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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Hubbell Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	597,801)	458,435)	403,273)	472,549)	591,651)
Cost of capital²	16.78%	16.14%	15.66%	15.59%	14.93%
Invested capital³	4,504,100)	4,298,100)	4,325,800)	4,209,500)	4,206,535)

Economic profit⁴	(158,211)	(235,490)	(274,109)	(183,844)	(36,373)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 597,801 – 16.78% × 4,504,100 = -158,211

The financial performance between 2018 and 2022 indicates a consistent failure to generate positive economic profit, meaning the return on invested capital did not exceed the cost of capital. While a recovery trend is evident in the latter part of the period, the entity remained in a value-destruction phase throughout the five-year window.

Net Operating Profit After Taxes (NOPAT): A V-shaped trajectory is observed in NOPAT. After starting at 591.7 million in 2018, the figure declined for two consecutive years, reaching a minimum of 403.3 million in 2020. A subsequent recovery phase saw NOPAT climb to 458.4 million in 2021 and further to 597.8 million in 2022, effectively recovering the losses in operating profitability experienced during the 2019-2020 period.
Cost of Capital: The cost of capital demonstrated a consistent and uninterrupted upward trend. Starting at 14.93% in 2018, the rate increased annually, reaching 16.78% by the end of 2022. This steady rise increased the financial hurdle required to achieve a positive economic profit.
Invested Capital: Invested capital remained relatively stagnant from 2018 through 2021, maintaining a range between 4.2 billion and 4.3 billion. However, a notable increase occurred in 2022, with invested capital rising to 4.5 billion, which further expanded the capital base that required a return.
Economic Profit Trends: Economic profit was negative across the entire analyzed period. The deficit widened significantly from -36.4 million in 2018 to a peak loss of -274.1 million in 2020, driven by the simultaneous decline in NOPAT and the rise in the cost of capital. From 2021 onward, the economic profit began to improve, narrowing to -158.2 million by 2022. This improvement was primarily fueled by the growth in NOPAT, which offset the negative impact of increasing capital costs and an expanded capital base.

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Hubbell Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income attributable to Hubbell Incorporated	545,900)	399,500)	351,200)	400,900)	360,200)
Deferred income tax expense (benefit)¹	(27,800)	9,200)	3,300)	6,100)	49,000)
Increase (decrease) in allowance for doubtful accounts²	3,700)	—)	4,800)	2,900)	200)
Increase (decrease) in LIFO reserve³	50,100)	56,800)	(2,500)	8,000)	20,200)
Increase (decrease) in contract liabilities, deferred revenue⁴	29,100)	(13,100)	(100)	3,300)	17,500)
Increase (decrease) in accrued warranties⁵	(19,900)	(6,600)	(1,600)	(10,600)	78,700)
Increase (decrease) in accrued liabilities for restructuring actions⁶	3,700)	(4,000)	(6,800)	(3,600)	100)
Increase (decrease) in equity equivalents⁷	38,900)	42,300)	(2,900)	6,100)	165,700)
Interest expense, net	49,600)	54,700)	60,300)	69,400)	72,400)
Interest expense, operating lease liability⁸	3,693)	2,306)	3,210)	3,546)	3,360)
Adjusted interest expense, net	53,293)	57,006)	63,510)	72,946)	75,760)
Tax benefit of interest expense, net⁹	(11,191)	(11,971)	(13,337)	(15,319)	(15,910)
Adjusted interest expense, net, after taxes¹⁰	42,101)	45,035)	50,173)	57,627)	59,851)
(Gain) loss on marketable securities	—)	—)	—)	1,800)	—)
Investment income, before taxes	—)	—)	—)	1,800)	—)
Tax expense (benefit) of investment income¹¹	—)	—)	—)	(378)	—)
Investment income, after taxes¹²	—)	—)	—)	1,422)	—)
(Income) loss from discontinued operations, net of tax¹³	(34,600)	(34,500)	—)	—)	—)
Net income (loss) attributable to noncontrolling interest	5,500)	6,100)	4,800)	6,500)	5,900)
Net operating profit after taxes (NOPAT)	597,801)	458,435)	403,273)	472,549)	591,651)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in contract liabilities, deferred revenue.

⁵ Addition of increase (decrease) in accrued warranties.

⁶ Addition of increase (decrease) in accrued liabilities for restructuring actions.

⁷ Addition of increase (decrease) in equity equivalents to net income attributable to Hubbell Incorporated.

⁸ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 115,400 × 3.20% = 3,693

⁹ 2022 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 53,293 × 21.00% = 11,191

¹⁰ Addition of after taxes interest expense to net income attributable to Hubbell Incorporated.

¹¹ 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0

¹² Elimination of after taxes investment income.

¹³ Elimination of discontinued operations.

Net Income Attributable to Hubbell Incorporated: The net income showed fluctuations throughout the observed periods. Starting at 360,200 thousand US dollars in 2018, it increased to 400,900 thousand US dollars in 2019. However, there was a decline in 2020 to 351,200 thousand US dollars, followed by a recovery to 399,500 thousand US dollars in 2021. In 2022, the net income rose significantly to 545,900 thousand US dollars, marking the highest value in the series and indicating improved profitability in that year.
Net Operating Profit After Taxes (NOPAT): The net operating profit after taxes declined from 591,651 thousand US dollars in 2018 to 472,549 thousand US dollars in 2019 and further to 403,273 thousand US dollars in 2020, showing a downward trend in operating profitability over these three years. This trend reversed in 2021 with an increase to 458,435 thousand US dollars, followed by a substantial rise to 597,801 thousand US dollars in 2022, reaching the highest level in the period assessed. This recovery suggests a notable improvement in operating efficiency and profitability in the most recent year examined.

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Hubbell Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Provision for income taxes	140,200)	88,200)	97,500)	113,100)	100,900)
Less: Deferred income tax expense (benefit)	(27,800)	9,200)	3,300)	6,100)	49,000)
Add: Tax savings from interest expense, net	11,191)	11,971)	13,337)	15,319)	15,910)
Less: Tax imposed on investment income	—)	—)	—)	(378)	—)
Cash operating taxes	179,191)	90,971)	107,537)	122,697)	67,810)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The data reveals fluctuations in the tax-related financial items over the five-year period ending in 2022.

Provision for Income Taxes: The provision for income taxes showed a general pattern of variability. Starting at 100,900 thousand USD in 2018, it increased to 113,100 thousand USD in 2019. This was followed by a decline to 97,500 thousand USD in 2020 and a further decrease to 88,200 thousand USD in 2021. However, in 2022, there was a significant rise to 140,200 thousand USD, marking the highest value in the observed period.
Cash Operating Taxes: Cash operating taxes displayed notable volatility across the years. The amount nearly doubled from 67,810 thousand USD in 2018 to 122,697 thousand USD in 2019. It then decreased to 107,537 thousand USD in 2020 and further declined to 90,971 thousand USD in 2021. The year 2022 saw a sharp increase to 179,191 thousand USD, the peak in the given timeline.

Overall, both provision for income taxes and cash operating taxes exhibit significant fluctuations year-over-year. Despite some declines in the intermediate years, each ended with considerable increases in 2022. This indicates possible changes in taxable income, tax rates, or tax planning strategies influencing tax expenses during the most recent year compared to the previous years.

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Hubbell Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Short-term debt and current portion of long-term debt	4,700)	9,700)	153,100)	65,400)	56,100)
Long-term debt, excluding current portion	1,437,900)	1,435,500)	1,436,900)	1,506,000)	1,737,100)
Operating lease liability¹	115,400)	85,400)	107,000)	101,300)	98,835)
Total reported debt & leases	1,558,000)	1,530,600)	1,697,000)	1,672,700)	1,892,035)
Total Hubbell Incorporated shareholders’ equity	2,360,900)	2,229,800)	2,070,000)	1,947,100)	1,780,600)
Net deferred tax (assets) liabilities²	108,300)	109,500)	130,200)	120,600)	113,600)
Allowance for doubtful accounts³	14,300)	10,600)	12,500)	7,700)	4,800)
Excess of FIFO over LIFO cost basis⁴	187,000)	136,900)	87,300)	89,800)	81,800)
Contract liabilities, deferred revenue⁵	45,800)	16,700)	30,900)	31,000)	27,700)
Accrued warranties⁶	46,200)	66,100)	80,500)	82,100)	92,700)
Accrued liabilities for restructuring actions⁷	7,900)	4,200)	10,600)	17,400)	21,000)
Equity equivalents⁸	409,500)	344,000)	352,000)	348,600)	341,600)
Accumulated other comprehensive (income) loss, net of tax⁹	345,200)	330,800)	329,200)	332,900)	285,700)
Noncontrolling interest	9,700)	10,900)	15,400)	13,400)	18,300)
Adjusted total Hubbell Incorporated shareholders’ equity	3,125,300)	2,915,500)	2,766,600)	2,642,000)	2,426,200)
Construction-in-progress¹⁰	(99,000)	(69,500)	(57,400)	(35,300)	(46,200)
Investments¹¹	(80,200)	(78,500)	(80,400)	(69,900)	(65,500)
Invested capital	4,504,100)	4,298,100)	4,325,800)	4,209,500)	4,206,535)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See details »

⁵ Addition of contract liabilities, deferred revenue.

⁶ Addition of accrued warranties.

⁷ Addition of accrued liabilities for restructuring actions.

⁸ Addition of equity equivalents to total Hubbell Incorporated shareholders’ equity.

⁹ Removal of accumulated other comprehensive income.

¹⁰ Subtraction of construction-in-progress.

¹¹ Subtraction of investments.

Total Reported Debt & Leases: The total reported debt and leases exhibited a declining trend from 2018 to 2021, decreasing from approximately 1,892,035 thousand USD in 2018 to 1,530,600 thousand USD in 2021. This reflects a reduction in debt levels over the four-year period. However, in 2022, there was a slight increase to 1,558,000 thousand USD, indicating a modest rise after several years of decline.
Total Hubbell Incorporated Shareholders’ Equity: Shareholders’ equity consistently increased throughout the period, starting from around 1,780,600 thousand USD in 2018 and reaching 2,360,900 thousand USD by the end of 2022. This steady growth suggests improving net assets and potentially increased retained earnings or capital contributions over time.
Invested Capital: Invested capital showed modest fluctuations but generally trended upward over the observed years. Starting at roughly 4,206,535 thousand USD in 2018, it remained relatively stable until 2021 with small variances, then increased notably to 4,504,100 thousand USD in 2022. This reflects an overall growth in the capital invested in the company’s operations, possibly supporting expansion or increased asset base.
Summary of Trends: The data reveal a conservative approach to debt management, with a reduction in total debt and leases for most of the period and only a slight uptick in the final year. Concurrently, the steady rise in shareholders’ equity highlights strengthening financial resilience and an increasing cushion for creditors. The invested capital’s gradual growth aligns with a broader investment or reinvestment strategy supporting the company’s operational and strategic objectives. Collectively, these trends suggest a focus on financial stability combined with measured growth.

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Hubbell Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	12,897,374)	12,897,374)	÷	14,323,974)	=	0.90	0.90	×	18.37%	=	16.54%
Debt³	1,311,200)	1,311,200)	÷	14,323,974)	=	0.09	0.09	×	3.14% × (1 – 21.00%)	=	0.23%
Operating lease liability⁴	115,400)	115,400)	÷	14,323,974)	=	0.01	0.01	×	3.20% × (1 – 21.00%)	=	0.02%
Total:	14,323,974)					1.00					16.78%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	9,973,726)	9,973,726)	÷	11,593,326)	=	0.86	0.86	×	18.37%	=	15.80%
Debt³	1,534,200)	1,534,200)	÷	11,593,326)	=	0.13	0.13	×	3.14% × (1 – 21.00%)	=	0.33%
Operating lease liability⁴	85,400)	85,400)	÷	11,593,326)	=	0.01	0.01	×	2.70% × (1 – 21.00%)	=	0.02%
Total:	11,593,326)					1.00					16.14%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	8,924,254)	8,924,254)	÷	10,753,854)	=	0.83	0.83	×	18.37%	=	15.24%
Debt³	1,722,600)	1,722,600)	÷	10,753,854)	=	0.16	0.16	×	3.11% × (1 – 21.00%)	=	0.39%
Operating lease liability⁴	107,000)	107,000)	÷	10,753,854)	=	0.01	0.01	×	3.00% × (1 – 21.00%)	=	0.02%
Total:	10,753,854)					1.00					15.66%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	8,031,238)	8,031,238)	÷	9,755,738)	=	0.82	0.82	×	18.37%	=	15.12%
Debt³	1,623,200)	1,623,200)	÷	9,755,738)	=	0.17	0.17	×	3.38% × (1 – 21.00%)	=	0.44%
Operating lease liability⁴	101,300)	101,300)	÷	9,755,738)	=	0.01	0.01	×	3.50% × (1 – 21.00%)	=	0.03%
Total:	9,755,738)					1.00					15.59%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	6,476,307)	6,476,307)	÷	8,294,342)	=	0.78	0.78	×	18.37%	=	14.34%
Debt³	1,719,200)	1,719,200)	÷	8,294,342)	=	0.21	0.21	×	3.40% × (1 – 21.00%)	=	0.56%
Operating lease liability⁴	98,835)	98,835)	÷	8,294,342)	=	0.01	0.01	×	3.40% × (1 – 21.00%)	=	0.03%
Total:	8,294,342)					1.00					14.93%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Hubbell Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	(158,211)	(235,490)	(274,109)	(183,844)	(36,373)
Invested capital²	4,504,100)	4,298,100)	4,325,800)	4,209,500)	4,206,535)
Performance Ratio
Economic spread ratio³	-3.51%	-5.48%	-6.34%	-4.37%	-0.86%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-20.46%	-19.06%	—	—	—
Caterpillar Inc.	-6.38%	-5.79%	—	—	—
Eaton Corp. plc	-9.76%	-9.37%	—	—	—
GE Aerospace	-13.79%	-18.70%	—	—	—
Honeywell International Inc.	-3.09%	-2.00%	—	—	—
Lockheed Martin Corp.	14.31%	15.29%	—	—	—
RTX Corp.	-4.69%	-4.16%	—	—	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -158,211 ÷ 4,504,100 = -3.51%

⁴ Click competitor name to see calculations.

The financial performance between 2018 and 2022 is characterized by persistent negative economic profit, indicating that the returns generated on invested capital were insufficient to cover the company's cost of capital throughout the period. While the deficit deepened significantly in the early part of the period, a recovery trend emerged after 2020.

Economic Profit Trend: Economic profit remained negative for the five-year duration, experiencing a sharp decline from -36,373 thousand US dollars in 2018 to a peak deficit of -274,109 thousand US dollars in 2020. Following this trough, the economic profit improved to -235,490 thousand US dollars in 2021 and further recovered to -158,211 thousand US dollars by the end of 2022.
Invested Capital Stability: Invested capital exhibited relative stability with a gradual overall increase. The capital base grew from 4,206,535 thousand US dollars in 2018 to 4,504,100 thousand US dollars in 2022, suggesting a steady expansion of the company's asset base despite the negative economic profit.
Economic Spread Ratio Analysis: The economic spread ratio, which reflects the difference between the return on invested capital and the cost of capital, mirrored the trend of economic profit. The ratio deteriorated from -0.86% in 2018 to -6.34% in 2020. Subsequently, a positive reversal occurred, with the ratio improving to -5.48% in 2021 and -3.51% in 2022, signaling a reduction in the gap between actual returns and required capital costs.

Overall, the data indicates a period of value destruction that peaked in 2020, followed by a steady improvement in efficiency and return generation through 2022, although the company had not yet returned to positive economic value added by the end of the analyzed period.

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Hubbell Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	(158,211)	(235,490)	(274,109)	(183,844)	(36,373)

Net sales	4,947,900)	4,194,100)	4,186,000)	4,591,000)	4,481,700)
Add: Increase (decrease) in contract liabilities, deferred revenue	29,100)	(13,100)	(100)	3,300)	17,500)
Adjusted net sales	4,977,000)	4,181,000)	4,185,900)	4,594,300)	4,499,200)
Performance Ratio
Economic profit margin²	-3.18%	-5.63%	-6.55%	-4.00%	-0.81%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-15.62%	-15.14%	—	—	—
Caterpillar Inc.	-6.18%	-6.67%	—	—	—
Eaton Corp. plc	-14.47%	-14.06%	—	—	—
GE Aerospace	-12.51%	-18.88%	—	—	—
Honeywell International Inc.	-4.08%	-2.79%	—	—	—
Lockheed Martin Corp.	5.77%	6.53%	—	—	—
RTX Corp.	-7.69%	-7.22%	—	—	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -158,211 ÷ 4,977,000 = -3.18%

³ Click competitor name to see calculations.

An analysis of the financial performance from 2018 to 2022 reveals a period of sustained negative economic profit, indicating that the returns generated were insufficient to cover the company's cost of capital. While the financial position deteriorated significantly between 2018 and 2020, a recovery trend is evident in the subsequent two years.

Economic Profit Trends: Economic profit underwent a sharp decline during the first three years of the period, moving from a deficit of 36.37 million US dollars in 2018 to a peak loss of 274.11 million US dollars in 2020. Following this trough, the deficit began to narrow, improving to 235.49 million US dollars in 2021 and further recovering to 158.21 million US dollars by the end of 2022.
Adjusted Net Sales Trajectory: Revenue patterns show a period of contraction followed by a strong expansion. Adjusted net sales decreased from a 2019 peak of 4.59 billion US dollars to a low of 4.18 billion US dollars in 2021. However, 2022 saw a significant surge in sales, reaching 4.98 billion US dollars, which represents the highest revenue level within the five-year window.
Economic Profit Margin Analysis: The economic profit margin followed a V-shaped trajectory. The margin eroded from -0.81% in 2018 to its lowest point of -6.55% in 2020. This decline suggests a period of decreased capital efficiency or increased cost of capital relative to earnings. The margin subsequently improved to -5.63% in 2021 and -3.18% in 2022, correlating with the increase in net sales and the reduction in absolute economic loss.

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Hubbell Inc. (NYSE:HUBB)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin