Hubbell(US:HUBB)2021-04-28 12:08PART I FINANCIAL INFORMATION Financial Statements (unaudited) Unaudited Q1 2021 financial statements reflect slightly decreased net sales, increased net income, rising total assets, and significant financing cash flow, following segment reorganization - Effective January 1, 2021, the Company consolidated its Electrical segment into Hubbell Electrical Solutions and moved its Hubbell Gas Connectors and Accessories business to the Utility Solutions segment, with all presented financial statements updated to reflect this change1516 Condensed Consolidated Statements of Income Q1 2021 net sales slightly decreased to $1,078.4 million, yet operating income remained stable and net income increased to $77.7 million, boosting diluted EPS and cash dividends Q1 2021 vs Q1 2020 Income Statement Highlights | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net sales | $1,078.4 million | $1,090.3 million | | Gross profit | $289.8 million | $313.5 million | | Operating income | $117.6 million | $118.8 million | | Net income attributable to Hubbell Inc. | $77.7 million | $75.0 million | | Diluted Earnings per share | $1.42 | $1.37 | | Cash dividends per common share | $0.98 | $0.91 | Condensed Consolidated Statements of Comprehensive Income Total comprehensive income for Q1 2021 significantly increased to $74.5 million, primarily due to a reduced negative impact from foreign currency translation adjustments Comprehensive Income Summary | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net income | $79.1 million | $75.7 million | | Other comprehensive (loss) income | ($4.6) million | ($22.4) million | | Total comprehensive income | $74.5 million | $53.3 million | Condensed Consolidated Balance Sheets As of March 31, 2021, total assets increased to $5.29 billion driven by higher cash, while total liabilities grew to $3.19 billion due to increased short-term debt, with equity remaining stable Balance Sheet Highlights | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,827.5 million | $1,587.6 million | | Total Assets | $5,292.9 million | $5,085.1 million | | Total Current Liabilities | $1,148.7 million | $948.2 million | | Total Liabilities | $3,194.9 million | $2,999.7 million | | Total Equity | $2,098.0 million | $2,085.4 million | Condensed Consolidated Statements of Cash Flows Q1 2021 net cash from operations decreased to $58.9 million due to working capital, while financing cash flow significantly increased to $132.4 million from new debt, resulting in a $174.2 million rise in cash Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58.9 million | $108.4 million | | Net cash used in investing activities | ($15.3) million | ($15.6) million | | Net cash provided by financing activities | $132.4 million | $35.7 million | | Increase in cash and cash equivalents | $174.2 million | $118.0 million | Notes to Condensed Consolidated Financial Statements Notes detail segment reorganizations, revenue recognition, Q1 2021 segment sales with Electrical Solutions declining and Utility Solutions growing, new $300 million senior notes, a $750 million credit facility, and ongoing restructuring costs Disaggregated Revenue by Segment (Q1 2021 vs Q1 2020) | Segment | 2021 Net Sales (millions) | 2020 Net Sales (millions) | | :--- | :--- | :--- | | Electrical Solutions | $546.2 | $563.7 | | Commercial and Industrial | $378.4 | $381.0 | | Heavy Industrial | $76.3 | $86.3 | | Residential and Retail | $91.5 | $96.4 | | Utility Solutions | $532.2 | $526.6 | | Utility T&D Components | $374.9 | $354.9 | | Utility Communications and Controls | $157.3 | $171.7 | | TOTAL | $1,078.4 | $1,090.3 | - As of March 31, 2021, the Company had approximately $380 million of unsatisfied performance obligations for long-term contracts, primarily within the Utility Solutions segment, expected to be recognized over the next three years27 - On March 12, 2021, the Company issued $300 million of 2.300% Senior Notes due 2031, with proceeds used to redeem outstanding 3.625% Senior Notes due 2022, resulting in a $16.8 million loss on extinguishment in Q2 202174 Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2021 net sales decreased 1.1% to $1.08 billion due to organic decline, gross margin contracted, but stable operating margin and adjusted diluted EPS growth were achieved through cost controls, alongside debt refinancing and decreased operating cash flow Consolidated Results Summary (Q1 2021 vs Q1 2020) | Metric | 2021 | % of Net sales | 2020 | % of Net sales | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,078.4 M | | $1,090.3 M | | | Gross profit | $289.8 M | 26.9% | $313.5 M | 28.8% | | Operating income | $117.6 M | 10.9% | $118.8 M | 10.9% | | Net income attributable to Hubbell | $77.7 M | 7.2% | $75.0 M | 6.9% | | Diluted EPS | $1.42 | | $1.37 | | Reconciliation of GAAP to Adjusted EPS | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $1.42 | $1.37 | | Adjusted Diluted EPS (Non-GAAP) | $1.72 | $1.64 | - Organic net sales declined 4.2% due to lower volume, partially offset by favorable price realization, which was offset by a 3.0% increase from acquisitions117118 Segment Results In Q1 2021, Electrical Solutions net sales declined 3.1% organically, while Utility Solutions net sales grew 1.1% driven by acquisitions, with both segments showing slight adjusted operating margin improvements Electrical Solutions Performance (Q1 2021) | Metric | Amount | Change vs Q1 2020 | | :--- | :--- | :--- | | Net Sales | $546.2 M | -3.1% | | Organic Net Sales | | -4.5% | | Adjusted Operating Margin | 10.5% | +30 bps | Utility Solutions Performance (Q1 2021) | Metric | Amount | Change vs Q1 2020 | | :--- | :--- | :--- | | Net Sales | $532.2 M | +1.1% | | Organic Net Sales | | -3.9% | | Adjusted Operating Margin | 15.5% | +10 bps | Financial Condition, Liquidity and Capital Resources The company's financial condition remains solid despite decreased operating cash flow, supported by new $300 million senior notes and a $750 million credit facility, alongside capital returns via dividends and share repurchases - Cash provided by operating activities decreased to $58.9 million for Q1 2021, compared to $108.4 million in Q1 2020, primarily due to changes in working capital components132 - On March 12, 2021, the company entered into a new five-year, $750 million committed revolving credit facility, which was undrawn as of March 31, 2021143 - In Q1 2021, the company repurchased $10.0 million of its common stock, leaving $290.0 million authorized under its current program141 Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk exposure, including foreign currency, material prices, and interest rates, occurred during Q1 2021, as referenced in the 2020 Annual Report on Form 10-K - There have been no significant changes in the Company's exposure to market risks during the three months ended March 31, 2021164 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2021167 - There were no changes in the Company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls168 PART II OTHER INFORMATION Risk Factors The company reports that there have been no material changes to its risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes in the Company's risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020170 Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2021, the company repurchased 62,000 common shares for $10.0 million, with $290.0 million remaining authorized under its stock repurchase program Q1 2021 Share Repurchase Activity | Period | Total Shares Purchased (000s) | Average Price Paid per Share | Remaining Authorization (millions) | | :--- | :--- | :--- | :--- | | January 2021 | 0 | $ - | $300.0 | | February 2021 | 62 | $162.35 | $290.0 | | March 2021 | 0 | $ - | $290.0 | - The company repurchased shares for an aggregate purchase price of $10.0 million in the three months ended March 31, 2021172 Exhibits This section lists the exhibits filed with the Form 10-Q, including documents related to new debt and credit agreements, certifications by the CEO and CFO, and XBRL data files Signatures The report is duly signed on April 28, 2021, by William R. Sperry, Executive Vice President and Chief Financial Officer, and Jonathan M. Del Nero, Vice President, Controller (Principal Accounting Officer)