2008 Annual Report - Hubbell Wiring Device-Kellems

Capital StructureDebt to CapitalNet debt, defined as total debt less cash and investments, is a non-GAAP measure that may not be comparableto definitions used by other companies. We consider net debt to be more appropriate than total debt for measuringour financial leverage as it better measures our ability to meet our funding needs.December 31,2008 2007(In millions)Total Debt .................................................. $ 497.4 $ 236.1Total Shareholders’ Equity ...................................... 1,008.1 1,082.6Total Capital ................................................. $1,505.5 $1,318.7Debt to Total Capital. .......................................... 33% 18%Cash and Investments .......................................... $ 213.3 $ 116.7Net Debt. ................................................... $ 284.1 $ 119.4Debt StructureDecember 31,2008 2007(In millions)Short-term debt ................................................. $ — $ 36.7Long-term debt. ................................................. 497.4 199.4Total Debt ..................................................... $497.4 $236.1At December 31, 2007, Short-term debt in our Consolidated Balance Sheet consisted of $36.7 million ofcommercial paper. Commercial paper is used to help fund working capital needs, in particular inventory purchases.At December 31, 2008 and 2007, Long-term debt in our Consolidated Balance Sheet consisted of $497.4 and$199.4 million, respectively, of ten year senior notes issued in May 2002 and May 2008. These fixed rate notes, withamounts of $200 million and $300 million due in 2012 and 2018, respectively, are not callable and are only subjectto accelerated payment prior to maturity if we fail to meet certain non-financial covenants, all of which were met atDecember 31, 2008 and 2007. The most restrictive of these covenants limits our ability to enter into mortgages andsale-leasebacks of property having a net book value in excess of $5 million without the approval of the Note holders.Prior to the issuance of both these notes, we entered into forward interest rate locks to hedge our exposure tofluctuations in treasury interest rates. The 2002 interest rate lock resulted in a $1.3 million loss, while the 2008interest rate lock resulted in a $1.2 million gain. Both of these amounts have been recorded in Accumulated othercomprehensive (loss) income, net of tax, and are being amortized over the respective lives of the notes.In October 2007, we entered into a revised five year, $250 million revolving credit facility to replace theprevious $200 million facility which was scheduled to expire in October 2009. In March 2008, we exercised ouroption to expand this revolving credit facility from $250 million to $350 million. The expiration date of the newcredit agreement is October 31, 2012. All other aspects of the original credit agreement remain unchanged. Theinterest rate applicable to borrowings under the credit agreement is either the prime rate or a surcharge over LIBOR.The covenants of the facility require that shareholders’ equity be greater than $675 million and that total debt notexceed 55% of total capitalization (defined as total debt plus total shareholders’ equity). We were in compliancewith all debt covenants at December 31, 2008 and 2007. Annual commitment fee requirements to supportavailability of the credit facility were not material. This facility is used as a backup to our commercial paperprogram and was undrawn as of December 31, 2008 and through the filing date of this Form 10-K. Additionalinformation related to our debt is included in Note 12 — Debt in the Notes to Consolidated Financial Statements.26