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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10Q

HUBBELL INCORPORATED

(203) 799-4100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report.)

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The number of shares outstanding of the Class A Common Stock and Class B Common Stock as of August 1, 2003 was 9,666,968 and 49,754,455, respectively.

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INDEX

HUBBELL INCORPORATED

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HUBBELL INCORPORATED

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Statements of Income
(unaudited)
(in millions, except per share amounts)

See notes to consolidated financial statements.

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HUBBELL INCORPORATED

Consolidated Balance Sheets
(in millions)

See notes to consolidated financial statements.

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HUBBELL INCORPORATED

Consolidated Statements of Cash Flows
(unaudited)
(in millions)

See notes to consolidated financial statements.

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HUBBELL INCORPORATED
Notes to Consolidated Financial Statements
June 30, 2003
(unaudited)

1.     Basis of Presentation

	The accompanying unaudited consolidated financial statements of Hubbell Incorporated (“Hubbell”, the “Company”, or “Registrant”) have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. Certain prior year amounts have been reclassified to conform with the current year presentation.
	The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America 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, 2002.

2.     Stock- Based Compensation

	Effective December 2002, the Company adopted the disclosure provisions as outlined in Statement of Financial Accounting Standards (“SFAS”) No. 148 “Accounting for Stock Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123”. SFAS No. 123 — “Accounting for Stock-Based Compensation” permits, but does not require, a fair value based method of accounting for employee stock option and performance plans which results in compensation expense being recognized in the results of operations when awards are granted. The Company continues to use the intrinsic value based method of accounting for such plans in accordance with Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees,” where compensation expense per option granted is measured as the excess, if any, of the quoted market price of the Company’s stock at the measurement date over the exercise price.
	The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 for stock options (in millions, except per share amounts):

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3.     Inventories are classified as follows (in millions):

4.     Business Combinations

	There were no business acquisitions or dispositions for the first six months of 2003.
	In April 2002, Hubbell acquired the LCA Group, Inc. (“LCA”), the domestic lighting business of U.S. Industries, Inc. The purchase price for the acquisition was approximately $235.0 million in cash.
	LCA manufactures and distributes a wide range of outdoor and indoor lighting products to commercial, industrial and residential markets under various brand names, including Alera, Kim, Spaulding, Whiteway, Moldcast, Architectural Area Lighting, Columbia, Keystone, Prescolite, Dual-Lite and Progress. Hubbell financed the acquisition of LCA with available cash and through the issuance of $200.0 million of long-term notes in May 2002.
	The following table summarizes the final fair value of the LCA assets acquired and liabilities assumed from U.S. Industries at April 26, 2002 (in millions):

The Company completed its final determination of goodwill related to the LCA acquisition in the second quarter of 2003. At June 30, 2003, goodwill related to the acquisition amounted to $55.9 million, representing the difference between the purchase price of $234.6 million and the net assets acquired of $178.7 million. In total, $76.6 million of the total purchase price has been allocated to goodwill and identifiable intangible assets deemed to have indefinite lives (primarily trademarks/trade names). Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets. The amortization of goodwill associated with the LCA acquisition is expected to be deductible for federal tax purposes.

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The following unaudited pro forma data summarize the results of operations for the periods indicated as if the acquisition of LCA had been completed as of the beginning of the periods presented. The pro forma data give effect to actual operating results prior to the acquisition and includes adjustments to interest expense and other costs associated with the acquisition. No effect has been given to cost reductions or operating synergies in this presentation. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred as of the beginning of the period presented or that may be obtained in the future (in millions, except per share amounts):

Management believes that the combination of the LCA brand names acquired and Hubbell’s other lighting brands will create leading market positions in many sub-segments of the North American lighting fixtures industry. Further, the acquisition adds complementary products to the Company’s current product offering and is expected to enhance the ability of the Company to attract premium manufacturers’ representatives in key markets, which is the primary channel to market in the North American lighting fixtures business. The acquired businesses are included in the Company’s Electrical Segment beginning on the acquisition date of April 26, 2002. The Company expects its lighting operations to generate annual sales of approximately $750 million due to the combination of LCA with the Company’s other lighting operations.

Dispositions

	In April 2000, the Company completed the sale of its WavePacer Digital Subscriber Line (“WavePacer”) assets, part of Pulse Communications, Inc., for a sales price of $61.0 million. The transaction produced a pretax gain on sale of $36.2 million in 2000. At the time of sale, the Company retained a contractual obligation to supply product to the buyer at prices below manufacturing cost, resulting in an adverse commitment.
	Management revised the remaining adverse commitment accrual in the 2002 first quarter to reflect lower order quantities and projected costs, which resulted in an additional pretax gain of $1.4 million.
	In September 2002, the Company entered into an agreement modifying the original manufacturing contract. In accordance with the modification agreement, final quantities were shipped and the Company was released from all service and warranty obligations.

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5.     Earnings Per Share

	The following table sets forth the computation of earnings per share for the three and six months ended June 30, 2003 and 2002 (in millions, except per share amounts).

     A portion of the total options to purchase shares of common stock outstanding were not included in the computation of diluted earnings per share because the effect would be anti-dilutive. The number of anti-dilutive options outstanding were 3.6 million for the second quarter and six months ended June 30, 2003. The number of anti-dilutive options outstanding were 2.2 million for the second quarter and six months ended June 30, 2002.

6.     Goodwill and Other Intangible Assets

	Changes in the carrying amount of goodwill for the six months ended June 30, 2003, by segment, were as follows (in millions):

	In the first and second quarters of 2003, the Company made certain adjustments to goodwill in order to finalize the purchase accounting of the acquisitions of Hawke Cable Glands Limited (“Hawke”) in March 2002, and LCA. These adjustments are related to the fair value of certain fixed assets and accrued liabilities.
	During 2002, the Company completed the initial impairment tests of the recorded value of goodwill, as required by SFAS 142, “Goodwill and Other Intangible Assets”. The Company identified one reporting unit within the Industrial Technology segment with a book value, including goodwill, which exceeded its fair market value. Thereafter, the implied fair value of the goodwill for this reporting unit was calculated, which resulted in a non-cash charge of $25.4 million, net of tax, or $0.43 per share-diluted to write-down the full value of the reporting unit’s goodwill. This non-cash charge was reported as the cumulative effect of a change in accounting principle retroactive to January 1, 2002. Fair values were calculated using a range of future operating results and primarily utilized a discounted cash flow model. In the second quarter of 2003, the Company performed its annual impairment testing of goodwill and indefinite-lived intangible assets. This testing resulted in implied fair values for each reporting unit which exceeded the reporting unit’s carrying value, including goodwill. Similarly, there were no impairments of indefinite-lived intangible assets. The Company’s policy is to perform its annual impairment testing in the second quarter of each year, unless circumstances dictate the need for more frequent assessments.

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Identifiable intangible assets as of June 30, 2003 are recorded in Intangible assets and other in the Consolidated Balance Sheet and include approximately $25 million of indefinite-lived intangible assets not subject to amortization and $8.1 million of intangibles with definite lives that are being amortized and are presented net of accumulated amortization of $1.9 million. Definite-lived intangible assets primarily represent trademarks and patents, for which amortization expense is expected to be approximately $1 million per year over the next five years.

7.     Shareholders’ Equity

	Shareholders’ Equity is comprised of the following (in millions, except share and per share amounts):

8.     Special Charges

     Special Charges — Lighting Business Integration Program

	Operating results in the second quarter and first six months of 2003 reflect special charges of $4.8 million and $5.9 million, respectively. Included in these amounts is $2.8 million of expense recorded in the second quarter consisting of contract cancellation costs of $1.5 million and asset impairments and other costs of $1.3 million resulting from the Company’s decision to discontinue its entertainment lighting product offering. In addition to the Special charge component, $1.8 million is included in Cost of goods sold for the write-down of entertainment lighting inventory to salvage value. Consequently, the total cost associated with the entertainment lighting product line discontinuance is $4.6 million. In addition, the Company expensed $2.0 million and $3.1 million in the second quarter and first six months of 2003, respectively, as Special charges related to the ongoing lighting business integration program. These expenses primarily related to facility closures and personnel realignment, and consist of costs which are expensed as they are incurred in 2003 in accordance with accounting principles generally accepted in the United States of America.
	The lighting business integration program began with a pretax charge to earnings of $10.3 million in December 2002 to provide for the following actions:

	Product Line Inventory Rationalization – ($5.4 million)
	This program reflected management’s decision to streamline its product offering and rationalize overlapping product lines between Hubbell’s existing lighting fixture business and the lighting fixture businesses acquired in 2002. The cost of this program reflected the write-down of the carrying cost of certain inventory to salvage value and is included in Cost of goods sold in the 2002 Consolidated Statement of Income. This inventory has been, or is expected to be, scrapped or sold for a nominal value, which was considered in the write-down recorded.
	Reorganization – ($4.9 million)
	The 2002 special charge also included costs related to future actions to integrate and reorganize the lighting fixture businesses acquired in 2002. Specific actions being undertaken or already completed, all within the Electrical segment, include the following:

	•		Relocate San Leandro, CA office
	•		Close Martin, TN manufacturing facility

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	•		Consolidate warehouses
	•		Rationalize product lines

	Total reorganization costs of $4.9 million expensed in the 2002 fourth quarter related to severance costs ($1.8 million), asset impairments ($2.4 million) and other facility exit costs ($0.7 million). Estimated proceeds of $1.0 million related to asset sale recoveries were considered in determining the asset impairment charges.
	A facility in Martin, TN was closed in the first quarter of 2003 and the carrying cost of this facility was reduced to estimated realizable value. The realizable value of equipment to be disposed of is nominal as the majority of the equipment is (A) proprietary, which would only be of value to competitors and which will not be sold; (B) designed specifically for the Company’s factories and therefore has limited or no marketability; or (C) equipment which the Company plans to scrap. A small amount of other equipment may be saleable if manufacturing equipment market conditions improve.
	Employee benefit costs included estimated severance benefits for 222 employees, all of whom left the company by March 31, 2003.
	Facility exit costs included warehouse lease termination costs and postproduction maintenance and facility restoration costs associated with facilities to be closed, and costs incurred in 2002 for moving equipment.

	In addition to the $10.3 million of 2002 special charge costs discussed above, an additional $2.0 million of costs related to integration activities affecting the acquired LCA operations were accrued at December 31, 2002 in the purchase accounting for the acquisition of LCA. The $2.0 million of costs accrued in the purchase accounting related primarily to severance and employee relocation ($1.7 million) in connection with the closure of the San Leandro, CA facility. Separation benefits were provided for approximately 64 employees, of which approximately 60 of these employees have left the Company as of June 30, 2003.
	The following table sets forth the components and status of total accrued lighting business integration costs at June 30, 2003 (in millions):

Through June 30, 2003, $20.0 million has either been accrued in purchase accounting or charged to expense in connection with this program. Substantially all actions contemplated by these charges are scheduled for completion by September 30, 2003. Cash expenditures for actions recorded to date under the lighting business integration program are expected to total approximately $9.4 million for severance and other costs of facility closings and contract terminations of which $6.4 million has been spent through June 30, 2003.

     Prior Year Special Charges — 2001 Streamlining Program

	The amounts recorded in 2002 as special charges includes $1.0 million and $1.7 million of costs incurred in the second quarter and six months, respectively, related to the streamlining and cost reduction program (the “Plan”) announced at the end of 2001. The Plan was comprised of a variety of costs associated with actions undertaken to reduce the productive capacity of the Company and realign employment levels to better match with lower actual and forecast rates of incoming business. In total, the Plan required a cumulative charge to pretax profit and loss of $52.0 million consisting of aggregate 2002 special charges of $3.4 million and $48.6 million of charges recognized in 2001.
	The $1.0 million special charge in the second quarter of 2002 related to the Plan primarily included severance and program implementation costs.
	Substantially all actions contemplated in the Plan were completed by December 31, 2002. Total cash expenditures through June 30, 2003 associated with the special charges totaled $12 million for severance and other costs of facility closings, prior to $11 million in asset sale recoveries achieved to date. An additional $2 million in asset sale recoveries is expected.

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9. Comprehensive Income:

     Total comprehensive income and its components are as follows (in millions):

10. Segment Information

     The following table sets forth financial information by business segment (in millions):