<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ TO __________________
Commission File Number 1-2958
HUBBELL INCORPORATED
(Exact name of registrant as specified in its charter)
STATE OF CONNECTICUT 06-0397030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
584 DERBY MILFORD ROAD, ORANGE, CT 06477
(Address of principal executive offices) (Zip Code)
(203) 799-4100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
___ ___
The number of shares of registrant's classes of common stock outstanding as of
November 6, 2000 were:
Class A ($.01 par value) 9,749,000
Class B ($.01 par value) 49,564,000
<PAGE> 2
INDEX
HUBBELL INCORPORATED
<TABLE>
<CAPTION>
Part I. Financial Information PAGE
----
<S> <C>
Item 1. Financial Statements - (unaudited)
Consolidated statement of income - Three months ended September
30, 2000 and 1999, Nine months ended September 30, 2000
and 1999 3
Consolidated balance sheets - September 30, 2000 and December 31, 1999 4
Consolidated statement of cash flows - Nine months ended September
30, 2000 and 1999 5
Notes to consolidated financial statements - September 30, 2000 6-11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12-15
Part II. Other Information
Item 1. Legal Proceedings N/A
Item 2. Changes In Securities and Use of Proceeds N/A
Item 3. Defaults upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Report on Form 8-K 16
Signature 16
</TABLE>
2
<PAGE> 3
HUBBELL INCORPORATED
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 360.8 $ 372.4 $ 1,078.0 $ 1,108.5
Cost of goods sold 260.4 275.0 800.1* 793.5
--------- --------- --------- ---------
GROSS PROFIT 100.4 97.4 277.9 315.0
Special charge (credits), net -- -- (.1) --
Selling & administrative expenses 54.3 57.2 167.4 167.1
(Gain) on sale of business -- (8.8) (36.2) (8.8)
--------- --------- --------- ---------
OPERATING INCOME 46.1 49.0 146.8 156.7
OTHER INCOME (EXPENSE):
Investment income 4.4 3.8 11.9 10.6
Interest expense (5.7) (4.6) (13.8) (12.3)
Other income, net (.2) .2 3.6 5.3
--------- --------- --------- ---------
TOTAL OTHER INCOME, NET (1.5) (.6) 1.7 3.6
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 44.6 48.4 148.5 160.3
Provision for income taxes 11.6 12.6 38.6 41.7
--------- --------- --------- ---------
NET INCOME $ 33.0 $ 35.8 $ 109.9 $ 118.6
========= ========= ========= =========
EARNINGS PER SHARE - BASIC $ 0.55 $ 0.55 $ 1.78 $ 1.82
========= ========= ========= =========
EARNINGS PER SHARE - DILUTED $ 0.55 $ 0.54 $ 1.77 $ 1.79
========= ========= ========= =========
CASH DIVIDENDS PER COMMON SHARE $ 0.33 $ 0.32 $ 0.98 $ 0.95
========= ========= ========= =========
</TABLE>
*2000 includes a special charge of $20.3 for product rationalizations.
See notes to consolidated financial statements.
3
<PAGE> 4
HUBBELL INCORPORATED
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and temporary cash investments $ 47.6 $ 24.0
Accounts receivable (net) 218.3 218.7
Inventories 295.0 278.5
Prepaid taxes and other 35.8 31.6
-------- --------
TOTAL CURRENT ASSETS 596.7 552.8
Property, plant and equipment (net) 305.7 308.9
Other Assets:
Investments 196.7 206.7
Purchase price in excess of net assets of companies acquired (net) 258.4 241.3
Property held as investment 11.5 10.5
Other 62.7 79.0
-------- --------
$1,431.7 $1,399.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Commercial paper and notes $ 211.8 $ 127.1
Accounts payable 67.2 75.9
Accrued salaries, wages and employee benefits 24.2 22.6
Accrued income taxes 47.7 24.6
Dividends payable 19.9 20.8
Accrued consolidation and streamlining charge 7.6 10.0
Other accrued liabilities 71.0 62.4
-------- --------
TOTAL CURRENT LIABILITIES 449.4 343.4
Long-Term Debt 99.7 99.6
Other Non-Current Liabilities 91.9 90.5
Deferred Income Taxes 6.8 9.9
Shareholders' Equity 783.9 855.8
-------- --------
$1,431.7 $1,399.2
======== ========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
HUBBELL INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
------------------------------------ ---- ----
<S> <C> <C>
Net income $109.9 $118.6
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sale of business (36.2) (8.8)
Gain on sale of assets (11.2) --
Depreciation and amortization 41.3 43.2
Deferred income taxes (6.3) (1.7)
Expenditures/reversals - streamlining and special charges (22.3) (3.5)
Special Charge - 2000 10.4 --
Changes in assets and liabilities, net of business acquisitions/dispositions:
(Increase)/Decrease in accounts receivable 8.3 (37.5)
(Increase)/Decrease in inventories (8.8) 19.8
(Increase)/Decrease in other current assets (1.8) .8
Increase/(Decrease) in current operating liabilities 6.8 (17.6)
(Increase)/Decrease in other, net (3.1) (2.4)
------ ------
Net cash provided by operating activities 87.0 110.9
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses (37.1) (38.3)
Sale of business 61.0 37.4
Proceeds from disposition of assets 23.3 --
Additions to property, plant and equipment (39.1) (44.4)
Purchases of investments (2.4) (34.1)
Repayments and sales of investments 12.5 22.2
Other, net 8.6 .6
------ ------
Net cash provided by (used in) investing activities 26.8 (56.6)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (61.4) (61.4)
Commercial paper and notes - borrowings 84.7 42.0
Exercise of stock options 1.9 5.6
Acquisition of treasury shares (115.4) (35.2)
------ ------
Net cash used in financing activities (90.2) (49.0)
------ ------
Increase in cash and temporary cash investments 23.6 5.3
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 24.0 30.1
------ ------
End of period $ 47.6 $ 35.4
====== ======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring items) considered necessary
for a fair presentation have been included. Operating results for the three
and nine month periods ending September 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended December
31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Hubbell Incorporated Annual Report on
Form 10-K for the year ended December 31, 1999.
2. SPECIAL AND NON-RECURRING CHARGES
Nine-month operating results reflect a special and non-recurring charge,
offset by a reduction in the streamlining program accrual established in
1997. These amounts, recorded in the first and second quarters, total $23.7
million ($17.5 million net of tax, or $.28 per diluted share).
In accordance with authoritative guidelines for reporting and disclosure,
the Company's charges and accrual reversal are recorded within their
respective classifications in the consolidated statement of income, as
follows (in millions):
<TABLE>
<CAPTION>
Classification
--------------
Third Quarter Nine Months
------------- -----------
<S> <C> <C>
Non recurring charges:
Net Sales $ --- $ 3.5
Special charges (credits):
Cost of goods sold --- 20.3
Special charge (credits), net --- (.1)
-------- ------
TOTAL COST $ --- $ 23.7
======== ======
</TABLE>
6
<PAGE> 7
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Net sales includes a non-recurring charge of $3.5 million related to an
increase in the reserve for customer returns and allowances. The increased
reserve requirement was primarily in response to higher customer credit
activity associated with inaccurate/incomplete shipments from the new
electrical products central distribution warehouse.
Cost of sales reflects a second quarter special charge of $20.3 million in
connection with management's decision to streamline its product offering
and eliminate non-strategic inventory across all business units.
Special charge, net, reflects the cost of additional first and second
quarter 2000 cost reduction and streamlining actions offset by a reversal,
in connection with management's ongoing review, of costs accrued in
connection with the 1997 streamlining program.
The following table sets forth the status of the 2000 special charge:
<TABLE>
<CAPTION>
Employee Asset Exit
Benefits Disposals Costs Total
-------- --------- ----- -----
<S> <C> <C> <C> <C>
2000 special charge $ 1.6 $ 6.0 $ 2.8 $10.4
Non-cash write-offs -- (6.0) -- (6.0)
Cash expenditures (.6) -- (1.1) (1.7)
----- ----- ----- -----
Remaining Accrual at September 30 $ 1.0 $ -- $ 1.7 $ 2.7
===== ===== ===== =====
</TABLE>
1997 Streamlining Program
The following table sets forth the status of the 1997 streamlining program:
<TABLE>
<CAPTION>
Employee Disposal Accrued
Benefits and Exit Costs Charge
-------- -------------- ------
<S> <C> <C> <C>
1997 streamlining program $15.6 $16.8 $32.4
Amount utilized (8.3) (8.7) (17.0)
Amounts reversed in 2000 (5.4) (5.1) (10.5)
----- ----- -----
Remaining Accrual at
September 30 $ 1.9 $ 3.0 $ 4.9
===== ===== =====
</TABLE>
7
<PAGE> 8
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
3. BUSINESS COMBINATIONS
Acquisitions
In July, the Company completed the purchase of common stock of GAI-Tronics
Corporation from Salient 3 Communications for a cash purchase price of
$37.1 million. Based in Reading, PA, GAI-Tronics is a leading supplier of
specialized communications systems designed for indoor, outdoor and
hazardous environments. GAI-Tronics will be included in the Company's Other
segment.
During the third quarter 1999, the Company acquired the assets of Haefely
Test AG, a manufacturer of high voltage test and measurement equipment, for
a cash purchase price of $25.0 million reported in the Other segment.
Acquisitions in 1999 also included the first quarter purchase of a
manufacturer of high voltage cable accessory products and technology for
use in the electric utility market for the Power segment.
The costs of the acquired businesses have been allocated to assets acquired
and liabilities assumed based on fair values with the residual amount
assigned to goodwill, which is being amortized over forty years. The
businesses have been included in the financial statements as of their
respective acquisition dates and had no material effect on the Company's
financial position and reported earnings during the respective periods.
Dispositions
------------
In April, the Company completed the sale of its WavePacer Digital
Subscriber Line assets, part of Pulse Communications, Inc. ("Pulse"), to
ECI Telecom Ltd. for a purchase price of $61.0 million with a provision for
additional payments depending upon WavePacer's sales in 2000. The
transaction produced a gain on sale of $36.2 million in the second quarter.
In September 1999, the Company completed the sale of The Kerite Company
("Kerite"), a wholly-owned subsidiary reported in the Power segment for a
cash purchase price of $38.4 million. The sale produced a net gain of $8.8
million.
4. INVENTORIES ARE CLASSIFIED AS FOLLOWS: (IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
Raw Material $ 98.0 $ 92.8
Work-in-Process 78.8 72.3
Finished Goods 164.4 158.9
------ ------
341.2 324.0
Excess of current
costs over LIFO basis (46.2) (45.5)
------ ------
$295.0 $278.5
====== ======
</TABLE>
8
<PAGE> 9
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
5. SHAREHOLDERS' EQUITY COMPRISES: (IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
Common Stock, $.01 par value:
Class A-authorized 50,000,000 shares,
outstanding 9,732,502 and 10,357,021 shares $ .1 $ .1
Class B-authorized 150,000,000 shares
outstanding 50,032,953 and 54,570,571 shares .5 .5
Additional paid-in-capital 236.2 349.7
Retained earnings 568.5 519.1
Cumulative translation adjustments (21.4) (13.6)
------ ------
$783.9 $855.8
====== ======
</TABLE>
The decrease in additional paid-in-capital primarily reflects the acquisition of
$115.4 million in shares repurchased under the Company's $300 million share
repurchase program. Shares repurchased are retired.
6. The following table sets forth the computation of earnings per share for
the three and nine-months ended September 30, (in millions except per share
data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 33.0 $ 35.8 $ 109.9 $ 118.6
======= ======= ======= =======
Weighted average number of common
shares outstanding during the period 60.3 65.0 61.9 65.1
Potential dilutive shares .1 1.0 .1 1.1
------- ------- ------- -------
Average number of shares outstanding - diluted 60.4 66.0 62.0 66.2
Earnings per share:
Basic $ 0.55 $ 0.55 $ 1.78 $ 1.82
Diluted $ 0.55 $ 0.54 $ 1.77 $ 1.79
</TABLE>
7. COMPREHENSIVE INCOME (IN MILLIONS)
Total comprehensive income was $30.2 and $102.1 for the three and
nine-months ended September 30, 2000, respectively, and $36.1 and $118.4
for the three and nine-months ended September 30, 1999, respectively. The
difference between Net Income and Comprehensive Income relates entirely to
translation adjustments.
9
<PAGE> 10
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
8. INDUSTRY SEGMENTS
The Company reports operations in three segments: Electrical, Power and
Other. Beginning in 2000, the Telecommunications Segment, which consisted
of the Pulse subsidiary, has been included in the Electrical Segment.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
The following table sets forth financial information by industry segment
for the three and nine months ended September 30 (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales
Electrical $ 234.4 $ 241.5 $ 711.7 $ 742.6
Power 89.9 105.3 280.7 305.2
Other 36.5 25.6 85.6 60.7
-------- -------- -------- --------
Total $ 360.8 $ 372.4 $1,078.0 $1,108.5
======== ======== ======== ========
Operating Income
Electrical* $ 33.2 $ 32.4 $ 98.5 $ 111.0
Special and non-recurring
charge, net -- -- (19.2) --
Gain on sale of business -- -- 36.2 --
Power 9.7 6.3 29.0 32.5
Special and non-recurring
charge, net -- -- (3.7) --
Gain on sale of business -- 8.8 -- 8.8
Other 3.2 1.5 6.8 4.4
Special charge -- -- (.8) --
-------- -------- -------- --------
Segment Total 46.1 49.0 146.8 156.7
Interest Expense (5.7) (4.6) (13.8) (12.3)
Investment and Other
Income, Net 4.2 4.0 15.5 15.9
-------- -------- -------- --------
Income Before Income Taxes $ 44.6 $ 48.4 $ 148.5 $ 160.3
======== ======== ======== ========
</TABLE>
* - ELECTRICAL SEGMENT OPERATING INCOME FOR THE NINE-MONTHS ENDED
SEPTEMBER 30, 2000 INCLUDES $8.1 MILLION IN CONNECTION
WITH THE GAIN ON SALE OF A FULLY-DEPRECIATED WEST COAST WAREHOUSE.
10
<PAGE> 11
HUBBELL INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
9. In June 1999, the Financial Accounting Standards Board issued statement of
Financial Accounting Standard ("SFAS") No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133", which delayed the effective date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", by one
year. SFAS No. 133 is now effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000 (January 1, 2001 for the Company). SFAS
No. 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. This will change the current practices of the
Company, but is not expected to have a significant impact on financial
position or results of operations.
10. In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," effective in the fourth quarter of fiscal years beginning
after December 15, 1999 (October 1, 2000 for the Company). SAB 101 sets
forth the basic principles of revenue recognition and does not supersede
any existing authoritative literature. SAB 101 is not expected to
have any material impact on financial position or results of operations.
11
<PAGE> 12
HUBBELL INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 2000
SEGMENTS
The Company reports operations in three segments: Electrical, Power and Other.
Beginning in 2000, the Telecommunications segment, which consisted of the Pulse
subsidiary, has been included in the Electrical segment. All prior year amounts
have been reclassified to conform to the current year presentation.
RESULTS OF OPERATIONS
Consolidated net sales for the third quarter and nine months of 2000 declined
slightly versus the comparable periods of the prior year primarily due to
declines at Pulse and within the commodity electrical businesses. Also, in the
quarter, softened order volume produced lower sales in the Power segment. These
declines were partially offset by the impact of acquisitions in the Other
segment.
Operating income declined 6% in the third quarter and nine months versus 1999.
Excluding the special charge, net and gain on sale of business, operating income
improved 15% for the quarter and, for the nine months, declined 9%.
Segment Results
Electrical Segment sales declined 3% in the quarter and 4% year-to-date versus
the comparable periods of 1999. The sales decline is primarily attributable to
the core products of Pulse, where sales fell sharply from the year ago periods
due to a drop in demand for multiplexing products. Volume also declined in
commodity electrical products due to overall lower demand coupled with
inefficiencies associated with operating the new mid-west distribution facility.
Operating income improved modestly in the quarter, however, operating
income remains down year-to-date due to the lower volume, increased freight
costs and the high logistics and start-up costs at the mid-west distribution
facility. Nine-month operating income for the segment also includes $8.1
million in connection with a gain on the sale of a west coast warehouse.
Power Segment comparable sales, excluding Kerite, fell 6% in the quarter,
however, on a year-to-date basis improved 4% versus the 1999 comparable period.
Strong order input and resultant higher shipments in the first half of 2000
contributed to the nine-month increase. In the third quarter, lower sales
reflects a softening of order input due to high levels of inventory in the
distribution channel and lower end-user demand. Operating income in the
quarter improved due to lower costs associated with having substantially
completed the complex series of changes in the segment's operations described
throughout 1999.
The Other Industry Segment reported substantially increased sales in the quarter
and year-to-date mainly as a result of the July 1999 acquisition of the Haefely
high voltage test and instrumentation business. Also, in July, 2000 the Company
completed the purchase of GAI-Tronics Corporation from
12
<PAGE> 13
HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 2000
(CONTINUED)
Salient 3 Communications for a cash purchase price of $37.1 million. GAI-Tronics
is a leading supplier of specialized communications systems designed for
indoor,outdoor and hazardous environments. In the remainder of this segment's
businesses, slower industrial demand resulted in flat sales in the third quarter
and year-to-date compared with comparable periods in 1999. However, operating
profit margins managed to improve due to effective cost management and a
favorable mix of product sales.
Special and non-recurring charges
The nine-month operating results reflect a special and non-recurring charge,
offset by a reduction in the streamlining program accrual established in 1997.
These amounts, recorded in the first and second quarters, total $23.7 million
($17.5 million net of tax, or $0.28 per diluted share).
The Company's charges and accrual reversal are recorded within their respective
classifications in the consolidated statement of income, as indicated in Note 2
of Notes to Consolidated Financial Statements.
Net sales includes a non-recurring charge of $3.5 million related to an increase
in the reserve for customer returns and allowances. The increased reserve
requirement was primarily in response to higher customer credit activity in the
first half of 2000 associated with inaccurate/incomplete shipments from the
new electrical products central distribution warehouse.
Cost of sales reflects a special charge of $20.3 million in connection with
management's decision to streamline its product offering and eliminate
non-strategic inventory across all business units.
Special charge, net, reflects the cost of additional first and second quarter
2000 cost reduction and streamlining actions offset by a reversal, in connection
with management's ongoing review, of costs accrued in connection with the 1997
streamlining program.
2000 Special Charge
The following table sets forth the status of the 2000 special charge:
<TABLE>
<CAPTION>
Employee Asset Exit
Benefits Disposals Costs Total
-------- --------- ----- -----
<S> <C> <C> <C> <C>
2000 special charge $ 1.6 $ 6.0 $ 2.8 $10.4
Non-cash write-offs -- (6.0) -- (6.0)
Cash expenditures (.6) -- (1.1) (1.7)
----- ----- ----- -----
Remaining Accrual at September 30 $ 1.0 $ -- $ 1.7 $ 2.7
===== ===== ===== =====
</TABLE>
The programs under the 2000 special charge are expected to be completed by June
30, 2001.
13
<PAGE> 14
HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 2000
(CONTINUED)
1997 Streamlining Program
Each of the remaining in-process programs within the Power and Electrical
segments will be completed by June 30, 2001, with a majority of the remaining
accrual balance of $4.9 million being spent by December 31, 2000.
Gain on sale of businesses
In April, the Company completed the sale of its WavePacer Digital Subscriber
Line assets, to ECI Telecom Ltd. for a purchase price of $61.0 million. The
transaction produced a gain on sale of $36.2 million in the second quarter. In
September, 1999, the Company completed the sale of Kerite for a cash purchase
price of $38.4 million. The sale produced a net gain of $8.8 million.
In the third quarter and on a year-to-date basis, interest expense increased
due to higher average debt levels and borrowing rates.
Other income & expense
Other income, net, for the nine months of 2000 is primarily comprised of the
first quarter gain on sale of leveraged lease investments in contemplation of
their pending expiration. The 1999 nine month balance primarily includes
insurance recoveries in connection with damage sustained from Hurricane Georges.
The effective income tax rate for the third quarter and nine months of 2000
remained at 26%, consistent with the comparable 1999 periods.
FINANCIAL CONDITION
The Company's working capital position remained strong at September 30, 2000 at
$147.3 million versus $209.4 million at December 31, 1999. Total borrowings at
September 30, 2000, were $311.5 million, 40% of shareholders equity. Versus
December 31, 1999, the debt to equity ratio has increased due to financing
higher inventory levels and the effect of continuing share purchases in
connection with the Company's $300 million stock repurchase program.
CASH FLOWS
The Company's overall cash and investment balances increased at September 30,
2000 versus December 31, 1999 primarily due to proceeds received in April in
connection with the sale of the WavePacer Digital Subscriber Line assets, which
resulted in cash proceeds of $61.0 million, offset by the July purchase of
GAI-Tronics for $37.1 million. The increase in cash and temporary cash
investments through September 30, 2000 also reflects the following: cash
provided from operating and investing activities and the issuance of commercial
paper; offset by investments in plant and equipment, quarterly dividend payments
and the acquisition of treasury shares under the Company's share
14
<PAGE> 15
HUBBELL INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 2000
(CONTINUED)
repurchase program. Through September 30, 2000, the Company has completed the
purchase of 8.2 million shares aggregating $263.7 million. The Company expects
to substantially complete the $300 million program by year-end.
Cash provided by operations declined in the first nine months of 2000 versus the
prior year. Despite the decline in accounts receivable and an increase in
current liabilities, higher inventory levels and lower earnings from operations
resulted in reduced operating cash flow. Higher inventory levels reflect
management's focus on improving service levels, as well as the recent softening
of certain of the Company's industrial markets. In addition to business
acquisitions and divestitures, cash flow from investing activities reflects
proceeds from the liquidation of an investment in leveraged leases and the sale
of a warehouse in the first quarter.
The Company believes that currently available cash, borrowing facilities, and
its ability to increase credit lines if needed, combined with internally
generated funds should be more than sufficient to fund capital expenditures as
well as any increase in working capital that would be required to accommodate a
higher level of business activity.
MARKET RISKS
In the operation of its business, the Company has identified market risk
exposures to foreign currency exchange rates, raw material prices and interest
rates. There have not been any material changes affecting the identified risks
or the Company's strategy for managing the exposures from the preceding year.
FORWARD-LOOKING STATEMENTS
Certain statements made in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and elsewhere in this report, are
forward-looking and are based on the Company's reasonable current expectations.
These forward-looking statements may be identified by the use of words such as
"believe", "expect", "anticipate", "should", "plan", "estimated", "potential",
"target", "goals" and "scheduled", among others. In connection with the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company is hereby identifying certain important factors that could cause actual
results to differ materially from those contained in the specified statements.
Such factors include, but are not limited to: the projection of improvement in
the rate of progress made in lowering costs and improving profitability in the
electrical products business and the timing of completion of actions in
connection with the 2000 special charge.
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HUBBELL INCORPORATED
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
EXHIBITS
NUMBER DESCRIPTION
27. Financial Data Schedule (Electronic filings only)
-----------------------------
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the three months ended September 30,
2000.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUBBELL INCORPORATED
Dated: November 9, 2000 /s/ T. H. Powers
---------------------------
Timothy H. Powers
Senior Vice President and
Chief Financial Officer
16
