Hubbell(HUBB) - 2024 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements Hubbell's Q1 2024 saw increased net sales but declining net income, diluted EPS, and operating cash flow Condensed Consolidated Statements of Income Q1 2024 net sales increased 8.8% to $1,399.1 million, yet operating and net income declined due to higher costs and a business disposition loss Q1 2024 vs Q1 2023 Income Statement Highlights | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $1,399.1 | $1,285.4 | +8.8% | | Gross profit | $447.7 | $448.3 | -0.1% | | Operating income | $228.5 | $248.8 | -8.2% | | Net income attributable to Hubbell | $147.8 | $181.9 | -18.7% | | Diluted earnings per share | $2.73 | $3.37 | -19.0% | - The company recorded a $5.3 million loss on the disposition of a business in Q1 2024, which was not present in the prior year period and contributed to the decline in pre-tax income[6] Condensed Consolidated Balance Sheets Total assets slightly decreased due to disposition, while liabilities declined from debt reduction, increasing shareholders' equity Balance Sheet Summary | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $2,232.5 | $2,167.2 | | Total Assets | $6,862.1 | $6,914.0 | | Total Current Liabilities | $1,348.7 | $1,323.4 | | Long-Term Debt | $1,895.7 | $2,023.2 | | Total Liabilities | $3,919.0 | $4,024.7 | | Total Hubbell Shareholders' Equity | $2,930.4 | $2,877.0 | - Assets and liabilities held for sale, which totaled $162.4 million and $42.1 million respectively at year-end 2023, were reduced to zero, reflecting the completion of the residential lighting business sale[10] Condensed Consolidated Statements of Cash Flows Operating cash flow decreased to $92.2 million; investing activities provided $88.6 million from a disposal, financing used $125.3 million Q1 2024 vs Q1 2023 Cash Flow Summary | Activity | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $92.2 | $113.7 | | Net cash provided by (used in) investing activities | $88.6 | $(35.1) | | Net cash used in financing activities | $(125.3) | $(91.8) | | Increase (decrease) in cash | $52.0 | $(10.5) | - The primary driver for the positive cash flow from investing activities was the $122.9 million received from the disposal of a business, which more than offset capital expenditures of $40.3 million[12] Notes to Condensed Consolidated Financial Statements Notes detail Q1 2024 residential lighting business sale, new restructuring, debt reduction, and revenue drivers - The company sold its residential lighting business in Q1 2024 for $131 million, recording a pre-tax loss of $5.3 million[28] - Total unsatisfied performance obligations for contracts longer than one year were approximately $150 million as of March 31, 2024, primarily within the Utility Solutions segment[40] - The company initiated new restructuring actions in 2024 with total expected costs of $9.8 million, of which $4.7 million was incurred in Q1 2024[80] Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2024 net sales grew from acquisitions and organic growth; operating margin contracted due to costs and investments, liquidity remained strong Q1 2024 Key Performance Metrics | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Net Sales | $1,399.1M | +9% | | Organic Net Sales Growth | 2% | - | | Operating Margin | 16.3% | -310 bps | | Adjusted Operating Margin | 19.7% | -100 bps | | Diluted EPS | $2.73 | -19% | | Adjusted Diluted EPS | $3.60 | -0.3% | - Sales growth was primarily driven by acquisitions in the Utility Solutions segment (notably Systems Control) and price realization across both segments. This was partially offset by the divestiture of the residential lighting business[115][117] - Margin contraction was attributed to material and other cost inflation, lower volumes, and continued business investments, which were partially offset by favorable price realization and productivity benefits[118][138] Segment Results Utility Solutions net sales rose 14.4% from acquisitions, despite margin decline; Electrical Solutions net sales flat with stable margin Financial Condition, Liquidity and Capital Resources Solid financial condition with 42% debt-to-capital ratio, $92.2 million operating cash flow, strong liquidity, and $75.5 million returned to shareholders Capital Structure | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Debt | $2,115.4M | $2,140.6M | | Total Capital | $5,045.8M | $5,017.6M | | Total Debt to Total Capital | 42% | 43% | - During Q1 2024, the company made $125 million in principal payments on its Term Loan Agreement, which was originally used to fund the Systems Control acquisition[160] - The company repurchased $10.0 million of its common stock in Q1 2024, with $290.0 million remaining under the current authorization[158] Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk exposure, including foreign currency, commodity prices, or interest rates, were reported for Q1 2024 - There were no significant changes in the Company's exposure to market risks such as foreign currency, commodity prices, and interest rates during the three months ended March 31, 2024[176] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control - Based on an evaluation as of March 31, 2024, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level[179] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[180] PART II OTHER INFORMATION Risk Factors No material changes to the company's risk factors were reported from those disclosed in the 2023 Form 10-K - 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, 2023[182] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2024, the company repurchased 29,000 shares for $10.0 million, with $290.0 million remaining under authorization Q1 2024 Share Repurchase Activity | Period | Shares Purchased (000s) | Average Price Paid | Value (in millions) | | :--- | :--- | :--- | :--- | | Feb 2024 | 29 | $350.87 | $10.0 | | Q1 Total | 29 | $350.87 | $10.0 | - As of March 31, 2024, the remaining authorization under the share repurchase program was $290.0 million[183][185]