SHELTON, Conn. — Hubbell Incorporated today reported operating results for the second quarter ended June 30, 2019.
Net sales in the second quarter of 2019 were $1.20 billion, an increase of 3% compared to the $1.17 billion reported in the second quarter of 2018. Operating income in the quarter was $167 million as compared to $157 million in the same period of 2018. Adjusted operating income in the quarter was $185 million as compared to $176 million in the same period of the prior year (1). Net income attributable to Hubbell in the second quarter of 2019 was $96 million compared to $100 million reported in the comparable period of 2018. Earnings per diluted share for the second quarter of 2019 were $1.75 compared to $1.82 in the same period of the prior year. Adjusted earnings per diluted share were $2.31 in the second quarter of 2019 as compared to $2.09 in the same period of the prior year (1).
Adjusted second quarter results continue to exclude the amortization of acquisition-related intangible assets ($0.25), as well as a non-recurring charge ($0.31) associated with the Company’s previously disclosed withdrawal from a multi-employer pension plan and the subsequent withdrawal and now likely liquidation of another employer in the plan. The Company expects the cash impact of this charge to be immaterial on an annual basis.
Net cash provided from operating activities was $132 million in the second quarter of 2019 versus $153 million in the comparable period of 2018. Free cash flow (defined as cash flow from operating activities less capital expenditures) was $107 million in the second quarter of 2019 versus $127 million reported in the comparable period of 2018 (3).
For the first six months of 2019, net sales were $2.28 billion, an increase of 6% compared to the $2.16 billion reported in the comparable period of 2018. Operating income was $288 million as compared to $257 million in the same period of 2018. Adjusted operating income was $324 million in the first six months of 2019 as compared to $307 million in the same period of the prior year (1). Net income attributable to Hubbell in the first six months of 2019 was $168 million compared to $159 million reported in the comparable period of 2018. Earnings per diluted share for the first six months of 2019 were $3.07 compared to $2.87 reported in the comparable period of 2018. Adjusted earnings per diluted share were $3.87 in the first six months of 2019 as compared to $3.60 in the same period of the prior year (1).
Net cash provided from operating activities was $210 million in the first six months of 2019 versus $152 million provided in the comparable period of 2018. Free cash flow (defined as cash flow from operating activities less capital expenditures) was $162 million in the first six months of 2019 versus $105 million reported in the comparable period of 2018 (3).
OPERATIONS REVIEW
“Hubbell delivered another strong quarter of operating performance,” said David G. Nord, Chairman and Chief Executive Officer. “End markets overall continue to grow at a modest pace as expected, with notable strength in electrical T&D and gas distribution offsetting weakness in oil markets. Our Power segment achieved strong top and bottom line performance in the quarter, with both legacy Power Systems and Aclara contributing similarly to our organic growth. The combination of these two strong franchises continues to yield benefits for Hubbell as we execute on our strategy, and we are well positioned to capitalize on attractive opportunities in electrical T&D markets.”
Nord continued, “We remain disciplined on driving price and productivity to offset inflationary headwinds, which enabled us to expand year-over-year adjusted operating margins despite accelerated investment in footprint optimization. Free cash flow performance was again strong in the quarter, driven by our ongoing working capital and inventory management, while maintaining high levels of delivery capability and customer service.”
SEGMENT REVIEW
The comments and year-over-year comparisons in this segment review are based on second quarter results in 2019 and 2018.
Electrical segment net sales in the second quarter of 2019 of $688 million were essentially flat compared to $689 million reported in the second quarter of 2018. Organic sales grew 1% in the quarter while foreign currency subtracted 1%. Operating income was $88 million, or 12.8% of net sales, compared to $91 million, or 13.3% of net sales in the same period of 2018. Adjusted operating income was $94 million, or 13.6% of net sales, in the second quarter of 2019 as compared to $97 million, or 14.1% of net sales in the same period of the prior year (1). The decrease in adjusted operating income and adjusted operating margin were primarily due to lower volumes and increased investment in restructuring and related activities, partially offset by price realization and productivity in excess of cost inflation.
Power segment net sales in the second quarter of 2019 increased 6% to $508 million compared to $478 million reported in the second quarter of 2018. Organic sales grew 7% compared to the second quarter of 2018, while foreign currency subtracted 1%. Operating income was $79 million, or 15.5% of net sales, compared to $66 million, or 13.7% of net sales in the same period of 2018. Adjusted operating income was $91 million, or 18.0% of net sales, in the second quarter of 2019 as compared to $79 million, or 16.5% of net sales in the same period of the prior year (1). Changes in operating income and operating margin were primarily due to volume growth and price realization and productivity in excess of cost inflation.
SUMMARY & OUTLOOK
For the full year 2019, Hubbell continues to anticipate end markets will grow approximately 2% to 3% in the aggregate, complemented by approximately 1% growth from previously completed acquisitions. This end market outlook includes growth of 1 – 3% in non-residential markets, 0 – 2% in residential markets, 1 – 3% in oil and gas markets, 3 – 5% in electrical T&D markets, and 1 – 3% in industrial markets.
Hubbell now anticipates 2019 adjusted diluted earnings per share (“Adjusted EPS”) in the range of $7.85 to $8.15(1) and reported diluted earnings per share expectations in the range of $6.55 to $6.85. Adjusted EPS excludes amortization of acquisition-related intangible assets, which the Company expects to be approximately $1.00 for the full year(1), as well as a non-recurring charge ($0.31) associated with the Company’s previously disclosed withdrawal from a multi-employer pension plan and the subsequent withdrawal and now likely liquidation of another employer in the plan. The Company expects the cash impact of this charge to be immaterial on an annual basis. The Company believes Adjusted EPS is an insightful measure of underlying financial performance in light of our acquisition strategy.
These ranges are based on a tax rate of 23-24% and include approximately $0.40 of anticipated restructuring and related investment, primarily driven by footprint consolidation efforts. The Company now expects free cash flow to be ~100% of adjusted net income in 2019(1,3).
Nord concluded, “Hubbell’s first half results demonstrate a strong start to 2019 and set us up well to deliver on our commitments for the full year. We feel confident in our ability to drive differentiated performance through continued execution of our strategy.”
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