Manufacturers

Hubbell Reports Fourth Quarter Sales of $830 Million

SHELTON, Conn. — Hubbell Incorporated reported operating results for the fourth quarter ended December 31, 2015.

Net sales in the fourth quarter of 2015 were $830 million, a decrease of 2% compared to the $849 million reported in the fourth quarter of 2014. Operating income in the quarter was $112 million, or 13.5% of sales, as compared to $126 million, or 14.9% of sales, in the same period of 2014. Excluding $6.7 million and $5.1 million of restructuring and related costs in 2015 and 2014, respectively, adjusted operating income decreased 10%(1). The effective tax rate in the quarter was 30.8% compared to 31.9% in the fourth quarter of 2014. Net income attributable to Hubbell in the fourth quarter of 2015 was $62 million  compared to the $81 million reported in the fourth quarter of 2014. Earnings per diluted share for the fourth quarter of 2015 were $1.06, compared to $1.38 in the fourth quarter of 2014. Excluding restructuring and related costs in both periods and the costs associated with the Common Stock reclassification in 2015, adjusted earnings per diluted share for the fourth quarter of 2015 were $1.31 compared to $1.44 in the same period of 2014(1). Free cash flow (defined as cash flow provided by operating activities less capital expenditures) was $113 million in the fourth quarter of 2015 versus $136 million reported in the comparable period of 2014(5).

Net sales for the full year 2015 were $3.4 billion, an increase of 1% compared to the full year 2014. Operating income was $475 million compared to $517 million for the comparable period of 2014. Excluding restructuring and related costs, adjusted operating income was $514 million compared to $523 million in the same period of 2014(1). The effective tax rate for the full year 2015 was flat compared to 2014 at 32.6%. Net income attributable to Hubbell for the full year 2015 was $277 million compared to the $325 million reported in 2014. Earnings per diluted share were $4.77 for 2015 and $5.48 for 2014. Excluding restructuring and related costs in both years and the costs associated with the Common Stock reclassification in 2015, adjusted earnings per diluted share for the full year 2015 were $5.52, compared to $5.54 in the same period of 2014(1). Free cash flow was $254 million compared to $331 million reported in 2014(5).

 

OPERATIONS REVIEW

“In the face of challenging end markets, we continued to focus on providing our customers with superior products and solutions while improving the competitiveness of our cost structure,” said David G. Nord, Chairman, President and Chief Executive Officer. “End markets remained mixed, as the bright spots of growing non-residential and residential demand were more than offset by deteriorating energy and industrial markets; utility markets were generally flat.

“Against this economic backdrop, our cost reduction initiatives have begun to demonstrate meaningful benefits. We exited 12 facilities in 2015, which together with additional actions, impacted approximately 350 positions. As a result, we realized more than $10 million of savings in 2015 from restructuring and related actions. At the same time, we continued to progress on process streamlining and back-office consolidation.

“We are also pleased to have achieved an important milestone in Hubbell’s history during the fourth quarter: On December 23rd, shareholders approved the reclassification of Hubbell’s dual-class equity structure to a single class of Common Stock, which started trading as HUBB on December 24th,” Mr. Nord continued. “With the reclassification completed, we began repurchasing shares through a 10b5-1 purchase plan agreement and are on track to repurchase up to $250 million of Common Stock in 2016, as previously announced.

“In addition to share repurchases, we continued to deploy capital to create shareholder value via acquisitions,” added Mr. Nord. “On January 19th, we completed the acquisition of R.W. Lyall & Company. Lyall is a leader in the design and application of components and assemblies for the natural gas distribution market, whose promising growth trajectory is fueled by infrastructure replacement programs as well as housing starts. Lyall joins our Electrical Segment and we are thrilled to welcome the company and its employees to Hubbell.”

 

SEGMENT REVIEW

The comments and year-over-year comparisons in this segment review are based on fourth quarter results in 2015 and 2014.

Electrical segment net sales in the fourth quarter of 2015 were $586 million compared to $605 million reported in the fourth quarter of 2014. Acquisitions added 2% to sales in the quarter while the unfavorable impact of foreign currency translation reduced sales by 2%. Organic volume declined by 3% due to lower shipments in industrial and energy-related businesses partially offset by higher shipments in construction-related businesses. Operating income was $62 million, or 10.6% of net sales, compared to $82 million, or 13.5% of net sales in the same period of 2014.  Excluding restructuring and related costs, adjusted operating income was $69 million, or 11.7% of net sales compared to $87 million, or 14.3% of net sales in the same period of 2014(1). Excluding restructuring and related costs, the decrease in adjusted operating income was primarily due to unfavorable mix(1).

Power segment net sales in the fourth quarter of 2015 were $244 million compared to $243 million reported in the fourth quarter of 2014. Acquisitions added 3% to sales in the quarter while foreign currency translation reduced sales by 2%. Organic sales decreased 1% with strength in telecommunications offset by lower transmission shipments. Compared to the fourth quarter of 2014, operating income increased 11% to $50 million, or 210 basis points to 20.3% of net sales. Excluding restructuring and related costs, adjusted operating income increased 13% and margin expanded 240 basis points(1). Both increases were primarily due to favorable material costs and productivity in excess of cost inflation.

 

SUMMARY & OUTLOOK

“Our performance in 2015 reflected continued focus on what we can control amidst market uncertainty,” Mr. Nord commented. “We believe 2016 will be more of the same.  End market volumes are expected to be flat, driven by low to mid single digit growth in construction-related markets and modest growth in electrical transmission and distribution.  We anticipate energy-related market declines of 15% to 20% while industrial markets are flat to slightly down in the aggregate.

“We expect to outperform end markets, while margins are negatively impacted by mix and pricing, as well as transactional FX, pension expense and investments in growing markets,” Mr. Nord continued, “We anticipate earnings per diluted share in the range of $5.20 to $5.40, up 3% to 7% compared to $5.07 in 2015 (excluding Common Stock reclassification costs) and including approximately $0.35 of restructuring and related costs. This range incorporates $0.30 of incremental savings in 2016 from restructuring and related actions initiated prior to year-end 2015.”

Mr. Nord concluded, “Despite the expected challenging market environment, we remain committed to our long-term strategy of growing organically and by acquisition, while improving our cost structure and deploying capital effectively to create shareholder value.”

 

Tagged with ,

Comment on the story

Your email address will not be published.