SHELTON, Conn. – Hubbell Incorporated today reported operating results for the second quarter ended June 30, 2021.
“Hubbell delivered a strong quarter, with year-over-year organic growth and adjusted earnings per share growth in excess of 20%,” said Gerben Bakker, Chairman, President and Chief Executive Officer. Broad-based strength across Electrical and Utility end markets drove significant volume and orders growth in the second quarter. In Utility Solutions, grid modernization initiatives, renewables projects, and replacement of aging infrastructure continue to drive demand from utility customers for Utility T&D components. As anticipated, Utility communications & controls returned to growth in the quarter as deployments which were previously affected by pandemic-related project delays resumed. In Electrical Solutions, growth continued to be led by light industrial markets, while heavy industrial and non-residential markets have also begun to recover.”
“As anticipated, in the second quarter the Company lapped the prior year impact of temporary cost actions taken as a result of the COVID-19 pandemic, and price/material was a net headwind as strong price realization was more than offset by increases in raw materials. More broadly, tight supply chains and labor markets across the industrial economy have resulted in increased freight and manufacturing costs, which we are actively mitigating through price, productivity initiatives and continued operating expense management.”
Bakker concluded, “We are pleased with the results of the second quarter, as the Company executed well in a dynamic environment to meet growing demand from our customers for reliable and efficient critical infrastructure solutions. As we move into the second half, we anticipate that our markets will remain strong, and are confident that Hubbell will execute effectively to provide these critical products to our customers while delivering strong financial results for our shareholders.”
Certain terms used in this release, including “Net debt”, “Free Cash Flow”, “Organic net sales”, “Organic growth”, “Restructuring-related costs”, “EBITDA”, and certain “adjusted” measures, are defined under the section entitled “Non-GAAP Definitions.” See page 8 for more information.
SECOND QUARTER FINANCIAL HIGHLIGHTS
The comments and year-over-year comparisons in this segment review are based on second quarter results in 2021 and 2020.
Electrical Solutions segment net sales in the second quarter of 2021 was $603 million compared to $469 million reported in the second quarter of 2020. Organic sales increased 26% in the quarter while acquisitions contributed 1% and foreign exchange contributed 1%. Operating income was $76.3 million, or 12.7% of net sales, compared to $52.8 million, or 11.2% of net sales in the same period of 2020. Adjusted operating income was $80.5 million, or 13.4% of net sales, in the second quarter of 2021 as compared to $57.0 million, or 12.1% of net sales in the same period of the prior year. Increases in adjusted operating profit and operating margin were driven primarily by higher volumes and productivity and restructuring benefits, partially offset by the non-repeat of prior year temporary cost savings and headwinds from price/material and supply chain costs.
Utility Solutions segment net sales in the second quarter of 2021 increased 23% to $589 million compared to $480 million reported in the second quarter of 2020. Organic sales increased 16% in the quarter, with acquisitions contributing approximately 6% growth. Including acquisitions, Utility T&D Components sales increased approximately 25% and Utility Communications and Controls sales increased by approximately 18%. Operating income was $76 million, or 13.0% of net sales, compared to $79 million, or 16.4% of net sales in the same period of 2020. Adjusted operating income was $93 million, or 15.7% of net sales, in the second quarter of 2021 as compared to $93 million, or 19.4% of net sales in the same period of the prior year. Decreases in adjusted operating margin were primarily due to headwinds from price/material and supply chain costs, the non-repeat of prior year temporary cost savings, unfavorable mix and acquisitions, partially offset by higher volumes.
Adjusted second quarter 2021 results exclude $0.29 of amortization of acquisition-related intangible assets, $0.23 related to the loss on early extinguishment of debt and $0.10 related to the loss on disposal of a business. Adjusted second quarter 2020 results exclude $0.26 of amortization of acquisition-related intangible assets.
The Company also benefited from lower year-over-year tax rate, interest and other expense in the quarter.
Net cash provided by operating activities was $150 million in the second quarter of 2021 versus $195 million in the comparable period of 2020. Free cash flow was $131 million in the second quarter of 2021 versus $178 million reported in the comparable period of 2020 as the Company built working capital to serve strengthening market demand.
SUMMARY & OUTLOOK
For the full year 2021, Hubbell anticipates sales growth of 11-13%. This expectation is comprised of 8-10% organic growth, including 4% price realization, bolstered by approximately 3% growth from acquisitions. By end market, the Company expects growth of +3-5% in Utility T&D Components, +4-6% in Utility Communications and Controls, +8-10% in Industrial, +6-8% in Residential, and +1-3% in Non-Residential.
Hubbell anticipates 2021 earnings per diluted share in the range of $7.05-$7.35 and anticipates adjusted diluted earnings per share (“Adjusted EPS”) in the range of $8.50-$8.80. Adjusted EPS excludes amortization of acquisition-related intangible assets, which the Company expects to be approximately $1.15 for the full year. Adjusted EPS also excludes a loss on the early extinguishment of debt from the 2022 Notes that were redeemed by the Company on April 2, 2021, as well as a loss recognized on the disposal of a business during the second quarter of 2021. 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 21-22% and continue to include approximately $0.30 per share of anticipated restructuring and related investment. The ranges also incorporate the impact of acquisitions, which we continue to anticipate adding approximately $0.25 to full year adjusted earnings. The Company expects full year 2021 free cash flow of approximately $500 million.
During the second quarter, the Company disposed of Aclara’s Consumer Analytics business for a sale price of $9.8 million and recognized a pre-tax loss of $6.8 million that is excluded from adjusted results. The disposition of this business did not have a significant impact on second quarter adjusted results and is not anticipated to have a significant impact on the Company’s future financial results.
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