HUBBELL INC - Annual Report: 2023 (Form 10-K)

Foreign currency translation()()()BALANCE AT DECEMBER 31, 2022$ $ $

Prior year acquisitions(1)

Current year acquisitions(1)

Reclassifications to held for sale(1)

()()Foreign currency translation BALANCE AT DECEMBER 31, 2023$ $ $

(1) Refer to Note 4 – Business Acquisitions and Dispositions for additional information.

In 2023, the Company completed multiple acquisitions. These acquisitions have been accounted for as business combinations and have resulted in the recognition of $ million of goodwill. The Company has not recorded any goodwill impairments since the initial adoption of the related accounting guidance in 2002.

$()$ $()Customer relationships, developed technology and other () ()TOTAL DEFINITE-LIVED INTANGIBLES () ()Indefinite-lived: Tradenames and other TOTAL OTHER INTANGIBLE ASSETS$ $()$ $()

Amortization expense associated with these definite-lived intangible assets was $ million, $ million and $ million in 2023, 2022 and 2021, respectively. Amortization expense associated with these intangible assets is expected to be $ million in 2024, $ million in 2025, $ million in 2026, $ million in 2027 and $ million in 2028. The Company amortizes intangible assets with definite lives using either an accelerated method that reflects the pattern in which economic benefits of the intangible assets are consumed and results in higher amortization in the earlier years of the assets' useful life, or using a straight line method. Approximately % of the gross value of definite-lived intangible assets follow an accelerated amortization method.


66			HUBBELL INCORPORATED - Form 10-K

NOTE 8

million as of December 31, 2023. Investments classified as trading securities were composed primarily of debt and equity mutual funds and are stated at fair market value based on current quotes.

$ $()$ $ $ $ $()$ $ Trading securities TOTAL INVESTMENTS$ $ $()$ $ $ $ $()$ $

$ After 1 year but within 5 years After 5 years but within 10 years Due after 10 years TOTAL$ $

The total unrealized gain/(loss) recognized in the year relating to available-for-sale securities, net of tax, was $ million and $() million for the year ended December 31, 2023 and 2022, respectively. These net unrealized gains/(losses) are included in Accumulated other comprehensive loss, net of tax. Net unrealized gains relating to trading securities have been reflected in the results of operations. The Company uses the specific identification method when identifying the cost basis used to calculate the gain or loss on these securities. Gains and losses for both available-for-sale and trading securities were not material in 2023, 2022 and 2021.

At December 31, 2023 and December 31, 2022, the Company had $ million and $ million, respectively, of available-for-sale municipal debt securities. These investments had an amortized cost of $ million and $ million, respectively. allowance for credit losses related to our available-for-sale debt securities was recorded for the twelve months ended December 31, 2023. As of December 31, 2023 and December 31, 2022 the unrealized losses attributable to our available-for-sale debt securities was $ million and $ million, respectively. The fair value of available-for-sale debt securities with unrealized losses was $ million at December 31, 2023 and $ million at December 31, 2022.

NOTE 9

$ Buildings and improvements Machinery, tools, and equipment Construction-in-progress Gross property, plant, and equipment Less accumulated depreciation()()PROPERTY, PLANT, AND EQUIPMENT, NET$ $

Depreciable lives on buildings range between - years. Depreciable lives on machinery, tools, and equipment range between - years. The Company recorded depreciation expense of $ million, $ million and $ million for 2023, 2022 and 2021, respectively.


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NOTE 10

$ Accrued income taxes Contract liabilities - deferred revenue Customer refund liability

Accrued warranties(1)

Current operating lease liabilities Other TOTAL$ $

NOTE 11

$ Other post-employment benefits Deferred tax liabilities

Accrued warranties long-term(1)

Non-current operating lease liabilities Other TOTAL$ $


68			HUBBELL INCORPORATED - Form 10-K

NOTE 12

million. This charge was the result of lump-sum payments which exceeded the threshold for settlement accounting under U.S. GAAP.

The Company's U.S. defined benefit pension plans were approximately % of the $ million total pension benefit obligations at December 31, 2023.


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$ $ $ Service cost Interest cost Plan participants’ contributions Amendments Actuarial loss/(gain) () ()Curtailment gain Settlements () Currency impact () Other()() Benefits paid()()()()Benefit obligation at end of year$ $ $ $ Change in plan assetsFair value of plan assets at beginning of year$ $ $ $

During 2022, the Company recognized $ million of settlement losses in continuing operations and $ million of settlement losses in discontinued operations. Those settlement losses are the result of lump-sum distributions from the Company's defined benefit pension plans which exceeded the threshold for settlement accounting under U.S. GAAP for the year.

The Company also maintains primary defined contribution pension plans. The total cost of the Company's defined contribution plans was $ million in 2023, $ million in 2022 and $ million in 2021, excluding the employer match for the 401(k) plan. This cost is not included in the above net periodic benefit cost for the defined benefit pension plans.

In 2021 and 2022 the Company participated in multi-employer defined benefit pension plan. The Company’s total contributions while participating in this plan was $ million in 2021 and $ million in 2022.

The risks of participating in multi-employer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may have to be assumed by the remaining participant employers. If we choose to stop participating in a multi-employer plan we may be required to pay those plans a withdrawal liability based on the unfunded status of the plan.


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% % % % % %Rate of compensation increase % % % % % %Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31,Discount rate % % % % % %Expected return on plan assets % % %N/AN/AN/ARate of compensation increase % % % % % %

At the end of each year, the Company determines the appropriate expected return on assets for each plan based upon its strategic asset allocation (see discussion below). In making this determination, the Company utilizes expected returns for each asset class based upon current market conditions and expected risk premiums for each asset class.

The Company also determines the discount rate to be used to calculate the present value of pension plan liabilities at the end of each year. The discount rate for the Company’s U.S. and Canadian pension plans is determined by matching the expected cash flows associated with its benefit obligations to the expected cash flows of a hypothetical portfolio of high quality, fixed income debt instruments with maturities that closely match the expected funding period of its pension liabilities. As of December 31, 2023, the Company used a discount rate of % for its U.S. pension plans compared to a discount rate of % used in 2022. For its Canadian pension plan, the Company used a discount rate of % as of December 31, 2023 compared to a % discount rate used in 2022.

For its UK pension plan the discount rate was derived using a full yield curve and uses plan specific cash flows. The derived discount rate is the single discount rate equivalent to discounting these liability cash flows at the term-dependent spot rate of AA corporate bonds. This methodology resulted in a December 31, 2023 discount rate for the UK pension plan of % as compared to a discount rate of % used in 2022.

In 2021, 2022 and 2023 we used the Pri-2012 mortality table and adopted the MP-2021 projection scale to calculate the present value of our pension plan liabilities. The Pri-2012 mortality table with adjustment for collar as appropriate and generational projection from 2012 using Scale MP-2021 was chosen as the best estimate based on the observed and anticipated experience of the plans after considering alternative tables.

The rate of compensation increase assumption reflects the Company’s actual experience and best estimate of future increases.

% % %Rate to which the cost trend is assumed to decline % % %Year that the rate reaches the ultimate trend rate


72			HUBBELL INCORPORATED - Form 10-K

% % %Debt securities & Cash % % %Alternative Investments % % %TOTAL % % %

At the end of each year, the Company estimates the expected long-term rate of return on pension plan assets based on the strategic asset allocation for its plans. In making this determination, the Company utilizes expected rates of return for each asset class based upon current market conditions and expected risk premiums for each asset class. The Company has written investment policies and asset allocation guidelines for its domestic and foreign pension plans. In establishing these policies, the Company has considered that its various pension plans are a major retirement vehicle for most plan participants and has acted to discharge its fiduciary responsibilities with regard to the plans solely in the interest of such participants and their beneficiaries. The goal underlying the establishment of the investment policies is to provide that pension assets shall be invested in a prudent manner and so that, together with the expected contributions to the plans, the funds will be sufficient to meet the obligations of the plans as they become due.

To achieve this result, the Company conducts a periodic strategic asset allocation study to form a basis for the allocation of pension assets between various asset categories. Specific policy benchmark percentages are assigned to each asset category with minimum and maximum ranges established for each. The assets are then tactically managed within these ranges. Derivative investments include futures contracts used by the plan to adjust the level of its investments within an asset allocation category. The actual and target percentages reported in the preceding table reflect the economic exposure to each asset category, including the impact of derivative positions. All futures contracts are % supported by cash or cash equivalent investments. At no time may derivatives be utilized to leverage the asset portfolio. At December 31, 2023 and 2022, there were holdings of Company stock in pension plan assets.

The Company’s other post-employment benefits are unfunded; therefore, no asset information is reported.


HUBBELL INCORPORATED - Form 10-K			73

$ $ $ $ Equity securities: Equity Mutual Funds

Common Pooled Equity Funds (a)

Fixed Income Securities: U.S. Treasuries State and Local Municipal Bonds Sovereign Debt

Corporate Bonds (b)

Fixed Income Mutual Funds

Common Pooled Fixed Income Funds (c)

Alternative Investment Funds (d)

Common Pooled Funds (e)

BALANCE AT DECEMBER 31, 2023$ $ $ $ $

Quoted Prices in Active
Markets for Identical Assets

Quoted Prices in Active
Market for Similar Asset

Significant
Unobservable Inputs

Investments Priced
Using Net Asset Value

Asset Category

Total

(Level 1)

(Level 2)

(Level 3)

Cash and cash equivalents

Equity securities:

Equity Mutual Funds

Common Pooled Equity Funds (a)

Fixed Income Securities:

U.S. Treasuries

State and Local Municipal Bonds

Sovereign Debt

Corporate Bonds (b)

Fixed Income Mutual Funds

Common Pooled Fixed Income Funds (c)

BALANCE AT DECEMBER 31, 2022

(a)Money market funds and time deposits are included in Cash and cash equivalents in the Consolidated Balance Sheet.

(b)Forward exchange contracts-Assets are reflected in Other current assets in the Consolidated Balance Sheet.

(c)Forward exchange contracts-(Liabilities) are reflected in Other accrued liabilities in the Consolidated Balance Sheet.

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 were 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 plan

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. During 2023 and 2022, the Company purchased $ million and $ million, respectively, of trading securities related to these deferred compensation plans. As a result of participant distributions, the Company sold $ million and $ million of these trading securities in 2023 and 2022 respectively. 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

The total carrying value of long-term debt including the $ million current portion of the Term Loan as of December 31, 2023 was $ million, net of unamortized discount and debt issuance costs. As of December 31, 2022 the carrying value of long-term debt was $ million, net of unamortized discount and debt issuance cost. The estimated fair value of the long-term debt as of December 31, 2023 and December 31, 2022 was $ million and $ million, respectively, using quoted market prices in active markets for similar liabilities (Level 2).


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NOTE 16

million and $ million as of December 31, 2023 and 2022, respectively.

The Company accounts for conditional asset retirement and environmental obligations in accordance with the applicable accounting guidance. The accounting guidance defines “conditional asset retirement obligation” as a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. Asset retirement obligations were not material as of December 31, 2023 and 2022.


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NOTE 17

Exercise of stock appreciation rights Director compensation arrangements, net Restricted/performance shares activity, net of forfeitures Acquisition/surrender of shares()OUTSTANDING AT DECEMBER 31, 2021 Exercise of stock appreciation rights Director compensation arrangements, net Restricted/performance shares activity, net of forfeitures Acquisition/surrender of shares()OUTSTANDING AT DECEMBER 31, 2022 Exercise of stock appreciation rights Director compensation arrangements, net Restricted/performance shares activity, net of forfeitures Acquisition/surrender of shares()OUTSTANDING AT DECEMBER 31, 2023

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 and Retained earnings to the extent required. Shares may be repurchased through the Company’s stock repurchase program, acquired by the Company from employees or surrendered to the Company by employees in settlement of their minimum tax liability on vesting of restricted shares and performance shares under the Hubbell Incorporated 2005 Incentive Award Plan as amended and restated (the “Award Plan”).

Shares reserved under other equity compensation plans TOTAL


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NOTE 18

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. In 2023, the Company's grant of stock-based awards included restricted stock, SARs and performance shares.

Stock-based compensation expense recognized by the Company was $ million in 2023, $ million in 2022 and $ million in 2021. The total income tax benefit recognized was $ million in 2023, $ million in 2022, and $ million in 2021. The net tax windfall recorded as a result of exercise or vesting (depending on the type of award) was $ million, $ million, and $ million in 2023, 2022 and 2021, respectively. As of December 31, 2023, there was $ million, pretax, of total unrecognized compensation cost related to non-vested share-based compensation arrangements. This cost is expected to be primarily recognized through 2026.

Stock-based compensation expense is recorded in S&A expense as well as Cost of goods sold. Of the total 2023 expense, $ million was recorded to S&A expense and $ million was recorded to Cost of goods sold. In 2022 and 2021, $ million and $ million, respectively, was recorded to S&A expense and $ million and $ million, respectively, was recorded to Cost of goods sold. Stock-based compensation costs capitalized to inventory was $ million in 2023, $ million in 2022 and $ million in 2021.

Each of the compensation arrangements is discussed below.

Restricted Stock

The Company issues various types of restricted stock awards all of which 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 grants are not transferable and are subject to forfeiture in the event of the recipient’s termination of employment prior to vesting.

Restricted Stock 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 equal installments on each of the first 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”).

Restricted Stock Issued to Non-employee Directors

In 2023, 2022 and 2021, each non-employee director received a restricted stock grant. These grants are made on the date of the annual meeting of shareholders and vest at the following year’s annual meeting of shareholders, or upon certain other events. The grant is subject to forfeiture if the director’s service terminates prior to the date of the next regularly scheduled annual meeting of shareholders. During 2023, 2022 and 2021, the Company granted shares, shares, and shares, respectively, to non-employee directors.


84			HUBBELL INCORPORATED - Form 10-K

$ Shares granted Shares vested() Shares forfeited() RESTRICTED STOCK AT DECEMBER 31, 2023 $

The weighted average fair value per share of restricted stock granted in 2023, 2022 and 2021 was $, $ and $, respectively. The total fair value of restricted stock vested in 2023, 2022 and 2021 was $ million, $ million and $ million, respectively.

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 equal installments during the first following the grant date and expire from the grant date.

$ Granted Exercised() Forfeited() Canceled() OUTSTANDING AT DECEMBER 31, 2023 $ years$ EXERCISABLE AT DECEMBER 31, 2023 $ years$

The aggregated intrinsic value of SARs exercised during 2023, 2022 and 2021 was $ million, $ million and $ million, respectively.

The fair value of each SAR award was measured using the Black-Scholes option pricing model.

% % % years$ 2022 % % % years$ 2021 % % % years$

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.


HUBBELL INCORPORATED - Form 10-K			85

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 - Performance and Market Conditions

In February 2020, the Company granted performance share awards with a target payout of shares that would vest subject to a performance condition and service requirement. The number of shares vested is then modified by a market condition as described below.

percent of the award granted would vest based on the Company's compounded annual growth rate of Net sales as compared to that of the companies that comprise the S&P Capital Goods 900 index. percent of the award granted would vest based on achieved operating margin performance as compared to internal targets, and percent of the award granted would vest based on achieved trade working capital as a percent of Net sales as compared to internal targets. Each of these performance conditions is measured over the same performance period. The cumulative result of these performance conditions would result in a number of shares earned in the range of % - % of the target number of shares subject to the award. That cumulative performance achieved is then further modified based on the Company's TSR relative to the companies that constitute the S&P Capital Goods 900 index, to potentially increase or reduce the shares earned by a multiple of up to or , depending on the award year. The fair value of the award was determined based upon a lattice model. The Company expensed these awards on a straight-line basis over the requisite service period which included an assessment of the performance achieved to date at each reporting period. The weighted average fair value per share was $ for the awards granted in 2020. During 2023, approximately shares from the 2020 awards vested as a result of the cumulative achievement of the performance metrics, and the fair value of the awards at vesting was approximately $ million.

Performance Shares - Market Condition

In February 2023, 2022, and 2021, the Company granted performance share awards with a target payout of , and shares, respectively, 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 performance period. Performance at target will result in vesting and issuance of the number of performance shares subject to the award, equal to % payout. Performance below or above target can result in issuance in the range of %-% of the number of shares subject to the award. Expense is recognized irrespective of the market condition being achieved.

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

%%% years$February 2022$%%% years$February 2021$%%% years$

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 2023, 2022, and 2021, the Company granted performance share awards with a target payout of , and shares, respectively, that will vest subject to an internal Company-based performance condition and service requirement.

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


86			HUBBELL INCORPORATED - Form 10-K

, $ and $ for the awards granted in 2023, 2022, and 2021, respectively.

Jan 2023 - Dec 2025

February 2022$Jan 2022 - Dec 2024

February 2021$Jan 2021 - Dec 2023


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NOTE 19

$ $ Less: Earnings allocated to participating securities()()()Net income from continuing operations available to common shareholders$ $ $ Net income from discontinued operations attributable to Hubbell Incorporated$ $ $ Less: Earnings allocated to participating securities ()()Net income from discontinued operations available to common shareholders$ $ $ Net income attributable to Hubbell Incorporated$ $ $ Less: Earnings allocated to participating securities()()()Net income available to common shareholders$ $ $ Denominator:Average number of common shares outstanding Potential dilutive shares Average number of diluted shares outstanding Basic earnings per share:Basic earnings per share from continuing operations$ $ $ Basic earnings per share from discontinued operations Basic earnings per share$ $ $ Diluted earnings per share:Diluted earnings per share from continuing operations$ $ $ Diluted earnings per share from discontinued operations Diluted earnings per share$ $ $

The Company did not have any material anti-dilutive securities in 2023, 2022 or 2021.


88			HUBBELL INCORPORATED - Form 10-K

NOTE 20

)$ $()$()$()Other comprehensive income (loss) before reclassifications () ()()Amounts reclassified from accumulated other comprehensive loss Current period other comprehensive income (loss) () ()()BALANCE AT DECEMBER 31, 2021$ $ $()$()$()Other comprehensive income (loss) before reclassifications ()()()()Amounts reclassified from accumulated other comprehensive loss() Current period other comprehensive income (loss) () ()()


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HUBBELL INC - Annual Report: 2023 (Form 10-K)

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