10-Q 1 hubb-20240331.htm 10-Q hubb-20240331
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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, 2024
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)
 
Connecticut06-0397030
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
40 Waterview Drive
Shelton,CT06484
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock - par value $0.01 per shareHUBBNew 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.
YesNo
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).
YesNo
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).
YesNo
 The number of shares outstanding of Hubbell common stock as of April 25, 2024 was 53,685,997.
HUBBELL INCORPORATED-Form 10-Q    1

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Index

HUBBELL INCORPORATED-Form 10-Q    2

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PART I
FINANCIAL INFORMATION

ITEM 1Financial Statements

Condensed Consolidated Statements of Income (unaudited)
 Three Months Ended March 31,
(in millions, except per share amounts)20242023
Net sales$1,399.1 $1,285.4 
Cost of goods sold951.4 837.1 
Gross profit447.7 448.3 
Selling & administrative expenses219.2 199.5 
Operating income228.5 248.8 
Interest expense, net(21.1)(9.7)
Loss on disposition of business (5.3) 
Other expense, net(0.7)(4.1)
Total other expense(27.1)(13.8)
Income before income taxes201.4 235.0 
Provision for income taxes52.3 51.6 
Net income 149.1 183.4 
Less: Net income attributable to noncontrolling interest(1.3)(1.5)
Net income attributable to Hubbell Incorporated$147.8 $181.9 
Earnings per share:  
Basic earnings per share$2.75 $3.39 
Diluted earnings per share $2.73 $3.37 
See notes to unaudited Condensed Consolidated Financial Statements.
HUBBELL INCORPORATED-Form 10-Q    3

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Condensed Consolidated Statements of Comprehensive Income (unaudited)
 
 Three Months Ended March 31,
(in millions)20242023
Net income$149.1 $183.4 
Other comprehensive income (loss):  
Foreign currency translation adjustments(11.9)7.9 
Defined benefit pension and post-retirement plans, net of taxes of $(0.6) and $(1.2)
2.5 1.4 
Unrealized gain (loss) on investments, net of taxes of $0.1 and $(0.1)
(0.3)0.3 
Unrealized gain (loss) on cash flow hedges, net of taxes of $(0.1) and $0.1
0.4 (0.3)
Other comprehensive income (loss)(9.3)9.3 
Comprehensive income139.8 192.7 
Less: Comprehensive income attributable to noncontrolling interest1.3 1.5 
Comprehensive income attributable to Hubbell Incorporated$138.5 $191.2 
See notes to unaudited Condensed Consolidated Financial Statements.






Comprehensive income attributable to Hubbell Incorporated$138.5 $191.2 
enotes to unaudited Condensed Consolidated Financial Statements.
See notes to unaudited Condensed Consolidated Financial
HUBBELL INCORPORATED-Form 10-Q    4

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Condensed Consolidated Balance Sheets (unaudited)
 
(in millions)
March 31, 2024December 31, 2023
ASSETS  
Current Assets  
Cash and cash equivalents
$388.2 $336.1 
Short-term investments
12.1 12.6 
Accounts receivable (net of allowances of $11.4 and $11.6)
865.6 785.4 
Inventories, net
842.4 832.9 
   Other current assets124.2 129.7 
Assets held for sale - current 70.5 
Total Current Assets2,232.5 2,167.2 
Property, Plant, and Equipment, net662.2 652.6 
Other Assets  
Investments75.3 75.8 
Goodwill2,532.7 2,533.4 
Other intangible assets, net1,165.1 1,196.0 
Other long-term assets194.3 197.1 
Assets held for sale - non-current 91.9 
TOTAL ASSETS$6,862.1 $6,914.0 
LIABILITIES AND EQUITY  
Current Liabilities  
Short-term debt and current portion of long-term debt$219.7 $117.4 
Accounts payable
598.5 563.5 
Accrued salaries, wages and employee benefits
74.0 173.6 
Accrued insurance
87.6 79.1 
Other accrued liabilities
368.9 365.2 
Liabilities held for sale - current 24.6 
Total Current Liabilities1,348.7 1,323.4 
Long-Term Debt1,895.7 2,023.2 
Other Non-Current Liabilities674.6 660.6 
Liabilities held for sale - non-current 17.5 
TOTAL LIABILITIES3,919.0 4,024.7 
Commitments and contingencies (Note 15)
Hubbell Incorporated Shareholders’ Equity2,930.4 2,877.0 
Noncontrolling interest12.7 12.3 
TOTAL EQUITY2,943.1 2,889.3 
TOTAL LIABILITIES AND EQUITY$6,862.1 $6,914.0 
See notes to unaudited Condensed Consolidated Financial Statements.



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Condensed Consolidated Statements of Cash Flows (unaudited)
 Three Months Ended March 31,
(in millions)20242023
Cash Flows from Operating Activities   
Net income $149.1 $183.4 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
59.9 35.6 
    Deferred income taxes19.1 (3.4)
    Stock-based compensation12.8 11.8 
    Provision for bad debt expense(0.2)0.1 
    Loss on disposition of business5.3  
    Loss on sale of assets0.2 0.1 
Changes in assets and liabilities, excluding effects of acquisitions:
    Increase in accounts receivable, net(84.6)(36.6)
    Increase in inventories, net(22.7)(38.8)
    Increase in accounts payable38.8 20.5 
    Decrease in current liabilities(92.9)(54.4)
    Changes in other assets and liabilities, net9.2 (3.2)
Contribution to qualified defined benefit pension plans  
Other, net(1.8)(1.4)
Net cash provided by operating activities 92.2 113.7 
Cash Flows from Investing Activities   
Capital expenditures(40.3)(33.4)
Acquisitions, net of cash acquired  
Proceeds from disposal of business, net of cash122.9  
Purchases of available-for-sale investments (6.4)
Proceeds from available-for-sale investments5.4 4.7 
Other, net0.6  
Net cash provided by (used in) investing activities88.6 (35.1)
Cash Flows from Financing Activities  
Payment of long-term debt(125.0) 
Borrowings of short-term debt, net98.4 0.1 
Payment of dividends(65.5)(60.0)
Acquisition of common shares(10.0)(20.0)
Other, net(23.2)(11.9)
Net cash used in financing activities(125.3)(91.8)
Effect of exchange rate changes on cash and cash equivalents(3.5)2.7 
Increase (decrease) in cash and cash equivalents52.0 (10.5)
Cash and cash equivalents, beginning of year336.1 440.5 
Cash and cash equivalents within assets held for sale, beginning of year  
Restricted cash, included in other assets, beginning of year3.2 2.8 
Less: Restricted cash, included in Other Assets3.1 3.0 
Cash and cash equivalents, end of period$388.2 $429.8 
See notes to unaudited Condensed Consolidated Financial Statements.

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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, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024.

The balance sheet at December 31, 2023 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, 2023.

Supplier Finance Program Obligations

In September 2022, the FASB issued ASU 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50: Disclosure of Supplier Finance Program Obligations)", which the Company adopted in the first quarter of 2023, with the exception of the rollforward information, which was effective for the Company in the first quarter of 2024.

Payment Services Arrangements
The Company has ongoing agreements with financial institutions to facilitate the processing of vendor payables. Under these agreements, the Company pays the financial institution the stated amount of confirmed invoices from participating suppliers on their original maturity date. The terms of the vendor payables are not affected by vendors participating in these agreements. As a result, the amounts owed are presented as accounts payable in the Company’s Condensed Consolidated Balance Sheet, of which $99.6 million and $101.3 million was outstanding at March 31, 2024 and December 31, 2023, respectively. Either party may terminate the agreements with 30 days written notice. Cash flows under the program are reported in operating activities in the Company’s Condensed Consolidated Statement of Cash Flows. The rollforward of the Company's outstanding obligations confirmed as valid under the Payment Services Arrangements supplier finance program for the three months ended March 31, 2024, is as follows:
 
(in millions)Three Months Ended March 31, 2024
Confirmed obligations outstanding at the beginning of the period$101.3 
Invoices confirmed during the period84.5 
Confirmed invoices paid during the period(86.2)
Confirmed obligations outstanding at the end of the period$99.6 


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Commercial Card Program
In 2021, the Company entered into an agreement with a financial institution that allows participating suppliers to receive payment for outstanding invoices through a commercial purchasing card sponsored by a financial institution. The Company is required to then settle such outstanding invoices through a consolidated payment to the financial institution 15 days after the commercial card billing cycle. The Company receives the benefit of extended payment terms and a rebate from the financial institution. Either party may terminate the agreement with 60 days written notice. The amount outstanding to the financial institution is presented as short-term debt in the Company’s Condensed Consolidated Balance Sheet, of which, $1.5 million and $2.0 million was outstanding at March 31, 2024 and December 31, 2023, respectively. Cash flows under the program are reported in financing activities in the Company’s Condensed Consolidated Statement of Cash Flows. The rollforward of the Company's outstanding obligations confirmed as valid under the commercial card supplier finance program for the three months ended March 31, 2024, is as follows:
 
(in millions)Three Months Ended March 31, 2024
Confirmed obligations outstanding at the beginning of the period$2.0 
Invoices confirmed during the period5.9 
Confirmed invoices paid during the period(6.4)
Confirmed obligations outstanding at the end of the period$1.5 


Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting-Improvements to Reportable Segment Disclosures", which adds a requirement for public entities to disclose its significant segment expense categories and amounts for each reportable segment for all periods presented. This information is required to be disclosed at both interim and annual periods. In addition, this ASU requires a public entity to disclose the title and position of the Chief Operating Decision Maker ("CODM") in the consolidated financial statements. Public entities are also required to disclose how the CODM uses each reported measure of segment profit or loss to assess performance and allocate resources to the segments. The ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. The Company is assessing the impact of adopting this standard on its financial statements.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes: Improvements to Income Tax Disclosures", which enhances the disaggregation of income tax disclosures. The ASU requires public entities on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold equal to or greater than 5%. Public entities are required to provide an explanation of certain rate reconciling items if not otherwise evident, such as the nature, causes and judgement used to categorize the item. The ASU also requires disclosure of income taxes paid (net of refund received) detailed by federal, state/local and foreign, and amounts paid to individual jurisdictions that are equal to or greater than 5% of total income taxes paid. The ASU is effective for public entities for fiscal years beginning after December 15, 2024 and for interim periods for fiscal years beginning after December 15, 2025. The Company is assessing the impact of adopting this standard on its financial statements.




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NOTE 2 Business Acquisitions and Dispositions
 
2023 Acquisitions

In the second quarter of 2023, the Company acquired all of the issued and outstanding membership interests of EI Electronics LLC ("EIG") for a cash purchase price of approximately $60 million, net of cash acquired, subject to customary purchase price adjustments. EIG offers fully integrated energy management and power quality monitoring solutions for the electric utility and commercial and industrial markets. This business is reported in the Utility Solutions segment.

In the fourth quarter of 2023, the Company acquired all of the issued and outstanding shares of Indústria Eletromecânica Balestro Ltda. ("Balestro") for a cash purchase price of approximately $88 million, net of cash acquired, subject to customary purchase price adjustments. Balestro is a company headquartered in Mogi Mirim, São Paulo, Brazil and designs, manufactures, and delivers top quality products for the electrical utility industry in Brazil and other countries in Latin America, as well as other parts of the world. This business is reported in the Utility Solutions segment.

In the fourth quarter of 2023 the Company acquired Northern Star Holdings, Inc. ("Systems Control") for approximately $1.1 billion, net of cash acquired, subject to customary purchase price adjustments. Systems Control is a manufacturer of substation control and relay panels, as well as turnkey substation control building solutions. This business is reported in the Utility Solutions segment.
Preliminary Allocation of Consideration Transferred to Net Assets Acquired

The following table presents the updated preliminary determination of the fair values of identifiable assets acquired and liabilities assumed from the Company's 2023 acquisitions. The final determination of the fair value of certain assets and liabilities will be completed within the applicable one year measurement period as required by FASB ASC Topic 805, “Business Combinations.” As the Company finalizes the fair values of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations and financial position. The finalization of the purchase accounting assessment may result in a change in the valuation of assets acquired and liabilities assumed and may have a material impact on the Company's results of operations and financial position.

The following table summarizes the updated preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition for all of the Company's 2023 acquisitions (in millions):

Accounts receivable$71.5 
Inventories85.7 
Other current assets49.8 
Property, plant and equipment31.9 
Other non-current assets2.8 
Intangible assets602.7 
Accounts payable(18.5)
Other accrued liabilities(87.0)
Deferred tax liabilities, net(134.8)
Other non-current liabilities(11.9)
Goodwill619.5 
Total Estimate of Consideration Transferred, Net of Cash Acquired$1,211.7 

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Dispositions

In December 2023, the Company entered into a definitive agreement to sell its residential lighting business for a cash purchase price of $131 million, subject to customary adjustments. The Company concluded the business met the criteria for classification as held for sale in the fourth quarter of 2023. The residential lighting business was reported within the Electrical Solutions Segment. The transaction closed in the first quarter of 2024 and the Company recorded a pre-tax loss on the sale of $5.3 million, which is recorded within Total other expense in the Company's Condensed Consolidated Statement of Income.

Under the terms of the transaction, Hubbell and the buyer entered into a transition services agreement ("TSA"), pursuant to which the Company agreed to provide certain administrative and operational services for a period of 12 months or less. Income from the TSA was $2.0 million for the three months ended March 31, 2024, and was recorded in Other expense, net in the Condensed Consolidated Statement of Income.
The following table presents balance sheet information of the residential lighting business' assets and liabilities held for sale as of December 31, 2023:
At December 31,
(in millions)2023
Cash and cash equivalents$ 
Accounts receivable, net29.8 
Inventories, net37.8 
Other current assets2.9 
Assets held for sale - current$70.5 
Property, Plant, and Equipment, net1.6 
Goodwill63.2 
Other Intangible assets, net6.5 
Other long-term assets20.6 
Assets held for sale - non-current$91.9 
Accounts payable1.9 
Accrued salaries, wages and employee benefits3.5 
Accrued insurance3.4 
Other accrued liabilities15.8 
Liabilities held for sale - current$24.6 
Other Non-Current Liabilities17.5 
Liabilities held for sale - non-current$17.5 



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NOTE 3 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, primarily in the Utility Solutions segment, recognized upon delivery of the product at the destination.

The Company also has performance obligations, primarily within the Utility Solutions segment, that are recognized over time due to the customized nature of the product and the Company's enforceable right to receive payment for work performed to date in the event of a cancellation. The Company uses an input measure to determine the extent of progress towards completion of the performance obligation, which the Company believes best depicts the transfer of control to the customer. Under this method, revenue recognition is primarily based upon the ratio of costs incurred to date compared with estimated total costs to complete.

Revenue from service contracts and post-shipment performance obligations are approximately two 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.

Certain of our 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. On January 1, 2024, we internally reorganized certain businesses within our Utility Solutions segment to streamline the organization and align the organization to better serve our customers. This change had no impact to our reportable segments. In conjunction with this change, prior period amounts have been reclassified to conform to the organizational changes within the Utility Solutions segment. In addition, the residential lighting business, included in the Retail and Builder section below was sold in the first quarter of 2024.
Three Months Ended March 31,
in millions20242023
Net sales
   Grid Infrastructure$612.8 $561.7 
   Grid Automation281.2 219.9 
Total Utility Solutions$894.0 $781.6 
   Electrical Products$211.5 $204.0 
   Connection and Bonding175.5 153.9 
   Industrial Controls96.9 93.9 
   Retail and Builder21.2 52.0 
Total Electrical Solutions$505.1 $503.8 
TOTAL$1,399.1 $1,285.4 

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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 millions20242023
Net sales
   United States$853.2 $740.3 
   International40.8 41.3 
Total Utility Solutions$894.0 $781.6 
   United States$434.2 $439.0 
   International70.9 64.8 
Total Electrical Solutions$505.1 $503.8 
TOTAL$1,399.1 $1,285.4 

Contract Balances

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

Contract liabilities were $140.8 million as of March 31, 2024 compared to $118.6 million as of December 31, 2023. The $22.2 million increase in our contract liabilities balance was primarily due to a $51.7 million net increase in current year deferrals primarily due to timing of advance payments on certain orders, partially offset by the recognition of $29.5 million in revenue related to amounts that were recorded in contract liabilities at January 1, 2024. The ending balance of contract assets as of March 31, 2024 and December 31, 2023, was $28.5 million and $41.6 million, respectively. Impairment losses recognized on our receivables and contract assets were immaterial for the three months ended March 31, 2024.

Unsatisfied Performance Obligations

As of March 31, 2024, the Company had approximately $150 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 two years.


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NOTE 4 Segment Information

The Company's reporting segments consist of the Utility Solutions segment and the Electrical Solutions segment. The Utility Solutions segment consists of businesses that design, manufacture, and sell a wide variety of electrical distribution, transmission, substation, and telecommunications products. This includes utility transmission & distribution (T&D) components such as arresters, insulators, connectors, anchors, bushings, enclosures, cutouts and switches. The Utility Solutions segment also offers solutions that serve the utility infrastructure, including smart meters, communications systems, substation control and relay panels, and protection and control devices. The Hubbell Utility Solutions segment supports the electrical distribution, electrical transmission, water, gas distribution, telecommunications, and solar and wind markets. Products are sold to distributors and directly to users such as utilities, telecommunication companies, industrial firms, construction and engineering firms.

The Electrical Solutions 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, components 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 gases 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 wiring devices, lighting fixtures 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 following table sets forth financial information by reporting segment (in millions):
 Net SalesOperating IncomeOperating Income as a % of Net Sales
 202420232024202320242023
Three Months Ended March 31,      
Utility Solutions$894.0 $781.6 $157.5 $177.5 17.6 %22.7 %
Electrical Solutions505.1 503.8 71.0 71.3 14.1 %14.2 %
TOTAL$1,399.1 $1,285.4 $228.5 $248.8 16.3 %19.4 %


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NOTE 5 Inventories, net
 
Inventories, net consists of the following (in millions):
 March 31, 2024December 31, 2023
Raw material$390.2 $394.1 
Work-in-process208.1 189.2 
Finished goods405.9 412.1 
Subtotal1,004.2 995.4 
Excess of FIFO over LIFO cost basis(161.8)(162.5)
TOTAL$842.4 $832.9 
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NOTE 6 Goodwill and Other Intangible Assets, net

Changes in the carrying values of goodwill for the three months ended March 31, 2024, by segment, were as follows (in millions):
 Segment 
 Utility SolutionsElectrical SolutionsTotal
BALANCE AT DECEMBER 31, 2023$1,897.5 $635.9 $2,533.4 
Prior year acquisitions(1)
4.8  4.8 
Foreign currency translation (4.2)(1.3)(5.5)
BALANCE AT MARCH 31, 2024$1,898.1 $634.6 $2,532.7 
 (1) Refer to Note 2 - Business Acquisitions for additional information.

The carrying value of other intangible assets included in Other intangible assets, net in the Condensed Consolidated Balance Sheets is as follows (in millions):
 March 31, 2024December 31, 2023
 Gross AmountAccumulated
Amortization
Gross AmountAccumulated
Amortization
Definite-lived:    
Patents, tradenames and trademarks$233.3 $(87.4)$233.7 $(84.8)
Customer relationships, developed technology and other1,510.0 (524.8)1,513.1 (500.1)
TOTAL DEFINITE-LIVED INTANGIBLES$1,743.3 $(612.2)$1,746.8 $(584.9)
Indefinite-lived:  
Tradenames and other34.0  34.1  
TOTAL OTHER INTANGIBLE ASSETS$1,777.3 $(612.2)$1,780.9 $(584.9)
 
Amortization expense associated with definite-lived intangible assets was $28.5 million and $17.8 million during the three months ended March 31, 2024 and 2023, respectively. Future amortization expense associated with these intangible assets is estimated to be $84.8 million for the remainder of 2024, $95.5 million in 2025, $90.3 million in 2026, $85.7 million in 2027, $82.2 million in 2028, and $78.0 million in 2029. 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 lives, or using a straight line method. Approximately 85% of the gross value of definite-lived intangible assets follow an accelerated amortization method.


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NOTE 7 Other Accrued Liabilities

Other accrued liabilities consists of the following (in millions):
 March 31, 2024December 31, 2023
Customer program incentives$27.7 $57.4 
Accrued income taxes45.1 21.1 
Contract liabilities - deferred revenue134.0 111.5 
Customer refund liability 18.9 18.1 
Accrued warranties short-term(1)
16.1 15.6 
Current operating lease liabilities32.7 30.6 
Other94.4 110.9 
TOTAL$368.9 $365.2 
(1) Refer to Note 22 - Guarantees, in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding warranties.



NOTE 8 Other Non-Current Liabilities

Other non-current liabilities consists of the following (in millions):
 March 31, 2024December 31, 2023
Pensions$133.6 $135.0 
Other post-retirement benefits14.4 14.4 
Deferred tax liabilities259.0 240.3 
Accrued warranties long-term(1)
24.0 23.6 
Non-current operating lease liabilities115.5 118.8 
Other128.1 128.5 
TOTAL$674.6 $660.6 
(1) Refer to Note 22 - Guarantees, in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding warranties.
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NOTE 9 Total Equity

A summary of changes in total equity for the three months ended March 31, 2024 and the three months ended March 31, 2023 is provided below (in millions, except per share amounts):
Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total Hubbell
Shareholders'
Equity
Non-
controlling
interest
BALANCE AT DECEMBER 31, 2023$0.6 $6.1 $3,182.7 $(312.4)$2,877.0 $12.3 
Net income— — 147.8 — 147.8 1.3 
Other comprehensive (loss) income— — — (9.3)(9.3)— 
Stock-based compensation— 12.8 — — 12.8 — 
Acquisition/surrender of common shares(1)
— (17.6)(14.6)— (32.2)— 
Cash dividends declared ($1.22 per share)
— — (65.7)— (65.7)— 
Dividends to noncontrolling interest— — — — — (0.9)
Directors deferred compensation— — — —  — 
BALANCE AT MARCH 31, 2024$0.6 $1.3 $3,250.2 $(321.7)$2,930.4 $12.7 

Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total Hubbell
Shareholders'
Equity
Non-
controlling
interest
BALANCE AT DECEMBER 31, 2022$0.6 $ $2,705.5 $(345.2)$2,360.9 $9.7 
Net income— — 181.9 — 181.9 1.5 
Other comprehensive (loss) income— — — 9.3 9.3 — 
Stock-based compensation— 11.7 — — 11.7 — 
Acquisition/surrender of common shares(1)
— (9.9)(21.2)— (31.1)— 
Cash dividends declared ($1.12 per share)
— — (60.0)— (60.0)— 
Dividends to noncontrolling interest— — — — — (0.8)
Directors deferred compensation— — — —  — 
BALANCE AT MARCH 31, 2023$0.6 $1.8 $2,806.2 $(335.9)$2,472.7 $10.4 
(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 $14.6 million and $21.2 million in the first three months of 2024 and 2023, respectively, reflects this accounting treatment.

The detailed components of total comprehensive income are presented in the Condensed Consolidated Statements of Comprehensive Income.
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NOTE 10 Accumulated Other Comprehensive Loss

A summary of the changes in Accumulated other comprehensive loss (net of tax) for the three months ended March 31, 2024 is provided below (in millions):
(debit) creditCash flow
hedge gain (loss)
Unrealized
gain (loss) on
available-for-
sale securities
Pension
and post
retirement
benefit plan
adjustment
Cumulative
translation
adjustment
Total
BALANCE AT DECEMBER 31, 2023$(0.3)$(0.2)$(178.4)$(133.5)$(312.4)
Other comprehensive income (loss) before reclassifications0.5 (0.3) (11.9)(11.7)
Amounts reclassified from accumulated other comprehensive income (loss)(0.1) 2.5  2.4 
Current period other comprehensive income (loss)0.4 (0.3)2.5 (11.9)(9.3)
BALANCE AT MARCH 31, 2024$0.1 $(0.5)$(175.9)$(145.4)$(321.7)

A summary of the gain (loss) reclassifications out of Accumulated other comprehensive loss for the three months ended March 31, 2024 and 2023 is provided below (in millions): 
Three Months Ended March 31,
Details about Accumulated Other
Comprehensive Loss Components
20242023 Location of Gain (Loss) Reclassified into Income
Cash flow hedges gain (loss):    
Forward exchange contracts$ $ Net sales
0.1 0.4  Cost of goods sold
  Other expense, net
 0.1 0.4  Total before tax
  (0.1) Tax benefit (expense)
 $0.1 $0.3  Gain (loss) net of tax
Amortization of defined benefit pension and post retirement benefit items:    
Prior-service costs (a)$(0.1)$(0.1) 
Actuarial gains (losses) (a)(3.0)(2.5) 
 (3.1)(2.6)Total before tax
 0.6 1.2 Tax benefit (expense)
 $(2.5)$(1.4)Gain (loss) net of tax
Gains (losses) reclassified into earnings$(2.4)$(1.1)Gain (loss) net of tax

(a) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see Note 12 - Pension and Other Benefits in the Notes to Condensed Consolidated Financial Statements for additional details).
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NOTE 11 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, 2024 and 2023 (in millions, except per share amounts):
Three Months Ended March 31,
 20242023
Numerator:  
Net income attributable to Hubbell Incorporated$147.8 $181.9 
Less: Earnings allocated to participating securities(0.3)(0.4)
Net income available to common shareholders$147.5 $181.5 
Denominator:  
Average number of common shares outstanding53.7 53.6 
Potential dilutive common shares0.3 0.3 
Average number of diluted shares outstanding54.0 53.9 
Earnings per share:  
Basic earnings per share$2.75 $3.39 
Diluted earnings per share $2.73 $3.37 
 
The Company did not have any significant anti-dilutive securities outstanding during the three months ended March 31, 2024 and 2023.
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NOTE 12 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, 2024 and 2023 (in millions):
 Pension BenefitsOther Benefits
 2024202320242023
Three Months Ended March 31,    
Service cost$0.1 $0.1 $ $ 
Interest cost8.3 8.7 0.2 0.2 
Expected return on plan assets(7.7)(7.0)  
Amortization of prior service cost0.1 0.1   
Amortization of actuarial losses (gains)3.1 2.6 (0.1)(0.1)
NET PERIODIC BENEFIT COST$3.9 $4.5 $0.1 $0.1 


Employer Contributions
 
The Company made no contributions to its qualified domestic defined benefit pension plan and no contributions to its foreign pension plans during the three months ended March 31, 2024. Although not required by ERISA and the Internal Revenue Code, the Company may elect to make additional voluntary contributions to its qualified domestic defined benefit pension plan in 2024.
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NOTE 13 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, 2024 and December 31, 2023, 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, 2024 and 2023 are set forth below (in millions):
20242023
BALANCE AT JANUARY 1, (a)
$39.2 $46.2 
Provision2.6 3.4 
Expenditures/payments/other(1.7)(6.4)
BALANCE AT MARCH 31, (a)
$40.1 $43.2 
(a) Refer to Note 7 Other Accrued Liabilities and Note 8 Other Non-Current Liabilities for a breakout of short-term and long-term warranties.
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NOTE 14 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, 2024, our accounts receivable balance was $865.6 million, net of allowances of $11.4 million. During the three months ended March 31, 2024, our allowances decreased by approximately $0.2 million.
Investments
 
At March 31, 2024 and December 31, 2023, the Company had $62.3 million and $65.0 million, respectively, of available-for-sale municipal debt securities. These investments had an amortized cost of $63.0 million and $65.3 million, respectively. No allowance for credit losses related to our available-for-sale debt securities was recorded for the three months ended March 31, 2024 or March 31, 2023. As of March 31, 2024 and December 31, 2023, the unrealized losses attributable to our available-for-sale debt securities were $0.8 million and $0.6 million, respectively. The fair value of available-for-sale debt securities with unrealized losses was $42.9 million at March 31, 2024 and $34.5 million at December 31, 2023.

The Company also had trading securities of $25.1 million at March 31, 2024 and $23.4 million at December 31, 2023 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 Condensed Consolidated Statement of Income.

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.

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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, 2024 and December 31, 2023 (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, 2024   
Money market funds(a)
$144.2 $ $ $144.2 
Available for sale investments 62.3  62.3 
Trading securities25.1   25.1 
Deferred compensation plan liabilities(25.1)  (25.1)
Derivatives:
Forward exchange contracts-Assets(b)
 0.2  0.2 
Forward exchange contracts-(Liabilities)(c)
 (0.1) (0.1)
TOTAL$144.2 $62.4 $ $206.6 
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, 2023   
Money market funds(a)
$105.1 $ $ $105.1 
Available for sale investments 65.0  65.0 
Trading securities23.4   23.4 
Deferred compensation plan liabilities(23.4)  (23.4)
Derivatives:
Forward exchange contracts-(Liabilities)(c)
 (0.5) (0.5)
TOTAL$105.1 $64.5 $ $169.6 
(a) Money market funds are reflected in Cash and cash equivalents in the Condensed Consolidated Balance Sheets.
(b) Forward exchange contracts-Assets are reflected in Other current assets in the Condensed Consolidated Balance Sheets.
(c) Forward exchange contracts-(Liabilities) are reflected in Other accrued liabilities in the Condensed Consolidated Balance Sheets.


The methods and assumptions used to estimate the Level 2 fair values were as follows:
 
Forward exchange contracts – The fair value of forward exchange contracts was based on quoted forward foreign exchange prices at the reporting date.

Available-for-sale municipal bonds classified in Level 2 – The fair value of available-for-sale investments in municipal bonds is based on observable market-based inputs, other than quoted prices in active markets for identical assets. 

Deferred compensation plans
 
The Company offers certain employees the opportunity to participate in non-qualified deferred compensation plans. A participant’s deferrals are invested in a variety of participant-directed debt and equity mutual funds that are classified as trading securities. The Company purchased $2.8 million and $2.1 million of trading securities related to these deferred compensation plans during the three months ended March 31, 2024 and 2023, respectively. As a result of participant distributions, the Company sold $2.7 million of these trading securities during the three months ended March 31, 2024 and $2.0 million during the three months ended March 31, 2023. The unrealized gains and losses associated with these trading securities are directly offset by the changes in the fair value of the underlying deferred compensation plan obligation.

Long Term Debt

As of March 31, 2024 and December 31, 2023, the carrying value of long-term debt, net of unamortized discount and debt issuance costs, including the $18.7 million and $15.0 million, respectively, current portion of the Term Loan, was $1,914.4 million and $2,038.2 million, respectively. The estimated fair value of the long-term debt as of March 31, 2024 and December 31, 2023 was $1,820.0 million and $1,951.6 million, respectively, using quoted market prices in active markets for similar liabilities (Level 2).

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NOTE 15 Commitments and Contingencies

The Company is subject to various legal proceedings arising in the normal course of its business. These proceedings include claims for damages arising out of use of the Company’s products, intellectual property, workers’ compensation and environmental matters. The Company is self-insured up to specified limits for certain types of claims, including product liability and workers’ compensation, and is fully self-insured for certain other types of claims, including environmental and intellectual property matters. The Company recognizes a liability for any contingency that in management’s judgment is probable of occurrence and can be reasonably estimated. We continually reassess the likelihood of adverse judgments and outcomes in these matters, as well as estimated ranges of possible losses based upon an analysis of each matter which includes advice of outside legal counsel and, if applicable, other experts.

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NOTE 16 Restructuring Costs and Other

In the three months ended March 31, 2024, we incurred costs for restructuring actions initiated in 2024 as well as costs for restructuring actions initiated in prior years. Our restructuring actions are associated with cost reduction efforts that include the consolidation of manufacturing and distribution facilities as well as workforce reductions. Restructuring costs include severance and employee benefits, asset impairments, accelerated depreciation, as well as facility closure, contract termination and certain pension costs that are directly related to restructuring actions. These costs are predominantly settled in cash from our operating activities and are generally settled within one year, with the exception of asset impairments, which are non-cash.

Pre-tax restructuring costs incurred in each of our reporting segments and the location of the costs in the Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023 are as follows (in millions):
Three Months Ended March 31,
202420232024202320242023
Cost of goods soldSelling & administrative expenseTotal
Utility Solutions$1.4 $0.7 $0.5 $0.1 $1.9 $0.8 
Electrical Solutions3.0 (0.3)0.3  3.3 (0.3)
Total Pre-Tax Restructuring Costs$4.4 $0.4 $0.8 $0.1 $5.2 $0.5 
Three Months Ended March 31,
The following table summarizes the accrued liabilities for our restructuring actions (in millions):
Beginning Accrued
 Restructuring Balance 1/1/24
Pre-tax Restructuring CostsUtilization and Foreign ExchangeEnding Accrued
Restructuring Balance 3/31/24
2024 Restructuring Actions
Severance$ $4.3 $(0.2)$4.1 
Asset write-downs    
Facility closure and other costs 0.4 (0.4) 
    Total 2024 Restructuring Actions$ $4.7 $(0.6)$4.1 
2023 and Prior Restructuring Actions
Severance$3.9 $0.2 $(0.6)$3.5 
Asset write-downs    
Facility closure and other costs0.1 0.3 (0.4) 
    Total 2023 and Prior Restructuring Actions$4.0 $0.5 $(1.0)$3.5 
Total Restructuring Actions$4.0 $5.2 $(1.6)$7.6 

The actual costs incurred and total expected cost in each of our reporting segments of our on-going restructuring actions are as follows (in millions):
Total expected costsCosts incurred during 2023Costs incurred in the first three months of 2024Remaining costs at 3/31/2024
2024 Restructuring Actions
Utility Solutions$2.0 $ $1.5 $0.5 
Electrical Solutions7.8  3.2 4.6 
    Total 2024 Restructuring Actions$9.8 $ $4.7 $5.1 
2023 and Prior Restructuring Actions
Utility Solutions$4.2 $2.9 $0.4 $0.9 
Electrical Solutions4.2 2.5 0.1 1.6 
    Total 2023 and Prior Restructuring Actions$8.4 $5.4 $0.5 $2.5 
Total Restructuring Actions$18.2 $5.4 $5.2 $7.6 

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NOTE 17 Debt and Financing Arrangements

Long-term debt consists of the following (in millions):
 MaturityMarch 31, 2024December 31, 2023
Senior notes at 3.35%
2026$398.7 $398.6 
Senior notes at 3.15%
2027298.1 298.0 
Senior notes at 3.50%
2028447.2 447.0 
Senior notes at 2.300%
2031296.9 296.7 
Term loan, net of current portion of $18.7 million and $15.0 million, respectively
2026454.8 582.9 
TOTAL LONG-TERM DEBT(a)
$1,895.7 $2,023.2 
(a)Long-term debt is presented net of debt issuance costs and unamortized discounts.

Term Loan Agreement

In connection with the December 2023 acquisition of Systems Control, the Company entered into a Term Loan Agreement with a syndicate of lenders under which the Company borrowed $600 million on an unsecured basis. Borrowings under the Term Loan Agreement bear interest generally at either the adjusted term SOFR rate plus an applicable margin (determined by a ratings based-grid) or the alternative base rate. Currently the loans bear interest based on the adjusted term SOFR rate, which was 6.7% as of March 31, 2024. The principal amount of borrowings under the Term Loan Agreement amortize in equal quarterly installments of 2.5% of the original outstanding principal amounts in 2024, 2.5% in 2025, and 5% in 2026, with the remaining outstanding principal amount under the Term Loan Agreement due and payable in full at maturity in December 2026. The Company may make principal payments in excess of the amortization schedule at its discretion. During the three months ended March 31, 2024 the Company made $125 million of principal payments. The sole financial covenant in the Term Loan Agreement requires that total debt not exceed 65% of total capitalization as of the last day of each fiscal quarter of the Company. The Company was in compliance with this covenant as of March 31, 2024.

2021 Credit Facility

The Company has a five-year credit agreement with a syndicate of lenders and JPMorgan Chase, N.A., as administrative agent, that provides a $750 million committed revolving credit facility (the “2021 Credit Facility"). Commitments under the 2021 Credit Facility may be increased to an aggregate amount not to exceed $1.25 billion.

The 2021 Credit Facility contains a financial covenant requiring that, as of the last day of each fiscal quarter, the ratio of total indebtedness to total capitalization shall not be greater than 65%. The Company was in compliance with this covenant as of March 31, 2024. As of March 31, 2024, the 2021 Credit Facility was undrawn.

Short-Term Debt and Current Portion of Long-Term Debt

The Company had $219.7 million and $117.4 million of short-term debt and current portion of long-term debt outstanding at March 31, 2024 and December 31, 2023, respectively, composed of the following:

$199.0 million of commercial paper borrowings outstanding at March 31, 2024, and $100.0 million of commercial paper borrowings outstanding at December 31, 2023, which was used to fund the Systems Control acquisition.

$18.7 million and $15.0 million of long-term debt classified as current within current liabilities in the Condensed Consolidated Balance Sheets, reflecting maturities within the next 12 months related to borrowing under the Term Loan Agreement at March 31, 2024 and December 31, 2023, respectively.

$2.0 million and $2.4 million of other short-term debt outstanding at March 31, 2024 and December 31, 2023, respectively, which consisted of borrowings to support our international operations in China and amounts outstanding under our commercial card program.





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Note 18 Stock-Based Compensation

As of March 31, 2024, the Company had various stock-based awards outstanding which were issued to executives and other key employees. The Company recognizes the grant-date fair value of all stock-based awards to employees over their respective requisite service periods (generally equal to an award’s vesting period), net of estimated forfeitures. A stock-based award is considered vested for expense attribution purposes when the employee’s retention of the award is no longer contingent on providing subsequent service. For those awards that vest immediately upon retirement eligibility, the Company recognizes compensation cost immediately for retirement-eligible individuals or over the period from the grant date to the date retirement eligibility is achieved, if less than the stated vesting period.
 
The Company’s long-term incentive program for awarding stock-based compensation includes a combination of restricted stock, stock appreciation rights (“SARs”), and performance shares of the Company’s common stock pursuant to the Hubbell Incorporated 2005 Incentive Award Plan as amended and restated (the "Award Plan"). Under the Award Plan, the Company may authorize up to 9.7 million shares of common stock to settle awards of restricted stock, performance shares, or SARs. The Company issues new shares to settle stock-based awards. During the three months ended March 31, 2024, the Company's grant of stock-based awards included restricted stock, SARs and performance shares.

Each of the compensation arrangements is discussed below.

Restricted Stock  

The Company issues various types of restricted stock, of which the restricted stock awards are considered outstanding at the time of grant, as the award holders are entitled to dividends and voting rights. Unvested restricted stock awards are considered participating securities when computing earnings per share. Restricted stock unit award holders are not entitled to dividends or voting rights until settlement. Restricted stock grants are not transferable and are subject to forfeiture in the event of the recipient’s termination of employment prior to vesting.

Restricted Stock Awards Issued to Employees - Service Condition
 
Restricted stock awards that vest based upon a service condition are expensed on a straight-line basis over the requisite service period. These awards generally vest either in three equal installments on each of the first three anniversaries of the grant date or on the third-year anniversary of the grant date. The fair value of these awards is measured by the average of the high and low trading prices of the Company’s common stock on the most recent trading day immediately preceding the grant date (“measurement date”).

In February 2024, the Company granted 37,817 restricted stock awards with a fair value per share of $352.55.
 
Restricted Stock Units Issued to Employees - Service Condition
 
Restricted stock units that vest based upon a service condition are expensed on a straight-line basis over the requisite service period. These awards generally vest in three equal installments on each of the first three anniversaries of the grant date. The fair value of these awards is measured by the average of the high and low trading prices of the Company’s common stock on the measurement date reduced by the present value of dividends expected to be paid during the requisite service period.

In February 2024, the Company granted 1,773 restricted stock units with a fair value per share of $341.19.

Stock Appreciation Rights

SARs grant the holder the right to receive, once vested, the value in shares of the Company's common stock equal to the positive difference between the grant price, as determined using the mean of the high and low trading prices of the Company’s common stock on the measurement date, and the fair market value of the Company’s common stock on the date of exercise. This amount is payable in shares of the Company’s common stock. SARs vest and become exercisable in three equal installments during the first three years following the grant date and expire ten years from the grant date.

In February 2024, the Company granted 62,908 SAR awards. The fair value of each SAR award was measured using the Black-Scholes option pricing model.

The following table summarizes the weighted-average assumptions used in estimating the fair value of the SARs granted during February 2024:

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Grant DateExpected Dividend YieldExpected VolatilityRisk Free Interest RateExpected TermWeighted Avg. Grant Date Fair Value of 1 SAR
February 20241.6%25.7%4.0%4.8 years$88.03
 
The expected dividend yield was calculated by dividing the Company’s expected annual dividend by the average stock price for the past three months. Expected volatilities are based on historical volatilities of the Company’s stock for a period consistent with the expected term. The expected term of SARs granted was based upon historical exercise behavior of SARs. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the award.

Performance Shares

Performance shares represent the right to receive a share of the Company’s common stock subject to the achievement of certain market or performance conditions established by the Company’s Compensation Committee and measured over a three-year period. Partial vesting in these awards may occur after separation from the Company for retirement eligible employees. Shares are not vested until approved by the Company’s Compensation Committee.

Performance Shares - Market Condition

In February 2024, the Company granted 8,736 performance shares that will vest subject to a market condition and service condition through the performance period. The market condition associated with the awards is the Company's total shareholder return ("TSR") compared to the TSR generated by the companies that comprise the S&P Capital Goods 900 index over a three year performance period. Performance at target will result in vesting and issuance of the number of performance shares granted, equal to 100% payout. Performance below or above target can result in issuance in the range of 0%-200% of the number of shares granted. Expense is recognized irrespective of the market condition being achieved.

The fair value of the performance share awards with a market condition for the 2024 grant was determined based upon a lattice model.

The following table summarizes the related assumptions used to determine the fair values of the performance share awards with a market condition granted during February 2024:

Grant DateStock Price on Measurement DateDividend YieldExpected VolatilityRisk Free Interest RateExpected TermWeighted Avg. Grant Date Fair Value
February 2024$352.551.4%30.6%4.1%2.9 years$483.99

Expected volatilities are based on historical volatilities of the Company’s and members of the peer group's stock over the expected term of the award. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the expected term of the award.

Performance Shares - Performance Condition

In February 2024, the Company granted 17,770 performance shares that will vest subject to an internal Company-based performance condition and service requirement.

Fifty percent of these performance shares granted will vest based on Hubbell’s compounded annual growth rate of Net sales as compared to that of the companies that comprise the S&P Capital Goods 900 index. Fifty percent of these performance shares granted will vest based on achieved operating profit margin performance as compared to internal targets. Each of these performance conditions is measured over the same three-year performance period. The cumulative result of these performance conditions can result in a number of shares earned in the range of 0%-200% of the target number of shares granted.

The fair value of the award is measured based upon the average of the high and low trading prices of the Company's common stock on the measurement date reduced by the present value of dividends expected to be paid during the requisite service period. The Company expenses these awards on a straight-line basis over the requisite service period and including an assessment of the performance achieved to date. The weighted average fair value per share was $341.19 for the awards granted during February 2024.
Grant DateFair ValuePerformance PeriodPayout Range
February 2024$341.19Jan 2024 - Dec 2026
0%-200%


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ITEM 2Management’s Discussion and Analysis of Financial Condition and Results of Operations


Executive Overview of the Business
 
Hubbell is a global manufacturer of quality electrical products and utility solutions for a broad range of customer and end market applications. We provide utility and electrical solutions that enable our customers to operate critical infrastructure reliably and efficiently, and we empower and energize communities through innovative solutions supporting energy infrastructure In Front of the Meter, on The Edge, and Behind the Meter. In Front of the Meter is where utilities transmit and distribute energy to their customers. The Edge connects utilities with owner/operators and allows energy and data to be distributed back and forth. Behind the Meter is where owners and operators of buildings and other critical infrastructure consume energy. Products are either sourced complete, manufactured or assembled by subsidiaries in the United States, Canada, Puerto Rico, Mexico, China, the UK, Brazil, Australia, Spain, Ireland and the Republic of the Philippines. The Company also participates in joint ventures in Hong Kong and the Republic of the Philippines, and maintains offices in Singapore, Italy, China, India, Mexico, South Korea, Chile, and countries in the Middle East. The Company employed approximately 18,400 individuals worldwide as of March 31, 2024.

The Company’s reporting segments consist of the Utility Solutions segment and Electrical Solutions segment.

Results for the three months ended March 31, 2024 by segment are included under “Segment Results” within this Management’s Discussion and Analysis.

The Company's long-term strategy is to serve its customers with reliable and innovative electrical and related infrastructure solutions with desired brands and high-quality service, delivered through a competitive cost structure; to complement organic revenue growth with acquisitions that enhance its product offerings; and to allocate capital effectively to create shareholder value.
 
Our strategy to complement organic revenue growth with acquisitions is focused on acquiring assets that extend our capabilities, expand our product offerings, and present opportunities to compete in core, adjacent or complementary markets. Our acquisition strategy also provides the opportunity to advance our revenue growth objectives during periods of weakness or inconsistency in our end-markets.

Our strategy to deliver products through a competitive cost structure has resulted in past and ongoing restructuring and related activities. Our restructuring and related efforts include the consolidation of manufacturing and distribution facilities, and workforce actions, as well as streamlining and consolidating our back-office functions. The primary objectives of our restructuring and related activities are to optimize our manufacturing footprint, cost structure, and effectiveness and efficiency of our workforce.

Productivity improvement also continues to be a key area of focus for the Company and efforts to drive productivity complement our restructuring and related activities to minimize the impact of rising material costs and other administrative cost inflation. Because material costs are approximately two thirds of our cost of goods sold, continued volatility in this area could significantly impact profitability. Our goal is to have pricing and productivity programs that offset material and other inflationary cost increases as well as pay for investments in key growth areas.

Productivity programs affect virtually all functional areas within the Company by reducing or eliminating waste and improving processes. We continue to expand our efforts related to global product and component sourcing, as well as supplier cost reduction programs. Value engineering efforts, product transfers and the use of lean process improvement techniques are expected to continue to increase manufacturing efficiency. In addition, we continue to build upon the benefits of our enterprise resource planning system across all functions.

Our sales are also subject to market conditions that may cause customer demand for our products to be volatile and unpredictable, particularly in our Electrical Solutions segment. Product demand can be affected by fluctuations in domestic and international economic conditions, as well as currency fluctuations, commodity costs, and a variety of other factors. Since early 2021, we have experienced significant inflationary pressure across much of our business. As a result, we have taken various pricing actions to cover the higher costs and protect our profitability. Although there has been some mitigation in the rate of inflation starting in 2023, we expect inflation to remain a factor for the foreseeable future and we expect to continue to take these pricing actions subject to demand and market conditions. Accordingly, there can be no assurance that we will be able to maintain our margins in response to further changes in inflationary pressures. In addition, macroeconomic effects such as increases in interest rates and other measures taken by central banks and other policy makers could have a negative effect on overall economic activity which could reduce our customers’ demand for our products, and cause the continuation of relatively high market interest rates that increase our borrowing costs.

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The following is a discussion and analysis of our business, financial condition and results of operations as of and for the three months ended March 31, 2024 and 2023. This discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and notes thereto in Item 1 of this Quarterly Report on Form 10-Q (the "Condensed Financial Statements"), and the audited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Results of Operations – First Quarter of 2024 compared to the First Quarter of 2023
 
Overview

First quarter 2024 net sales were $1,399.1 million and grew by 9%, including 2% organic growth from price realization and 6% growth from acquisitions net of divestitures.

Organic growth in the Electrical Solutions segment was strong, where electrification is driving broad-based strength across electrical products and industrial markets, with continued high rates of renewables growth. Organic growth was flat in the Utility Solutions segment as strength in grid automation products and continued backlog conversion in metering products, was offset by continued channel inventory management in distribution markets and weak Telcom markets in the quarter. Price realization continues to be positive in our segments as compared to the first quarter of 2023.

Acquisitions within Utility Solutions contributed to 8% net sales growth driven by our acquisition of Systems Control in the fourth quarter of 2023, while the divestiture of our residential lighting business from the Electrical Solutions segment was completed in the first quarter of 2024 and contributed to a 2% decline in net sales as compared to the first quarter of 2023.

Operating margin in the first quarter of 2024 was 16.3% and contracted by 310 basis points. Adjusted operating margin, which excludes amortization of acquisition-related intangibles and transaction, integration and separation costs, was 19.7% and contracted by 100 basis points. Margin contraction in the quarter was primarily driven by material and other cost inflation, lower volume and our continuing investments in the business. Margins in the first quarter of 2024 also reflect the effect of favorable price realization and benefits from operational productivity. These factors are further described within Segment Results below.

In December 2023, the Company entered into a definitive agreement to sell its residential lighting business for a cash purchase price of $131 million, subject to customary adjustments. The Company concluded the business met the criteria for classification as held for sale in the fourth quarter of 2023. The residential lighting business was reported within the Electrical Solutions Segment. The transaction closed in the first quarter of 2024 and the Company recorded a pre-tax loss on the sale of $5.3 million, which is recorded within Total other expense in the Company's Condensed Consolidated Statement of Income.

In addition, during 2023, the Company completed a number of acquisitions that affect the comparability of current period results of operations to those of prior year periods. For additional information regarding such transactions, see Note 2, Business Acquisitions and Dispositions in the notes to the Condensed Financial Statements.


SUMMARY OF CONDENSED CONSOLIDATED RESULTS (IN MILLIONS, EXCEPT PER SHARE DATA): 
 Three Months Ended March 31,
 2024% of Net sales2023% of Net sales
Net sales$1,399.1  $1,285.4  
Cost of goods sold951.4 68.0 %837.1 65.1 %
Gross profit447.7 32.0 %448.3 34.9 %
Selling & administrative ("S&A") expense219.2 15.7 %199.5 15.5 %
Operating income228.5 16.3 %248.8 19.4 %
Net income149.1 10.7 %183.4 14.3 %
Less: Net income attributable to non-controlling interest(1.3)(0.1)%(1.5)(0.1)%
Net income attributable to Hubbell Incorporated147.8 10.6 %181.9 14.2 %
Less: Earnings allocated to participating securities(0.3)(0.4)
Net income available to common shareholders$147.5 $181.5 
Average number of diluted shares outstanding54.0 53.9 
DILUTED EARNINGS PER SHARE $2.73 $3.37 
HUBBELL INCORPORATED-Form 10-Q    30

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In the following discussion of results of operations, we refer to "adjusted" operating measures. We believe those adjusted measures, which exclude the impact of certain costs, gains and losses, may provide investors with useful information regarding our underlying performance from period to period and allow investors to understand our results of operations without regard to items that, in management's judgement, significantly affect the comparability of operating results, or we do not consider a components of our core operating performance.

Significant items impacting comparability:

Transaction, integration and separation costs

The effects that acquisitions and divestitures may have on our results fluctuate significantly based on the timing, size and number of transactions, and therefore result in significant volatility in the costs to complete transactions and to integrate or separate the businesses.

Transaction costs are primarily professional services and other fees incurred to complete the transactions. Integration and separation costs are the internal and external incremental costs directly relating to these activities for the acquired or divested business.

The acquisition and divestiture actions taken by the Company in the fourth quarter of 2023 have resulted in a significant increase in current period integration and separation costs. As a result, we believe excluding costs relating to these fourth quarter transactions provides useful and more comparable information to investors to better assess our operating performance.

Gains or losses on disposition of a business

Certain of the Company's adjusted measures exclude these gains or losses because we believe it enhances management's and investors' ability to analyze underlying business performance and facilitates comparisons of our financial results over multiple periods. In the first quarter of 2024 the Company recognized a $5.3 million pre-tax loss on the disposition of the residential lighting business.

Certain of the Company's adjusted measures also exclude the income tax effect directly related to the disposition of the residential lighting business. In the first quarter of 2024, the Company recognized $6.8 million of income tax expense on the sale of the residential lighting business, primarily driven by differences between book and tax basis in goodwill.

Amortization of intangible assets

Adjusted operating measures exclude amortization of all intangible assets associated with our business acquisitions, including inventory step-up amortization associated with those acquisitions. The intangible assets associated with our business acquisitions arise from the allocation of the purchase price using the acquisition method of accounting in accordance with Accounting Standards Codification 805, “Business Combinations.” These assets consist primarily of customer relationships, developed technology, trademarks and tradenames, and patents, as reported in Note 7 – Goodwill and Other Intangible Assets, under the heading “Total Definite-Lived Intangibles,” within the Company’s audited consolidated financial statements set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

The Company believes that the exclusion of these non-cash expenses (i) enhances management’s and investors’ ability to analyze underlying business performance, (ii) facilitates comparisons of our financial results over multiple periods, and (iii) provides more relevant comparisons of our results with the results of other companies as the amortization expense associated with these assets may fluctuate significantly from period to period based on the timing, size, nature, and number of acquisitions. Although we exclude amortization of these acquired intangible assets and inventory step-up from our non-GAAP results, we believe that it is important for investors to understand that revenue generated, in part, from such intangibles is included within revenue in determining adjusted net income attributable to Hubbell Incorporated.

Adjusted results also excluded the income tax effects of the above adjustments which are calculated using the statutory tax rate, taking into consideration the nature of the item and the relevant taxing jurisdiction, unless otherwise noted.

HUBBELL INCORPORATED-Form 10-Q    31

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Organic net sales (or organic net sales growth), a non-GAAP measure, represents Net sales according to U.S. GAAP, less Net sales from acquisitions and divestitures during the first twelve months of ownership or divestiture, respectively, less the effect of fluctuations in Net sales from foreign currency exchange. The period-over-period effect of fluctuations in Net sales from foreign currency exchange is calculated as the difference between local currency Net sales of the prior period translated at the current period exchange rate as compared to the same local currency Net sales translated at the prior period exchange rate. We believe this measure provides management and investors with a more complete understanding of the underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and foreign currency as these activities can obscure underlying trends. When comparing Net sales growth between periods, excluding the effects of acquisitions, business dispositions and currency exchange rates, those effects are different when comparing results for different periods. For example, because Net sales from acquisitions are considered inorganic from the date we complete an acquisition through the end of the first year following the acquisition, Net sales from such acquisition are reflected as organic net sales thereafter.

There are limitations to the use of non-GAAP measures. Non-GAAP measures do not present complete financial results. We compensate for this limitation by providing a reconciliation between our non-GAAP financial measures and the respective most directly comparable financial measure calculated and presented in accordance with GAAP. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These financial measures should not be considered in isolation from, as substitutes for, or alternative measures of, reported GAAP financial results, and should be viewed in conjunction with the most comparable GAAP financial measures and the provided reconciliations thereto. We believe, however, that these non-GAAP financial measures, when viewed together with our GAAP results and related reconciliations, provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

The following table reconciles Adjusted operating income, a non-GAAP measure, to Operating income, the directly comparable GAAP financial measure (in millions):

 Three Months Ended March 31,
 2024% of Net sales2023% of Net sales
Operating income (GAAP measure)$228.5 16.3 %$248.8 19.4 %
Amortization of acquisition-related intangible assets39.4 2.8 %17.8 1.3 %
Transaction, integration & separation costs7.3 0.6 %— — %
Adjusted operating income (non-GAAP measure)$275.2 19.7 %$266.6 20.7 %
The following table reconciles Adjusted net income attributable to Hubbell Incorporated, Adjusted net income available to common shareholders, and the diluted per share amounts thereof, each a non-GAAP measure, to the directly comparable GAAP financial measures (in millions, except per share data).
Three Months Ended March 31,
2024Diluted Per Share2023Diluted Per Share
Net income attributable to Hubbell Incorporated (GAAP measure)$147.8 $2.73 $181.9 $