01—Abstract
Summary
Summary of the 10-K filed February 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Hubbell Incorporated reported 2023 net sales of $5,372.9 milliona, up $425.0 million, or 8.6%, from $4,947.9 million in 2022.
Organic net sales rose 6.6%, driven by price realization partially offset by modestly lower volumes. Operating income increased to $1,038.5 millionb (19.3% of net sales) from $709.1 million (14.3%), and net income from continuing operations attributable to Hubbell was $759.8 million, or $14.05 diluted EPS, versus $9.43 in 2022. Adjusted diluted EPS from continuing operations was $15.33 versus $10.62, a non-GAAP measure the company reconciles to GAAP in the filing.
The year was dominated by acquisitions. Hubbell completed three deals for about $1.2 billionc net of cash, including Northern Star Holdings (Systems Control) for approximately $1.1 billion in December 2023, funded partly by a $600 million unsecured term loan and $100 million of commercial paper. Long-term debt rose to $2,023.2 million from $1,437.9 million, and total debt to total capital reached 43% versus 38% in 2022.
Operating cash flow from continuing operations was $880.8 milliond and free cash flow was $715.1 million, while the company paid $245.5 million in dividends and repurchased $30.0 million of shares. Looking ahead, the filing notes a pending sale of the residential lighting business for $131 million, expected to close in the first quarter of 2024, and a backlog of firm orders of $2,328 million at year-end versus $2,463 million a year earlier. Management cites ongoing inflation, trade-policy changes and tariffs, and the higher debt load following the Systems Control acquisition as key risks.
02—Key points
Key Highlights
- Net sales rose 8.6% to $5,372.9 million, with organic net sales up 6.6% on favorable price realization.
- Operating margin expanded to 19.3% from 14.3%; gross profit margin increased to 35.1% from 29.7%.
- Diluted EPS from continuing operations increased to $14.05 from $9.43; adjusted diluted EPS was $15.33 versus $10.62.
- Utility Solutions net sales reached $3,261.7 million (up 13.6%) with operating income of $706.6 million; Electrical Solutions net sales were $2,111.2 million (up 1.7%), with an organic decline of 0.5%.
- Systems Control acquisition for approximately $1.1 billion, plus Balestro and EI Electronics, brought total 2023 acquisition spend to about $1.2 billion; total debt rose to $2,140.6 million.
- Free cash flow was $715.1 million, and the Board raised the quarterly dividend to $1.22 per share from $1.12.
- Backlog of firm orders was $2,328 million at December 31, 2023, down from $2,463 million a year earlier.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Hubbell kept $0.14.
- Revenue$5.37B100.0%
- Cost of revenue−$3.50B65.1%
- Gross profit$1.88B34.9%
- Operating costs−$849.6M15.8%
- Operating income$1.03B19.1%
- Interest, other & tax−$276.0M5.1%
- Net income$751.4M14.0%
Where FY2023 revenue went
$5.37B- Cost of revenue: $3.50B, 65% of revenue
- SG&A: $849.6M, 16% of revenue
- Net income: $751.4M, 14% of revenue
- Interest, other & tax: $276.0M, 5.1% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 8, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $5.37B$4.95B | +8.6% |
| Cost of Revenue | $3.50B$3.48B | +0.6% |
| Gross Profit | $1.88B$1.47B | +27.5% |
| SG&A Expenses | $849.60M$762.50M | +11.4% |
| Operating Income | $1.03B$709.10M | +44.9% |
| Net Income | $751.40M$545.90M | +37.6% |
| EPS (Basic) | $13.98$10.13 | +38.0% |
| EPS (Diluted) | $13.89$10.07 | +37.9% |
| Shares Outstanding (Basic) | 53.60M53.70M | −0.2% |
| Shares Outstanding (Diluted) | 54.00M54.10M | −0.2% |
05—Questions
Frequently Asked Questions
What drove the increase in Hubbell's profitability in 2023?
Operating income rose to $1,038.5 million from $709.1 million. The filing attributes about nine percentage points of gross margin expansion to favorable price realization, improved operational productivity and lower material costs, partly offset by roughly four points of non-material cost inflation and investments in capacity and innovation.
How was the Systems Control acquisition financed, and how did leverage change?
Hubbell borrowed $600 million under a new unsecured Term Loan Agreement and issued $100 million of commercial paper to partly fund the approximately $1.1 billion, net of cash acquired, purchase. Long-term debt increased to $2,023.2 million from $1,437.9 million, and total debt to total capital rose to 43% from 38%.
What is the status of the residential lighting business sale?
In December 2023 Hubbell agreed to sell its residential lighting business for a cash purchase price of $131 million, subject to customary adjustments and closing conditions including regulatory approvals. The filing expects the sale to close in the first quarter of 2024 and anticipates a gain between $1 million and $10 million.
What do shareholders receive, and what repurchase capacity remains?
Dividends paid in 2023 totaled $245.5 million. The quarterly common dividend rate increased from $1.12 to $1.22 per share, starting with the December 15, 2023 payment. Hubbell repurchased $30.0 million of stock in 2023 and had $300 million remaining under its October 2022 program, which expires in October 2025.
What key risks does management highlight?
The filing highlights inflation and its effect on margins, tariffs and changes in U.S. trade policy affecting imported materials such as steel and aluminum, and the higher interest cost of the increased debt. It also cites integration risk from the Systems Control acquisition and the possibility of goodwill and intangible asset impairments, with $3,729 million of goodwill and other intangibles at year-end.
06—Continue