SHELTON, Conn. — Hubbell Incorporated reported operating results for the second quarter ended June 30, 2016.
Net sales in the second quarter of 2016 were $909 million, an increase of 4% compared to the $874 million reported in the second quarter of 2015. Operating income in the quarter was $132 million as compared to $127 million in the same period of 2015. Excluding restructuring and related costs in both periods, adjusted operating income was $138 million in the second quarter of 2016, compared to $143 million in the second quarter of 2015 . Net income attributable to Hubbell in the second quarter of 2016 was $81 million compared to $80 million reported in the comparable period of 2015. Earnings per diluted share for the second quarter of 2016 were $1.45, compared to $1.37 reported in the second quarter of 2015. Excluding restructuring and related costs in both periods, adjusted earnings per diluted share were $1.53 in the second quarter of 2016, compared to $1.56 of adjusted earnings per diluted share in the second quarter of 2015. Free cash flow (defined as cash flow from operating activities less capital expenditures) was $49 million in the second quarter of 2016 versus $55 million reported in the comparable period of 2015.
For the first six months of 2016 net sales were $1.7 billion, an increase of 4% compared to the same period of the prior year. Operating income was $234 million compared to $232 million for the comparable period of 2015. Excluding restructuring and related costs, adjusted operating income for the first six months of 2016 was $247 million compared with $252 million for the comparable period of 2015. Net income attributable to Hubbell of $142 million in the first six months of 2016 was flat as compared to the comparable period of 2015. Earnings per diluted share for the first six months of 2016 were $2.53 compared to $2.44 reported for the first six months of 2015. Excluding restructuring and related costs, earnings per diluted share for the first six months of 2016 were $2.69 compared with $2.68 for the comparable period of 2015. Free cash flow was $92 million compared to $64 million reported in the first six months of 2015.
OPERATIONS REVIEW
“Similar to the first quarter, organic growth offset foreign exchange headwind while acquisitions fueled higher sales,” said David G. Nord, Chairman, President and Chief Executive Officer. “End market performance continued to be mixed, with expansion in non-residential and residential markets, declines in oil and core industrial, and flat utility markets. While overall demand was in line with our annual expectations, it was uneven within the months of the quarter. The lack of steady market trends did not distract us from our focus on product innovation, channel development, and cost reduction.
“We continued executing our restructuring and related programs and the realized savings are on track. We made significant progress in the quarter, particularly in business process initiatives, toward our objectives of streamlining our operations and optimizing our cost structure,” stated Mr. Nord. “In addition, the integration of the two acquisitions completed earlier this year is going as planned. And in July, Hubbell Power Systems closed on an acquisition of a polymer insulator manufacturer based in China.
“As previously announced, we completed our stated share repurchases for 2016 in the quarter, buying back $250 million of shares since completing our Common Stock reclassification in December,” added Mr. Nord.
SEGMENT REVIEW
The comments and year-over-year comparisons in this segment review are based on second quarter results in 2016 and 2015.
Electrical segment net sales in the second quarter of 2016 increased 4% to $641 million compared to $615 million reported in the second quarter of 2015. Organic sales increased 1% in the quarter due to higher shipments in construction-related businesses partially offset by declines in oil and core industrial markets. Foreign currency translation reduced sales by 1%. Acquisitions added 4% to net sales in the quarter. Operating income was $77 million, or 12.0% of net sales, compared to $75 million, or 12.1% of net sales, in the same period of 2015. Excluding restructuring and related costs, adjusted operating income was $83 million, or 12.9% of net sales compared to $88 million, or 14.3% of net sales in the same period of 2015 . The decreases in adjusted operating income and margin were primarily due to mix headwind .
Power segment net sales in the second quarter of 2016 increased 3% to $267 million compared to $259 million reported in the second quarter of 2015. Organic sales increased 1% in the quarter and offset unfavorable foreign currency translation of 1%. Acquisitions added 3% to net sales in the quarter. Compared to the second quarter of 2015, operating income increased 5% to $55 million, or 40 basis points to 20.6% of net sales. Excluding restructuring and related costs, adjusted operating income was $56 million, or 20.9% of net sales compared to $55 million, or 21.1% of net sales in the same period of 2015 . The impacts of favorable material costs and price contributed to the increase in adjusted operating income, while acquisitions had an unfavorable impact on adjusted operating margin.
SUMMARY & OUTLOOK
Mr. Nord commented, “First half financial performance reflected growing construction-related markets partially offset by oil and core industrial declines. We expect this dynamic to continue into the second half of 2016, although we anticipate easier compares in our Harsh and Hazardous business.
“We continue to expect flat end markets in the aggregate for the second half of 2016, consistent with our annual expectations, and we target to outperform our end markets,” Mr. Nord added. “With half of 2016 complete, we are confident in our ability to deliver full year diluted earnings per share in the range of $5.20 to $5.40, including approximately $0.35 of restructuring and related costs and $0.30 of incremental savings, and free cash flow greater than 90% of net income.”
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