SECURITIES AND EXCHANGE COMMISSION
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001. | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934. |
Commission File No. 1-2958
Hubbell Incorporated
Connecticut
|
06-0397030 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification Number) |
|
584 Derby Milford Road,
Orange, Connecticut (Address of principal executive offices) |
06477-4024
(Zip Code) |
(203) 799-4100
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class | Name of Exchange on which Registered | |
|
|
|
Class A Common $.01 par value
(20 votes per share)
|
New York Stock Exchange | |
Class B Common $.01 par value (1
vote per share)
|
New York Stock Exchange | |
Series A Junior Participating Preferred
Stock Purchase Rights
|
New York Stock Exchange | |
Series B Junior Participating Preferred
Stock Purchase Rights
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
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 report), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
The approximate aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 8, 2002 was $1,815,286,600*. The number of shares outstanding of the Class A Common Stock and Class B Common Stock as of March 8, 2002 was 9,671,600 and 49,287,800, respectively.
Documents Incorporated by Reference
The definitive proxy statement for the proposed annual meeting of stockholders to be held on May 6, 2002, filed with the Commission on March 19, 2002 Part III.
* | Calculated by excluding all shares held by executive Officers and Directors of Registrant and the Roche Trust, the Hubbell Trust and the Harvey Hubbell Foundation, without conceding that all such persons are affiliates of registrant for purpose of the Federal Securities Laws. |
PART I
Item 1.
Business
Hubbell Incorporated (herein referred to as
Hubbell, the Company or the
registrant, which references shall include its
divisions and subsidiaries as the context may require) was
founded as a proprietorship in 1888, and was incorporated in
Connecticut in 1905. For over a century, Hubbell has
manufactured and sold high quality electrical and electronic
products for a broad range of commercial, industrial,
telecommunications, and utility applications. Since 1961,
Hubbell has expanded its operations into other areas of the
electrical industry and related fields. Hubbell products are now
manufactured or assembled by thirty-one divisions and
subsidiaries in North America, Switzerland, Puerto Rico, Mexico,
Italy, and the United Kingdom. Hubbell also participates in a
joint venture in Taiwan, and maintains sales offices in
Singapore, the Peoples Republic of China, Mexico, Hong
Kong, South Korea, and the Middle East.
Hubbell is primarily engaged in the engineering,
manufacture and sale of electrical and electronic products. For
management reporting and control, the businesses are divided
into three operating segments: Electrical, Power and Industrial
Technology, as described below. Reference is made to
page 42 for information relative to Industry Segment and
Geographic Area Information for years 2001, 2000, and 1999.
In October, 2001, Hubbell acquired the stock of
MyTech Corporation (MyTech). Based in Austin, Texas,
MyTech designs, manufactures and markets microprocessor-based,
digital, self-adjusting occupancy sensors, high intensity
discharge (HID) dimming controls, photocells and
other lighting related electronic control products used
primarily to reduce energy consumption in commercial and
industrial applications by turning off lights and other
electronic devices in areas that are unoccupied. MyTech is
included in the Electrical Segment.
In March 2002, Hubbell acquired the stock of
Hawke Cable Glands Limited (Hawke). Based in
Ashton-Under-Lyne, England, Hawke designs, manufactures and
markets cable glands and cable connectors to provide a means to
terminate cables at junction boxes, light fixtures, control
centers, panel boards, motor control enclosures and electrical
equipment, as well as a line of enclosures, cable transit,
breathers, and field bus products, all for the hazardous area
and industrial markets. Hawke is included in the Electrical
Segment and except as noted, is included in the description of
the Business herein.
In March 2002, Hubbell entered into an agreement
to acquire USIs LCA Group, Inc. (LCA), the
domestic lighting division of U.S. Industries, Inc. The purchase
price for the acquisition will be $250.0 million in cash,
subject to adjustment based on certain circumstances. LCA
manufactures and distributes a wide range of outdoor and indoor
lighting products to the commercial, industrial and residential
markets under various brand names, including Alera, Kim,
Spaulding, Whiteway, Moldcast, Architectural Area Lighting,
Columbia, Keystone, Prescolite, Dual Lite and Progress.
Consummation of the acquisition is subject to the satisfaction
of certain closing conditions set forth in the purchase
agreement, including expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. Although there can be no
assurances, we anticipate that the closing conditions will be
satisfied in due course.
The Electrical Segment is comprised of businesses
that primarily sell through distributors, lighting showrooms,
home centers, telephone and telecommunication companies, and
represents stock items including standard and special
application wiring device products, lighting fixtures, fittings,
switches and outlet boxes, enclosures, wire management products
and voice and data signal processing components. The products
are typically used in and around industrial, commercial, and
institutional facilities by electrical contractors, maintenance
personnel, electricians, and telecommunication companies.
Electrical Wiring Devices
Hubbell manufactures and sells highly durable and
reliable wiring devices which are supplied principally to
industrial, commercial and institutional customers. These
products, comprising several thousand catalog
2
Lighting Fixtures
Hubbell manufactures and sells lighting fixtures
and accessories for both indoor and outdoor applications with
three basic classifications of products: Outdoor, Industrial and
Commercial. The Outdoor products include poles, MiniLiter®
and Sterners Infranor floodlights, Devines
Geometric 2000 series fixtures and Magnusquare® II
Architectural fixtures which are used to illuminate service
stations, outdoor display signs, parking lots, security areas,
shopping centers and similar areas, and Sportsliter®
fixtures which are used to illuminate athletic and recreational
fields. In addition, a line of Lightscaper® decorative
outdoor fixtures is sold for use in landscaping applications
such as pools, gardens and walkways. The Industrial products
include Superbay 2.0, Controlux® 2.0,
Superwatt®, The Detector®, and Kemlux fixtures
used to illuminate factories, work spaces, and similar areas,
including specialty requirements such as paint rooms, clean
rooms and warehouses. The Commercial products include HID,
fluorescent, Pathfinder® emergency and exit, and recessed
and track fixtures which are used for offices, schools,
hospitals, retail stores, and similar applications. The fixtures
use high-intensity discharge lamps, such as mercury-vapor,
high-pressure sodium, and metal-halide lamps, as well as quartz,
fluorescent and incandescent lamps, all of which are purchased
from other sources. Hubbell also manufactures a broad range of
track and down lighting fixtures and accessories sold under the
Marco® trademark, a line of life safety products, fixtures
and related components which are used in specialized safety
applications, and a line of IEC lighting fixtures designed for
hazardous, hostile and corrosive applications sold under the
Chalmit trademark.
Outlet Boxes, Enclosures and
Fittings
Hubbell manufactures and/or sells: (a) under
the Raco® trademark, steel and plastic boxes used at
outlets, switch locations and junction points; (b) a broad
line of metallic and plastic fittings, including rigid plastic
conduit fittings, EMT (thinwall) fittings and metal conduit
fittings; (c) a family of nonmetallic electrical products
including conduit tubing and Bell Outdoor® outlet boxes;
(d) a variety of electrical boxes, covers, combination
devices, lampholders and lever switches manufactured under the
Bell® trademark, with an emphasis on weather-resistant
types suitable for outdoor applications; and (e) under the
Wiegmann® trademark, a full-line of fabricated steel
enclosures such as rainproof and dust-tight panels, consoles and
3
Holding Devices
Hubbell manufactures and sells a line of
Kellems® and Bryant® mesh grips used to pull, support
and create strain relief in elongated items such as cables,
electrical cords, hoses and conduits, a line of Gotcha®
cord connectors designed to prevent electrical conductors from
pulling away from electrical terminals to which the conductors
are attached, and wire management products including
non-metallic surface raceway products for wiring and
non-metallic liquid-tight flexible conduit for OEM applications.
The grips are sold under the Dua-Pull® and Kellems®
trademarks and range in size and strength to accommodate
differing application needs. These products, which are designed
to tighten around the gripped items, are sold to industrial,
commercial, utility and microwave and cell phone tower markets.
Hazardous and Hostile Location Application
Products
Hubbells special application products,
which are sold under the Killark® trademark, include
weatherproof and hazardous location products suitable for
standard, explosion-proof and other hostile area applications,
include conduit raceway fittings, Disconex® switches,
enclosures, HostileLite® lighting fixtures, electrical
distribution equipment, standard and custom electrical motor
controls, junction boxes, plugs and receptacles. Hubbell also
manufactures and sells under the Hawke® trademark a line of
cable glands and cable connectors, enclosures, cable transit,
breathers and fieldbus products for the hazardous area and
industrial markets. Hazardous locations are those areas where a
potential for explosion and fire exists due to the presence of
flammable gasses, fibers, vapors, dust or other easily ignitable
materials and include such applications as refineries,
petro-chemical plants, grain elevators and material processing
areas.
Telecommunications Products
Hubbell designs, manufactures and sells under the
Pulsecom® trademark, voice and data signal processing
components primarily used by telephone and telecommunications
companies, and consisting of channel cards and banks for loop
and trunk carriers, and racks and cabinets. These products
provide a broad range of communications access solutions for use
by the telephone and telecommunications industry including:
(a) digital loop carrier solutions to multiplex traffic
from many users over a single link using existing copper or
fiber facilities providing easier and more cost-effective
service to new users since fewer and smaller cables are required
for providing expanded service; and (b) D4 solutions to
provide delivery of integrated voice and data services.
Customers of these product lines include various
telecommunications companies, the Regional Bell Operating
Companies (RBOCs), independent telephone companies, competitive
local exchange carriers, companies with private networks, and
internet service providers.
Sales and Distribution of Electrical Segment
Products
A majority of Hubbells Electrical Segment
products are stock items and are sold through electrical and
industrial distributors, home centers, some retail and hardware
outlets, and lighting showrooms. Special application products
are sold primarily through wholesale distributors to
contractors, industrial customers and original equipment
manufacturers. Voice and data signal processing equipment
products are represented worldwide through a direct sales
organization and by selected, independent telecommunications
representatives, primarily sold through datacom, electrical and
catalogue distribution channels. Telecommunications products are
sold primarily by direct sales to customers in the United States
and in foreign countries through sales personnel and sales
representatives. Hubbell maintains a sales and marketing
organization to assist potential users with the application of
certain products to their specific requirements, and maintains
regional offices in the United States which work with
architects, engineers, industrial designers, original equipment
manufacturers and electrical contractors for the design of
electrical systems to meet the specific requirements of
industrial, institutional, and commercial users. Hubbell is also
represented by sales representatives for its lighting fixtures
and electrical wiring devices product lines. The sales of
Electrical Segment products accounted for approximately 64% of
Hubbells total revenue in year 2001, 65% in 2000 and 66%
in 1999.
4
POWER SEGMENT
Power Segment operations comprise a wide variety
of construction, switching and protection products, hot line
tools, grounding equipment, cover ups, fittings and fasteners,
cable accessories, insulators, arresters, cutouts,
sectionalizers, connectors and compression tools for the
building and maintenance of overhead and underground power and
telephone lines, as well as applications in the industrial,
construction and pipeline industries.
Electrical Transmission and Distribution
Products
Hubbell manufactures and sells, under the Ohio
Brass® registered trademark, a complete line of polymer
insulators and high-voltage surge arresters used in the
construction of electrical transmission and distribution lines
and substations. The primary focus in this product area are the
Hi*Lite®, Hi*Lite®XL and Veri*Lite polymer
insulator lines and the polymer housed metal-oxide varistor
surge arrester lines. Electrical transmission products,
primarily Hi*Lite® suspension and post insulators, are used
in the expansion and upgrading of electrical transmission
capability.
Hubbell manufactures and sells, under the
Chance® trademark, products used in the electrical
transmission and distribution and telecommunications industries,
including overhead and underground electrical apparatus such as
(a) distribution switches (to control and route the flow of
power through electrical lines); (b) cutouts,
sectionalizers, and fuses (to protect against faults and
over-current conditions on power distribution systems); and
(c) fiberglass insulation systems (pole framing and
conductor insulation).
Hubbell manufactures and sells, under the
Anderson® trademark, electrical connectors and associated
hardware including pole line, line and tower hardware,
compression crimping tools and accessories, mechanical and
compression connectors, suspension clamps, terminals, supports,
couplers, and tees for utility distribution and transmission
systems, substations, and industry.
Hubbell manufactures and sells, under the
Fargo® trademark, electrical power distribution and
transmission products, principally for the utility industry.
Distribution products include electrical connectors, automatic
line splices, dead ends, hot line taps, wildlife protectors, and
various associated products. Transmission products include
splices, sleeves, connectors, dead ends, spacers and dampers.
Products also consist of original equipment and resale products
including substation fittings for cable, tube and bus as well as
underground enclosures, wrenches, hydraulic pumps and presses,
and coatings.
Hubbell manufactures and sells, under the
Hubbell® trademark, cable accessories including loadbreak
switching technology, deadbreak products, surge protection,
cable splicing and cable termination products, as well as
automation-ready overhead switches and aluminum transformer
equipment mounts for transformers and equipment.
Construction Materials/ Tools
Hubbell manufactures and sells, under the
Chance® trademark, (a) line construction materials
including power-installed helical earth anchors and
power-installed foundations to secure overhead power and
communications line poles, guyed and self-supporting towers,
streetlight poles and pipelines (Helical Pier® Foundation
Systems are used to support homes and buildings, and earth
anchors are used in a variety of farm, home and construction
projects including tie-back applications); (b) pole line
hardware, including galvanized steel fixtures and extruded
plastic materials used in overhead and underground line
construction, connectors, and other accessories for making high
voltage connections and linkages; (c) construction tools
and accessories for building overhead and underground power and
telephone lines; and (d) hot-line tools (all types of tools
mounted on insulated poles used to construct and maintain
energized high voltage lines) and other safety equipment.
Sales and Distribution of Power Segment
Products
Sales of high-voltage products are made through
distributors and directly to users such as electric utilities,
mining operations, industrial firms, and engineering and
construction firms. While Hubbell believes
5
INDUSTRIAL TECHNOLOGY SEGMENT
The Industrial Technology Segment consists of
operations that design and manufacture test and measurement
equipment, high voltage power supplies and variable
transformers, industrial controls including motor speed
controls, pendant-type push-button stations, overhead crane
controls, Gleason Reel® electric cable and hose reels, and
specialized communications systems such as intra-facility
communications systems, telephone systems, and land mobile radio
peripherals. Products are sold primarily to steel mills,
industrial complexes, oil, gas and petrochemical industries,
seaports, transportation authorities, the security industry
(malls and colleges), and cable and electronic equipment
manufacturers.
High Voltage Test and Measurement
Equipment
Hubbell manufactures and sells, under the
Hipotronics®, Haefely Test and Tettex®
trademarks, a broad line of high voltage test and measurement
systems to test materials and equipment used in the generation,
transmission and distribution of electricity, and high voltage
power supplies and electromagnetic compliance equipment for use
in the electrical and electronic industries. Principal products
include AC/DC hipot testers and megohmmeters, cable fault
location systems, oil testers and DC hipots, impulse generators,
digital measurement systems and tan-delta bridges, AC series
resonant and corona detection systems, DC test sets and power
supplies, variable transformers, voltage regulators, and motor
and transformer test sets.
Industrial Controls
Hubbell manufactures and sells a variety of
heavy-duty electrical and radio control products which have
broad application in the control of industrial equipment and
processes. These products range from standard and specialized
industrial control components to combinations of components that
control industrial manufacturing processes. Standard products
include motor speed controls, pendant-type push-button stations,
power and grounding resistors and overhead crane controls. Also
manufactured and sold are a line of transfer switches used to
direct electrical supply from alternate sources, and a line of
fire pump control products used in fire control systems.
Hubbell manufactures, under the Gleason
Reel® trademark, industrial-quality cable management
products including electric cable and hose reels, protective
steel and nylon cable tracks (cable and hose carriers), cable
festooning hardware, highly engineered container crane reels and
festoons for the international market, slip rings, and a line of
ergonomic tool support systems (workstation accessories and
components such as balancers, retractors, torque reels, tool
supports, boom and jib kits).
Hubbell manufactures and sells under the
GAI-Tronics® trademark, specialized communications systems
designed to withstand indoor and outdoor hazardous environments.
Products include intra-facility communication systems, telephone
systems, and land mobile radio peripherals. These products are
sold to oil, gas and petrochemical industries, transportation
authorities (for use on public highways and in trains and on
train platforms), and the security industry (for use in malls
and on college campuses).
Hubbells Industrial Technology Segment
products are sold primarily through direct sales and sales
representatives to contractors, industrial customers and
original equipment manufacturers, with the exception of high
voltage test and measurement equipment which is sold primarily
by direct sales to customers in the United States and in foreign
countries through its sales engineers and independent sales
representatives.
The sale of products in the Industrial Technology
Segment accounted for approximately 11% of Hubbells total
revenue in year 2001, 9% in 2000 and 6% in 1999.
6
INFORMATION APPLICABLE TO ALL GENERAL
CATEGORIES
International Operations
Hubbell Ltd. in the United Kingdom manufactures
and/or markets fuse switches, contactors, selected wiring device
products, premise wiring products, specialized control gear,
chart recording products, and industrial control products used
in motor control applications such as fuse switches and
contactors.
Hubbell Canada Inc. and Hubbell de Mexico, S.A.
de C.V. manufacture and/or market wiring devices, premise wiring
products, lighting fixtures, grips, fittings, non-metallic
switches and outlet boxes, hazardous location products,
electrical transmission and distribution products and earth
anchoring systems. Industrial control products are sold in
Canada through an independent sales agent. Hubbell Canada also
designs and manufactures electrical outlet boxes, metallic wall
plates, and related accessories.
Hawke Cable Glands Limited in the United Kingdom
manufactures and/or markets a range of products used in
hazardous locations including brass cable glands and cable
connectors used in watertight terminations, cable transition
devices, utility transformer breathers, enclosures and field bus
connectivity components.
Harvey Hubbell S.E. Asia Pte. Ltd. markets wiring
devices, lighting fixtures, hazardous location products and
electrical transmission and distribution products.
Haefely Test AG in Switzerland designs and
manufactures high voltage test and instrumentation systems, and
GAI-Tronics in the United Kingdom and Italy designs and
manufactures specialized communications systems including closed
circuit television systems (CCTV).
Hubbell also manufactures lighting products,
wiring devices, weatherproof outlet boxes, fittings, and power
products in Juarez, Mexico. Hubbell also has interests in
various other international operations such as a joint venture
in Taiwan, and maintains sales offices in Mexico, Singapore, the
Peoples Republic of China, Hong Kong, South Korea and the
Middle East.
The wiring devices sold by Hubbells
operations in the United Kingdom, Singapore, Canada and Mexico
are similar to those produced in the United States, most of
which are manufactured in the United States and Puerto Rico.
As a percentage of total sales, international
shipments from foreign subsidiaries were 11% in 2001, 10% in
2000 and 8% in 1999, with the Canadian market representing
approximately 45% of the total.
Raw Materials
Principal raw materials used in the manufacture
of Hubbell products include steel, brass, copper, aluminum,
bronze, plastics, phenolics, bone fiber, elastomers and
petrochemicals. Hubbell also purchases certain electrical and
electronic components, including solenoids, lighting ballasts,
printed circuit boards, integrated circuit chips and cord sets,
from a number of suppliers. Hubbell is not materially dependent
upon any one supplier for raw materials used in the manufacture
of its products and equipment and, at the present time, raw
materials and components essential to its operation are in
adequate supply.
Patents
Hubbell has approximately 835 active United
States and foreign patents covering many of its products, which
expire at various times. While Hubbell deems these patents to be
of value, it does not consider its business to be dependent upon
patent protection. Hubbell licenses under patents owned by
others, as may be needed, and grants licenses under certain of
its patents.
7
Working Capital
Hubbell maintains sufficient inventory to enable
it to provide a high level of service to its customers. The
inventory levels, payment terms and return policies are in
accord with the general practices of the electrical products
industry and standard business procedures.
Backlog
Backlog of orders believed to be firm at
December 31, 2001 and 2000 were approximately $91.5 million
and $117.8 million, respectively. Most of the backlog is
expected to be shipped in the current year. Although this
backlog is important, the majority of Hubbells revenues
result from sales of inventoried products or products that have
short periods of manufacture.
Competition
Hubbell experiences substantial competition in
all categories of its business, but does not compete with the
same companies in all of its product categories. The number and
size of competitors vary considerably depending on the product
line. Hubbell cannot specify with exactitude the number of
competitors in each product category or their relative market
position. However, some of its competitors are larger companies
with substantial financial and other resources. Hubbell
considers product performance, reliability, quality and
technological innovation as important factors relevant to all
areas of its business and considers its reputation as a
manufacturer of quality products to be an important factor in
its business. In addition, product price and other factors can
affect Hubbells ability to compete.
Environment
Compliance with Federal, State and local
provisions regulating the discharge of materials into the
environment, or otherwise relating to the protection of the
environment, is not believed to have any material effect upon
the financial or competitive position of Hubbell. See also Notes
to Consolidated Financial Statements, Commitments and Contingent
Liabilities, on page 38.
Employees
As of December 31, 2001, Hubbell had
approximately 8,771 full-time employees, including salaried and
hourly personnel. Approximately 42% of Hubbells United
States employees are represented by fourteen labor unions.
Hubbell considers its labor relations to be satisfactory.
Item 2.
Properties
A list of Hubbells material manufacturing
facilities, classified by segment, is included on Page 43
hereof under Industry Segment and Geographical Area Information.
Item 3.
Legal
Proceedings
There are no material pending legal proceedings
to which Hubbell or any of its subsidiaries is a party or of
which any of their property is the subject, other than ordinary
and routine litigation incident to their business.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Item 4. | Submission of Matters to a Vote of Security Holders |
No matters were submitted to a vote of security holders during the fourth quarter of 2001.
8
PART II
Item 5. | Market for the Registrants Common Equity and Related Stockholder Matters |
The Companys Class A and Class B
common stocks are principally traded on the New York Stock
Exchange under the symbols HUBA and
HUBB. The following tables provide information on
market prices, dividends declared and number of common
shareholders.
Common A
Common B
Market Prices (Dollars Per Share)
Years Ended December 31,
High
Low
High
Low
29.40
23.90
30.45
23.30
29.50
23.59
30.98
23.50
29.75
23.70
30.95
23.40
28.95
26.15
30.16
26.83
28.38
21.75
28.81
21.63
27.50
23.50
27.44
23.63
27.31
21.38
28.31
21.81
27.00
22.00
27.81
21.63
Common A
Common B
Dividends Declared (Cents Per Share)
Years Ended December 31,
2001
2000
2001
2000
33
32
33
32
33
33
33
33
33
33
33
33
33
33
33
33
Number of Common Shareholders
At December 31,
2001
2000
1999
1998
1997
916
983
1,090
1,176
1,242
4,174
4,442
4,805
5,153
5,339
9
Item 6.
Selected
Financial Data
The following summary should be read in
conjunction with the consolidated financial statements and notes
contained herein (dollars and shares in millions, except per
share amounts).
10
2001
2000
1999
1998
1997
$
1,312.2
1,424.1
1,451.8
1,424.6
1,378.8
$
314.0
(1)
369.1
(2)
409.0
438.2
430.4
$
40.0
(1)
(.1
)(2)
52.0
(3)
$
(4.7
)
(36.2
)
(8.8
)
$
56.5
(1)
184.5
(2)
194.4
226.1
171.6
$
48.3
(1)
138.2
(2)
145.8
169.4
130.3
(3)
3.7
%
9.7
%
10.0
%
11.9
%
9.5
%
6.4
%
17.0
%
17.2
%
20.3
%
16.6
%
$
0.83
(1)
2.26
2.24
2.56
1.94
(3)
$
0.82
(1)
2.25
2.21
2.50
1.89
(3)
$
1.32
1.31
1.27
1.22
1.13
58.9
61.3
65.9
67.7
68.8
$
199.3
123.8
176.0
190.4
148.6
$
28.6
48.6
53.7
86.1
60.6
$
53.0
54.9
52.8
48.1
43.2
$
224.4
123.2
209.4
219.8
339.9
1.8 to 1
1.3 to 1
1.6 to 1
1.6 to 1
2.3 to 1
$
264.2
305.3
308.9
310.1
251.9
$
1,205.4
1,448.5
1,407.2
1,390.4
1,284.8
$
99.8
99.7
99.6
99.6
99.5
$
736.5
769.5
855.8
840.6
830.3
$
12.50
12.55
13.00
12.42
12.06
8,771
10,469
10,190
10,562
8,801
(1)
In the fourth quarter of 2001, the Company
recorded a special charge of $56.3 million, offset by a $3.3
million reversal relating to the 1997 streamlining program. A
portion of the total 2001 charge, $13.0 million, relates to
product rationalization which is classified in cost of goods
sold. This special charge, net, reduced net income by $35.5
million or $0.60 per share. Excluding the special charge, net
income would have been $83.8 million or $1.42 per
share diluted.
(2)
Special charge (credit) for 2000 reflects a
special charge, offset by a reduction in the streamlining
program accrual established in 1997. In addition, $20.3 million
for product rationalization is included in cost of goods sold.
(3)
In the fourth quarter of 1997, the Company
recorded a special charge of $52.0 million which reduced net
income by $32.2 million or $0.47 per share. Excluding the
special charge, net income would have been $162.5 million or
$2.36 per share diluted.
Table of Contents
Item 7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
Consolidated net sales declined 8% versus the
prior year as a result of widespread economic weakness
throughout the Companys markets in 2001 and, in
particular, the period following the terrorist events of
September 11. Although depressed economic conditions
negatively affected orders and sales in a majority of the
Companys product lines, improvements in customer service
and modest growth in oil & gas markets did provide positive
year-over-year comparisons in the Companys commodity
electrical and harsh and hazardous product offerings,
respectively.
Pro forma operating income, defined as reported
operating income excluding the effects in both years of special
and non-recurring charges and gains on sale of business,
declined 39%. This decline exceeded the decline in sales
primarily due to the effect of unabsorbed fixed manufacturing
costs and by having a larger proportion of lower margin sales in
the overall sales mix. However, cost reduction actions, which
began in the fourth quarter of 2000, were effective at
containing the margin decline by reducing variable costs
associated with lower sales and partly reducing fixed costs. To
further these efforts, the Company completed development in
December 2001 of a comprehensive plan to reduce manufacturing
capacity and targeted fixed costs and recorded a net
$53.0 million pre-tax special charge to cover the cost of
facility closures, workforce reductions, outsourcing and other
actions. Management expects the actions covered by the charge to
improve operating margins by 1-1 1/2 percentage points when
fully implemented. Sales and profits in 2001 also reflect a full
years results of GAI-Tronics Corporation
(GAI-Tronics), which was acquired in July 2000.
Electrical Segment sales declined 10% due to
significantly lower orders in the Segments core
specification-grade wiring devices and lighting product lines
and from a decline in demand from data/ telecommunications
customers affecting sales of premise wiring and the multiplexing
products of Pulse Communications (Pulse). Partially
offsetting these declines were improved sales of commodity
electrical boxes and fittings resulting from improvements in
customer service, and generally healthier harsh/ hazardous
electrical products markets associated with an increase in
energy exploration and processing projects. The Segments
operating profits on a comparative basis fell by 39% due to high
unabsorbed manufacturing expenses and the volume decline in
higher margin industrial application products.
Power Segment sales also declined 10% on lower
shipments across most product families including over-voltage,
connectors, apparatus and tool & rod. Full year sales in
this Segment reflect a slowing, which began in the second half
of 2000, in order input from utility industry customers. Lower
utility industry demand is attributable to generally weak
economic conditions and the industrys emphasis on
investment in generating capacity as opposed to the
Segments distribution and transmission products. Operating
income declined 39% due to the lower sales and unabsorbed fixed
expenses. In addition, the Segment incurred an expense of $3
million in connection with a third quarter customer bankruptcy
and $3.8 million in the second quarter related to the impairment
of manufacturing facility assets.
Industrial Technology Segment sales increased 14%
for the year versus 2000 as a result of the July 2000
acquisition of GAI-Tronics. GAI-Tronics is a leading supplier of
specialized communications systems designed for indoor, outdoor
and hazardous environments. However, excluding the strong
contribution from GAI-Tronics, sales fell 16% as a result of the
Segments reliance on domestic industrial markets including
steel processing and industrial controls, which were in
recession for most of 2001. In addition, worldwide demand fell
sharply during the year for the test sets produced by the
Segments high voltage test businesses. Operating income,
including the full year results from GAI-Tronics, fell 48% due
to the sharp decline in sales which outpaced managements
ability to respond with commensurate cost reduction actions. The
Company is continuing its program to transition this Segment,
through internal development, into faster growing and more
profitable instrumentation and industrial communications markets.
11
Special and Non-Recurring Charges
Current Year
Full year operating results in 2001 reflect
special and non-recurring charges offset by a $3.3 million
reduction in the streamlining program accrual established in
1997. These net costs, which were recorded in the fourth
quarter, total $53.0 million ($35.5 million net of tax, or $0.60
per diluted share).
The 2001 streamlining and cost reduction
initiative (the Plan) is comprised of a variety of
individual programs and was primarily undertaken to reduce the
productive capacity of the Company and realign employment levels
to better match with lower actual and forecast rates of incoming
business. In total, the Plan is expected to require a cumulative
charge to profit and loss of $62.0 million. In addition to the
2001 charge of $56.3 million, costs totaling $5.7 million are
expected to be charged against profit in 2002, as funds are
spent and specific actions are announced and implemented.
A breakdown of the major programs specified in
the Plan and its attendant cost of $62.0 million is as
follows:
Facility rationalization reflects
managements decision to permanently reduce the
manufacturing space occupied by the Company and consolidate and
eliminate office space in each Segment. In total, the Plan
covers the cost of closing six manufacturing facilities
representing approximately 600,000 sq/ft, 11% of the
Companys approximately 5.6 million total active
manufacturing square footage. In addition, three offices
totaling approximately 100,000 sq./ft. are being eliminated
through consolidation.
Other capacity reductions include the write-off
of surplus productive assets which will no longer be used. These
reductions are both in association with facilities to be closed
and relate to product lines deemed to have excess fixed
investment (i.e., tools, dies, machinery) versus the capacity
needed to produce at forecast volumes. These actions occurred
primarily in the Power Segment, within the Lighting products
group of the Electrical Segment and in the Industrial Technology
Segment.
12
The following table sets forth the components and
status of the 2001 special charge at December 31:
Substantially all actions contemplated in the
Plan are scheduled for completion by December 31, 2002.
Once complete, the Plan should provide $20 million in ongoing
annual savings primarily realized through lower manufacturing,
selling and administrative costs. Cash expenditures under the
Plan will be approximately $26 million for severance and other
costs of facility closings, net of an estimated $9.0 million in
asset sale recoveries.
Special and Non-Recurring Charges
Prior Year
Full year operating results in 2000 also reflect
a special and non-recurring charge offset by a reduction in the
streamlining program accrual established in 1997. These net
costs, which were recorded in the first and second quarters of
2000, total $23.7 million ($17.8 million net of tax, or $0.29
per diluted share).
Net sales included a non-recurring charge of $3.5
million related to an increase in the reserve for customer
returns and allowances primarily in response to higher customer
credit activity associated with inaccurate/ incomplete shipments
from an electrical products central distribution warehouse that
began operation in late 1999. Cost of sales reflected a special
charge of $20.3 million in connection with managements
decision to streamline its product offering and eliminate
non-strategic inventory across all business units.
Special charge, net, reflects the cost of first
and second quarter 2000 cost reduction and streamlining actions
of $10.4 million offset by a $10.5 million reversal, in
connection with managements ongoing review, of costs
accrued in connection with the 1997 streamlining program. The
special charge costs primarily related to asset impairments and
facility consolidation actions undertaken to reduce ongoing
operating costs and exit certain joint venture arrangements. All
actions under the 2000 special charge were completed in the
first quarter of 2001.
1997 Streamlining Plan
In 1997, the Company recorded a special charge of
$52.0 million ($32.2 million after-tax or $.47 per share),
comprised of $32.4 million of accrued consolidation and
streamlining costs, $9.5 million of facility asset impairments,
a $7.4 million goodwill asset impairment, and other current
employee and product line exit costs of $2.7 million. The
Companys consolidation and streamlining initiatives were
undertaken to optimize the organization and cost structure
primarily within the Electrical and Power Segments.
As part of managements ongoing review of
estimated program costs in connection with the plan, adjustments
in the amount $3.3 million and $10.5 million were made in 2001
and 2000, respectively. These adjustments reflected costs
originally estimated as part of the 1997 plan which were deemed
no longer required to complete certain actions in the Electrical
and Power Segments. The change in estimate in 2001 of $3.3
million primarily occurred within the Electrical Segment in
connection with managements decision to terminate plans
related to closure of the Louisiana, MO manufacturing facility.
Following this adjustment, all actions contemplated under the
1997 Streamlining Plan were completed.
13
Selling and Administrative (S&A)
Expenses
S&A expenses increased as a percentage of
sales in 2001 versus 2000 due to the full year inclusion of
GAI-Tronics, which generates higher S&A costs than the
Companys average, the cost of senior management and
employee severance actions and an increase in customer bad debt
expense. Although the rate of volume decline outpaced
managements ability to respond with cost reduction actions
in 2001, a reduction in S&A as a percentage of sales is
expected in 2002 as a result of a 10% reduction in S&A
workforce implemented in connection with the 2001 capacity
reduction Plan, and other actions.
Gain on Sale of Business
In April 2000, the Company completed the sale of
its WavePacer Digital Subscriber Line (DSL) assets
to ECI Telecom Ltd. (ECI) for a purchase price of
$61.0 million. The Company recognized a gain on this sale of
$36.2 million in the prior year second quarter. At the time of
sale, the Company retained a contractual obligation to supply
product to ECI at prices below manufacturing cost, resulting in
an adverse commitment. In December 2001, management revised the
remaining adverse commitment accrual to reflect lower known and
projected orders from ECI through the contract expiration date
and recorded an additional gain of $4.7 million. Service under
this contract will expire in April 2002, by which time the
Companys actual cost under the manufacturing commitment
will be quantified.
Other Income/ Expense
Investment income declined 34% in 2001 versus
2000 due to lower average cash and investments balances and
lower average interest rates. Similarly, year-over-year interest
expense declined 21% due to lower average debt levels and lower
average interest rates on the Companys outstanding
commercial paper. During the third quarter 2001, the Company
repositioned a significant portion of its long-term investment
portfolio to better match the maturity dates of the securities
owned with investment requirements. Overall, this repositioning
shortened the average maturity period of the portfolio.
Other income, net, in 2001 and 2000 includes $3.6
million and $3.2 million, respectively, of gains on sale of
leveraged lease investments. In 2001, a leveraged lease
investment was liquidated which no longer represented a
tax/investment strategy consistent with the Companys
current objectives. The prior year first quarter also included a
gain on sale of similar leveraged lease investments in
contemplation of their pending expiration. The current year
transaction fully liquidated the Companys portfolio of
leveraged lease investments. Other income, net in the current
year also includes a gain on sale of investments in connection
with the investment portfolio repositioning noted above.
Income Taxes
During the fourth quarter, the Company adjusted
its effective tax rate to a full year rate of 13.4%, down from
23%, which had been used in the second and third quarters of
2001, and significantly lower than the prior year rate of 25%.
The rate reduction versus the prior year is a result of
recording the special charge in the fourth quarter of 2001,
which substantially reduced the overall percentage of earnings
being derived from domestic operations, which have comparatively
higher tax rates. In 2002, the Company expects to return to a
23% effective tax rate.
Net Income
Net income declined in response to the decline in
segment operating profit, the increase in special and
non-recurring charges, and the decline in the gain on sale of
DSL assets. The percentage decline in diluted earnings per share
was lower than the percentage decline in net income as a result
of a 2.5 million reduction in average diluted shares outstanding
which occurred in connection with the 1997 share repurchase
program.
14
2000 Compared to 1999
Consolidated net sales increased 1% (excluding
the impact of the September 1999 disposition of The Kerite
Company (Kerite)) due to acquisitions and higher
shipments of utility and lighting products. Offsetting these
increases were a decline in orders and, consequently, sales to
telephone companies at Pulse and weakness in commodity
electrical products. Operating income on a comparative basis
declined 6% (excluding the results of Kerite in 1999, gains on
sale of businesses in 1999 and 2000, and special and
nonrecurring charges in 2000). This decline is mainly
attributable to the lower sales and higher logistical costs at
the commodity electrical products business and lower lighting
margins.
Electrical Segment sales declined 4% due to
significantly lower sales at Pulse as a result of the decline in
demand from telephone operating companies for the units
core multiplexing access line products. In addition, declining
orders and logistical issues associated with the start-up of a
new central distribution warehouse to service primarily
electrical commodity products led to lower sales in this
business. Partially offsetting these declines were improved
sales of premise wiring products due to a combination of strong
international demand and new products. Despite favorable
comparisons from having disposed of the DSL assets of Pulse,
operating profit was driven down by lower earnings in commodity
products where high logistical costs related to freight and
warehousing combined to reduce profitability versus 1999.
However, management improved operations as the year progressed
resulting in this business reporting breakeven operating income
in the 2000 fourth quarter. The Segments 2000 profit also
includes an $8.1 million gain on sale of a west-coast facility.
Power Segment sales increased 2%, excluding
Kerite, on higher shipments across most product lines including
over voltage, connectors, apparatus and tool and rod. Full year
sales in this segment reflect a slowing in the second half of
the year in order input versus strong first half demand,
consistent with the postponement by utility industry customers
of necessary upgrades to the transmission and distribution
infrastructure. Comparable operating income rose due to cost
savings associated with the streamlining program. However,
delays in completing certain streamlining actions to late 1999
and early 2000, primarily impacting high margin connector
products, added cost in 2000 and reduced operating efficiencies.
These actions were substantially completed by year-end.
Industrial Technology Segment (renamed from
Other in the Fourth Quarter 2000) sales were up 41%
for the year versus 1999 as a result of the July 1999
acquisition of Haefely Test AG, a high voltage test and
instrumentation business, and the July 2000 acquisition of
GAI-Tronics. Operating income rose 19% due to the effect of
acquisitions. Within the Segments legacy businesses,
slower industrial demand resulted in flat sales and modestly
lower profits compared with 1999.
Gain on Sale of Business
In April 2000, the Company completed the sale of
its DSL business assets to ECI Telecom Ltd. for a cash purchase
price of $61.0 million. The transaction produced a gain on sale
of $36.2 million in the second quarter. As a result of the sale,
the Company no longer absorbed new product development costs and
associated operating costs for this business (a development
stage company with limited revenues) which totalled
approximately $4.5 million in 2000.
In 1999, the Company sold Kerite, a manufacturer
of power cable previously included in the Power Segment. This
transaction produced a gain on sale of $8.8 million.
Investment income increased due to higher average
interest rates in 2000 versus 1999, partially offset by lower
average investment balances due to a decline in investable funds
resulting from a continuation of the share repurchase program,
acquisitions, additions to property, plant and equipment, and
overall lower earnings. The increase in interest expense
primarily reflects the higher level of commercial paper
outstanding during the year. The effective tax rate was 25.0% in
2000 versus 26.0% in 1999. The decrease in the consolidated
effective tax rate results from a greater proportion of income
being derived from tax-advantaged operations in Puerto Rico.
15
Other income, net in 2000 includes the first
quarter gain of $3.2 million on sale of leveraged lease
investments in contemplation of their pending expiration. The
1999 balance includes insurance recoveries in connection with
damage sustained from Hurricane Georges.
Net income declined in response to the decline in
segment operating profit and the special and nonrecurring
charges, offset by the gain on sale of DSL assets. However,
diluted earnings per share increased as a result of a
4.6 million reduction in average diluted shares outstanding
in connection with the 1997 share repurchase program (see Notes
to Consolidated Financial Statements Earnings Per
Share).
LIQUIDITY AND CAPITAL RESOURCES
Management measures liquidity on the basis of the
Companys ability to meet operational funding needs, fund
additional investments, including acquisitions, and make
dividend payments to shareholders. The Companys working
capital position at December 31, 2001 was
$224.4 million, up from $123.2 million at
December 31, 2000. Total borrowings at December 31,
2001 were lowered to $167.5 million, 23% of total
shareholders equity, versus $359.2 million or 47% of total
shareholders equity, at December 31, 2000. The
combination of substantially higher operating cash flow, a
suspension of stock repurchase activity and a reduction of
investments facilitated a decline in commercial paper
outstanding and, consequently, the debt to equity ratio as
compared to the prior year.
The Company also applied financial resources to
pay the quarterly dividend to shareholders, make capital
expenditures and, in the first quarter, complete the 1997 share
repurchase program. However, capital spending has been reduced
by $20.0 million in 2001 versus 2000 due to the overall
decline in the level of business activity and the resulting
opportunity for management to reorganize and redeploy
underutilized capital assets as opposed to making new capital
additions.
In December 2000, the Companys Board of
Directors authorized repurchase of $300 million of
Class A and Class B shares. Through December 31,
there have been no purchases under this authorization and none
are anticipated in 2002.
Cash provided by operations in 2001 reached an
all time high for the Company and increased by
$75.5 million or 61% versus 2000. Although strong cash
generation will normally accompany a decline in business
activity, as was experienced by the Company in 2001, management
focused significant attention on reducing inventory and accounts
receivable, which together accounted for in excess of
$100 million in cash provided from operations. In addition,
cash from operations improved due to the timing of tax payments
and reduced expenditures in connection with streamlining and
special charges. The decline in operating liabilities reflects a
decline in accounts payable and general business accruals,
consistent with the lower levels of business activity
year-over-year. Investing cash flow in 2001 reflects the
acquisition of MyTech Corporation, offset by the liquidation of
a leveraged lease investment. Investing cash flow in the prior
year includes proceeds of $84.3 million from the sale of
DSL assets, liquidation of leveraged leases and the sale of a
west coast warehouse, offset by the acquisition of GAI-Tronics.
Financing cash flows reflect the impact of the reduction in
commercial paper borrowings during 2001, completion of the 1997
share repurchase program, which limited cash expenditures for
treasury shares to $9.9 million in 2001 versus
$142.8 million in 2000, and a flat dividend rate of $1.32
per share.
In 2002, inventory reduction will continue to be
a primary area of focus for management, contributing up to
$30 million in operating cash flow. Strong internal cash
generation, although not expected to continue at the record
level achieved in 2001, together with currently available cash,
available borrowing facilities, and an ability to access credit
lines if needed, are expected to be more than sufficient to fund
operations, the current rate of dividends, capital expenditures,
and any increase in working capital that would be required to
accommodate a higher level of business activity. The Company
actively seeks to expand by acquisition as well as through the
growth of its present businesses. While a significant
acquisition may require additional borrowings, the Company
believes it would be able to obtain financing based on its
favorable historical earnings performance and strong financial
position.
16
During 2001, the Companys debt consisted of
commercial paper and long-term notes payable. Commercial paper
borrowings ranged from a low in December of $67.7 million
to a high earlier in the year of $240.5 million. The
long-term debt is fixed until 2005 at $100 million.
Borrowings were also available from committed bank credit
facilities up to $150 million, although these facilities
were not used during the year, except for two days following the
September 11 attack due to a lack of liquidity in the commercial
paper markets.
Although not the principle source of liquidity
for the Company, management believes these facilities are
capable of providing significant financing at reasonable rates
of interest. However, a significant deterioration in results of
operations or cash flows, leading to deterioration in financial
condition, could either increase the Companys borrowing
costs or altogether restrict the Companys ability to sell
commercial paper in the open market. Further, the bank credit
facilities are dependent on the Company maintaining certain
financial and non-financial covenants, which were met at
December 31, 2001. The long-term debt is not callable and
is only subject to accelerated payment prior to 2005 if the
Company fails to meet certain non-financial covenants. The
Company has not entered into any other guarantees, commitments
or obligations that could give rise to unexpected cash
requirements.
Market Risks and Risk Management
In the operation of its business, the Company has
market risk exposures to foreign currency exchange rates, raw
material prices and interest rates. Each of these risks and the
Companys strategies to manage the exposure is discussed
below.
The Company manufactures its products in North
America, Switzerland, Puerto Rico, Mexico, Italy, and the United
Kingdom and sells products in those markets as well as through
sales offices in Singapore, The Peoples Republic of China,
Mexico, Hong Kong, South Korea and the Middle East.
International sales were 18% of the Companys sales in 2001
and 15% in 2000. The Canadian market represents 45%, United
Kingdom 19%, Mexico 17%, Switzerland 15% and all other areas 4%
of the total international sales. As such, the Companys
operating results could be affected by changes in foreign
currency exchange rates or weak economic conditions in the
foreign markets in which the Company distributes its products.
To manage this exposure, the Company closely monitors the
working capital requirements of its international units and to
the extent possible will maintain their monetary assets in
U.S. dollar instruments. The Company views this exposure as
not being material to its operating results and, therefore, does
not actively hedge its foreign currency risk.
Raw materials used in the manufacture of the
Companys products include steel, brass, copper, aluminum,
bronze, plastics, phenols, bone fiber, elastomers and
petrochemicals as well as purchased electrical and electronic
components. The Companys financial results could be
affected by the availability and changes in prices of materials.
The Company closely monitors its inventory requirements and
utilizes multiple suppliers. The Company is not materially
dependent upon any single material or supplier and does not
actively hedge or use derivative instruments in the management
of its inventories.
The financial results of the Company are subject
to risk from interest rate fluctuations to the extent that there
is a difference between the amount of the Companys
interest-earning assets and the amount of interest-bearing
liabilities. The principal objective of the Companys
investment management activities is to maximize net investment
income while maintaining acceptable levels of interest rate and
liquidity risk and facilitating the funding needs of the
Company. As part of its investment management, the Company may
use derivative financial products such as interest rate hedges
and interest rate swaps. During the two years ended
December 31, 2001 there were no material derivative
transactions.
17
The following table presents information related
to interest risk sensitive instruments by maturity at
December 31, 2001 (dollars in millions):
As described in its Statement of Accounting
Policies, the Company may use derivative financial instruments
only if they are matched with a specific asset, liability, or
proposed future transaction. The Company does not speculate or
use leverage when trading a financial derivative product.
Critical Accounting Policies
The Company is required to make estimates and
judgments in the preparation of its financial statements that
affect the reported amounts of assets and liabilities, revenues
and expenses and related disclosures. The Company continually
reviews these estimates and their underlying assumptions to
ensure they are appropriate for the circumstances. Estimates and
judgments are viewed by management to be most significant in the
areas of customer credit and collections, employee benefit costs
and taxes.
Credit and Collections
The Company maintains allowances for doubtful
accounts receivable in order to reflect the potential inability
of customers to make required payments for purchases of products
on open credit. If the financial condition of the Companys
customers were to deteriorate, resulting in their inability to
make the required payments, the Company may be required to
record additional allowances against income. Further, certain of
the Companys businesses deal with significant volumes of
customer deductions and debits, as is customary in commodity
electrical products markets. These deductions primarily relate
to pricing, quantity of shipment, item shipped and, in certain
situations, quality corrections. This situation requires
management to estimate at the time of sale the value of
shipments that should not be recorded as revenue equal to the
amount which is not expected to be collected in cash from
customers. Management primarily relies upon historical trends of
actual collections to estimate these reserves at time of
shipment.
Employee Benefits Costs and Funding
Employee benefits costs are accrued in the
financial statements to reflect the future cost of primarily
employee retirement and other post-employment benefits.
Applicable accounting standards require that amounts recognized
in financial statements be determined on an actuarial basis and
that the effects of the performance of plan assets (applicable
only to the pension plan) and changes in liability discount
rates on the computation of pension expense be amortized over
future periods.
The most significant assumption in determining
the Companys pension expense is the expected return on
plan assets. In 2001, the Company estimated that the expected
long-term rate of return on plan assets would
18
At the end of each year, the Company determines
the discount rate to be used to calculate the present value of
plan liabilities. The discount rate is an estimate of the
current interest rate at which the liabilities could effectively
be settled at the end of the year. In estimating this rate, the
Company looks to rates of return on high-quality, fixed-income
investments with maturities that closely match the expected
funding period of the Companys liability. At
December 31, 2001, the Company determined this rate to be
7.25%, a decrease of 25 basis points from the rate used at
December 31, 2000. Changes in discount rates over the past
three years have not materially affected plan expense, and the
net effect of changes in the discount rate, as well as the net
effect of other changes in actuarial assumptions and experience,
have been deferred, in accordance with SFAS Nos. 87 and 106.
Taxes
The Company accounts for income taxes in
accordance with SFAS No. 109, Accounting for Income
Taxes which requires that deferred tax assets and
liabilities be recognized using enacted tax rates for the effect
of temporary differences between the book and tax bases of
recorded assets and liabilities. SFAS No. 109 also requires
that deferred tax assets be reduced by a valuation allowance if
it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
At December 31, 2001 and 2000, the Company
had deferred tax assets of $28.7 million and
$12.1 million, respectively. At December 31, 2001 and
2000, management determined that these assets will be fully
realized and, therefore, no valuation allowance was recorded
against these balances.
The factors used to assess the likelihood of
realization are the forecast of future taxable income and
available tax planning strategies that could be implemented to
realize the net deferred tax assets. Failure to achieve
forecasted taxable income might affect the ultimate realization
of the net deferred tax assets.
In addition, the Company operates within multiple
taxing jurisdictions and is subject to audit in these
jurisdictions. These audits can involve complex issues, which
may require an extended period of time to resolve. In
managements opinion, adequate provisions for income taxes
have been made for all years.
Inflation
In times of inflationary cost increases, the
Company has historically been able to maintain its profitability
by improvements in operating methods and cost recovery through
price increases. In large measure, the reported operating
results have absorbed the effects of inflation since the
Companys predominant use of the LIFO method of inventory
accounting generally has the effect of charging operating
results with costs (except for depreciation) that reflect
current price levels.
Recently Issued Accounting Standards
In July 2001, the Financial Accounting Standards
Board (FASB) published two Statements: Statement
No. 141 (FAS 141), Business
Combinations, and Statement No. 142 (FAS
142), Goodwill and Other Intangible Assets.
FAS 141 primarily addresses the accounting for the cost of an
19
FAS 141 was effective for all business
combinations (as defined in that Statement), accounted for by
the purchase method, completed after June 30, 2001.
FAS 142 primarily addresses the accounting for
goodwill and intangible assets subsequent to their acquisition
(i.e., the post-acquisition accounting). FAS 142 supercedes APB
17, Intangible Assets. The most significant changes made by FAS
142 are:
In 2001, the Company recorded approximately
$8.0 million of goodwill amortization expense which will
not be recorded in 2002. In addition, the Company is in the
process of performing the initial impairment tests of the
recorded value of goodwill, as is required by the Standard, and
will report any adjustment as a cumulative effect of a change in
accounting principle when adopted in 2002.
In November 2001, FASB issued Statement
No. 143 (FAS 143), Accounting for
Obligations Associated with the Retirement of Long-Lived
Assets. FAS 143 establishes accounting standards for the
recognition and measurement of asset retirement obligations
associated with the retirement of tangible long-lived assets
that have indeterminate lives. FAS 143 will be effective for the
Company January 1, 2003. However, it is not expected to
have a material effect on financial position, results of
operations or cash flows, as the Company does not currently have
any such assets.
In October 2001, FASB issued FAS No. 144
(FAS 144), Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement provides
guidance on the accounting for the impairment or disposal of
long-lived assets and also specifies a revised definition for
what constitutes a discontinued operation, as previously defined
in APB 30, Discontinued Operations. FAS 144 is effective for the
Company on January 1, 2002 and, generally, its provisions
are to be applied prospectively. This pronouncement is not
expected to have any material effect on financial position,
results of operations or cash flows of the Company.
Forward-Looking Statements
Certain statements made in this Managements
Discussion and Analysis of Financial Condition and Results of
Operations, and elsewhere in this report and in the Annual
Report attached hereto, which does not constitute part of this
Form 10-K, are forward-looking and are based on the
Companys reasonable current expectations. These
forward-looking statements may be identified by the use of
words, such as believe, expect,
anticipate, should, plan,
estimated, potential,
pending, 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
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: projection of the
improvement in operating margins, cost savings, cash
expenditures, timing of actions in connection with the capacity
reduction plan, expected levels of operating cash flow and
inventory reduction amounts in 2002, tax rate forecast in 2002,
estimated SG&A expense reduction, anticipated expenditures
in connection with share repurchases and the pending acquisition
of USI Lighting Group, the lighting division of the U.S.
Industries, Inc.
20
Table of Contents
Capacity reduction ($22.5 million), includes
facility rationalization and other capacity reduction actions:
Workforce reductions ($12.1 million)
in addition to the 10% reduction in overall employment levels
recorded through the first nine months of the year, the Plan
contemplates a further 9% reduction in overall employment levels
through voluntary and involuntary termination, mainly focused on
indirect manufacturing and salaried employees in each of the
Companys segments.
Outsourcing ($3.8 million) primarily
includes asset write-off costs in support of decisions to exit
manufacturing of certain end products and components not
considered core competencies of the business and procure these
products and components from lower cost sources of supply both
domestically and internationally.
Exit product lines ($13.0 million)
this program reflects managements decision to streamline
its product offering and eliminate non-strategic inventory
across all business units. The cost of this program is included
in Cost of goods sold in the Consolidated Statement of Income.
This rationalization of product is intended to facilitate
improvements in manufacturing efficiencies and lower working
capital needs.
Other ($10.6 million) primarily
includes costs associated with environmental remediation actions
of previously exited facilities in anticipation of their
disposal and costs associated with uncompleted acquisitions.
Table of Contents
Employee
Asset
Exit
Benefits
Disposals
Costs
Other
Total
$
10.3
$
34.1
$
2.3
$
9.6
$
56.3
(13.0
)
(13.0
)
(21.1
)
(21.1
)
(2.4
)
(.5
)
(1.7
)
(4.6
)
$
7.9
$
$
1.8
$
7.9
$
17.6
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Fair
Value
2002
2003
2004
2005
2006
Thereafter
Total
12/31/01
$
10.0
$
3.0
$
0.3
$
0.5
$
0.4
$
0.6
$
14.8
$
14.8
6.2
%
6.6
%
5.6
%
3.4
%
3.1
%
3.3
%
$
2.9
$
15.8
$
5.9
$
24.0
$
26.0
$
3.1
$
77.7
$
79.9
3.1
%
3.5
%
6.5
%
4.9
%
4.5
%
6.0
%
$
(67.7
)
$
(67.7
)
$
(67.7
)
2.0
%
$
(99.8
)
$
(99.8
)
$
(105.3
)
6.7
%
Table of Contents
Table of Contents
It requires use of the purchase method of
accounting for all business combinations, thereby eliminating
use of the pooling-of-interests method.
It provides new criteria for determining whether
intangible assets acquired in a business combination should be
recognized separately from goodwill.
Goodwill and indefinite lived intangible assets
will no longer be amortized (effective for goodwill created in
purchase transactions after July 1, 2001) and will be
tested for impairment at the reporting unit level at least
annually (effective on January 1, 2002 for all goodwill).
The amortization period of intangible assets with
finite lives is no longer limited to forty years.
Table of Contents
Item 8.
Financial
Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Hubbell Incorporated:
In our opinion, the consolidated financial
statements listed in the index on page 52 present fairly,
in all material respects, the financial position of Hubbell
Incorporated and Subsidiaries (the Company) at
December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Companys management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
Stamford, Connecticut
21
HUBBELL INCORPORATED AND
SUBSIDIARIES
See notes to consolidated financial statements.
22
HUBBELL INCORPORATED AND
SUBSIDIARIES
See notes to consolidated financial statements.
23
HUBBELL INCORPORATED AND
SUBSIDIARIES
See notes to consolidated financial statements.
24
HUBBELL INCORPORATED AND
SUBSIDIARIES
See notes to consolidated financial statements
25
HUBBELL INCORPORATED AND
SUBSIDIARIES
STATEMENT OF ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include all
subsidiaries; all significant intercompany balances and
transactions have been eliminated. Investments in joint ventures
are accounted for by using the equity method. Certain
reclassifications have been made in prior year financial
statements to conform to the current year presentation.
Revenue Recognition
Revenue is recognized from sales upon shipment of
products to customers and when the risks and rewards of
ownership pass to customers. Sales discounts, quantity rebates,
allowances and warranty costs are estimated based on experience
and recorded in the period in which the sale is recorded.
Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities and
disclosures, if any, of contingent assets and liabilities at the
date of the financial statements. Similarly, estimates and
assumptions are required for the reporting of revenues and
expenses. Actual results could differ from the estimates that
were used.
Foreign Currency Translation
The assets and liabilities of international
subsidiaries are translated to U.S. dollars at exchange
rates in effect at the end of the year, and income and expense
items are translated at average rates of exchange in effect
during the year. The effects of exchange rate fluctuations on
the translated amounts of foreign currency assets and
liabilities is included as translation adjustments in
shareholders equity. Gains and losses from foreign
currency transactions are included in income of the period.
Cash and Temporary Cash Investments
Temporary cash investments consist of liquid
investments with maturities of three months or less when
purchased. The carrying value of cash and temporary cash
investments approximates fair value because of their short
maturities.
Short-Term Investments
Short-term investments are primarily bank
obligations with a maturity of greater than three months but
less than one year.
Investments
Investments in debt and equity securities are
classified by individual security into one of three separate
categories: trading, available-for-sale or held-to-maturity.
Trading investments are bought and held principally for the
purpose of selling them in the near term and are carried at fair
market value. Adjustments to the carrying value of trading
investments are included in current earnings. Available-for-sale
investments are intended to be held for an indefinite period but
may be sold in response to events not reasonably expected in the
future. These investments are carried at fair value with
adjustments recorded in shareholders equity net of tax.
Debt securities which the Company has the positive intent and
ability to hold to maturity are classified as held-to-maturity
and carried at amortized cost. The effects of amortizing these
securities are recorded in current earnings.
26
Inventories
Inventories are stated at the lower of cost or
market. The cost of substantially all domestic inventories, 76%
of total inventory value, is determined on the basis of the
last-in, first-out (LIFO) method of inventory accounting. The
cost of foreign inventories and certain domestic inventories is
determined on the basis of the first-in, first-out (FIFO) method
of inventory accounting.
Property, Plant, and Equipment
Property, plant, and equipment placed in service
prior to January 1, 1999 are depreciated over their
estimated useful lives, principally using accelerated methods.
Assets placed in service subsequent to January 1, 1999 are
depreciated using straight-line methods. The change to the
straight-line method did not have a material impact on the
Companys financial position or results of operations.
Goodwill and Other Intangible Assets
Goodwill represents costs in excess of fair
values assigned to the underlying net assets of acquired
companies and has generally been amortized using the
straight-line method of amortization over periods ranging from
10 to 40 years. Effective July 1, 2001, the Company
adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 141, Business
Combinations and SFAS No. 142, Goodwill and
Other Intangible Assets, applicable to business
combinations completed after June 30, 2001. In accordance
with these standards, goodwill acquired after June 30, 2001
was not amortized.
During 2001, the Company evaluated potential
impairment of goodwill on an ongoing basis and of other
long-lived assets when appropriate. This evaluation compared the
carrying value of an asset to the sum of its undiscounted
expected future cash flows. If an assets carrying value
exceeded the cash flows, the asset was written down to fair
value.
As of January 1, 2002, the remaining
provisions of SFAS No. 141 and No. 142 are effective
for the Company. These standards require the use of the purchase
method of accounting for business combinations, set forth the
accounting for the initial recognition of acquired intangible
assets and goodwill, and describe the accounting for intangible
assets and goodwill subsequent to initial recognition. Under the
provisions of these standards, intangible assets deemed to have
indefinite lives and goodwill are no longer subject to
amortization. All other intangible assets are to be amortized
over their estimated useful lives. Intangible assets and
goodwill are subject to annual impairment testing using the
specific guidance and criteria described in the standards. This
testing compares carrying values to fair values and when
appropriate, the carrying value of these assets will be reduced
to fair value.
Deferred Income Taxes
Deferred income taxes are recognized for the tax
consequence of differences between the financial statement
carrying amounts and tax bases of assets and liabilities by
applying the currently enacted statutory tax rates. The effect
of a change in statutory tax rates is recognized in income in
the period that includes the enactment date. Federal income
taxes have not been provided on the undistributed earnings of
the Companys international subsidiaries as the Company has
reinvested all of these earnings indefinitely.
Retirement Benefits
The Companys policy is to fund pension
costs within the ranges prescribed by applicable regulations. In
addition to providing pension benefits, in some circumstances
the Company provides health care and life insurance benefits for
retired employees. The Companys policy is to fund these
benefits through insurance premiums or as actual expenditures
are made.
27
Earnings Per Share
Earnings per share is based on reported net
income and the weighted average number of shares of common stock
outstanding (basic) and the total of common stock outstanding
and common stock equivalents (diluted).
Stock-Based Compensation
SFAS 123
Accounting for Stock-Based Compensation permits, but
does not require, a fair value based method of accounting for
employee stock option and performance plans which results in
compensation expense being recognized in the results of
operations when awards are granted. The Company continues to use
the current intrinsic value based method of accounting for such
plans where compensation expense is measured as the excess, if
any, of the quoted market price of the Companys stock at
the measurement date over the exercise price. However, as
required by SFAS 123, the Company provides pro forma disclosure
of net income and earnings per share in the notes to the
consolidated financial statements as if the fair value based
method of accounting has been applied.
Comprehensive Income
As shown in the Statement of Changes in
Shareholders Equity, comprehensive income is a measure of
net income and all other changes in equity of the Company that
result from recognized transactions and other events of the
period other than transactions with shareholders. The other
changes in equity are comprised of the change in Cumulative
Translation Adjustments for foreign currency items and
Unrealized Gain (Loss) on investments held for sale.
Derivatives
The Company, to limit financial risk in the
management of its assets, liabilities and debt may use
derivative financial instruments such as: foreign currency
hedges, commodity hedges, interest rate hedges and interest rate
swaps. All derivative financial instruments must be matched with
an existing Company asset, liability or proposed transaction.
Market value gains or losses on the derivative financial
instrument are recognized in income when the effects of the
related price changes of the related asset or liability are
recognized in income. There were no material derivative
transactions, individually or in total, for the three years
ended December 31, 2001.
28
HUBBELL INCORPORATED AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Special and Nonrecurring Charges
Full year operating results in 2001 reflect a
special charge, offset by a $3.3 million reduction in the
streamlining program accrual established in 1997. These net
costs, which were recorded in the fourth quarter, total
$53.0 million ($35.5 million net of tax, or $0.60 per
diluted share).
The 2001 streamlining and cost reduction
initiative (the Plan) is comprised of a variety of
individual programs and was primarily undertaken to reduce the
productive capacity of the company and realign employment levels
to better match with lower actual and forecast rates of incoming
business. In total, the Plan is expected to require a cumulative
charge to profit and loss of $62.0 million. In addition to the
2001 charge of $56.3 million, costs totaling $5.7 million
are expected to be charged against profit in 2002, as funds are
spent and specific actions are announced and implemented.
The following table sets forth the components and
status of the 2001 special charge at December 31:
2000 Special
Charge
The 2000 special charge is comprised of asset
impairments of $6.0 million and facility consolidation and
downsizing, severance, and other provisions of $4.4 million. The
asset impairments primarily consisted of adjustments to the
carrying cost of certain joint venture investments and
write-downs of surplus equipment. The latter were either
(1) acquired in connection with actions originally
contemplated in the 1997 streamlining program which had been
revised or were (2) rendered obsolete as a result of the
year 2000 product line discontinuance.
Cost of sales reflects a special charge of
$20.3 million in connection with managements decision
to streamline its product offering and eliminate non-strategic
inventory across all business units. The charge represents the
cost of inventories identified for discontinuance and disposal.
Also in 2000, net sales includes a non-recurring charge of
$3.5 million related to an increase in the reserve for
customer returns and allowances due to inaccurate/incomplete
shipments from a new electrical products central distribution
warehouse. All actions contemplated in the 2000 special charge
were completed as planned in 2001.
1997
Streamlining Plan
In 1997, the Company recorded a special charge of
$52.0 million ($32.2 million after-tax or $.47 per
share), comprised of $32.4 million of accrued consolidation
and streamlining costs, $9.5 million of facility asset
impairments, a $7.4 million goodwill asset impairment, and
other current employee and product line exit costs of
$2.7 million. The Companys consolidation and
streamlining initiatives were undertaken to optimize the
organization and cost structure primarily within the Electrical
and Power Segments.
As part of managements ongoing review of
estimated program costs in connection with the plan, adjustments
in the amount of $10.5 million were made in the first and
second quarters of 2000. The adjustments (income) reflected
costs originally estimated as part of the 1997 plan which were
deemed no longer required to complete certain actions in the
Electrical and Power Segments. The changes in estimate within
the Electrical Segment of $4.4 million occurred primarily
in connection with newly appointed operating
29
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
managements decision to terminate plans
related to closure of the St. Louis, MO and South Bend, IN
manufacturing facilities. In addition, the accrual reduction in
the Power Segment of approximately $6.1 million related to
underspending of severance and exit costs, principally in
connection with a foundry consolidation and relocation of
production to lower cost areas. The underspending of severance
is mainly due to an increased incidence of natural attrition and
the reassignment of affected employees.
The change in estimate in 2001 of
$3.3 million primarily occurred within the Electrical
Segment in connection with managements decision to
terminate plans related to closure of the Louisiana, MO
manufacturing facility. Following this adjustment, all actions
contemplated under the 1997 Streamlining Plan were completed.
Acquisitions
In October 2001, Hubbell acquired the stock of
MyTech. Based in Austin, Texas, MyTech designs, manufactures and
markets microprocessor-based, digital, self-adjusting occupancy
sensors, HID dimming controls, photo cells and other
lighting-related electrical control products used primarily to
reduce energy consumption in commercial and industrial
applications by turning off lights and other electronic devices
in areas that are unoccupied. MyTech is included in the
Electrical Segment.
In July 2000, Hubbell acquired the stock of
GAI-Tronics from Salient 3 Communications, Inc. Based in
Reading, Pennsylvania, GAI-Tronics is a leading supplier of
specialized communications systems designed for indoor, outdoor
and hazardous environments. GAI-Tronics is included in the
Industrial Technology Segment. To complement the Companys
Electrical Segment, Hubbell acquired the stock of Temco Electric
Products Inc. of Quebec, Canada in December 2000. Temco designs
and manufactures electrical outlet boxes, metallic wall plates
and related accessories.
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. The
businesses have been included in the financial statements as of
their respective acquisition dates and represented less than 1%
in 2001, approximately 2% and 1% of net sales in 2000 and 1999,
respectively, with no material effect on the Companys
reported earnings.
In connection with the above acquisitions,
liabilities were assumed as follows (in millions):
Dispositions
In April, 2000, Hubbell sold its digital
subscriber line communications equipment business
(WavePacer®), and certain related intellectual
property to ECI. Gross proceeds were $61.0 million and the
transaction produced a gain on sale of $36.2 million in the
second quarter. At the time of sale, the Company retained a
contractual obligation to supply product to ECI at prices below
manufacturing cost, resulting in an adverse commitment. In
December 2001, management revised the remaining adverse
commitment accrual to reflect lower known and projected orders
from ECI through the contract expiration date and recorded an
additional gain of $4.7 million. WavePacer solutions enable
delivery of high speed network access for data-intensive
applications such as telecommuting, branch office connectivity,
and remote internet access; and WavePacer remote access
multiplexers provide asymmetric digital subscriber designated
line (ADSL) series to remote locations and are capable of
interfacing with any vendors equipment in the central
office.
30
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In September 1999, the Company completed the sale
of Kerite, a wholly-owned subsidiary reported in the Power
Segment. Kerite, which manufactures high-performance, insulated
power cable, was sold to The Marmon Corporation for a cash
purchase price of $38.4 million. The sale produced a net
gain of $8.8 million.
Investments
Investments consist primarily of mortgage-backed
securities, asset-backed securities, corporate bonds and
U.S. Treasury Notes. Investments which are
available-for-sale are stated at market values based on current
quotes while investments which are being held-to-maturity are
stated at amortized cost. There were no securities during 2001
and 2000 that were classified as trading investments. Certain
portfolio securities that are affected by changes in interest
rates may be hedged with futures contracts for U.S. Treasury
Notes and Bonds. Market value gains and losses on the futures
contracts are recognized in income when the effects of the
related price changes in the value of the hedged securities are
recognized. At December 31, 2001 there were no open futures
contracts.
The following tables set forth selected data with
respect to the Companys long-term investments at
December 31, (in millions):
31
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Contractual maturities of investments in debt
securities, available-for-sale and held-to-maturity at
December 31, 2001 were as follows (in millions):
The change in net unrealized holding gain or loss
on available-for-sale securities that has been included in the
separate component of shareholders equity was immaterial
in 2001 and 2000. The cost basis used in computing the gain or
loss on these securities was through specific identification.
The proceeds from the sale of these securities were
$162.2 million in 2001 and $4.9 million in 2000.
Inventories
Inventories are classified as follows at
December 31, (in millions):
The financial accounting basis for the LIFO
inventories of acquired companies exceeds the tax basis by
approximately $29.5 million at December 31, 2001.
32
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income Taxes
The following table sets forth selected data with
respect to the Companys income tax provisions for the
years ended December 31, (in millions):
The principal items making up the deferred tax
provisions (benefits) are set forth in the following table
for the years ended December 31, (in millions):
The components of the net deferred tax asset
(liability) at December 31, (in millions) were as
follows:
33
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2001, United States income
taxes had not been provided on approximately $30.2 million
of undistributed international earnings. Payments of income
taxes were $24.3 million in 2001, $33.4 million in
2000 and $46.6 million in 1999.
The consolidated effective income tax rates
varied from the United States federal statutory income tax rate
for the years ended December 31, as follows:
Other Non-Current Liabilities
Other Non-Current Liabilities consists of the
following at December 31, (in millions):
34
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Retirement Benefits
The Company and its subsidiaries have a number of
non-contributory defined benefit pension plans and other
non-pension retirement benefit plans. During 2000, the Company
made an acquisition where defined benefit pension assets and
liabilities of the acquired company were assumed. No
acquisitions impacting pension assets and liabilities occurred
during 2001.
The following table sets forth the reconciliation
of beginning and ending balances of the benefit obligations and
the plan assets for the above plans at December 31, (in
millions):
35
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the components of
pension and other benefits cost for the years ended
December 31, (in millions):
The Company and its subsidiaries have a number of
health care and life insurance benefit plans covering eligible
employees who reached retirement age while working for the
Company. These other benefits were discontinued in 1991 for
substantially all future retirees, with the exception of A.B.
Chance Company, which was acquired in 1994, and Anderson
Electrical Products, Inc., which was acquired in 1996. For
measurement purposes, an 8.50% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
2001. The rate was assumed to decrease gradually to 5% for 2008
and remain at that level thereafter. The impact of a
1 percentage point increase or decrease in assumptions
would not be material to the Company. Some of the plans provide
for retiree contributions which are periodically increased. The
plans anticipate future cost-sharing changes that are consistent
with the Companys past practices.
At December 31, 2001, approximately
$150.4 million of the pension plan assets were invested in
common stocks, including Hubbell Incorporated common stock with
a market value of $9.9 million. The balance of plan assets
of $80.7 million were invested in short term money market
accounts, government and corporate bonds.
At December 31, 2001, the Company had
certain defined benefit plans where the accumulated benefit
obligation exceeded plan assets. In total, the accumulated
benefit obligation for these plans at December 31, 2001 was
$29.4 million and there were no plan assets. No additional
minimum liability was required to be recognized for any of these
plans.
The Company also maintains two qualified defined
contribution plans. The total cost of these plans was
$2.0 million in 2001, $1.7 million in 2000 and $1.5 in
1999. This cost is not included in the above net periodic
benefit cost. Total pension expense (including defined
contribution plans) as a percent of payroll was 2.1% in 2001,
1.6% in 2000, and 1.1% in 1999.
36
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Commercial Paper, Other Borrowings and
Long-Term Debt
The following table sets forth the components of
the Companys debt structure at December 31, (in
millions):
Interest paid for commercial paper, bank
borrowings, and long-term debt totaled $15.5 million in
2001, $19.7 million in 2000, and $15.9 million in
1999. The Company maintains various bank credit agreements
primarily to support commercial paper borrowings. At
December 31, 2001 and through the date of filing this
Form 10-K, the Company had total unused bank credit
agreements of $150 million. The expiration date for these
bank credit agreements is September 22, 2002. Borrowings
under credit agreements generally are available at the prime
rate or at a surcharge over the London Interbank Offered Rate
(LIBOR). Annual commitment fee requirements to support
availability of credit agreements at December 31, 2001,
total approximately $150,000. In October, 1995, the Company
issued ten year non-callable notes due in 2005 at a face value
of $100.0 million and a fixed interest rate of 6 5/8%.
Research, Development and
Engineering
Expenses for new product development and ongoing
improvement of existing products were $7.6 million in 2001,
$10.0 million in 2000 and $20.0 million in 1999. The
decline in research, development, and engineering is consistent
with the sale of the WavePacer business assets in April 2000.
(see Notes to Consolidated Financial Statements
Dispositions).
Financial Instruments
Concentration of Credit Risks: Financial
instruments which potentially subject the Company to
concentration of credit risks consist of trade receivables and
temporary cash investments. The Company grants credit terms in
the normal course of business to its customers. Due to the
diversity of its product lines, the Company has an extensive
customer base including electrical distributors and wholesalers,
electric utilities, equipment manufacturers, electrical
contractors, telephone operating companies and retail and
hardware outlets. As part of its ongoing procedures, the Company
monitors the credit worthiness of its customers. Bad debt
write-offs have historically been minimal, however, they did
increase in 2001 due to the generally weak economic conditions
affecting U.S. industrial markets. The Company places its
temporary cash investments with financial institutions and
limits the amount of exposure to any one institution.
Fair Value: The carrying amounts reported in the
consolidated balance sheets for cash and temporary cash
investments, short-term investments, receivables, commercial
paper and bank borrowings, accounts payable and accruals
approximate their fair values given the immediate or short-term
maturity of these financial investments (see also Notes to
Consolidated Financial Statements Investments).
37
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair value of long-term debt was
$105.3 million and $101.4 million at December 31,
2001 and 2000, respectively.
Commitments and Contingent
Liabilities
Environmental
and Legal
The Company is subject to various legal
proceedings and claims that arise in the ordinary course of
business. The Company is also subject to environmental laws and
regulations which may require that it investigate and remediate
the effects of potential contamination associated with past and
present operations. Estimates of future liability with respect
to such matters are based on an evaluation of currently
available facts. Liabilities are recorded when it is probable
that costs will be incurred and can be reasonably estimated.
Given the nature of matters involved, it is possible that
liabilities will be incurred in excess of amounts currently
recorded; however based upon available information, management
believes that the ultimate liability with respect to these
matters is not material to the consolidated financial position,
results of operations or cash flows of the Company.
Leases
Total rental expense under operating leases were
$10.7 million in 2001, $9.4 million in 2000 and
$9.1 million in 1999. The minimum annual rentals on
non-cancelable, long-term, operating leases in effect at
December 31, 2001 will approximate $5.7 million in
2002, $3.5 million in 2003, $2.7 million in 2004,
$2.1 million in 2005 and $1.8 million in 2006.
Capital Stock
Share activity in the Companys preferred
and common stocks is set forth below for the three years ended
December 31, 2001:
Treasury shares are retired when acquired and
the purchase price is charged against par value and additional
paid-in capital. Voting rights per share: Class A
Common twenty; Class B Common one.
In addition, the Company has 5,891,097 authorized shares of
preferred stock; none are outstanding.
The Company has a Stockholder Rights Agreement
under which holders of Class A Common Stock have
Class A Rights and holders of Class B Common Stock
have Class B Rights. These Rights become exercisable after
a specified period of time only if a person or group of
affiliated persons acquires beneficial ownership of
20 percent or more of the outstanding Class A Common
Stock of the Company or announces or commences a
38
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
tender or exchange offer that would result in the
offeror acquiring beneficial ownership of 20 percent or
more of the outstanding Class A Common Stock of the
Company. Each Class A Right entitles the holder to purchase
from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock (Series A
Preferred Stock), without par value, at a price of $175.00
per one one-thousandth of a share. Similarly, each Class B
Right entitles the holder to purchase one one-thousandth of a
share of Class B Junior Participating Preferred Stock
(Series B Preferred Stock), without par value,
at a price of $175.00 per one one-thousandth of a share. The
Rights may be redeemed by the Company for one cent per Right
prior to the day a person or group of affiliated persons
acquires 20 percent or more of the outstanding Class A
Common Stock of the Company. The Rights expire on
December 31, 2008, unless earlier redeemed by the Company.
Shares of Series A Preferred Stock or
Series B Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Series A
Preferred Stock or Series B Preferred Stock will be
entitled, when, as and if declared, to a minimum preferential
quarterly dividend payment of $10.00 per share but will be
entitled to an aggregate dividend of 1,000 times the dividend
declared per share of Common Stock. In the event of liquidation,
the holders of the Series A Preferred Stock or
Series B Preferred Stock will be entitled to a minimum
preferential liquidation payment of $100 per share (plus any
accrued but unpaid dividends) but will be entitled to an
aggregate payment of 1,000 times the payment made per share of
Class A Common Stock or Class B Common Stock,
respectively. Each share of Series A Preferred Stock will
have 20,000 votes and each share of Series B Preferred
Stock will have 1,000 votes, voting together with the Common
Stock. Finally, in the event of any merger, consolidation,
transfer of assets or earning power or other transaction in
which shares of Common Stock are converted or exchanged, each
share of Series A Preferred Stock or Series B
Preferred Stock will be entitled to receive 1,000 times the
amount received per share of Common Stock. These rights are
protected by customary antidilution provisions.
Upon the occurrence of certain events or
transactions specified in the Rights Agreement, each holder of a
Right will have the right to receive, upon exercise, that number
of shares of the Companys common stock or the acquiring
companys shares having a market value equal to twice the
exercise price.
Shares of stock were reserved at
December 31, 2001 as follows:
Stock Options
The Company has granted to officers and key
employees options to purchase the Companys Class A
and Class B Common Stock and the Company may grant to
officers and key employees options to purchase the
Companys Class B Common Stock at not less than 100%
of market prices on the date of grant with a ten year
39
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
term and, generally, a three year vesting period.
Stock option activity for the three years ended
December 31, 2001 is set forth below:
On December 31, 2001, outstanding options
were comprised of 1,773,912 shares exerciseable with an average
remaining life of three years and an average price of $27.89
(range $25.15 $32.06); 1,364,700 shares exerciseable
with an average remaining life of six years and an average price
of $44.64 (range $41.69 $47.13); 899,900 shares
exerciseable and 1,206,900 shares not vested with a remaining
life of eight years and an average price of $32.65 (range
$27.66 $39.34); and 2,988,450 shares not vested with
an average remaining life of ten years and an average price of
$26.25 (range $24.59 $30.74).
The following table summarizes the pro forma
effect on net income if compensation expense had been recognized
for stock options using the Black-Scholes option-pricing model
and related assumptions:
40
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Earnings Per Share
The following table sets forth the computation of
earnings per share for the three years ended December 31,
(in millions):
Options to purchase shares of common stock were
outstanding at each year-end, but were not included in the
computation of diluted earnings per share because the effect
would be anti-dilutive. The number of anti-dilutive options
outstanding were 2.9 million, 5.1 million and
3.2 million at December 31, 2001, 2000 and 1999,
respectively.
Subsequent Events (unaudited)
In March 2002, the Company completed a cash
purchase of the common stock of Hawke Cable Glands Limited
(Hawke). Based in the United Kingdom, Hawke is a
leading supplier of products used in harsh and hazardous
locations worldwide including brass cable glands and cable
connectors, cable transition devices, utility transformer
breathers, stainless steel and nonmetallic enclosures and field
bus connectivity components. Hawke complements the product
offering of the Companys Killark brand electrical
components and will be included in the Companys Electrical
Segment. The acquisition was not significant to the financial
position of the Company.
In March 2002, Hubbell entered into an agreement
to acquire USIs LCA Group, Inc. (LCA), the
domestic lighting division of U.S. Industries, Inc. The purchase
price for the acquisition will be $250.0 million in cash,
subject to adjustment based on certain circumstances. LCA
manufactures and distributes a wide range of outdoor and indoor
lighting products to the commercial, industrial and residential
markets under various brand names, including Alera, Kim,
Spaulding, Whiteway, Moldcast, Architectural Area Lighting,
Columbia, Keystone, Prescolite, Dual Lite and Progress.
Consummation of the acquisition is subject to the satisfaction
of certain closing conditions set forth in the purchase
agreement, including expiration or early termination of the
waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. Hubbell expects to finance
the acquisition of LCA through the incurrence of indebtedness
under its existing commercial paper program and additional
indebtedness, which may include the issuance of loans or debt
securities.
41
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Industry Segment and Geographic Area
Information
Nature of
Operations
Hubbell Incorporated was founded as a
proprietorship in 1888, and was incorporated in Connecticut in
1905. For over a century, Hubbell has manufactured and sold high
quality electrical and electronic products for a broad range of
commercial, industrial, telecommunications and utility
applications. Since 1961, Hubbell has expanded its operations
into other areas of the electrical industry and related fields.
Hubbell products are now manufactured or assembled by
twenty-nine divisions and subsidiaries in North America,
Switzerland, Puerto Rico, Mexico, Italy and the United Kingdom.
Hubbell also participates in a joint venture in Taiwan, and
maintains sales offices in Singapore, the Peoples Republic
of China, Mexico, Hong Kong, South Korea and the Middle East.
The Company is primarily engaged in the
engineering, manufacture and sale of electrical and electronic
products. For management reporting and control, the businesses
are divided into three operating segments: Electrical, Power,
and Industrial Technology. Information regarding operating
segments has been presented as required by SFAS No. 131. At
December 31, 2001 the operating segments were comprised as
follows:
The Electrical Segment is comprised of businesses
that primarily sell through distributors, lighting showrooms,
home centers, telephone and telecommunication companies, and
represents stock items including standard and special
application wiring device products, lighting fixtures, fittings,
switch and outlet boxes, enclosures, wire and cable management
products and voice and data signal processing components. The
products are typically used in and around industrial, commercial
and institutional facilities by electrical contractors,
maintenance personnel, electricians, and telecommunication
companies.
Power Segment operations comprise a wide variety
of construction, switching and protection products, hot line
tools, grounding equipment, cover ups, fittings and fasteners,
cable accessories, insulators, arresters, cutouts,
sectionalizers, connectors and compression tools for the
building and maintenance of overhead and underground power and
telephone lines, as well as applications in the industrial,
construction and pipeline industries.
The Industrial Technology Segment consists of
operations that design and manufacture test and measurement
equipment, high voltage power supplies and variable
transformers, industrial controls including motor speed
controls, pendant-type push-button stations, overhead crane
controls, Gleason Reel® electric cable and hose reels, and
specialized communication systems such as intra-facility
communication systems, telephone systems, and land mobile radio
peripherals. Products are sold primarily to steel mills,
industrial complexes, oil, gas and petro-chemical industries,
seaports, transportation authorities, the security industry
(malls and colleges), and cable and electronic equipment
manufacturers.
On a geographic basis, the Company defines
international as operations and subsidiaries based
outside of the United States and its possessions. Sales of
international units were 11% of total sales in 2001, 10% in
2000, and 8% in 1999, with the Canadian market representing
approximately 45% of the total. Net assets of international
subsidiaries were 11% of the consolidated total in 2001, 9% in
2000 and in 1999. Export sales directly to customers or through
electric wholesalers from the United States operations were
$88.4 million in 2001, $74.8 million in 2000, and
$75.8 million in 1999.
42
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys principal manufacturing
facilities are located in the following areas, classified by
segment:
Additionally, the Company owns or leases
warehouses and distribution centers containing approximately
1,256,500 square feet. The Company believes its manufacturing
and warehousing facilities are adequate to carry on its business
activities.
43
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of December 31, 2001, the Company had
approximately 8,771 full-time employees, including salaried and
hourly personnel. Approximately 42% of the United States
employees are represented by fourteen labor unions. During the
next twelve months there are no union contracts due for
renegotiation.
Financial
Information
Financial information by industry segment and
geographic area for the three years ended December 31,
2001, is summarized below (in millions). When reading the data
the following items should be noted:
Industry Segment
44
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Geographic Area
45
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Quarterly Financial Data (Unaudited)
The table below sets forth summarized quarterly
financial data for the years ended December 31, 2001 and
2000 (in millions, except per share amounts):
46
PricewaterhouseCoopers LLP
Table of Contents
Years ended December 31,
2001
2000
1999
(Dollars in millions, except
per share amounts)
$
1,312.2
$
1,424.1
$
1,451.8
998.2
1,055.0
1,042.8
314.0
369.1
409.0
40.0
(.1
)
222.2
220.9
223.4
(4.7
)
(36.2
)
(8.8
)
56.5
184.5
194.4
10.5
15.9
13.4
(15.5
)
(19.7
)
(15.9
)
4.3
3.6
5.1
(.7
)
(.2
)
2.6
55.8
184.3
197.0
7.5
46.1
51.2
$
48.3
$
138.2
$
145.8
$
0.83
$
2.26
$
2.24
$
0.82
$
2.25
$
2.21
*
2001 and 2000 include special charges of $13.0
and $20.3 for product rationalization, respectively.
Table of Contents
At December 31,
2001
2000
(Dollars in millions)
$
33.4
$
74.8
43.1
163.4
209.8
242.6
298.6
25.8
29.4
508.3
612.6
16.1
15.8
155.2
148.3
434.2
465.2
605.5
629.3
341.3
324.0
264.2
305.3
92.5
192.9
267.9
262.0
72.5
75.7
432.9
530.6
$
1,205.4
$
1,448.5
$
67.7
$
259.5
55.5
69.9
27.8
21.0
43.7
43.9
19.4
19.5
69.8
75.6
283.9
489.4
99.8
99.7
85.2
89.9
.1
.1
.5
.5
206.9
211.0
548.3
577.4
(19.3
)
(19.5
)
736.5
769.5
$
1,205.4
$
1,448.5
Table of Contents
Years ended December 31,
2001
2000
1999
(Dollars in millions)
$
48.3
$
138.2
$
145.8
(4.7
)
(36.2
)
(8.8
)
(4.7
)
(11.2
)
53.0
54.9
52.8
(16.6
)
2.2
8.5
(10.1
)
(24.0
)
(5.4
)
43.3
10.4
43.8
17.6
(15.6
)
58.5
(11.4
)
25.0
10.0
(3.1
)
2.7
(23.7
)
(10.6
)
(23.4
)
2.2
(3.0
)
(5.6
)
199.3
123.8
176.0
61.0
37.4
(13.7
)
(43.6
)
(38.3
)
13.0
23.3
(28.6
)
(48.6
)
(53.7
)
(104.9
)
(5.6
)
(37.4
)
162.2
19.4
27.9
4.6
8.6
(2.1
)
32.6
14.5
(66.2
)
(191.8
)
132.4
13.8
(77.4
)
(81.2
)
(82.2
)
(9.9
)
(142.8
)
(57.4
)
5.8
4.1
9.9
(273.3
)
(87.5
)
(115.9
)
(41.4
)
50.8
(6.1
)
74.8
24.0
30.1
$
33.4
$
74.8
$
24.0
Table of Contents
For the three years ended December 31, 2001
Class A
Class B
Additional
Cumulative
Unrealized
Common
Common
Paid-In
Retained
Translation
Gain (Loss)
Comprehensive
Stock
Stock
Capital
Earnings
Adjustments
on Investments
Income
(Dollars in millions, except per share amounts)
$
.1
$
.5
$
397.8
$
455.7
$
(13.6
)
$
.1
145.8
$
145.8
(.1
)
(.1
)
$
145.7
9.3
(57.4
)
(82.4
)
$
.1
$
.5
$
349.7
$
519.1
$
(13.6
)
$
138.2
$
138.2
(5.9
)
(5.9
)
$
132.3
4.1
(142.8
)
(79.9
)
$
.1
$
.5
$
211.0
$
577.4
$
(19.5
)
$
48.3
$
48.3
.2
.2
$
48.5
5.8
(9.9
)
(77.4
)
$
.1
$
.5
$
206.9
$
548.3
$
(19.3
)
$
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Employee
Asset
Exit
Benefits
Disposals
Costs
Other
Total
$
10.3
$
34.1
$
2.3
$
9.6
$
56.3
(13.0
)
(13.0
)
(21.1
)
(21.1
)
(2.4
)
(.5
)
(1.7
)
(4.6
)
$
7.9
$
$
1.8
$
7.9
$
17.6
Table of Contents
2001
2000
1999
$
14.1
$
57.6
$
47.3
(13.7
)
(43.6
)
(38.3
)
$
.4
$
14.0
$
9.0
Table of Contents
2001
2000
Gross
Gross
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Carrying
Amortized
Unrealized
Unrealized
Fair
Carrying
Cost
Gains
Losses
Value
Value
Cost
Gains
Losses
Value
Value
Available-For-Sale
Investments
$
14.8
$
.1
$
(.1
)
$
14.8
$
14.8
$
13.9
$
$
$
13.9
$
13.9
$
14.8
$
.1
$
(.1
)
$
14.8
$
14.8
$
13.9
$
$
$
13.9
$
13.9
Held-To-Maturity
Investments
$
$
$
$
$
$
70.4
$
.4
$
(.5
)
$
70.3
$
70.4
20.2
.4
20.6
20.2
26.6
.5
(.5
)
26.6
26.6
77.7
2.2
79.9
77.7
61.8
.6
62.4
61.8
$
77.7
$
2.2
$
$
79.9
$
77.7
$
179.0
$
1.9
$
(1.0
)
$
179.9
$
179.0
Table of Contents
U.S. Treasury
Notes &
Other Bonds
Amortized
Fair
Cost
Value
$
10.1
$
10.0
4.1
4.2
.6
.6
$
14.8
$
14.8
$
2.9
$
2.9
71.7
73.8
1.9
1.9
1.2
1.3
$
77.7
$
79.9
2001
2000
$
77.1
$
93.1
68.4
75.0
140.3
172.9
285.8
341.0
43.2
42.4
$
242.6
$
298.6
Table of Contents
2001
2000
1999
$
47.2
$
170.1
$
193.0
8.6
14.2
4.0
$
55.8
$
184.3
$
197.0
$
17.5
$
36.2
$
38.5
2.2
3.3
3.0
4.4
4.4
1.2
(16.6
)
2.2
8.5
$
7.5
$
46.1
$
51.2
2001
2000
1999
$
(9.4
)
$
(3.3
)
$
(1.5
)
(8.9
)
5.5
2.0
2.5
3.1
(1.6
)
(.8
)
(3.1
)
9.6
$
(16.6
)
$
2.2
$
8.5
2001
2000
$
3.3
$
2.9
(11.2
)
(11.3
)
9.8
2.0
15.1
17.1
$
17.0
$
10.7
$
(30.3
)
$
(27.8
)
(9.4
)
15.4
16.2
9.5
9.9
17.1
12.5
11.7
1.4
$
28.7
$
12.1
Table of Contents
2001
2000
1999
35.0
%
35.0
%
35.0
%
1.3
1.3
1.3
(1.3
)
(.4
)
(.3
)
(23.5
)
(11.8
)
(10.7
)
1.9
.9
.7
13.4
%
25.0
%
26.0
%
2001
2000
$
41.1
$
44.0
24.2
26.1
19.9
19.8
$
85.2
$
89.9
Table of Contents
Pension Benefits
Other Benefits
2001
2000
2001
2000
$
262.4
$
239.2
$
26.1
$
27.7
8.1
8.5
.2
.3
18.4
17.7
1.8
1.1
.1
(3.7
)
4.1
(.5
)
(.3
)
5.5
(13.7
)
(12.7
)
(3.4
)
(2.7
)
$
271.5
$
262.4
$
24.2
$
26.1
$
245.9
$
242.6
$
$
(8.2
)
5.4
6.3
7.1
4.3
(13.7
)
(12.7
)
$
231.1
$
245.9
$
$
$
(40.4
)
$
(
16.5
)
$
(24.2
)
$
(26.1
)
(1.9
)
(28.9
)
.8
1.0
$
(41.5
)
$
(44.4
)
$
(24.2
)
$
(26.1
)
7.25
%
7.50
%
7.00
%
7.50
%
9.00
%
9.00
%
N/A
N/A
4.25
%
4.75
%
N/A
N/A
Table of Contents
Pension Benefits
Other Benefits
2001
2000
1999
2001
2000
1999
$
8.1
$
8.5
$
9.8
$
.2
$
.3
$
.3
18.4
17.7
16.7
1.8
1.1
1.2
(21.4
)
(21.2
)
(18.0
)
.2
.3
.3
(1.4
)
(2.4
)
(1.0
)
(.5
)
(.3
)
(1.2
)
(5.9
)
$
3.9
$
2.9
$
1.9
$
1.5
$
1.1
$
.3
Table of Contents
2001
2000
Commercial
Commercial
Paper and
Paper and
Other
Long-Term
Other
Long-Term
Borrowings
Debt
Total
Borrowings
Debt
Total
$
67.7
$
99.8
$
167.5
$
259.5
$
99.7
$
359.2
$
340.3
$
359.6
$
192.6
$
99.7
$
292.3
$
197.2
$
99.7
$
296.9
1.96
%
6.70
%
4.78
%
6.55
%
6.71
%
6.59
%
4.01
%
6.70
%
4.93
%
6.46
%
6.71
%
6.54
%
Table of Contents
Common Stock
Preferred
Stock
Class A
Class B
10,781,483
54,813,287
26,000
391,845
(532,916
)
(1,227,502
)
10,274,567
53,977,630
247,688
(560,629
)
(5,104,865
)
9,713,938
49,120,453
347,227
(42,315
)
(420,165
)
9,671,623
49,047,515
Table of Contents
Common Stock
Preferred
Class A
Class B
Stock
8,233,862
959,012
2,706,153
58,719
959,012
10,940,015
58,719
Table of Contents
Number
Option Price Per
Weighted
of Shares
Share Range
Average
5,696,622
$16.86-$47.13
$
33.24
1,321,800
$27.66
$
27.66
(417,845
)
$16.86-$32.06
$
23.55
(259,688
)
$32.06-$47.13
$
41.79
6,340,889
$19.33-$47.13
$
33.23
1,602,300
$24.59
$
24.59
(247,688
)
$19.33-$26.99
$
20.05
(352,158
)
$19.33-$47.13
$
28.20
7,343,343
$23.39-$47.13
$
31.63
1,444,000
$27.81-$30.74
$
28.01
(347,227
)
$23.39-$47.13
$
23.92
(206,254
)
$23.39-$47.13
$
32.96
8,233,862
$24.59-$47.13
$
31.25
Weighted Avg.
Grant Date
Proforma
Dividend
Expected
Interest
Expected
Fair Value
Effect on
Yield
Volatility
Rate
Option Term
of 1 Option
Net Income*
4.5
%
23
%
5.1
%
7 Years
$
5.01
$
3.7 Million
4.5
%
22
%
5.2
%
7 Years
$
4.36
$
3.6 Million
4.0
%
22
%
6.6
%
7 Years
$
6.16
$
4.2 Million
*
These pro forma disclosures may not be
representative of the effects on reported net income for future
years since options vest over several years and options granted
prior to 1997 are not considered. The pro forma effect on
earnings per share would be immaterial.
Table of Contents
2001
2000
1999
$
48.3
$
138.2
$
145.8
58.7
61.2
65.1
.2
.1
.8
58.9
61.3
65.9
$
0.83
$
2.26
$
2.24
$
0.82
$
2.25
$
2.21
Table of Contents
Table of Contents
Approximate
No. of
Floor Area in
Segment
Location
Facilities
Square Feet
Connecticut
2
213,500
Puerto Rico
2
301,300
(1)
Tennessee
1
246,800
Virginia
2
471,400
Illinois
2
318,800
(6)
Indiana
1
314,800
Missouri
2
266,000
Minnesota
1
149,500
(2)
Georgia
1
57,100
Texas
1
11,600
(3)
Mexico
2
288,600
(5)
United Kingdom
3
105,500
(3)
Canada
1
42,900
Ohio
1
90,000
South Carolina
1
360,000
Alabama
2
288,000
Tennessee
1
74,000
Missouri
1
804,900
Puerto Rico
1
135,600
(3)
Mexico
1
208,000
(5)
Ohio
1
76,900
North Carolina
1
81,000
(3)
Wisconsin
1
94,200
(4)
New York
2
169,900
Pennsylvania
1
104,900
(3)
Switzerland
2
104,100
(3)
United Kingdom
1
40,000
(3)
Italy
1
27,000
(3)
(1)
138,700 square feet leased
(2)
41,200 square feet leased
(3)
Leased
(4)
20,000 square feet leased
(5)
Shared between Electrical and Power Segments
(6)
95,700 square feet leased
Table of Contents
Net sales comprise sales to unaffiliated
customers intersegment and inter-area sales are
immaterial.
Segment operating income consists of net sales
less operating expenses. Interest expense, and other income have
not been allocated to segments.
General corporate assets not allocated to
segments are principally cash and investments.
2001
2000
1999
$
837.7
$
928.6
$
965.4
335.0
372.9
399.5
139.5
122.6
86.9
$
1,312.2
$
1,424.1
$
1,451.8
$
75.2
$
122.3
$
134.6
(25.0
)
(19.2
)
4.7
36.2
24.4
39.7
42.6
(21.3
)
(3.7
)
8.8
5.2
10.0
8.4
(6.7
)
(.8
)
56.5
184.5
194.4
(15.5
)
(19.7
)
(15.9
)
14.8
19.5
18.5
$
55.8
$
184.3
$
197.0
$
531.2
$
577.9
$
589.7
319.2
369.1
370.4
143.8
159.1
111.0
211.2
342.4
336.1
$
1,205.4
$
1,448.5
$
1,407.2
Table of Contents
2001
2000
1999
$
18.1
$
35.5
$
34.1
8.3
9.8
17.6
1.4
1.5
1.4
.8
1.8
.6
$
28.6
$
48.6
$
53.7
$
31.2
$
32.3
$
30.3
16.3
17.8
19.0
4.8
4.2
2.8
.7
.6
.7
$
53.0
$
54.9
$
52.8
2001
2000
1999
$
1,161.3
$
1,279.1
$
1,334.0
150.9
145.0
117.8
$
1,312.2
$
1,424.1
$
1,451.8
$
89.7
$
154.3
$
171.5
(46.3
)
(22.6
)
4.7
36.2
8.8
15.1
17.7
14.1
(6.7
)
(1.1
)
$
56.5
$
184.5
$
194.4
$
1,075.1
$
1,313.0
$
1,285.8
130.3
135.5
121.4
$
1,205.4
$
1,448.5
$
1,407.2
Table of Contents
First
Second
Third
Fourth
2001
Quarter
Quarter
Quarter
Quarter
$
344.1
$
341.2
$
325.7
$
301.2
$
86.5
$
84.9
$
80.0
$
62.6
$
21.1
$
21.8
$
19.5
$
(14.1
)
$
.36
$
.37
$
.34
$
(.24
)
$
.36
$
.37
$
.33
$
(.24
)
$
360.6
$
356.6
$
360.8
$
346.1
$
103.1
$
74.4
$
100.3
$
91.3
$
35.1
$
41.8
$
33.0
$
28.3
$
.55
$
.67
$
.55
$
.49
$
.55
$
.67
$
.55
$
.48
Table of Contents
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Not applicable.
PART III
Information relative to Executive Officers appears on Page 50 of this report.
Item 10. | Directors and Executive Officers of the Registrant (1) |
Item 11. | Executive Compensation (1) |
Item 12. | Security Ownership of Certain Beneficial Owners and Management (1) |
Item 13. | Certain Relationships and Related Transactions (1) |
PART IV
Item 14. | Exhibits, Financial Statement Schedules, and Reports on Form 8-K |
1. Financial Statements and Schedules
Financial statements and schedules listed in the Index to Financial Statements and Schedules appearing on Page 52 are filed as part of this Annual Report on Form 10-K.
2. Exhibits
Number
Description
3a
Restated Certificate of Incorporation, as amended
and restated as of May 14, 1998. (1) Exhibit 3a
of the registrants report on Form 10-Q for the second
quarter (ended June 30), 1998, and filed on August 7,
1998, is incorporated by reference; (2) Exhibit 1 of
the registrants reports on Form 8-A and 8-K, both
dated and filed on December 17, 1998, is incorporated by
reference; and (3) Exhibit 3(a), being a Certificate of
Correction to the Restated Certificate of Incorporation, of the
registrants report on Form 10-Q for the third quarter
(ended September 30), 1999, and filed on November 12,
1999, is incorporated by reference.
3b
By-Laws, Hubbell Incorporated, as amended on
March 5, 2001. Exhibit 3b of the registrants
report on Form 10-K for the year 2000, filed March 27,
2001, is incorporated by reference.
3c
Rights Agreement, dated as of December 9,
1998, between Hubbell Incorporated and ChaseMellon Shareholder
Services, L.L.C.) as Rights Agent (incorporated by reference to
Exhibit 1 to the registrants Registration Statement
on Form 8-A and Form 8-K, both dated and filed on
December 17, 1998. Exhibit 3(c), being an Amendment to
Rights Agreement, of the registrants report on
Form 10-Q for the third quarter (ended September 30),
1999, and filed on November 12, 1999, is incorporated by
reference.
4a
Instruments with respect to the 1996 issue of
long-term debt have not been filed as exhibits to this Annual
Report on Form 10-K as the authorized principal amount on
such issue does not exceed 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis;
registrant agrees to furnish a copy of each such instruments to
the Commission upon request.
10a
Hubbell Incorporated Supplemental Executive
Retirement Plan, as amended and restated effective June 7,
2001. Exhibit 10a of the registrants report on
Form 10-Q for the second quarter (ended June 30), 2001,
filed August 9, 2001, is incorporated by reference.
10b(1)
Hubbell Incorporated 1973 Stock Option Plan for
Key Employees, as amended and restated effective May 7,
2001. Exhibit 10b(1) of the registrants report on
Form 10-Q for the second quarter (ended June 30), 2001,
filed August 9, 2001, is incorporated by reference.
47
Number
Description
10c
Description of the Hubbell Incorporated, Post
Retirement Death Benefit Plan for Participants in the
Supplemental Executive Retirement Plan, as amended effective
May 1, 1993. Exhibit 10c of the registrants
report on Form 10-Q for the second quarter (ended
June 30), 1993, filed on August 12, 1993, is
incorporated by reference.
10f
Hubbell Incorporated Deferred Compensation Plan
for Directors, as amended and restated effective
December 8, 1999. Exhibit 10f of the registrants
report on Form 10-K for the year 1999, filed March 27,
2000, is incorporated by reference.
10g
Hubbell Incorporated Incentive Compensation Plan,
as amended effective January 1, 1996. Exhibit B of the
registrants proxy statement, dated March 22, 1996 and
filed on March 27, 1996, is incorporated by reference.
10h
Hubbell Incorporated Key Man Supplemental Medical
Insurance, as amended and restated effective December 9,
1986. Exhibit 10h of the registrants report on
Form 10-K for the year 1987, filed on March 25, 1988,
is incorporated by reference.
10i
Hubbell Incorporated Retirement Plan for
Directors, as amended and restated effective December 8,
1999. Exhibit 10i of the registrants report on
Form 10-K for the year 1999, filed March 27, 2000, is
incorporated by reference.
10l
Employment Agreement, dated March 28, 1989
(effective January 1, 1989), between Hubbell Incorporated
and G. Jackson Ratcliffe, Chairman of the Board, President and
Chief Executive Officer. Exhibit 10l of the
registrants report on Form 10-K for the year 1988,
filed on March 29, 1989, is incorporated by reference.
10n
Employment Agreement, dated March 28, 1989
(effective January 1, 1989), between Hubbell Incorporated
and Harry B. Rowell, Jr., Executive Vice President.
Exhibit 10n of the registrants report on
Form 10-K for the year 1988, filed on March 29, 1989,
is incorporated by reference.
10o
Hubbell Incorporated Policy for Providing
Severance Payments to Key Managers, as amended and restated
effective September 9, 1993. Exhibit 10o of the
registrants report on Form 10-Q for the third quarter
(ended September 30), 1993, filed on November 10,
1993, is incorporated by reference.
10p
Hubbell Incorporated Senior Executive Incentive
Compensation Plan, effective January 1, 1996.
Exhibit C of the registrants proxy statement, dated
March 22, 1996 and filed on March 27, 1996, is
incorporated by reference.
10r
Continuity Agreement, dated as of
December 27, 1999, between Hubbell Incorporated and G.
Jackson Ratcliffe. Exhibit 10r of the registrants
report on Form 10-K for the year 1999, filed March 27,
2000, is incorporated by reference.
10s
Continuity Agreement, dated as of
December 27, 1999, between Hubbell Incorporated and Harry
B. Rowell, Jr. Exhibit 10s of the registrants report
on Form 10-K for the year 1999, filed March 27, 2000,
is incorporated by reference.
10t
Continuity Agreement, dated as of
December 27, 1999, between Hubbell Incorporated and Timothy
H. Powers. Exhibit 10t of the registrants report on
Form 10-K for the year 1999, filed March 27, 2000, is
incorporated by reference.
10u
Continuity Agreement, dated as of
December 27, 1999, between Hubbell Incorporated and Richard
W. Davies. Exhibit 10u of the registrants report on
Form 10-K for the year 1999, filed March 27, 2000, is
incorporated by reference.
10v
Continuity Agreement, dated as of
December 27, 1999, between Hubbell Incorporated and James
H. Biggart. Exhibit 10v of the registrants report on
Form 10-K for the year 1999, filed March 27, 2000, is
incorporated by reference.
10w
Continuity Agreement, dated as of
December 27, 1999, between Hubbell Incorporated and Glenn
M. Grunewald. Exhibit 10w of the registrants report
on Form 10-K for the year 2000, filed March 27, 2001,
is incorporated by reference.
10x*
Termination Agreement and General Release, dated
as of October 21, 2001, between Hubbell Incorporated and
Harry B. Rowell, Jr.
48
Number
Description
10y
The retirement arrangement with G. Jackson
Ratcliffe is incorporated by reference to the registrants
proxy statement, dated March 27, 2002 as set forth under
the heading Employment Agreements/ Retirement
Arrangements.
10z*
Hubbell Incorporated Incentive Compensation Plan,
adopted effective January 1, 2002.
21
Listing of significant subsidiaries.
27
Exhibit 27 Financial Data Schedule
(Electronic filings only)
| This exhibit constitutes a management contract, compensatory plan, or arrangement |
* | Filed hereunder |
3. Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended December 31, 2001.
49
Executive Officers of the Registrant
Name
Age(1)
Present Position
Business Experience
65
Chairman of the Board
President and Chief Executive Officer
January 1, 1988 to July 1, 2001; Chairman of the Board
since 1987; Executive Vice President Administration
1983-1987; Senior Vice President Finance and Law
1980-1983; Vice President, General Counsel and Secretary
1974-1980.
53
President and Chief Executive Officer
President and Chief Executive Officer since
July 1, 2001; Senior Vice President and Chief Financial
Officer September 21, 1998 to June 30, 2001;
previously Executive Vice President, Finance & Business
Development, Americas Region, Asea Brown Boveri.
44
Senior Vice President and Chief Financial Officer
Present position since February 18, 2002,
previously Senior Vice President and Chief Financial Officer,
Chesapeake Corporation.
55
Vice President, General Counsel and Secretary
Present position since January 1, 1996;
General Counsel since 1987; Secretary since 1982; Assistant
Secretary 1980-1982; Assistant General Counsel 1974-1987.
49
Vice President and Treasurer
Present position since January 1, 1996;
Treasurer since 1987; Assistant Treasurer 1986-1987; Director of
Taxes 1984-1986.
There is no family relationship between any of the above-named executive officers.
(1) | As of March 8, 2002 |
50
Pursuant to the requirements of Section 13 or 15(d) 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 |
By | /s/ T. H. POWERS |
|
|
T. H. Powers | |
President, Chief Executive Officer | |
and Director |
Date: 3/5/02
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Title | Date | |||||
|
|
|||||
By |
/s/ G. J. RATCLIFFE
G. J. Ratcliffe |
Chairman of the Board | 3/5/02 | |||
By |
/s/ T. H. POWERS
T. H. Powers |
President and Chief Executive Officer
(Chief Accounting Officer) |
3/5/02 | |||
By |
/s/ E. R. BROOKS
E. R. Brooks |
Director | 3/5/02 | |||
By |
/s/ G. W. EDWARDS, JR.
G. W. Edwards, Jr. |
Director | 3/5/02 | |||
By |
/s/ J. S. HOFFMAN
J. S. Hoffman |
Director | 3/5/02 | |||
By |
/s/ A. MCNALLY IV
A. McNally IV |
Director | 3/5/02 | |||
By |
/s/ D. J. MEYER
D. J. Meyer |
Director | 3/5/02 | |||
By |
/s/ J. A. URQUHART
J. A. Urquhart |
Director | 3/5/02 | |||
By |
/s/ M. WALLOP
M. Wallop |
Director | 3/5/02 |
51
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Form 10-K for | |||||
2001, Page: | |||||
|
|||||
Financial Statements
|
|||||
Report of Independent Accountants
|
21 | ||||
Consolidated Statement of Income for the three
years ended December 31, 2001
|
22 | ||||
Consolidated Balance Sheet at December 31,
2001 and 2000
|
23 | ||||
Consolidated Statement of Cash Flows for the
three years ended December 31, 2001
|
24 | ||||
Consolidated Statement of Changes in
Shareholders Equity for the three years ended
December 31, 2001
|
25 | ||||
Statement of Accounting Policies
|
26 | ||||
Notes to Consolidated Financial Statements
|
29 | ||||
Financial Statement Schedule
|
|||||
Report of Independent Accountants on Financial
Statement Schedule
|
53 | ||||
Valuation and Qualifying Accounts and Reserves
(Schedule VIII)
|
54 |
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
52
REPORT OF INDEPENDENT ACCOUNTANTS ON
To the Board of Directors and Shareholders of Hubbell Incorporated:
Our audits of the consolidated financial statements referred to in our report dated January 22, 2002, appearing on page 21 of this Form 10-K also included an audit of the Financial Statement Schedule listed in the index on page 52 of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP |
Stamford, Connecticut
53
Schedule VIII
HUBBELL INCORPORATED AND
SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
Reserves deducted in the balance sheet from the
assets to which they apply:
Additions
Acquisition
Balance at
Charged
Disposition
Balance
Beginning
to Costs
of
at End
of Period
and Expenses
Businesses
Deductions
of Period
(In millions)
$
5.7
$
.7
$
.6
$
(2.9
)
$
4.1
$
4.1
$
3.0
$
.6
$
(3.5
)
$
4.2
$
4.2
$
7.6
$
.1
$
(4.5
)
$
7.4
$
18.5
$
8.0
*
$
.7
$
(7.9
)
$
19.3
$
19.3
$
22.2
*
$
1.1
$
(20.0
)
$
22.6
$
22.6
$
16.1
*
$
.2
$
(12.9
)
$
26.0
* | Includes the cost of product line discontinuances of $13.0 million, $20.3 million and $3.3 million at December 31, 2001, 2000 and 1999, respectively. |
54
Exhibit 10.X
THIS IS AN IMPORTANT LEGAL DOCUMENT. BY SIGNING IT, YOU GIVE UP YOUR RIGHT TO SUE HUBBELL INCORPORATED. YOU SHOULD THOROUGHLY REVIEW AND UNDERSTAND THE EFFECT OF THIS RELEASE BEFORE ACTING ON IT. IF YOU DO NOT UNDERSTAND IT, DO NOT SIGN IT. THE COMPANY URGES YOU TO SEE A LAWYER BEFORE YOU SIGN THIS AGREEMENT.
TERMINATION AGREEMENT AND GENERAL RELEASE
You and the Company, for the promises and money set forth below, desire to enter into this Agreement and agree as follows:
1. | Definitions used in this Termination Agreement And General Release: |
(a) | The words You and Your refer to Harry B. Rowell, Jr. , a former employee of Hubbell Incorporated . It also means anyone acting on Your behalf, which includes Your heirs, Your executors, Your administrators, Your successors, and Your assigns. | ||
(b) | The Company is Hubbell Incorporated , the employer, with its offices located at 584 Derby Milford Road, Orange, Connecticut 06477-4024 . The Company means Hubbell Incorporated itself and all persons and entities acting on behalf of the Company. This includes its employees, officers, directors, and agents. It also includes organizations related to the Company such as the Companys affiliates, subsidiaries, divisions, successors, and assigns. | ||
(c) | The Agreement means this Termination Agreement and General Release. |
2. | You received this Agreement from the Company on December 18, 2001 . | |
3. | Your termination date from the Company is October 1, 2001 . | |
4. | You acknowledge that the Company has encouraged You to consult with an attorney before signing this Agreement. | |
5. | You have carefully thought about alternatives to signing this Agreement. | |
6. | In exchange for Your signing this Agreement and Your agreement to fulfill the promise made in it, the Company promises: |
(a) | You will be considered administratively retired with the consent of the Company for purposes of the Hubbell Incorporated 1973 Stock Option Plan for Key Employees. In effect, Your option grants of December 8, 1998 , December 7, 1999 and December 5, 2000 will continue to mature (vest) in the normal manner and each of Your outstanding option grants (other than Your option grants of December 18, 1991, December 15, |
-1-
1992 and December 14, 1993 , as described below) will be exercisable by You until the close of business on September 30, 2004 (the third anniversary date of Your retirement). Notwithstanding the foregoing, Your option grant of December 18, 1991 expires on the close of business on December 17, 2001 ; and Your option grant of December 15, 1992 expires on the close of business on December 14, 2002 ; and Your option grant of December 14, 1993 expires on the close of business December 13, 2003. | |||
(b) | You will be considered administratively retired with the consent of the Company for purposes of the Hubbell Incorporated Key Man Supplemental Medical Plan. In effect, You will be a Covered Retiree under this medical program and, effective October 1, 2001 , the lifetime maximum of $150,000 will be reestablished pursuant to Article II, Section 5 thereof. | ||
(c) | Richard W. Davies letter to You dated July 7, 2000 indicates the term of the Agreement dated as of December 13, 1988 between the Company and You (Employment Agreement) terminates on July 7, 2002. Therefore, Your termination date of October 1, 2001 results in nine (9) months remaining on Your Employment Agreement. At the Companys request, You delayed Your retirement from July 1, 2001 to October 1, 2001; therefore, the Company agrees to treat the remaining period of the Employment Agreement as if there were twelve (12) months remaining under the Employment Agreement, using Your full 2000 base salary of $416,000 and full bonus average of $245,000 (bonus average calculated using 1998 bonus $370,000, 1999 bonus $185,000, 2000 bonus $180,000) for purposes of calculating the present value of Your lump sum payment under the Employment Agreement. This lump sum is $654,376, less required deductions, and will be paid to You by the Company within fourteen (14) days after both parties sign this Agreement. You also authorize the Company to deduct from this lump sum payment the amount of $46,259.77 representing the Medicare tax portion of FICA related to Your SERP benefit. | ||
(d) | The Company agrees to pay for the cost of moving Your household goods from Your home at 535 Stonehouse Road, Trumbull, Connecticut, to Your residence at Reynolds Plantation, 1601 Bennett Springs Drive, Greensboro, GA 30642, in the amount of $8,142.27. This amount will be deducted from the lump sum payment specified in Paragraph 6(c). | ||
(e) | As of Your termination date, October 1, 2001, You will be age 60. The Company agrees to waive the early retirement reduction factors under Section 5.2 of the Hubbell Incorporated Supplement Executive Retirement Plan (SERP), therefore, Your SERP benefit will be unreduced. |
-2-
(f) | The Company agrees to give to You Your current Company vehicle, a 2001 Cadillac STS. However, You will be responsible for any and all costs associated with the transfer and/or registration of the vehicle including, but not limited to, all registration, tax and transfer fees, as required. | ||
(g) | The Company agrees to provide You with the miscellaneous benefits set forth in Section 4.4 of Your Employment Agreement, including Club Dues of $7,228, Tax Preparation Service of $3,000 and the value of Office Rental/Secretary of $140,000, which will be paid to You in a lump sum totaling $150,228. This lump sum will be paid to You by the Company within fourteen (14) days after both parties sign this Agreement. | ||
(h) | The Company agrees to provide You with the benefits set forth in Section 4.3 of Your Employment Agreement. | ||
(i) | For a period of six (6) years from and after December 31, 2001, the Company will attempt to maintain coverage for You as an insured on any insurance policy protecting directors and/or officers of the Company, commonly known as Directors and Officers Liability Policy(ies), unless, in the sole opinion of the Company, the cost of doing so would be impractical. In the event the Company does not maintain such coverage for You, the Company agrees to indemnify You during such period for any claims brought against You in Your capacity as a former director and/or officer of the Company under its By-Laws and Title 33, Chapter 601, Part VIII(E) of the Connecticut General Statutes to the same extent, and subject to the same limitations, as it indemnifies its then-existing directors and/or officers. | ||
(j) | You will receive an additional lump sum payment of $10,000 within fourteen (14) days after both parties sign this Agreement. |
7A. General Release of Claim . For and in consideration of the payments and promises set forth herein, You knowingly and voluntarily release and forever discharge the Company, of and from any and all claims, known and unknown, which against the Company, You, Your heirs, executors, administrators, successors, and assigns (referred to collectively throughout this Agreement as You) have or may have as of the date of execution of this Agreement, including, but not limited to, any alleged violation of:
| The Age Discrimination in Employment Act; | ||
| The Family and Medical Leave Act; | ||
| The Connecticut Family and Medical Leave Act; | ||
| The non-discrimination and/or anti-retaliation provisions of the Connecticut Workers Compensation Law (C.G.S § 31-290a); | ||
| Title VII of the Civil Rights Act of 1964, as amended; |
-3-
| The Civil Rights Act of 1991; | ||
| Sections 1981 through 1988 of Title 42 of the United States Code, as amended; | ||
| The Employee Retirement Income Security Act of 1974, as amended; | ||
| The Immigration Reform and Control Act, as amended; | ||
| The Americans with Disabilities Act of 1990, as amended; | ||
| The Workers Adjustment and Retraining Notification Act, as amended; | ||
| The Occupational Safety and Health Act, as amended; | ||
| The Connecticut Civil Rights Act, as amended; | ||
| The Connecticut Minimum Wage Law, as amended; | ||
| Equal Pay Law for Connecticut, as amended; | ||
| Any other federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance; | ||
| Any public policy, contract, tort, or common law; or | ||
| Any allegation for costs, fees, or other expenses including attorneys fees incurred in these matters. |
Provided, however, that the release in this Paragraph 7A does not apply to (i) Your rights under the 1973 Stock Option Plan for Key Employees, and Your option grants pursuant to that plan; (ii) Your rights under the Hubbell Incorporated Retirement Plan for Salaried Employees; (iii) Your rights under the Hubbell Incorporated Supplemental Executive Retirement Plan, restated and amended effective June 7, 2001, as modified and supplemented by the Agreement; (iv) Your rights under the Hubbell Incorporated Key Man Supplemental Medical Plan, amended and restated effective December 9, 1986; (v) Your rights under the Hubbell Incorporated (Alternate Choice Out of Area) Plan AB-2001 health care plan, or any successor plan; and (vi) any claims or matters arising on or after the Effective Date of this Agreement. You agree that this Agreement provides You with all the benefits that You are entitled to receive under the Employment Agreement and any claims that You may have under the Employment Agreement are covered by this Agreement.
7B. No Claims Exist . You confirm that no claim, charge, complaint, or action by You exists in any forum or form against the Company. If any such claim, charge, complaint or action is filed, You will withdraw it with prejudice and You shall not be entitled to recover any relief or recovery therefrom, including costs and attorneys fees.
7C. You acknowledge that, while employed by the Company, You acquired confidential information about the business, affairs and financial condition of the Company,
-4-
its affiliates and customers, the continued confidentiality of which is of material importance to the Company and such affiliates. You will not disclose or reveal to any person, firm or corporation or use for his own benefit trade secrets or other confidential information concerning the Company or its affiliates, including, without limitation, financial information, business plans, budgets, corporate policies or sales programs, without the prior written consent of the Corporate Secretary unless such information has been made generally available to the public. You confirm that You are not aware of any adverse information relating to the Company or its affiliates which has not been previously disclosed to the Companys Chief Executive Officer.
7D. In consideration of the items referenced in Paragraph 6, You agree that:
(a) | You will comply with Articles 12.4 and 12.5 of the Companys SERP document; | ||
(b) | You will not at any time disclose or use (other than for the benefit of the Company or its affiliates) any of the confidential or proprietary information referred to in Paragraph 7c above, either directly or indirectly; | ||
(c) | By signing this Agreement, You confirm Your resignation, as of October 1, 2001 , as an officer of the Company and as an officer and/or director of any subsidiary or affiliate of the Company, or joint venture or partnership involving the Company, and from all industry associations or similar bodies and any committees or advisory bodies thereof, on which You serve at the request of or on behalf of the Company; | ||
(d) | If You violate the provisions of Articles 12.4 or 12.5 of the SERP document or violate the provisions of clauses b and c of this Paragraph 7D, any and all payments and benefits listed in Paragraph 6 shall be immediately discontinued and terminated as of the date of the violation; | ||
(e) | If You initiate a claim covered by the General Release of Claim in this Agreement or challenge the enforceability of this Agreement, all of the above items listed in Paragraph 6 shall be immediately discontinued and terminated and the Company shall have the right to recover from You all sums which it has previously paid on account of the items listed in Paragraph 6 and all costs including attorneys fees associated with the recovery of such sums, unless prohibited by the Older Workers Benefit Protection Act; and | ||
(f) | Except for certain documents pertaining to Project Clover which You will immediately return to the Company at its request, You will not remove from the Company any documents, records or other materials (or copies thereof) pertaining to the Company and any such materials (and copies thereof) which may have been removed, will be returned immediately to the Company. |
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8. You agree not to disclose the existence or terms of this Agreement. This prohibition includes, but is not limited to, disclosure to members of the media (newspapers, television, radio, etc.), present and former employees of the Company, and other members of the public. It does not include any person You choose to seek advice from or consult with regarding Your consideration of and decision to sign or cancel this Agreement.
9. You will not apply in the future for any employment with the Company. If You do, the Company will have good cause to refuse to employ You based on this Agreement.
10. You pledge that You have not filed any charge, complaint, or action before any federal, state, or local administrative agency or court against the Company.
11. You agree and understand that nothing contained in this Agreement is an admission by the Company of any wrongdoing, liability, violation of any duty, or unlawful activity.
12. There can be no changes made to this Agreement except upon the signed written consent of both parties.
13. This Agreement is made in the State of Connecticut. This Agreement is to be interpreted under the laws of the State of Connecticut and the parties agree that any future disputes between them, including any dispute regarding this Agreement, shall be decided by state or federal courts located in the State of Connecticut.
14. If any federal or state law conflicts with any provisions(s) of this Agreement, the provision(s) involved will remain in effect only to the extent allowed by law. The rest of this Agreement will remain in full force and effect. Nothing in this Agreement shall interfere with Your rights under the Older Workers Benefit Protection Act.
15. The Company reserves the right to withhold from any payments made pursuant to this Agreement any amounts which it reasonably determines are required to be withheld under applicable federal, state and local laws.
16. You acknowledge that You would not have received certain of the amounts and benefits (specifically, (i) the waiver of the early reduction factors noted in Paragraph 6.(e) hereof; (ii) being considered administratively retired with the consent of the Company as noted in Paragraphs 6.(a) and (b) hereof; (iii) the additional lump sum noted in Paragraph 6.(j) hereof; (iv) the difference between use of Your Company vehicle for one year and the transfer of the vehicle to You at no cost as noted in Paragraph 6.(f) hereof; and (v) the insurance commitment noted in Paragraph 6.(i) hereof) under this Agreement unless You accepted this Agreement and promised to fulfill its terms. If You violate any of Your promises in this Agreement, You agree to return to the Company the additional consideration You have received under this Agreement noted in items (i), (iii) and (iv) in the parenthetical of the immediately preceding sentence and the Company is relieved of its insurance commitment in Paragraph 6(i). This does not prevent the Company from seeking additional damages from You for any violation of this Agreement by You.
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17. You understand that in executing this Agreement You are, inter alia, giving up rights and claims under the Age Discrimination in Employment Act of 1967, as amended. You were given at least twenty-one (21) days to consider this Agreement. During this period, You may seek advice from any person, including a lawyer. For this Agreement to be effective, You must sign it in the presence of a witness and return this Agreement to George D. Zurman at the Company within twenty-one (21) days, or by January 8, 2002 equal to 21 days from receiving Agreement.
18. You have seven (7) days after You give the signed Agreement to the Company to cancel the Agreement. This Agreement will not become effective and enforceable until this seven (7) day period expires. If You choose to cancel this Agreement, the Company must actually receive Your cancellation before the expiration of this seven (7) day period. Upon request by the Company, You agree to sign a statement, as a condition to receiving any of the monies under this Agreement, that You have not cancelled or attempted to cancel this Agreement.
You and the Company have read and fully considered this Agreement, which consists of eighteen (18) numbered paragraphs and seven (7) pages.
Having decided to sign this Agreement, to carry out the promises in it, and to receive the benefit of these promises, You and the Company now voluntarily and knowingly sign this Agreement.
By: | ||||
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Date | Harry B. Rowell, Jr. | |||
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Witness | Date | |
Hubbell Incorporated
(The Company) |
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By: | ||||
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Date |
George D. Zurman
Vice President, Human Resources |
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John F. Mulvihill, Witness | Date |
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Exhibit 10.Z
HUBBELL INCORPORATED
INCENTIVE COMPENSATION PLAN
Adopted, Effective January 1, 2002
HUBBELL INCORPORATED
INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
1.1 The purpose of this Incentive Compensation Plan (the Plan) is to provide incentive compensation to executive and administrative employees of Hubbell Incorporated (the Company) and its subsidiaries who have contributed effectively to the success of the Company by their ability, industry, loyalty or exceptional services and to encourage continuance of their services with the Company by a form of recognition of their efforts in contributing significantly to the success and growth of the Company in the preceding fiscal year.
1.2 The persons eligible to participate in the Plan shall be those employees who are primarily responsible in an administrative or executive capacity for the direction of the functions and operations of the divisions and departments within the Company or a subsidiary of the Company.
ARTICLE II
ADMINISTRATION
2.1 The Board of Directors shall appoint in each year from among their number at least three directors, none of whom shall be an employee of the Company, to be known as the Compensation Committee (the Committee), to serve at the pleasure of the Board. Vacancies in the Committee shall be filled by the Board.
2.2 The Committee shall administer the Plan under such rules, regulations and criteria as it shall prescribe. It shall designate a member thereof as secretary to keep minutes and records of its proceedings. It shall report its doings to the Board of Directors. Its decisions in the administration and interpretation of the Plan shall be final as to all interested parties and shall be and constitute acts of the Company.
2.3 The Committee shall from time to time designate the employees eligible for participation in the Plan. The persons so designated by the Committee are hereinafter called participants. In making such designations the Committee shall give consideration to the recommendations and criticisms of the executive officers of the Company.
2.4 The Committee shall, in writing, determine the performance goal or performance goals applicable to each participant for the plan year based on one or more quantitative and/or qualitative performance measures. The Committee will also determine the payout schedule detailing the total amount which may be available to each participant as an
annual award based upon the relative level of attainment of the performance goal or performance goals. Annual awards shall be made from the general funds of the Company. No special or separate fund (including the incentive compensation fund described below) shall be established or other segregation of assets made to assure payment. No participant or other person shall have under any circumstances any interest in any particular property assets of the Company.
ARTICLE III
METHOD OF MAKING
INCENTIVE PAYMENTS; INCENTIVE COMPENSATION FUND
3.1 Incentive payments awarded under the Plan shall be paid in cash. The amount of any incentive payment to be made to a participant in cash shall be paid as soon as practicable (but not later than six months) after the close of the fiscal year for which such incentive payment is awarded.
3.2 The Company shall determine for each fiscal year the amount which is fifteen percent of the amount by which the consolidated net earnings of the Company and its subsidiaries exceeds ten percent of their invested capital and long-term debt at the beginning of each such fiscal year and shall designate such amount as the incentive compensation fund.
ARTICLE IV
GENERAL PROVISIONS
4.1 Neither the establishment of the Plan nor the selection of any employee as a participant shall give any such participant any right to be retained in the employ of the Company or an subsidiary of the Company, or any right whatsoever under the Plan other than to receive incentive payments awarded by the Committee.
4.2 The place of administration of the Plan shall be conclusively deemed to be within the State of Connecticut, and the validity, construction, interpretation and effect of the Plan, its rules and regulations and the rights of any and all participants having or claiming to have an interest therein or thereunder shall be governed by and determined conclusively and solely in accordance with the laws of the State of Connecticut, without regard to any conflicts of laws provisions.
4.3 No member of the Board of Directors or of the Committee shall be liable to any person in respect of the Plan for any act or omission of such member or of any other member or of any officer, agent or employee of the Company.
ARTICLE V
AMENDMENT, SUSPENSION
OR TERMINATION
5.1 The board of Directors of the Company may from time to time amend, suspend or terminate, in whole or in part, any or all of the provisions of the Plan, provided that no such action shall affect the rights of any participant or the operation of the Plan with respect to any payment to which a participant may have become entitled, deferred or otherwise, prior to the effective date of such action.
ARTICLE VI
EFFECTIVE DATE OF THE PLAN
The Plan shall become effective on January 1, 2002.
Exhibit 21
HUBBELL INCORPORATED AND
SUBSIDIARIES
LISTING OF SIGNIFICANT SUBSIDIARIES
State or Other
Percentage
Jurisdiction of
Owned By
Incorporation
Registrant
Delaware
100
%
Switzerland
100
%
England
100
%
Canada
100
%
Delaware
100
%
Delaware
100
%
Delaware
100
%
Delaware
100
%
Delaware
100
%
Connecticut
100
%
Virginia
100
%
Delaware
100
%
Delaware
100
%
New York
100
%
Delaware
100
%
Delaware
100
%
Canada
100
%
Texas
100
%
England
100
%
55