SHELTON, Conn. – Hubbell Incorporated today reported operating results for the second quarter ended June 30, 2020.
“Hubbell effectively navigated a challenging economic environment in the second quarter, delivering operating margin expansion and strong free cash flow generation despite significantly lower volumes,” said David G. Nord, Chairman and Chief Executive Officer. “We continue to realize substantial benefits from our ongoing operational transformation, as our investments in restructuring and footprint optimization are paying off by generating attractive savings. Proactive compensation reduction actions, as well as lower operating expenses and continued execution on price/cost, allowed us to overcome headwinds from COVID-19 related inefficiencies. Additionally, our intense focus on working capital management once again drove very robust free cash flow generation in the quarter.”
Nord continued, “Grid hardening and modernization initiatives, along with ongoing renewable energy trends, provided resilience in demand for T&D components in our Utility facing markets. As expected and previously communicated, while supply chain disruptions as a result of COVID-19 affected our ability to fully meet this demand in the second quarter, all of our manufacturing facilities are currently operational and we are well positioned to continue serving the critical infrastructure needs of our customers. As anticipated, Aclara revenues were negatively affected in the quarter by regulatory restrictions on project deployments and installations as a result of the COVID-19 pandemic. Our Electrical businesses faced broad-based declines in the quarter driven primarily by weaker end markets.”
Nord concluded, “Hubbell’s second quarter results reflect strong execution in an uncertain and volatile environment. We remain cautious on near-term volume expectations, but with aggressive cost actions underway and continued opportunity for operational improvement ahead of us, we are confident in our ability to drive consistent and differentiated performance. Our high quality portfolio of electrical and utility solutions with strong brand value and best in class reliability positions us well for long-term success.”
Hubbell also today provided an update on the impact of the COVID-19 pandemic on our business and operations. “At Hubbell, our priority is the safety and well-being of our employees, their families, our customers and suppliers, and our communities,” said Chairman and CEO Dave Nord. “Hubbell provides mission-critical electrical and utility solutions that enable our customers to operate critical infrastructure safely, reliably and efficiently. We are committed to continue supporting our customers with high quality products while protecting the safety of our employees.”
Hubbell is generally deemed an essential manufacturer by various authorities in the localities where we operate. While we faced supply chain disruptions as a result of the pandemic in the second quarter, these were resolved within the quarter as expected, and all of our facilities are currently operational.
SECOND QUARTER FINANCIAL HIGHLIGHTS
The comments and year-over-year comparisons in this segment review are based on second quarter results in 2020 and 2019.
Electrical segment net sales in the second quarter of 2020 of $507 million compared to $688 million reported in the second quarter of 2019. Organic sales declined 26% in the quarter while the net impact of acquisitions and divestitures subtracted <1%. Operating income was $57 million, or 11.3% of net sales, compared to $88 million, or 12.8% of net sales in the same period of 2019. Adjusted operating income was $63 million, or 12.4% of net sales, in the second quarter of 2020 as compared to $94 million, or 13.6% of net sales in the same period of the prior year (1). The decreases in adjusted operating income and adjusted operating margin were primarily due to lower volumes and COVID-19 related inefficiencies, partially offset by lower operating expenses, price realization in excess of material costs, and productivity savings from restructuring and footprint optimization initiatives.
Utility Solutions segment net sales in the second quarter of 2020 decreased 13% to $442 million compared to $508 million reported in the second quarter of 2019. Organic sales declined 14% compared to the second quarter of 2019, with acquisitions contributing approximately 1% growth and foreign exchange a modest headwind. Power Systems sales declined mid single digits and Aclara sales declined by ~25%. Operating income was $74 million, or 16.8% of net sales, compared to $79 million, or 15.5% of net sales in the same period of 2019. Adjusted operating income was $87 million, or 19.7% of net sales, in the second quarter of 2020 as compared to $91 million, or 18.0% of net sales in the same period of the prior year(1). Changes in operating income and operating margin were primarily due to lower volumes and COVID-19 related inefficiencies, offset by lower operating expenses, price realization in excess of material costs, and positive mix.
Adjusted second quarter results exclude $0.25 of amortization of acquisition-related intangible assets.
Net cash provided from operating activities was $195 million in the second quarter of 2020 versus $132 million in the comparable period of 2019. Free cash flow (defined as cash flow from operating activities less capital expenditures) was $178 million in the second quarter of 2020 versus $107 million reported in the comparable period of 2019 (3).
SUMMARY & OUTLOOK
For the full year 2020, Hubbell anticipates earnings per diluted share in the range of $6.00-$6.25 and adjusted diluted earnings per share (“Adjusted EPS”) in the range of $7.00-$7.25(1). Adjusted EPS excludes amortization of acquisition-related intangible assets, which the Company expects to be approximately $1.00 for the full year(1). The Company believes Adjusted EPS is a useful measure of underlying performance in light of our acquisition strategy.
The earnings per share and adjusted earnings per share ranges are based on an adjusted tax rate of ~23% and include approximately $0.40 of anticipated restructuring and related investment. The ranges also incorporate the impact of a previously completed divestiture and previously completed acquisitions, the net of which is expected to be a modest tailwind to 2020 adjusted EPS. The Company expects free cash flow to exceed $500 million in 2020(3).
HUBBELL ANNOUNCES ORGANIZATIONAL AND LEADERSHIP CHANGES
Hubbell Incorporated announced today the consolidation of its Electrical segment from three business groups to a single operating group, Hubbell Electrical Solutions. Hubbell Electrical Solutions combines Hubbell’s Commercial & Industrial group, Construction & Energy group, and Lighting group into a unified operating group which complements Hubbell’s other operating group, Hubbell Utility Solutions.
David Nord, Hubbell’s Chairman and Chief Executive Officer, commented, “The combination of our three electrical operating groups into one strengthens Hubbell as a company and will provide growth opportunities and efficiencies for our customers and shareholders.” Noted Gerben Bakker, Hubbell’s President and Chief Operating Officer, “The Electrical Solutions group unites business groups with similar operating models, products and go to market strategies under one unified operating banner, driving synergies and long-term growth opportunities for Hubbell. This new alignment allows Hubbell to better execute on our four key foundational pillars: (i) serving the customer, (ii) growing the enterprise, (iii) operating with discipline, and (iv) developing our people.”
In connection with this consolidation, Hubbell has appointed Peter Lau as the new President of Hubbell Electrical Solutions. Lau will join Hubbell in August. He will report to Bakker and will lead the consolidation of the newly formed Hubbell Electrical Solutions. Coming most recently from Honeywell where he led the Security and Fire divisions, Lau has nearly 20 years of leadership experience with a strong track record of driving innovation and efficiencies in the electrical industry. Bakker noted, “Peter brings to Hubbell tremendous relevant operational and customer experience and will be a great addition to our team. Peter is a proven leader who we believe is uniquely capable of driving Hubbell Electrical Solutions to its full potential.”
Concurrently, Hubbell has promoted Rodd Ruland, former Group President of Hubbell’s Construction and Energy group to Executive Vice President, Transition and Integration. In this newly created role, Ruland will continue to report to Bakker, but is tasked with supporting Hubbell’s transition into its new operating structure. Ruland has been with Hubbell since its acquisition of Burndy in 2009.
Bakker commented, “Rodd had recently expressed a desire to retire after a very successful career at Hubbell leading first our Burndy business and then our Construction and Energy group, but he has graciously agreed to postpone his retirement for a year to ensure a successful start to the new Hubbell Electrical Solutions.”
Nord concluded, “Our mission at Hubbell remains to enable our customers to operate critical infrastructure safely, reliably and efficiently. We are confident that we have the right leadership in place across both Hubbell Electrical Solutions and Hubbell Utility Solutions to ensure long-term success for the enterprise.”Tagged with financial results, Hubbell, people