SHELTON, CT. (July 22, 2014) – Hubbell Incorporated (NYSE: HUBA, HUBB) today reported operating results for the second quarter ended June 30, 2014.
Net sales in the second quarter of 2014 were $855.8 million, an increase of 7% compared to the $801.3 million reported in the second quarter of 2013. Operating income was $143.7 million, or 16.8% of net sales, compared to $132.1 million, or 16.5% of net sales, for the comparable period of 2013. Net income in the second quarter of 2014 was $90.2 million, an increase of 10% compared to the $82.1 million reported in the second quarter of 2013. Earnings per diluted share were $1.51, an increase of 10% compared to the $1.37 reported in the second quarter of 2013. Free cash flow (defined as cash flow from operations less capital expenditures) was $43.4 million in the second quarter of 2014 versus $52.8 million reported in the comparable period of 2013.
For the first six months of 2014 net sales were $1.6 billion, an increase of 5% compared to the same period last year. Operating income was $248.5 million, or 15.4% of net sales, compared to $229.8 million, or 14.9% of net sales, for the comparable period of 2013. The effective tax rate in the first six months of 2014 was 32.9%. This compares to an effective tax rate of 30.0% reported in the first six months of 2013, which included the retroactive application of the U.S. Federal R&D tax credit that was part of the American Taxpayer Relief Act of 2012. Net income in the first six months of 2014 was $154.4 million, an increase of 4% compared to the $148.0 million reported in the first six months of 2013. Earnings per diluted share were $2.59, or 5% above the $2.47 reported for the comparable period of 2013. Free cash flow was $74.1 million compared to $82.5 million reported in the first six months of 2013.
OPERATIONS REVIEW
David G. Nord, Chairman, President and Chief Executive Officer, said, “The second quarter results reflect good operational execution on improving order trends. After a slower than planned start to the year, we were encouraged by the broad based strengthening of underlying demand experienced during the quarter. We increased our earnings per diluted share by 10% in the second quarter compared to 2013 as improving market conditions and solid execution of productivity initiatives drove higher profitability.”
Nord added “We continued to make progress on our growth initiatives by completing two acquisitions in the second quarter and another small but important acquisition in July which will be added to the electrical segment. We have invested $147 million on six acquisitions so far this year and I am proud of the entire team`s efforts in driving growth while also ensuring each acquisition is seamlessly transitioned into the Hubbell family.”
SEGMENT REVIEW
The comments and year-over-year comparisons in this segment review are based on second quarter results in 2014 and 2013.
Electrical segment net sales in the second quarter of 2014 increased 8% to $612.4 million compared to $564.5 million reported in the second quarter of 2013. Acquisitions added five percentage points to the sales increase in the quarter. Compared to the second quarter of 2013, operating income increased 7% to $95.5 million. Operating margin in the second quarter of 2014 was 15.6%, compared to 15.7% reported in the comparable period of 2013. The increase in operating income was primarily due to the benefit of productivity in excess of all cost increases and the favorable contribution of acquisitions. Operating margin decreased slightly primarily due to the impact of acquisitions.
Power segment net sales in the second quarter of 2014 were $243.4 million compared to $236.8 million reported in the second quarter of 2013. The sales increase was primarily due to the impact of acquisitions which added four percentage points to sales in the quarter. Sales related to distribution and transmission products were essentially flat while unfavorable foreign currency translation reduced net sales by one percentage point in the quarter. Compared to the second quarter of 2013, operating income increased 12% to $48.2 million. Operating margin in the second quarter of 2014 was 19.8%, compared to 18.2% reported in the comparable period of 2013. The increase in operating income and margin was primarily due to productivity improvements and lower facility closure costs, partially offset by unfavorable pricing and material costs.
SUMMARY & OUTLOOK
Mr. Nord commented, “Based on our first half performance, we continue to expect overall sales to increase in the 5 to 6% range with balanced growth from acquisitions and organic volume. From a profitability standpoint, operating margins are expected to expand in the 20 to 30 basis points range.”
Mr. Nord concluded, “Our strategy to grow sales organically and through acquisitions has helped us navigate through the first half of the year. Despite weaker than forecasted end markets to start the year; we have been able to offset the slower organic growth with a higher level of acquisition activity. The investments we have made to expand our capabilities to close and integrate new acquisitions have yielded good results and we are excited to continue the momentum into the future. As we look to the medium and longer term horizon, we are excited with the prospects for strong growth in several of our end markets, most notably non-residential construction where we are well positioned to support those customers.”