Company Quick10K Filing
Hubbell
Price137.88 EPS7
Shares55 P/E19
MCap7,542 P/FCF20
Net Debt1,414 EBIT479
TEV8,956 TEV/EBIT19
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-02-14
10-Q 2019-09-30 Filed 2019-10-30
10-Q 2019-06-30 Filed 2019-07-31
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-02-15
10-Q 2018-09-30 Filed 2018-10-24
10-Q 2018-06-30 Filed 2018-07-25
10-Q 2018-03-31 Filed 2018-04-25
10-K 2017-12-31 Filed 2018-02-15
10-Q 2017-09-30 Filed 2017-10-25
10-Q 2017-06-30 Filed 2017-07-26
10-Q 2017-03-31 Filed 2017-04-26
10-K 2016-12-31 Filed 2017-02-16
10-Q 2016-09-30 Filed 2016-10-26
10-Q 2016-06-30 Filed 2016-07-27
10-Q 2016-03-31 Filed 2016-04-27
10-K 2015-12-31 Filed 2016-02-18
10-Q 2015-09-30 Filed 2015-10-23
10-Q 2015-06-30 Filed 2015-07-24
10-Q 2015-03-31 Filed 2015-04-24
10-K 2014-12-31 Filed 2015-02-19
10-Q 2014-09-30 Filed 2014-10-24
10-Q 2014-06-30 Filed 2014-07-22
10-Q 2014-03-31 Filed 2014-04-22
10-K 2013-12-31 Filed 2014-02-18
10-Q 2013-09-30 Filed 2013-10-18
10-Q 2013-06-30 Filed 2013-07-19
10-Q 2013-03-31 Filed 2013-04-19
10-K 2012-12-31 Filed 2013-02-13
10-Q 2012-09-30 Filed 2012-10-19
10-Q 2012-06-30 Filed 2012-07-20
10-Q 2012-03-31 Filed 2012-04-20
10-K 2011-12-31 Filed 2012-02-15
10-Q 2011-09-30 Filed 2011-10-21
10-Q 2011-06-30 Filed 2011-07-22
10-Q 2011-03-31 Filed 2011-04-22
10-K 2010-12-31 Filed 2011-02-16
10-Q 2010-09-30 Filed 2010-10-22
10-Q 2010-06-30 Filed 2010-07-23
10-Q 2010-03-31 Filed 2010-04-23
10-K 2009-12-31 Filed 2010-02-19
8-K 2020-05-05 Shareholder Vote
8-K 2020-04-30 Earnings, Exhibits
8-K 2020-04-15 Earnings, Exhibits
8-K 2020-04-09 Other Events, Exhibits
8-K 2020-03-12 Officers
8-K 2020-02-04 Earnings, Exhibits
8-K 2019-10-29 Earnings, Exhibits
8-K 2019-07-30 Earnings, Exhibits
8-K 2019-06-05 Officers
8-K 2019-05-07 Shareholder Vote
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-03-11 Officers
8-K 2019-02-05 Earnings, Exhibits
8-K 2018-12-10 Officers
8-K 2018-10-23 Earnings, Exhibits
8-K 2018-07-24 Earnings, Exhibits
8-K 2018-05-01 Shareholder Vote
8-K 2018-04-24 Earnings, Exhibits
8-K 2018-04-12 Other Events
8-K 2018-02-02 Leave Agreement, M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-01-31 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-31 Other Events, Exhibits
8-K 2018-01-31 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-30 Earnings, Exhibits
8-K 2018-01-10 Enter Agreement, Exhibits

HUBB 10Q Quarterly Report

Part I Financial Information
Item 1 Financial Statements
Note 1 Basis of Presentation
Note 2 Revenue
Note 3 Segment Information
Note 4 Inventories, Net
Note 5 Goodwill and Other Intangible Assets, Net
Note 6 Other Accrued Liabilities
Note 7 Other Non - Current Liabilities
Note 8 Total Equity
Note 9 Accumulated Other Comprehensive Loss
Note 10 Earnings per Share
Note 11 Pension and Other Benefits
Note 12 Guarantees
Note 13 Fair Value Measurement
Note 14 Commitments and Contingencies
Note 15 Restructuring Costs and Other
Note 16 Long - Term Debt and Financing Arrangements
Note 17 Stock - Based Compensation
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Item 4 Controls and Procedures
Part II Other Information
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 6 Exhibits
EX-31.1 hubb-20200331xex311.htm
EX-31.2 hubb-20200331xex312.htm
EX-32.1 hubb-20200331xex321.htm
EX-32.2 hubb-20200331xex322.htm

Hubbell Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
1.31.00.80.50.30.02012201420172020
Rev, G Profit, Net Income
1.00.60.1-0.3-0.8-1.22012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 1-2958

lhubx1x1a03a04.jpg  
HUBBELL INCORPORATED
(Exact name of registrant as specified in its charter)
 
Connecticut
06-0397030
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
40 Waterview Drive

Shelton,
CT
06484
(Address of principal executive offices)
(Zip Code)
(475)
882-4000
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if changed since last report.)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock - par value $0.01 per share
HUBB
New York Stock Exchange
Indicate by check mark
 
 
 
 
 
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer 
Non-accelerated filer 
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
 The number of shares outstanding of Hubbell common stock as of April 29, 2020 was 54,201,073.

HUBBELL INCORPORATED-Form 10-Q    1


Index



HUBBELL INCORPORATED-Form 10-Q    2


PART I
FINANCIAL INFORMATION

ITEM 1
Financial Statements

Condensed Consolidated Statements of Income (unaudited)

 
Three Months Ended March 31,
(in millions, except per share amounts)
2020

2019

Net sales
$
1,090.3

$
1,087.3

Cost of goods sold
776.8

780.0

Gross profit
313.5

307.3

Selling & administrative expenses
194.7

186.4

Operating income
118.8

120.9

Interest expense, net
(15.1
)
(17.5
)
Other expense, net
(3.8
)
(5.4
)
Total other expense
(18.9
)
(22.9
)
Income before income taxes
99.9

98.0

Provision for income taxes
24.2

24.2

Net income
75.7

73.8

Less: Net income attributable to noncontrolling interest
0.7

1.5

Net income attributable to Hubbell Incorporated
$
75.0

$
72.3

Earnings per share
 

 

Basic
$
1.38

$
1.32

Diluted
$
1.37

$
1.32

Cash dividends per common share
$
0.91

$
0.84

See notes to unaudited Condensed Consolidated Financial Statements.

HUBBELL INCORPORATED-Form 10-Q    3


Condensed Consolidated Statements of Comprehensive Income (unaudited)
 
 
Three Months Ended March 31,
(in millions)
2020

2019

Net income
$
75.7

$
73.8

Other comprehensive (loss) income:
 

 

Foreign currency translation adjustments
(25.6
)
7.1

Defined benefit pension and post-retirement plans, net of taxes of ($0.6) and ($0.5)
1.7

1.5

Available-for-sale investments, net of taxes of $0.0 and ($0.1)
(0.1
)
0.3

Unrealized gain (loss) on cash flow hedges, net of taxes of ($0.6) and $0.2
1.6

(0.6
)
Other comprehensive (loss) income
(22.4
)
8.3

Total comprehensive income
53.3

82.1

Less: Comprehensive income attributable to noncontrolling interest
0.7

1.5

Comprehensive income attributable to Hubbell Incorporated
$
52.6

$
80.6

See notes to unaudited Condensed Consolidated Financial Statements.




HUBBELL INCORPORATED-Form 10-Q    4


Condensed Consolidated Balance Sheets (unaudited)
 
(in millions)
March 31, 2020

December 31, 2019

ASSETS
 

 

Current Assets
 

 

Cash and cash equivalents
$
300.0

$
182.0

Short-term investments
13.5

14.2

Account receivable (net of allowances of $13.6 and $7.7)
707.7

683.0

Inventories, net
595.7

633.0

   Other current assets
58.1

62.0

Total Current Assets
1,675.0

1,574.2

Property, Plant, and Equipment, net
495.5

505.2

Other Assets
 

 

Investments
53.2

55.7

Goodwill
1,807.1

1,811.8

Other intangible assets, net
758.8

781.5

Other long-term assets
169.5

174.6

TOTAL ASSETS
$
4,959.1

$
4,903.0

LIABILITIES AND EQUITY
 

 

Current Liabilities
 

 

Short-term debt and current portion of long-term debt
$
106.7

$
65.4

Accounts payable
358.4

347.7

Accrued salaries, wages and employee benefits
65.9

101.5

Accrued insurance
78.0

68.1

Other accrued liabilities
232.3

262.2

Total Current Liabilities
841.3

844.9

Long-Term Debt
1,597.3

1,506.0

Other Non-Current Liabilities
592.0

591.6

TOTAL LIABILITIES
3,030.6

2,942.5

Hubbell Incorporated Shareholders’ Equity
1,914.9

1,947.1

Noncontrolling interest
13.6

13.4

Total Equity
1,928.5

1,960.5

TOTAL LIABILITIES AND EQUITY
$
4,959.1

$
4,903.0

See notes to unaudited Condensed Consolidated Financial Statements.

HUBBELL INCORPORATED-Form 10-Q    5


Condensed Consolidated Statements of Cash Flows (unaudited)
    
 
Three Months Ended March 31,
(in millions)
2020
2019
Cash Flows from Operating Activities
 

 

Net income
$
75.7

$
73.8

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
38.9

36.6

Deferred income taxes
1.6

3.0

Stock-based compensation
11.6

4.1

    Provision for bad debt expense
5.3

0.8

Changes in assets and liabilities, excluding effects of acquisitions:
 

 
(Increase) decrease in accounts receivable, net
(36.8
)
9.3

Decrease (increase) in inventories, net
32.7

(10.7
)
Increase in accounts payable
15.2

12.6

Decrease in current liabilities
(48.8
)
(61.1
)
Changes in other assets and liabilities, net
7.5

9.2

Contribution to qualified defined benefit pension plans
(0.1
)
(0.1
)
Other, net
5.6

0.6

Net cash provided by operating activities
108.4

78.1

Cash Flows from Investing Activities
 

 

Capital expenditures
(17.8
)
(23.3
)
Acquisition of businesses, net of cash acquired
(2.1
)

Purchases of available-for-sale investments
(4.7
)
(1.0
)
Proceeds from available-for-sale investments
6.5

2.7

Other, net
2.5

1.5

Net cash used in investing activities
(15.6
)
(20.1
)
Cash Flows from Financing Activities
 
 

Long-term debt borrowings
100.0


Long-term debt repayments
(6.3
)
(6.3
)
Short-term debt borrowings, net
38.1

21.2

Payment of dividends to shareholders
(49.5
)
(45.8
)
Payment of dividends to noncontrolling interest
(0.6
)
(1.0
)
Repurchase of common stock
(41.3
)
(10.0
)
Other, net
(4.7
)
(1.8
)
Net cash (used) provided by financing activities
35.7

(43.7
)
Effect of exchange rate changes on cash and cash equivalents
(10.5
)
2.0

Increase in cash and cash equivalents
118.0

16.3

Cash and cash equivalents
 
 
Beginning of period
182.0

189.0

End of period
$
300.0

$
205.3

See notes to unaudited Condensed Consolidated Financial Statements.

HUBBELL INCORPORATED-Form 10-Q    6


Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 1 Basis of Presentation
 
 
The accompanying unaudited Condensed Consolidated Financial Statements of Hubbell Incorporated (“Hubbell”, the “Company”, “registrant”, “we”, “our” or “us”, which references include its divisions and subsidiaries) have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by United States of America (“U.S.”) GAAP for audited financial statements. In the opinion of management, all adjustments consisting only of normal recurring adjustments considered necessary for a fair statement of the results of the periods presented have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020. In the first quarter of 2020 our former Power segment was re-named Hubbell Utility Solutions ("Utility Solutions") to reflect the depth and breadth of our industry-leading offering for electric, water, gas and telecom utilities ranging from a wide variety of critical infrastructure components to full-scale smart grid solutions.
 
The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Hubbell Incorporated Annual Report on Form 10-K for the year ended December 31, 2019.

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic has significantly impacted global economic conditions and in the U.S., accelerated during the first half of March as federal, state and local governments reacted to the public health crisis with mitigation measures, creating significant uncertainties in the U.S. and global economies. The extent to which the coronavirus pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict and which may cause the actual results to differ from the estimates and assumptions we are required to make in the preparation of financial statements according to GAAP.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued an Accounting Standards Update (ASU 2016-13), "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASC 326), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The Company adopted the requirements of the new standard in the first quarter of 2020. The adoption of this guidance and recognition of a loss allowance at an amount equal to lifetime expected credit losses for trade receivables resulted in a $1.0 million cumulative-effect adjustment to retained earnings, net of tax.

In August 2018, the FASB issued an Accounting Standards Update (ASU 2018-15) "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract", which clarifies the accounting for implementation costs in cloud computing arrangements. The Company adopted the standard prospectively during the first quarter of 2020 with no material impact to the consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued an Accounting Standards Update (ASU 2019-12) "Simplifying the Accounting for Income Taxes", which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently assessing the impact of adopting this standard on its financial statements.

In March 2020, FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are effective for all entities beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently assessing the impact of adopting this standard on its financial statements.

HUBBELL INCORPORATED-Form 10-Q    7


NOTE 2 Revenue
 
 
The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs, for products, upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company’s revenue associated with products is recognized at a point in time when the product is shipped to the customer, with a relatively small amount of transactions in the Utility Solutions segment recognized upon delivery of the product at the destination. Revenue from service contracts and post-shipment performance obligations are approximately three percent of total annual consolidated net revenue and those service contracts and post-shipment obligations are primarily within the Utility Solutions segment. Revenue from service contracts and post-shipment performance obligations is recognized when or as those obligations are satisfied. The Company primarily offers assurance-type standard warranties that do not represent separate performance obligations and on occasion will separately offer and price extended warranties that are separate performance obligations for which the associated revenue is recognized over-time based on the extended warranty period. The Company records amounts billed to customers for reimbursement of shipping and handling costs within revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of goods sold. Sales taxes and other usage-based taxes are excluded from revenue.

Within the Electrical segment, certain businesses require a portion of the transaction price to be paid in advance of transfer of control. Advance payments are not considered a significant financing component as they are received less than one year before the related performance obligations are satisfied. In addition, in the Utility Solutions segment, certain businesses offer annual maintenance service contracts that require payment at the beginning of the contract period. These payments are treated as a contract liability and are classified in Other accrued liabilities in the Condensed Consolidated Balance Sheets. Once control transfers to the customer and the Company meets the revenue recognition criteria, the deferred revenue is recognized in the Condensed Consolidated Statements of Income. The deferred revenue relating to the annual maintenance service contracts is recognized in the Condensed Consolidated Statements of Income on a straight-line basis over the expected term of the contract.


The following table presents disaggregated revenue by business group:
 
Three Months Ended March 31,
in millions
2020
2019
Net sales
 
 
   Commercial and Industrial
$
213.0

$
221.3

   Construction and Energy
191.4

188.4

   Lighting
201.7

220.5

Total Electrical
$
606.1

$
630.2

   Power Systems
326.3

291.9

   Aclara
157.9

165.2

Total Utility Solutions
$
484.2

$
457.1

TOTAL
$
1,090.3

$
1,087.3


The following table presents disaggregated revenue by geographic location (on a geographic basis, the Company defines "international" as operations based outside of the United States and its possessions):

 
Three Months Ended March 31,
in millions
2020
2019
Net sales
 
 
   United States
$
549.7

$
565.7

   International
56.4

64.5

Total Electrical
$
606.1

$
630.2

   United States
455.5

431.2

   International
28.7

25.9

Total Utility Solutions
$
484.2

$
457.1

TOTAL
$
1,090.3

$
1,087.3



HUBBELL INCORPORATED-Form 10-Q    8



Contract Balances

Our contract liabilities consist of advance payments for products as well as deferred revenue on service obligations and extended warranties. The current portion of deferred revenue is included in Other accrued liabilities and the non-current portion of deferred revenue is included in Other non-current liabilities in the Condensed Consolidated Balance Sheets.

Contract liabilities were $34.7 million as of March 31, 2020 compared to $31.0 million as of December 31, 2019. The $3.7 million increase in our contract liabilities balance was primarily due to a $11.0 million net increase in current year deferrals primarily due to timing of advance payments on certain orders, partially offset by the recognition of $7.3 million in revenue related to amounts that were recorded in contract liabilities at January 1, 2020. The Company has an immaterial amount of contract assets relating to performance obligations satisfied prior to payment that is recorded in Other long-term assets in the Condensed Consolidated Balance Sheets. Impairment losses recognized on our receivables and contract assets were immaterial for the three months ended March 31, 2020.

Unsatisfied Performance Obligations

As of March 31, 2020, the Company had approximately $345 million of unsatisfied performance obligations for contracts with an original expected length of greater than one year, primarily relating to long-term contracts of the Utility Solutions segment to deliver and install meters, metering communications and grid monitoring sensor technology. The Company expects that a majority of the unsatisfied performance obligations will be completed and recognized over the next 3 years.



HUBBELL INCORPORATED-Form 10-Q    9


NOTE 3 Segment Information
 

The Company's reporting segments consist of the Electrical segment and the Utility Solutions segment. In the first quarter of 2020 our former Power segment was re-named Utility Solutions to reflect the depth and breadth of our industry-leading offering for electric, water, gas and telecom utilities ranging from a wide variety of critical infrastructure components to full-scale smart grid solutions.

The Electrical segment comprises businesses that sell stock and custom products including standard and special application wiring device products, rough-in electrical products, connector and grounding products, lighting fixtures and controls, components and assemblies for the natural gas distribution market and other electrical equipment. The products are typically used in and around industrial, commercial and institutional facilities by electrical contractors, maintenance personnel, electricians, utilities, and telecommunications companies. In addition, certain of our businesses design and manufacture industrial controls and communication systems used in the non-residential and industrial markets. Many of these products are designed such that they can also be used in harsh and hazardous locations where a potential for fire and explosion exists due to the presence of flammable gasses and vapors. Harsh and hazardous products are primarily used in the oil and gas (onshore and offshore) and mining industries. There are also a variety of lighting fixtures, wiring devices and electrical products that have residential and utility applications, including residential products with Internet-of-Things ("IoT") enabled technologies. These products are primarily sold through electrical and industrial distributors, home centers, retail and hardware outlets, lighting showrooms and residential product-oriented internet sites. Special application products are primarily sold through wholesale distributors to contractors, industrial customers and OEMs. The Electrical segment is comprised of three business groups, which have been aggregated as they have similar economic characteristics, customers and distribution channels, among other factors.

The Utility Solutions segment consists of businesses that design and manufacture various distribution, transmission, substation and telecommunications products primarily used by the electrical, water, gas, and telecommunication utility industries. These offerings include advanced metering infrastructure, meter and edge devices, software and infrastructure services, which are primarily sold to the electrical, water, and gas utility industries. In addition, certain of these products are used in the civil construction, water utility, and transportation industries. Products are sold to distributors and directly to users such as utilities, telecommunication companies, pipeline and mining operations, industrial firms, construction and engineering firms.

The following table sets forth financial information by business segment (in millions):
 
Net Sales
Operating Income
Operating Income as a % of Net Sales
 
2020

2019

2020

2019

2020

2019

Three Months Ended March 31,
 
 

 
 

 
 

Electrical
$
606.1

$
630.2

$
58.0

$
68.6

9.6
%
10.9
%
Utility Solutions
484.2

457.1

60.8

52.3

12.5
%
11.4
%
TOTAL
$
1,090.3

$
1,087.3

$
118.8

$
120.9

10.9
%
11.1
%




NOTE 4 Inventories, net
 
 
Inventories, net consists of the following (in millions):
 
March 31, 2020

December 31, 2019

Raw material
$
222.4

$
217.4

Work-in-process
108.2

101.8

Finished goods
355.1

403.6

Subtotal
685.7

722.8

Excess of FIFO over LIFO cost basis
(90.0
)
(89.8
)
TOTAL
$
595.7

$
633.0



HUBBELL INCORPORATED-Form 10-Q    10


NOTE 5 Goodwill and Other Intangible Assets, net
 

Changes in the carrying values of goodwill for the three months ended March 31, 2020, were as follows (in millions):
 
Segment
 

 
Electrical

Utility Solutions

Total

BALANCE DECEMBER 31, 2019
$
727.7

$
1,084.1

$
1,811.8

Prior year acquisitions

3.4

3.4

Foreign currency translation
(4.4
)
(3.7
)
(8.1
)
BALANCE MARCH 31, 2020
$
723.3

$
1,083.8

$
1,807.1


 
During the three months ended March 31, 2020, we recognized an increase to the consideration paid in conjunction with our acquisition of Cantega Technologies Inc., including its wholly owned subsidiary Greenjacket Inc., and all of the issued and outstanding shares of Reliaguard Inc. (collectively "Cantega") as a result of the customary net working capital provisions in the acquisition agreements. The increase in consideration paid of $2.1 million resulted in a corresponding increase to goodwill. The goodwill is not deductible for tax purposes.

The carrying value of other intangible assets included in Intangible assets, net in the Condensed Consolidated Balance Sheets is as follows (in millions):
 
March 31, 2020
December 31, 2019
 
Gross Amount

Accumulated
Amortization

Gross Amount

Accumulated
Amortization

Definite-lived:
 

 

 

 

Patents, tradenames and trademarks
$
201.8

$
(66.9
)
$
202.7

$
(65.0
)
Customer relationships, developed technology and other
856.8

(285.8
)
861.0

(270.8
)
Total
$
1,058.6

$
(352.7
)
$
1,063.7

$
(335.8
)
Indefinite-lived:
 

 

 

 

Tradenames and other
52.9


53.6


TOTAL
$
1,111.5

$
(352.7
)
$
1,117.3

$
(335.8
)

 
Amortization expense associated with definite-lived intangible assets was $19.1 million and $18.2 million for the three months ended March 31, 2020 and 2019, respectively. Future amortization expense associated with these intangible assets is estimated to be $54.8 million for the remainder of 2020, $72.1 million in 2021, $67.0 million in 2022, $62.2 million in 2023, $56.8 million in 2024, and $52.3 million in 2025. The Company amortizes intangible assets with definite lives using either an accelerated method that reflects the pattern in which economic benefits of the intangible assets are consumed and results in higher amortization in the earlier years of the assets useful life, or using a straight line method. Approximately 75% of the gross value of definite-lived intangible assets follow an accelerated amortization method.

HUBBELL INCORPORATED-Form 10-Q    11


NOTE 6 Other Accrued Liabilities
 

Other accrued liabilities consists of the following (in millions):
 
March 31, 2020

December 31, 2019

Customer program incentives
$
28.7

$
49.0

Accrued income taxes
10.8

6.0

Contract liabilities - deferred revenue
34.7

31.0

Customer refund liability
18.9

19.0

Accrued warranties(1)
24.2

24.0

Current operating lease liabilities
28.1

29.6

Other
86.9

103.6

TOTAL
$
232.3

$
262.2


(1) Refer to Note 21 - Guarantees, in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information regarding warranties.

NOTE 7 Other Non-Current Liabilities
 

Other non-current liabilities consists of the following (in millions):
 
March 31, 2020

December 31, 2019

Pensions
$
196.2

$
198.5

Other post-retirement benefits
21.5

21.5

Deferred tax liabilities
125.6

126.8

Accrued warranties long-term(1)
58.3

58.1

Non-current operating lease liabilities
70.9

71.7

Other
119.5

115.0

TOTAL
$
592.0

$
591.6


(1) Refer to Note 21 - Guarantees, in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information regarding warranties.


HUBBELL INCORPORATED-Form 10-Q    12


NOTE 8 Total Equity
 

A summary of changes in total equity for the three months ended March 31, 2020 and the three months ended March 31, 2019 is provided below (in millions, except per share amounts):
 
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total Hubbell
Shareholders'
Equity
Non-
controlling
interest
BALANCE AT DECEMBER 31, 2019
$
0.6

$

$
2,279.4

$
(332.9
)
$
1,947.1

$
13.4

Net income


75.0


75.0

0.7

Other comprehensive loss



(22.4
)
(22.4
)

Stock-based compensation

11.6



11.6


Acquisition/surrender of common shares(1)

(10.4
)
(34.1
)

(44.5
)

Cash dividends declared ($0.91 per share)


(49.7
)

(49.7
)

Dividends to noncontrolling interest





(0.5
)
Directors deferred compensation

(1.2
)


(1.2
)

Cumulative effect from adoption of CECL accounting standard (Note1)


(1.0
)

(1.0
)

BALANCE AT MARCH 31, 2020
$
0.6

$

$
2,269.6

$
(355.3
)
$
1,914.9

$
13.6


 
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total Hubbell
Shareholders'
Equity
Non-
controlling
interest
BALANCE AT DECEMBER 31, 2018
$
0.6

$
1.3

$
2,064.4

$
(285.7
)
$
1,780.6

$
18.3

Net income


72.3


72.3

1.5

Other comprehensive (loss) income



8.3

8.3


Stock-based compensation

4.1



4.1


Reclassification of stranded tax effects


30.0

(30.0
)


Acquisition/surrender of common shares(1)

(5.3
)
(6.3
)

(11.6
)

Cash dividends declared ($0.84 per share)


(45.7
)

(45.7
)

Dividends to noncontrolling interest





(1.0
)
Directors deferred compensation

0.1



0.1


BALANCE AT MARCH 31, 2019
$
0.6

$
0.2

$
2,114.7

$
(307.4
)
$
1,808.1

$
18.8


(1) For accounting purposes, the Company treats repurchased shares as constructively retired when acquired and accordingly charges the purchase price against common stock par value, Additional paid-in capital, to the extent available, and Retained earnings. The change in Retained earnings of $34.1 million and $6.3 million in the first quarter of 2020, and 2019, respectively, reflects this accounting treatment.

The detailed components of total comprehensive income are presented in the Condensed Consolidated Statements of Comprehensive Income.

HUBBELL INCORPORATED-Form 10-Q    13


NOTE 9 Accumulated Other Comprehensive Loss
 

A summary of the changes in Accumulated other comprehensive loss (net of tax) for the three months ended March 31, 2020 is provided below (in millions):
(debit) credit
Cash flow
hedge (loss)
gain
Unrealized
gain (loss) on
available-for-
sale securities
Pension
and post
retirement
benefit plan
adjustment
Cumulative
translation
adjustment
Total
BALANCE AT DECEMBER 31, 2019
$
(0.5
)
$
0.6

$
(203.2
)
$
(129.8
)
$
(332.9
)
Other comprehensive income (loss) before reclassifications
1.8

(0.1
)

(25.6
)
(23.9
)
Amounts reclassified from accumulated other comprehensive loss
(0.2
)

1.7


1.5

Current period other comprehensive income (loss)
1.6

(0.1
)
1.7

(25.6
)
(22.4
)
BALANCE AT MARCH 31, 2020
$
1.1

$
0.5

$
(201.5
)
$
(155.4
)
$
(355.3
)

 

A summary of the gain (loss) reclassifications out of Accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019 is provided below (in millions): 
 
Three Months Ended March 31,
 
Details about Accumulated Other
Comprehensive Loss Components
2020
2019
Location of Gain (Loss) Reclassified into Income
Cash flow hedges gain (loss):
 

 

 
Forward exchange contracts
$
0.1

$
0.2

Net sales
 
0.2

0.3

Cost of goods sold
 
0.3

0.5

Total before tax
 
(0.1
)
(0.2
)
Tax benefit (expense)
 
$
0.2

$
0.3

Gain (loss) net of tax
Amortization of defined benefit pension and post retirement benefit items:
 

 

 
Prior-service costs (a)
$
0.1

$
0.2

 
Actuarial gains/(losses) (a)
(2.4
)
(2.2
)
 
 
(2.3
)
(2.0
)
Total before tax
 
0.6

0.5

Tax benefit (expense)
 
$
(1.7
)
$
(1.5
)
Gain (loss) net of tax
Gains (losses) reclassified into earnings
$
(1.5
)
$
(1.2
)
 
(a)
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note 11 Pension and Other Benefits in the Notes to Condensed Consolidated Financial Statements for additional details).

HUBBELL INCORPORATED-Form 10-Q    14


NOTE 10 Earnings Per Share
 

The Company computes earnings per share using the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities. Service-based and performance-based restricted stock awards granted by the Company are considered participating securities as these awards contain a non-forfeitable right to dividends.
 
The following table sets forth the computation of earnings per share for the three months ended March 31, 2020 and 2019 (in millions, except per share amounts):
 
Three Months Ended March 31,
 
2020

2019

Numerator:
 

 

Net income attributable to Hubbell Incorporated
$
75.0

$
72.3

Less: Earnings allocated to participating securities
(0.3
)
(0.3
)
Net income available to common shareholders
$
74.7

$
72.0

Denominator:
 

 

Average number of common shares outstanding
54.3

54.4

Potential dilutive common shares
0.3

0.2

Average number of diluted shares outstanding
54.6

54.6

Earnings per share:
 

 

Basic
$
1.38

$
1.32

Diluted
$
1.37

$
1.32


 
The Company did not have outstanding any significant anti-dilutive securities during the three months ended March 31, 2020 and 2019.

HUBBELL INCORPORATED-Form 10-Q    15


NOTE 11 Pension and Other Benefits
 
 
The following table sets forth the components of net pension and other benefit costs for the three months ended March 31, 2020 and 2019 (in millions):
 
Pension Benefits
Other Benefits
 
2020

2019

2020

2019

Three Months Ended March 31,
 

 

 

 

Service cost
$
0.3

$
0.5

$

$

Interest cost
7.2

8.7

0.2

0.3

Expected return on plan assets
(8.5
)
(7.6
)


Amortization of prior service cost


(0.1
)
(0.2
)
Amortization of actuarial losses
2.4

2.2



NET PERIODIC BENEFIT COST
$
1.4

$
3.8

$
0.1

$
0.1


 
Employer Contributions
 
The Company anticipates making required contributions of approximately $4.3 million to its foreign pension plans during 2020, of which $0.1 million has been contributed through March 31, 2020. Although not required by ERISA and the Internal Revenue Code, the Company may elect to make additional voluntary contribution to its qualified domestic defined benefit pension plan in 2020. Additionally we anticipate making cash payments of $6.0 million and $5.0 million due in 2020 and 2021, respectively, related to the previously disclosed settlement agreement with a multi-employer pension plan.
 

HUBBELL INCORPORATED-Form 10-Q    16


NOTE 12 Guarantees
 

The Company records a liability equal to the fair value of guarantees in accordance with the accounting guidance for guarantees. When it is probable that a liability has been incurred and the amount can be reasonably estimated, the Company accrues for costs associated with guarantees. The most likely costs to be incurred are accrued based on an evaluation of currently available facts and, where no amount within a range of estimates is more likely, the minimum is accrued. As of March 31, 2020 and December 31, 2019, the fair value and maximum potential payment related to the Company’s guarantees were not material.
 
The Company offers product warranties that cover defects on most of its products. These warranties primarily apply to products that are properly installed, maintained and used for their intended purpose. The Company accrues estimated warranty costs at the time of sale. Estimated warranty expenses, recorded in cost of goods sold, are based upon historical information such as past experience, product failure rates, or the estimated number of units to be repaired or replaced. Adjustments are made to the product warranty accrual as claims are incurred, additional information becomes known, or as historical experience indicates.
 
Changes in the accrual for product warranties during the three months ended March 31, 2020 and 2019 are set forth below (in millions):
 
2020
2019
BALANCE AT JANUARY 1, (a)
$
82.1

$
92.7

Provision
4.6

3.5

Expenditures/payments/other
(4.2
)
(12.0
)
BALANCE AT MARCH 31, (a)
$
82.5

$
84.2


(a) Refer to Note 6 Other Accrued Liabilities and Note 7 Other Non-Current Liabilities for a breakout of short-term and long-term warranties.


HUBBELL INCORPORATED-Form 10-Q    17


NOTE 13 Fair Value Measurement
 
 
Financial Instruments

Financial instruments which potentially subject the Company to significant concentrations of credit loss risk consist of trade receivables, cash equivalents and 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, telecommunication 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. The Company places its cash and cash equivalents with financial institutions and limits the amount of exposure in any one institution.
At March 31, 2020 our accounts receivable balance was $707.7 million, net of allowances of $13.6 million. While we have not experienced any significant collection issues to date, during the three months ended March 31, 2020 our allowances increased approximately $5.9 million. The cumulative effect of the adoption of ASC 326 resulted in a $1.3 million increase to the opening balance. The remainder of the increase is primarily the result of our estimate of expected credit losses resulting from the deterioration of general economic conditions, including the recent declines in oil prices and potential impacts of the COVID-19 pandemic, which we anticipate could have a negative impact on certain of our customers ability to satisfy their obligations to Hubbell.
Investments
 
At March 31, 2020 and December 31, 2019, the Company had $48.5 million and $50.7 million, respectively, of available-for-sale municipal debt securities. These investments had an amortized cost of $48.0 million and $50.1 million, respectively. No allowance for credit losses related to our available-for-sale debt securities was recorded for the three months ended March 31, 2020. As of March 31, 2020 and December 31, 2019 the unrealized losses attributable to our available-for-sale debt securities was $0.1 million and $0.1 million. The fair value of available-for-sale debt securities with unrealized losses was $8.6 million at March 31, 2020 and $3.6 million at December 31, 2019. The Company also had trading securities of $18.1 million at March 31, 2020 and $19.2 million at December 31, 2019 that are carried on the balance sheet at fair value. Unrealized gains and losses associated with available-for-sale debt securities are reflected in Accumulated other comprehensive loss, net of tax, while unrealized gains and losses associated with trading securities are reflected in the results of operations.

Fair value measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The FASB fair value measurement guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value. The three broad levels of the fair value hierarchy are as follows:
 
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
 
Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly.
 
Level 3 – Unobservable inputs for which little or no market data exists, therefore requiring a company to develop its own assumptions.


HUBBELL INCORPORATED-Form 10-Q    18


The following table shows, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis at March 31, 2020 and December 31, 2019 (in millions):
Asset (Liability)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Quoted Prices in
Active Markets for
Similar Assets
(Level 2)
Unobservable inputs
for which little or no
market data exists
(Level 3)
Total

March 31, 2020
 
 
 
 
Money market funds(a)
$
159.4

$

$

$
159.4

Available for sale investments

48.5


48.5

Trading securities
18.1



18.1

Deferred compensation plan liabilities
(18.1
)


(18.1
)
Derivatives:
 
 
 
 
Forward exchange contracts-Assets(b)

1.9


1.9

TOTAL
$
159.4

$
50.4

$

$
209.8

 
 
 
 
 
Asset (Liability)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Quoted Prices in
Active Markets for
Similar Assets
(Level 2)
Unobservable inputs
for which little or no
market data exists
(Level 3)
Total

December 31, 2019
 
 
 
 
Money market funds(a)
$
27.5

$

$

$
27.5

Available for sale investments

50.7


50.7

Trading securities
19.2



19.2

Deferred compensation plan liabilities