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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	14.31%	13.78%	13.38%	13.33%	12.79%
Invested capital³	4,504,100)	4,298,100)	4,325,800)	4,209,500)	4,206,535)

Economic profit⁴	(46,886)	(133,988)	(175,566)	(88,717)	53,788)

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 – 14.31% × 4,504,100 = -46,886

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Hubbell Inc. economic profit increased from 2020 to 2021 and from 2021 to 2022.

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.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Hubbell Inc. NOPAT increased from 2020 to 2021 and from 2021 to 2022.

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Hubbell Inc. cash operating taxes decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

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.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Hubbell Inc. invested capital decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

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	×	15.62%	=	14.07%
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					14.31%

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	×	15.62%	=	13.44%
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					13.78%

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	×	15.62%	=	12.96%
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					13.38%

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	×	15.62%	=	12.86%
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					13.33%

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	×	15.62%	=	12.20%
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					12.79%

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	(46,886)	(133,988)	(175,566)	(88,717)	53,788)
Invested capital²	4,504,100)	4,298,100)	4,325,800)	4,209,500)	4,206,535)
Performance Ratio
Economic spread ratio³	-1.04%	-3.12%	-4.06%	-2.11%	1.28%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-21.04%	-19.59%	-31.10%	—	—
Caterpillar Inc.	0.18%	0.33%	-6.19%	—	—
Eaton Corp. plc	-5.90%	-5.64%	-7.73%	—	—
GE Aerospace	-10.02%	-14.99%	-4.85%	—	—
Honeywell International Inc.	-2.10%	-1.03%	-2.36%	—	—
Lockheed Martin Corp.	12.74%	13.74%	17.06%	—	—
RTX Corp.	-2.83%	-2.37%	-7.92%	—	—

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 × -46,886 ÷ 4,504,100 = -1.04%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Hubbell Inc. economic spread ratio improved from 2020 to 2021 and from 2021 to 2022.

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	(46,886)	(133,988)	(175,566)	(88,717)	53,788)

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	-0.94%	-3.20%	-4.19%	-1.93%	1.20%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-16.06%	-15.54%	-25.47%	—	—
Caterpillar Inc.	0.17%	0.38%	-8.57%	—	—
Eaton Corp. plc	-8.75%	-8.47%	-11.87%	—	—
GE Aerospace	-9.08%	-15.13%	-7.75%	—	—
Honeywell International Inc.	-2.77%	-1.43%	-3.50%	—	—
Lockheed Martin Corp.	5.14%	5.86%	7.32%	—	—
RTX Corp.	-4.78%	-4.22%	-16.18%	—	—

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 × -46,886 ÷ 4,977,000 = -0.94%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Hubbell Inc. economic profit margin improved from 2020 to 2021 and from 2021 to 2022.

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