01—Abstract
Summary
Summary of the 10-K filed February 11, 2021. Cited figures are marked; the original filing is the authoritative source.
Hubbell Incorporated's 2020 results reflected a sharp pandemic-driven sales decline.
Net sales were $4.19 billiona, down $405.0 million from $4,591.0 million in 2019, with organic net sales declining 9.1%. Operating income fell 11% to $533.0 million and operating margin declined 30 basis points to 12.7%. Net income attributable to Hubbell declined 12.4% to $351.2 million, and diluted EPS was $6.43, down 12.0%.
Adjusted diluted EPS was $7.58b, down 6.7%. The Electrical Solutions segment, which accounted for 54% of consolidated revenues, saw net sales fall 13.8% with operating income down about 27%. The Utility Solutions segment, 46% of revenues, saw net sales fall 2.2%, but operating income rose 8% to $298.2 million, with adjusted operating margin up 160 basis points to 18.2%.
Cash generation was strong. Operating cash flow was $648.0 millionc and free cash flow was $559.6 million, versus $497.7 million in 2019. The company paid $201.4 million in dividends, raised its quarterly dividend from $0.91 to $0.98 per share, and repurchased $41.3 million of stock.
It also spent $239.6 milliond on acquisitions, including Armorcast, Beckwith Electric and AccelTex in the fourth quarter. Total debt was $1.59 billion, debt to total capital was 43%, and net debt to total capital was 34%. The company fully repaid its $500 million Term Loan from the Aclara acquisition in 2020 and had $750.0 million of available capacity under its revolving credit facility at year-end.
Management highlighted several forward-looking items. Backlog at year-end was approximately $1,065.8 million, compared with $1,037.0 million a year earlier.
The company is consolidating its Electrical segment into Electrical Solutions and moving its Gas Connectors business to Utility Solutions effective January 1, 2021. Risks flagged in the filing include COVID-19 disruption, tariffs and trade policy, Brexit, and the goodwill and intangible base of about $2.7 billion.
02—Key points
Key Highlights
- Net sales of $4,186.0 million declined $405.0 million (8.8%) from 2019, with organic net sales down 9.1% on pandemic-related volume declines.
- Operating income fell 11% to $533.0 million; adjusted operating income was $608.9 million, with adjusted operating margin of 14.5%.
- Diluted EPS was $6.43 (down 12.0%); adjusted diluted EPS was $7.58 (down 6.7%).
- Electrical Solutions sales fell 13.8% to $2.3 billion, while Utility Solutions sales fell 2.2% to $1.9 billion but its operating income rose 8% to $298.2 million.
- Free cash flow was $559.6 million, up from $497.7 million, supporting $201.4 million in dividends and $41.3 million in share repurchases.
- Quarterly dividend increased from $0.91 to $0.98 per share; $300 million share repurchase authorization approved in October 2020.
- Total debt of $1,590.0 million; debt to total capital 43%; Term Loan fully repaid in 2020; $750.0 million undrawn revolver capacity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Hubbell kept $0.10.
- Revenue$3.68B100.0%
- Cost of revenue−$2.60B70.5%
- Gross profit$1.09B29.5%
- Operating costs−$591.3M16.1%
- Operating income$494.5M13.4%
- Interest, other & tax−$143.3M3.9%
- Net income$351.2M9.5%
Where FY2020 revenue went
$3.68B- Cost of revenue: $2.60B, 71% of revenue
- SG&A: $591.3M, 16% of revenue
- Net income: $351.2M, 9.5% of revenue
- Interest, other & tax: $143.3M, 3.9% of revenue
Kept 9.5% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 11, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $3.68B$3.95B | −6.7% |
| Cost of Revenue | $2.60B$2.77B | −6.4% |
| Gross Profit | $1.09B$1.17B | −7.3% |
| SG&A Expenses | $591.30M$644.90M | −8.3% |
| Operating Income | $494.50M$526.70M | −6.1% |
| Interest Expense | $60.30M$69.40M | −13.1% |
| Net Income | $351.20M$400.90M | −12.4% |
| EPS (Basic) | $6.46$7.35 | −12.1% |
| EPS (Diluted) | $6.43$7.31 | −12.0% |
| Shares Outstanding (Basic) | 54.20M54.40M | −0.4% |
| Shares Outstanding (Diluted) | 54.50M54.70M | −0.4% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic affect Hubbell's 2020 results?
Shutdowns in the second quarter reduced sales volume and created manufacturing inefficiencies, with work stoppages in U.S., Mexican and UK plants. Organic net sales declined 9.1%, led by Electrical Solutions, where non-residential and industrial markets weakened. Aclara meter installations were also delayed by regulatory restrictions. The company cut costs through compensation actions and discretionary spending reductions.
Why did Utility Solutions operating income increase despite lower sales?
Utility Solutions sales fell 2.2% to $1.92 billion, but operating income rose 8% to $298.2 million and operating margin reached 15.5%. The filing attributes this mainly to productivity savings, lower cost inflation, favorable price realization and restructuring savings, partly offset by lower volume and pandemic inefficiencies.
What acquisitions did Hubbell complete in 2020 and how were they funded?
In the fourth quarter Hubbell acquired Armorcast Products for $136.8 million, Beckwith Electric for $54.3 million and AccelTex Solutions for $45.1 million, net of cash acquired. Total acquisition spending was $239.6 million. Part of the fourth-quarter acquisitions was funded with short-term commercial paper borrowings, and the company's year-end commercial paper balance was $150.0 million.
How strong is Hubbell's balance sheet and liquidity?
At December 31, 2020, total debt was $1,590.0 million and net debt was $1,250.0 million, with debt to total capital of 43% and net debt to total capital of 34%. Cash and cash equivalents were $259.6 million. The company had no long-term debt maturing within twelve months and $750.0 million of available revolver capacity. Its single financial covenant limits total debt to 65% of total capitalization.
What changes to the segment structure take effect in 2021?
Effective January 1, 2021, the three business groups within the former Electrical segment were consolidated into Hubbell Electrical Solutions. The Hubbell Gas Connectors and Accessories business, which had approximately $157.1 million of 2020 net sales and $19.4 million of operating profit, moved from Electrical Solutions to Utility Solutions. Segment results will be reported under this structure beginning with the first-quarter 2021 Form 10-Q.
06—Continue