interest, other & tax−$197.3M5.8%
- Net income$277.3M8.2%
Where FY2015 revenue went
$3.39B- Cost of revenue: $2.30B, 68% of revenue
- SG&A: $617.2M, 18% of revenue
- Net income: $277.3M, 8.2% of revenue
- Interest, other & tax: $197.3M, 5.8% of revenue
Kept 8.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 18, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $3.39B$3.36B | +0.9% |
| Cost of Revenue | $2.30B$2.25B | +2.1% |
| Gross Profit | $1.09B$1.11B | −1.6% |
| SG&A Expenses | $617.20M$591.60M | +4.3% |
| Operating Income | $474.60M$517.40M | −8.3% |
| Interest Expense | $31.00M$31.20M | −0.6% |
| Net Income | $277.30M$325.30M | −14.8% |
| EPS (Basic) | $4.79$5.51 | −13.1% |
| EPS (Diluted) | $4.77$5.48 | −13.0% |
| Shares Outstanding (Basic) | 57.70M58.80M | −1.9% |
| Shares Outstanding (Diluted) | 58.00M59.20M | −2.0% |
05—Questions
Frequently Asked Questions
Why did Hubbell's operating income and earnings decline in 2015?
Operating income fell to $474.6 million from $517.4 million, and operating margin declined to 14.0% from 15.4%. The filing attributes the decline to $38.9 million of Restructuring and Related Costs, unfavorable product and business mix, and unfavorable foreign exchange. Adjusted operating income decreased to $513.5 million from $522.5 million.
What was the Reclassification and what did it cost shareholders?
On December 23, 2015, Hubbell's Class A and Class B common stock was reclassified into a single class of Common Stock with one vote per share. Holders of Class A common stock received $28.00 per share in cash, an aggregate of $200.7 million. The company recorded $19.7 million of Reclassification Costs in 2015, mostly professional fees. The Common Stock began trading on the NYSE under the ticker HUBB on December 24, 2015.
What is the status of the shareholder lawsuit related to the Reclassification?
On October 16, 2015, Norfolk County Retirement System filed a complaint challenging the Reclassification, and it filed an amended direct and derivative complaint on February 1, 2016. The amended complaint seeks, among other relief, to recoup damages on behalf of the company. The defendants intend to move to dismiss the amended complaint.
What does Hubbell expect for 2016?
Management expects end markets in aggregate to be flat in 2016, with oil and gas markets projected to decline by approximately fifteen to twenty percent. The company anticipates earnings of $5.20 to $5.40 per diluted share, including approximately $0.35 of restructuring and related costs. It also expects free cash flow of approximately 90% of net income and plans up to $250 million of share repurchases.
What acquisitions did Hubbell complete in early 2016?
In January 2016, Hubbell acquired R.W. Lyall & Company, Inc. for approximately $130.0 million, which was added to the Electrical segment. In February 2016, it acquired Electric Motion Company, Inc. and related entities for approximately $43.0 million, which was added to the Power segment. The company also expects to complete additional acquisitions in 2016.
06—Continue