<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 22, 1996
THOMAS & BETTS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its Charter)
New Jersey 1-4682 22-1326940
(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
1555 Lynnfield Road, Memphis, Tennessee 38119
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (901) 682-7766
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a)(1) Financial statement of business acquired. Audited
consolidated balance sheets of Amerace Corporation
and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income,
stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1994.
See Exhibit 7(a)(1).
(a)(2) Condensed consolidated balance sheets of Amerace
Corporation and subsidiaries as of September 30, 1995
(unaudited) and December 31, 1994, and related
condensed consolidated statements of income and cash
flows for the nine-month periods ended September 30,
1995 and 1994 (unaudited). See Exhibit 7(a)(2).
(b) Pro forma financial statements. Unaudited pro forma
condensed consolidated balance sheet as of October 1,
1995 and the condensed consolidated statements of
earnings for the year ended January 1, 1995 and the
nine-month period ended October 1, 1995. See Exhibit
7(b).
(c) Exhibits.
(2) Plan of Acquisition, reorganization, arrangement,
liquidation or succession in Form 8-K dated January
17, 1996.
(7)(a)(1) Financial statement of business acquired.
Audited consolidated balance sheets of
Amerace Corporation and subsidiaries as of
December 31, 1994 and 1993, and the related
consolidated statements of income,
stockholder's equity and cash flows for each
of the three years in the period ended
December 31, 1994.
(a)(2) Condensed consolidated balance sheets of
Amerace Corporation and subsidiaries as of
September 30, 1995 (unaudited) and December
31, 1994 and related condensed consolidated
statements of income and cash flows for
each of the interim periods ended September
30, 1995 and 1994.
(b) Pro forma financial statements.
Unaudited pro forma condensed consolidated
balance sheet as of October 1, 1995 and the
condensed consolidated statements of earnings
for the year ended January 1, 1995 and the
nine-month period ended October 1, 1995.
(23) Consent of Arthur Anderson LLP.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THOMAS & BETTS CORPORATION
By:/s/ Fred R. Jones
---------------------------
Fred R. Jones
Vice President-Finance and
Treasurer
Dated: January 22, 1996
------------------
3
<PAGE> 1
EXHIBIT 7(a)(1)
AMERACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
TOGETHER WITH AUDITORS' REPORT
<PAGE> 2
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants
3
Consolidated Balance Sheets
4
Consolidated Statements of Income
5
Consolidated Statements of Stockholder's Equity
6
Consolidated Statements of Cash Flows
7
Notes to Consolidated Financial Statements
9
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Amerace Corporation and the Board of Directors of
Thomas & Betts Corporation:
We have audited the accompanying consolidated balance sheets of
Amerace Corporation (a Delaware corporation) and Subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Amerace Corporation and Subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As explained in Note 1 and Note 6 to the consolidated financial
statements, effective January 1, 1993, the Company adopted the requirements of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". As explained in Note 1 to the consolidated financial statements,
effective December 31, 1993, the Company adopted the requirements of Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits".
ARTHUR ANDERSEN LLP
Chicago, Illinois,
December 29, 1995
3
<PAGE> 4
AMERACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3.2 $ 5.8
Accounts receivable, net 0.5 23.3
Inventories, net 24.5 26.0
Other current assets 5.2 10.6
------ ------
Total current assets 33.4 65.7
Property, plant and equipment, net 48.7 49.2
Goodwill 161.5 166.1
Investment in affiliates 15.7 12.1
Advances to affiliate 73.7 44.0
Other assets 10.6 19.0
------ ------
Total assets $343.6 $356.1
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion long-term debt $ 1.3 $ _
Accounts payable 14.5 12.4
Accrued liabilities 7.7 15.1
------ ------
Total current liabilities 23.5 27.5
Long-term debt 1.2 115.3
Accrued employee benefit obligations 28.3 26.0
Other long-term liabilities 25.4 24.8
------ ------
Total liabilities 78.4 193.6
------ ------
Mandatory Redeemable 12.5% Cumulative Exchangeable
Preferred Stock; $.01 par value; 1,600,000 shares
authorized; 894,602 and 790,996 shares issued and
outstanding at December 31, 1994 and 1993 22.4 19.8
Stockholder's equity:
Common stock, par value $.01 per share, 1,600,000
shares authorized, 1,370,000 issued and outstanding _ _
Paid-in capital 281.4 155.4
Retained deficit (40.5) (12.4)
Cumulative translation adjustments 2.6 0.1
Pension liability adjustment (0.7) (0.4)
------ ------
Total stockholder's equity 242.8 142.7
------ ------
Total liabilities and stockholder's equity $343.6 $356.1
====== ======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
4
<PAGE> 5
AMERACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Net sales $200.1 $176.8 $168.7
Cost of sales 148.0 132.1 125.9
------ ------ ------
Gross earnings 52.1 44.7 42.8
Selling and administrative expenses 26.5 24.6 25.0
Other income (3.2) (1.3) (3.0)
Goodwill amortization 4.7 4.7 4.7
Restructuring charges _ 2.6 _
Management fees to affiliate 9.4 1.5 1.9
------ ------ ------
Operating income 14.7 12.6 14.2
Net interest expense 18.3 10.1 9.9
------ ------ ------
Income (loss) from continuing operations before income taxes (3.6) 2.5 4.3
Provision for income taxes from continuing operations 1.5 3.2 1.7
------ ------ ------
Income (loss) from continuing operations (5.1) (0.7) 2.6
Discontinued operations, net of taxes:
Operating loss _ (0.5) (0.8)
Loss on disposal _ (7.1) _
------ ------ ------
Income (loss) before extraordinary item and cumulative effect
of change in accounting principles (5.1) (8.3) 1.8
Extraordinary item:
Net loss from early retirement of debt (4.2) _ _
------ ------ ------
Income (loss) before cumulative effect of change in accounting
principles (9.3) (8.3) 1.8
Cumulative effect of change in accounting principles, net _ 1.2 _
------ ------ ------
Net income (loss) (9.3) (7.1) 1.8
Mandatory Redeemable Preferred Stock dividend requirements 2.6 2.3 2.0
------ ------ ------
Net loss applicable to common stock $(11.9) $ (9.4) $ (0.2)
====== ====== ======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
5
<PAGE> 6
AMERACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
RETAINED CUMULATIVE PENSION
COMMON PAID-IN EARNINGS TRANSLATION LIABILITY
STOCK CAPITAL (DEFICIT) ADJUSTMENTS ADJUSTMENT
------ ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $ _ $155.4 $ (2.5) $ 0.5 $ _
Net income _ _ 1.8 _ _
Cash dividend on common stock _ _ (0.3) _ _
Dividends on Mandatory Redeemable _ _ (2.0) _ _
12.5% Preferred Stock
Translation adjustments _ _ _ 0.2 _
----- ------ ------ ----- -----
Balance at December 31, 1992 _ 155.4 (3.0) 0.7 _
Net loss _ _ (7.1) _ _
Dividends on Mandatory Redeemable _ _ (2.3) _ _
12.5% Preferred Stock
Translation adjustments _ _ _ (0.6) _
Pension liability adjustment _ _ _ _ (0.4)
----- ------ ------ ----- -----
Balance at December 31, 1993 _ 155.4 (12.4) 0.1 (0.4)
Net loss _ _ (9.3) _ _
Dividends on Mandatory
Redeemable _ _ (2.6) _ _
12.5% Preferred Stock
Dividends paid to parent _ _ (16.2) _ _
Capital contribution from
parent _ 126.0 _ _ _
Translation adjustments _ _ _ 2.5 _
Pension liability adjustment _ _ _ _ (0.3)
----- ------ ------ ----- -----
Balance at December 31, 1994 $ _ $281.4 $(40.5) $ 2.6 $(0.7)
===== ====== ====== =====
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
6
<PAGE> 7
AMERACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (5.1) $ (0.7) $ 2.6
Adjustments to reconcile income (loss) from continuing
operations to net cash flow from operating activities:
Depreciation and amortization 12.9 14.1 13.4
Restructuring charges _ 2.6 _
Undistributed earnings of joint ventures (3.6) (0.5) (1.6)
Deferred income tax provision 4.6 4.6 1.6
Proceeds from sale of accounts receivable 22.3 _ _
Cash effects of (excluding the effects of dispositions of
businesses):
(Increase) decrease in accounts receivable 0.6 (4.7) (0.8)
(Increase) decrease in inventories 1.5 3.0 (1.3)
Decrease in other current assets 2.5 _ 0.8
Increase in accounts payable 2.1 1.5 2.3
Decrease in accrued liabilities and accrued employee
benefit obligations (3.5) (7.2) (4.3)
------ ------ ------
Net cash from continuing operating activities 34.3 12.7 12.7
Net cash from (used in) discontinued operations 0.9 (0.2) (1.1)
------ ------ ------
Net cash from operations 35.2 12.5 11.6
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7.2) (8.1) (9.4)
Other 1.7 (3.5) (1.7)
------ ------ ------
Net cash used in investing activities (5.5) (11.6) (11.1)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on long-term debt _ (1.3) (1.3)
Net borrowings on revolving credit facilities _ 4.0 11.0
Repayment of senior subordinated debt (79.1) _ _
Repayment of senior credit facility (38.0) _ _
Capital contribution from parent 122.4 _ _
Dividends paid to parent _ _ (0.3)
Net payments to affiliate (37.6) (6.8) (4.8)
------ ------ ------
Net cash from (used in) financing activities (32.3) (4.1) 4.6
------ ------ ------
CHANGE IN CASH AND CASH EQUIVALENTS (2.6) (3.2) 5.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5.8 9.0 3.9
------ ------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3.2 $ 5.8 $ 9.0
====== ====== ======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
7
<PAGE> 8
AMERACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------
1994 1993 1992
------ ----- -----
<S> <C> <C> <C>
NET CASH PAID (RECEIVED) DURING THE
PERIOD FOR (RELATING TO CONTINUING AND
DISCONTINUED OPERATIONS):
Interest $ 5.0 $12.6 $12.6
Income taxes (3.9) (4.7) 3.8
NONCASH TRANSACTIONS:
Equity transactions:
Adjustment increasing additional paid-in capital $ 3.7 $ _ $ _
Adjustment decreasing retained earnings (11.5) _ _
Adjustment increasing advances to affiliates 7.8 _ _
------ ---- ----
$ _ $ _ $ _
====== ==== ====
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
8
<PAGE> 9
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION:
Amerace Corporation (the "Company" or "Amerace") is an indirect,
wholly-owned subsidiary of Eagle Industries, Inc. ("Eagle"). The Consolidated
Financial Statements include the accounts of the Company and its subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS:
All highly liquid investment instruments with original maturities of
three months or less are considered to be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost includes
raw materials, labor and manufacturing overhead. The last-in, first-out
("LIFO") method of inventory valuation is used for 12.0% and 14.4% of inventory
at December 31, 1994 and 1993, respectively. The first-in first-out ("FIFO")
method of inventory valuation is used for the remaining inventory.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost. The straight-line
method is generally used to provide for depreciation over the estimated useful
lives of the assets.
GOODWILL:
Goodwill represents the purchase price associated with acquired
businesses in excess of the fair value of the net assets acquired. Goodwill is
amortized on a straight-line basis over forty years. Accumulated amortization
was $23.7 million and $19.0 million at December 31, 1994 and 1993,
respectively.
Recoverability of unamortized goodwill is based on operating income
and cash flow. Whenever current operating income is not sufficient to recover
current amortization of goodwill or when events and circumstances indicate that
future operating income and cash flow may be negatively affected, the
recoverability is evaluated based upon the estimated future operating income
and undiscounted cash flow of the related entity during the remaining period of
goodwill amortization.
REVENUE RECOGNITION:
The Company recognizes revenues as products are shipped.
POSTEMPLOYMENT BENEFITS:
The Company adopted the provisions of Statement of Financial
Accounting Standard ("SFAS") No. 112 "Employers' Accounting for Postemployment
Benefits" effective December 31, 1993. By adopting this standard, the Company
recorded a pretax charge of $0.3 million and applicable tax benefits of $0.1
million reflected as a "Cumulative effect of change in accounting principle".
9
<PAGE> 10
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
INCOME TAXES:
The Company is included in Eagle's consolidated U.S. federal income
tax return. Under the terms of a tax sharing arrangement with Eagle, the
Company computes and pays to Eagle its liability for U.S. federal income taxes
as if the Company filed a separate U.S. federal income tax return. The Company
files separate U.S. state and non-U.S. income tax returns.
The Company adopted the provisions of SFAS No. 109, "Accounting for
Income Taxes" effective January 1, 1993. This new standard changed the
Company's method of accounting for income taxes from the deferred method
required under APB No. 11 to the asset and liability method. If it is more
likely than not that some portion or all of a deferred tax asset will not be
realized, a valuation allowance is recognized. (See Note 6.)
(2) DISCONTINUED OPERATIONS
The Company sold certain assets of its Underground Technologies
subsidiary in the fourth quarter of 1993 for total proceeds of $0.5 million.
The Company recorded a provision of $7.1 million, net of applicable tax
benefits of $1.8 million, for estimated losses from operations and from the
ultimate disposition of this business, including the write-off of approximately
$5.5 million of goodwill. Net sales were $4.6 million and $4.2 million for the
years ended December 31, 1993 and 1992, respectively. The operating loss was
$0.6 million and $1.0 million for the years ended December 31, 1993 and 1992,
respectively.
(3) INVESTMENT IN AFFILIATES
As of December 31, 1994, the Company owned 49.9% of Euromold S.A. and
50.0% of Fujimold LTD. and Taimold Electrical LTD. The Company reports these
investments under the equity method of accounting. The Company recognized
income from its investments in the joint ventures of $3.2 million, $1.5 million
and $1.8 million for years ended December 31, 1994, 1993 and 1992,
respectively. Combined operating results were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1994 1993 1992
------- --------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales $ 54.8 $ 44.4 $ 43.3
Gross earnings 18.4 13.2 13.6
Net income 6.5 3.0 3.6
</TABLE>
(4) DEBT
In January 1994, Eagle consummated a refinancing (the "Refinancing")
of substantially all of its outstanding debt including the Senior Subordinated
Notes ("13.75% Notes") and senior bank credit facility of the Company and
entered into a credit facility with a group of banks (the "Eagle Credit
Facility"). As a result of the Refinancing, the Company recorded a pretax
charge of $6.6 million net of a tax benefit of $2.4 million in the first
quarter of 1994. In connection with the Refinancing, the Company was
recapitalized, resulting in changes to the components of stockholder's equity.
Subsequent to the Refinancing, the Company relies on Eagle to provide its
liquidity and financing needs. See Note 12 "Related Party
Transactions-Advances to Affiliate". The Eagle Credit Facility is secured by
substantially all of the property, plant and equipment, inventory and certain
receivables of Eagle, including those of the Company.
10
<PAGE> 11
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
13.75% NOTES:
The $75 million 13.75% Notes were issued pursuant to an indenture
dated March 15, 1988. In January 1994, all of the 13.75% Notes were called for
redemption on March 15, 1994 at 105.5% of their principal amount plus accrued
interest. Proceeds for the redemption were derived from the Refinancing.
SENIOR BANK CREDIT FACILITY:
The Company had a senior credit facility which was available to its
subsidiary group prior to the Refinancing (the "Senior Bank Credit Facility").
A portion of the proceeds of the Refinancing were utilized to fully repay the
Senior Bank Credit Facility in January 1994. The aggregate amount outstanding
under the Senior Bank Credit Facility amounted to $38.0 million at December 31,
1993. Borrowings under the Senior Bank Credit Facility bore interest at
alternative floating rate structures, at management's option (5.6% at December
31, 1993), and was secured by substantially all domestic property, plant,
equipment, inventory and receivables of the Company's subsidiaries.
(5) EMPLOYEE RETIREMENT AND BENEFIT PLANS
PENSION:
Substantially all employees are covered by Company or Eagle sponsored
defined benefit pension plans. Plans covering salaried employees provide
pension benefits that are based on the employee's years of service with the
Company and compensation. For other employees, pension benefits are provided
based on a stated amount for each year of service. Certain amounts in the
following tables relate to the Eagle plan and represent the portion of the plan
allocated to the Company as calculated by Eagle's consulting actuary. The
Company's funding policy for all plans is to make no less than the minimum
annual contributions required by applicable governmental regulations. Plan
assets generally consist of common stocks and fixed income instruments.
The following table sets forth the funded status for all U.S. defined
benefit pension plans and related amounts recognized in the Company's
Consolidated Financial Statements:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of:
Accumulated benefit obligation $ 21.6 $ 22.0
======= =======
Vested benefits $ 21.4 $ 21.8
======= =======
Plan assets at fair value $ 15.4 $ 17.7
Projected benefit obligation 21.6 22.0
------- -------
Plan assets less than projected benefit (6.2) (4.3)
obligation
Net unrecognized (gain) loss 1.1 (0.4)
Net unrecognized prior service costs 0.4 0.4
Additional minimum liability (1.5) (1.0)
------- -------
Pension liability recognized in Consolidated
Financial Statements $ (6.2) $ (5.3)
======= =======
</TABLE>
11
<PAGE> 12
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31,1994
In accordance with SFAS No. 87, "Employers' Accounting for Pensions",
the Company has recorded an additional minimum pension liability for certain
underfunded plans of $1.5 million and $1.0 million at December 31, 1994 and
1993, respectively, representing the excess of unfunded accumulated benefit
obligations over previously recorded pension cost liabilities. A corresponding
amount is recognized as an intangible asset except to the extent that these
additional liabilities exceed related unrecognized prior service costs and net
transition obligations, in which case the increase in liabilities is charged
directly to stockholder's equity. At December 1994 and 1993, the excess
minimum pension liability resulted in a net reduction of equity of $0.7 million
and $0.4 million, respectively.
Net periodic pension cost for defined benefit pension plans included
in the above table was:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1994 1993 1992
------- -------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost $ 0.4 $ 0.3 $ 0.3
Interest cost 1.6 1.6 1.6
Actual return on assets (0.2) (1.9) (1.7)
Net amortization and deferral (1.2) 0.5 0.3
------ ------ ------
Net periodic pension cost $ 0.6 $ 0.5 $ 0.5
====== ====== ======
</TABLE>
The following assumptions were used in determining the actuarial
present value of the projected benefit obligation for the Company's U.S.
defined benefit plans for the years ended December 31, 1994 and 1993:
weighted-average discount rate of 7.5%; rate of increase in future compensation
levels of 4.0%; and expected long-term rate of return on assets of 9.0%.
The Company and its subsidiaries also have several defined
contribution plans for certain U.S. employees. Company contributions to these
plans were $2.3 million, $2.3 million and $1.1 million in the years ended
December 31, 1994, 1993 and 1992, respectively. Contributions to these plans by
the Company are determined under a variety of methods including those based on
years employed or a percentage of the contribution made by the employee.
OTHER POSTRETIREMENT BENEFITS:
The Company provides certain postretirement life and health-care
benefits to certain of its U.S. employees. For most business units providing
these benefits, employees retiring from the Company on or after attaining age
55 who have rendered at least 15 years of active service to the Company are
entitled to postretirement benefits coverage. Most of these plans are
non-contributory, while there are a few in which employees and retirees
contribute towards their coverage. The Company has not funded any of this
postretirement benefits liability. Contributions to the postretirement plans
are made by the Company as claims are incurred.
The accumulated postretirement benefit obligation was determined using
an assumed discount rate of 7.5% for the years ended December 31, 1994 and
1993, and a health care cost trend rate of 14% for the year ended December 31,
1993 and 13% for the year ended December 31, 1994, with the assumption that the
health care cost trend rate would decrease ratably to 6.0% by the year 1998.
The effect of a one percent increase in the health care cost trend rate
assumption would be to increase the accumulated postretirement benefit
obligation component by approximately $0.2 million.
12
<PAGE> 13
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
In the fourth quarter of 1993, the Company curtailed certain of its
postretirement benefits for its non-bargaining employees. In general, the
curtailment affects employees who retire after December 1994 with exception for
employees who meet certain age plus years of service requirements. The
curtailment resulted in a reduction of the postretirement benefit liability of
$1.8 million.
The following table sets forth postretirement benefits recognized in
the Company's Consolidated Financial Statements:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
-------- ---------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 28.6 $ 25.5
Other fully eligible participants 1.4 1.1
Other active participants _ 0.3
-------- --------
30.0 26.9
Unrecognized actuarial loss (7.1) (2.2)
-------- --------
Postretirement benefit liability recognized in
Consolidated Financial Statements $ 22.9 $ 24.7
======== ========
</TABLE>
Net postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------
1994 1993 1992
----------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost $ _ $ 0.1 $ 0.2
Interest cost 0.5 0.7 0.7
-------- ------- -------
Net postretirement benefit cost 0.5 0.8 0.9
Effect of curtailment _ (1.8) _
-------- ------- -------
Adjusted net postretirement benefit cost (income) $ 0.5 $ (1.0) $ 0.9
======== ======= =======
</TABLE>
(6) INCOME TAXES
The Company adopted the provisions of SFAS No. 109 effective January
1, 1993. The December 31, 1993 Consolidated Financial Statements reflect an
increase in the net deferred tax assets of $1.4 million and a corresponding
gain of $1.4 million, reflected as a "Cumulative effect of change in accounting
principle".
13
<PAGE> 14
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
The Company's Consolidated Financial Statements reflect the following deferred
tax assets and liabilities (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
<S> <C> <C>
Deferred tax assets:
Inventory and bad debt reserves $ 2.3 $ 2.5
Accrued employee benefit obligations 14.2 14.9
Insurance reserves 1.9 2.2
Divestiture and restructuring reserves _ 2.4
Legal and environmental reserves 7.5 7.0
Other 0.5 2.3
-------- --------
$ 26.4 $ 31.3
======== ========
Deferred tax liabilities:
Property, plant and equipment basis difference $ 10.4 $ 11.7
Undistributed foreign earnings 2.9 1.9
Other 2.4 1.7
-------- --------
$ 15.7 $ 15.3
======== ========
</TABLE>
Management believes that future taxable income and tax planning
strategies are available to fully realize the recorded net deferred tax assets
and accordingly, no valuation allowance has been recorded.
The U.S. and non-U.S. components of income from continuing operations
before income taxes and the components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Income (loss) from continuing operations before income taxes:
U.S. $ (5.7) $ 0.5 $ 3.0
Non-U.S. 2.1 2.0 1.3
-------- ------- -------
Total $ (3.6) $ 2.5 $ 4.3
======== ======= =======
Provision (benefit) for income taxes:
Current:
U.S. federal $ (3.9) $ (4.8) $ (0.2)
U.S. state (0.1) 2.3 (0.1)
Non-U.S. 0.9 1.1 0.4
-------- ------- -------
(3.1) (1.4) 0.1
-------- ------- -------
Deferred:
U.S. federal 3.0 6.2 1.4
U.S. state 1.6 (1.6) 0.2
-------- ------- -------
4.6 4.6 1.6
-------- ------- -------
Total $ 1.5 $ 3.2 $ 1.7
======== ======= =======
</TABLE>
14
<PAGE> 15
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
Reconciliation of income taxes computed at the U.S. federal statutory
rate to the consolidated provision (benefit) for income taxes from continuing
operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------------
1994 1993 1992
---------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
U.S. federal statutory rate 35% 35% 34%
Income taxes at U.S. federal statutory rate $ (1.3) $ 0.9 $ 1.5
U.S. state income taxes, net of U.S. federal tax benefit 1.0 0.5 0.5
Nondeductible book depreciation and amortization 1.5 1.6 1.9
Effects of net-of-tax accounting _ _ (1.6)
Other 0.3 0.2 (0.6)
------- ------- -------
Provision for income taxes $ 1.5 $ 3.2 $ 1.7
======= ======= =======
Effective income tax rate (41.9)% 129.5% 40.5%
======= ======= =======
</TABLE>
(7) RESTRUCTURING CHARGES
Restructuring charges totaling $2.6 million were recorded in the third
and fourth quarter of 1993. In conjunction with the relocation of one of AEC's
manufacturing facilities in the first quarter of 1993, costs were incurred
which exceeded previously established reserves. Accordingly, the Company
recorded $2.0 million in charges in the fourth quarter of 1993. Elastimold
recorded charges of $0.6 million related to an early retirement program.
15
<PAGE> 16
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
(8) BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Inventories:
Raw materials and supplies $ 10.7 $ 12.0
Work in process 6.2 7.7
Finished goods 7.6 6.3
------- -------
Total $ 24.5 $ 26.0
======= =======
Excess of replacement cost over LIFO inventory cost $ 0.8 $ 0.8
======= =======
Other current assets:
Deferred taxes $ 3.3 $ 7.6
Other 1.9 3.0
------- -------
Total $ 5.2 $ 10.6
======= =======
Property, plant and equipment:
Land $ 2.8 $ 2.8
Buildings 18.7 17.5
Machinery and equipment 54.2 49.2
Construction in progress 3.7 4.2
Less accumulated depreciation (30.7) (24.5)
------- -------
Total $ 48.7 $ 49.2
======= =======
Accrued liabilities:
Divestiture reserves $ _ $ 0.5
Wages and benefits 5.1 6.7
Interest 0.1 3.1
Other 2.5 4.8
------- -------
Total $ 7.7 $ 15.1
======= =======
Other long-term liabilities:
Legal and environmental reserves $ 17.0 $ 15.1
Insurance reserves 4.4 4.7
Other 4.0 5.0
------- -------
$ 25.4 $ 24.8
======= =======
</TABLE>
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
Cash and cash equivalents
The carrying amount of cash and cash equivalents approximates fair
value because of the short maturity of those instruments.
13.75% Notes
The fair value of the Company's 13.75% Notes at December 31, 1993 is
based on the call price at January 31, 1994.
16
<PAGE> 17
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
Senior Bank Credit Facility
The carrying amount approximates fair value as the rates are tied to
the prime rate and LIBOR which fluctuate based on current market conditions.
Other Debt
The carrying amount approximates fair value as rates approximate
borrowing rates currently available to the Company for similar loans.
The estimated fair values of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 3.2 $ 3.2 $ 5.8 $ 5.8
13.75% Notes _ _ 75.0 79.1
Senior Bank Credit Facility _ _ 38.0 38.0
Other Debt 2.5 2.5 2.3 2.3
</TABLE>
(10) MANDATORY REDEEMABLE 12.5% CUMULATIVE
EXCHANGEABLE PREFERRED STOCK
The Preferred Stock is senior to the Company's Common Stock and must
be redeemed by the Company in three equal installments on July 1, of 2000, 2001
and 2002, at a redemption value of $25 per share plus all accrued and unpaid
dividends. In addition, the Company has the option of redeeming the Preferred
Stock at a price equal to a declining percentage of the redemption value,
currently 102.8% and declining to 100% for the period beginning July 1, 1996,
and thereafter. The Preferred Stock is also exchangeable at the Company's
option, for its authorized but unissued 12.5% subordinated debentures due 2001,
subject to specified conditions. Dividends on this stock are required to be
paid quarterly and may be paid at the option of the Company in additional
shares of Preferred Stock. All of the outstanding shares of Preferred Stock
are owned by Eagle. During the years ended December 31, 1994, 1993 and 1992,
the Company issued 103,606, 91,608 and 80,999 shares, respectively of Preferred
Stock in lieu of cash dividends. The Company recorded the quarterly Preferred
Stock dividend requirement as a reduction of retained earnings.
(11) STOCKHOLDER'S EQUITY
In connection with the Refinancing, the Company was recapitalized,
resulting in changes to the Company's capital structure. In addition, certain
assets were dividended to Eagle and Eagle made capital contributions to Amerace
to permit Amerace to retire its then outstanding debt. See Note 4 "Debt".
(12) RELATED PARTY TRANSACTIONS
ACCOUNTS RECEIVABLE:
In January 1994, Eagle entered into an asset securitization program
(the "Securitization") whereby it sells certain of its accounts receivable on a
limited recourse and continuous basis, including those of the Company. Under
this program, the Company sells accounts receivable to Eagle daily for a
purchase price payable in cash. As a result of the Securitization, the Company
sold substantially all of its accounts receivable to Eagle. The proceeds from
the sale of the receivables increased advances to affiliate.
17
<PAGE> 18
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
ADVANCES TO AFFILIATE:
Eagle makes advances to the Company for general corporate purposes and
also provides centralized treasury functions and financing for the Company,
including funding of their U.S. cash needs for processing of accounts payable
items. Prior to the Refinancing, the Company did not rely on Eagle for these
services, but rather, relied on availability under its Senior Bank Credit
Facility and the 13.75% Notes for its financing and liquidity needs.
Fluctuations in the balance of advances to affiliate are primarily a function
of daily cash activity associated with net disbursements for payments of
invoices offset by the sale of accounts receivable under the Securitization.
In addition, payments made to Eagle for allocations of corporate expenses and
payments in accordance with the tax sharing agreement are included in advances
to affiliate. Certain components of the advances are interest bearing, at
various interest rates ranging from 7.0% to 14.3%. The Company recorded net
interest expense on these advances of $16.4 million in the year ended December
31, 1994 and interest income of $3.9 million and $4.0 million in the years
ended December 31, 1993 and 1992, respectively.
MANAGEMENT FEES TO AFFILIATE:
Eagle provides strategic direction, financial management and other
corporate administrative services to the Company. The management fees are
charged to the Company on an annual basis.
INSURANCE:
The Company participates in Eagle sponsored insurance programs which
include coverage in the U.S. for medical, workers' compensation, product
liability, property and general liability insurance. The Company paid Eagle
$1.7 million, $1.9 million and $1.5 million in 1994, 1993 and 1992,
respectively for amounts paid primarily to third party administrators for
workers' compensation, product liability, property and general liability
insurance and $2.6 million, $2.9 million and $3.0 million in 1994, 1993 and
1992, respectively for medical insurance premiums. Other long-term liabilities
include $4.4 million and $4.7 million at December 31, 1994 and 1993,
respectively for the Eagle sponsored insurance programs for workers'
compensation, product liability, property and general liability.
(13) COMMITMENTS AND CONTINGENCIES
The Company conducts manufacturing operations at various leased
facilities and also leases warehouses, office space, computers and office
equipment. Most of the realty leases contain renewal options and escalation
clauses. Total rent expense, including related real estate taxes, amounted to
$1.3 million, $1.5 million and $1.1 million in the years ended December 31,
1994, 1993 and 1992, respectively.
The Company and certain of its subsidiaries are involved in several
lawsuits and environmental matters arising in the ordinary course of business.
However, it is the opinion of the Company's management, based upon the advice
of counsel, that these lawsuits and environmental matters are either without
merit, are covered by insurance, or are adequately reserved for in the
Consolidated Financial Statements, and that the ultimate disposition of pending
litigation will not be material in relation to the Company's consolidated
financial position or results of operations.
18
<PAGE> 19
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1994
(14) SEGMENT AND GEOGRAPHIC DATA
The Company's current operations are in one industry segment providing
electrical power distribution and those supplying industrial electrical
products for electrical equipment manufacturers. The principal products
manufactured by this group include underground cable accessories, medium
voltage electric cable and interconnect and timing devices.
The Company's revenues and identifiable assets related to its
continuing operations are predominantly related to its U.S. operations and no
one other geographic area accounts for more than 10% of total revenue or 10% of
total assets. Export sales from the United States to other geographic areas
were $24.6 million, $22.2 million and $23.2 million in the years ended December
31, 1994, 1993 and 1992, respectively.
(15) SUBSEQUENT EVENT
In November 1995, Eagle entered into an agreement for the sale of the
Company. The sale is expected to be completed in January 1996.
19
<PAGE> 1
EXHIBIT 7(a)(2)
AMERACE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995 AND 1994
<PAGE> 2
AMERACE CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1995
INDEX
<TABLE>
<S> <C>
Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
</TABLE>
2
<PAGE> 3
AMERACE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1.5 $ 3.2
Accounts receivable, net 2.7 0.5
Inventories, net 22.6 24.5
Other current assets 5.9 5.2
------- -------
Total current assets 32.7 33.4
Property, plant and equipment, net 49.9 48.7
Goodwill 158.0 161.5
Investment in affiliates 18.0 15.7
Advances to affiliate 70.6 73.7
Other assets 10.4 10.6
------- -------
Total assets $ 339.6 $ 343.6
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion long-term debt $ -- $ 1.3
Accounts payable 13.6 14.5
Accrued liabilities 9.8 7.7
------- -------
Total current liabilities 23.4 23.5
Long-term debt -- 1.2
Accrued employee benefit obligations 27.3 28.3
Other long-term liabilities 23.4 25.4
------- -------
Total liabilities 74.1 78.4
------- -------
Mandatory Redeemable 12.5% Cumulative Exchangeable
Preferred Stock; $.01 par value; 1,600,000 shares
authorized; 981,119 and 894,602 shares issued and
outstanding at September 30, 1995 and December 31, 1994 24.5 22.4
Stockholder's equity:
Common stock, par value $.01 per share, 1,600,000
shares authorized, 1,370,000 issued and outstanding -- --
Paid-in capital 281.4 281.4
Retained deficit (43.4) (40.5)
Cumulative translation adjustments 3.7 2.6
Pension liability adjustment (0.7) (0.7)
------- -------
Total stockholder's equity 241.0 242.8
------- -------
Total liabilities and stockholder's equity $ 339.6 $ 343.6
======= =======
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
3
<PAGE> 4
AMERACE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1995 1994
-------- -------
<S> <C> <C>
Net sales $ 166.5 $ 148.3
Cost of sales 122.3 109.4
-------- -------
Gross earnings 44.2 38.9
Selling and administrative expenses 22.1 19.8
Other income (4.2) (1.5)
Goodwill amortization 3.5 3.5
Management fees to affiliate 4.8 9.4
-------- -------
Operating income 18.0 7.7
Net interest expense 16.4 13.1
-------- -------
Income (loss) before income taxes 1.6 (5.4)
Provision for income taxes 2.3 1.3
-------- -------
Loss before extraordinary item (0.7) (6.7)
Extraordinary item:
Net loss from early retirement of debt -- (4.2)
-------- -------
Net loss (0.7) (10.9)
Mandatory Redeemable Preferred Stock dividend requirements 2.2 1.9
-------- -------
Net loss applicable to common stock $ (2.9) $ (12.8)
======== =======
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
4
<PAGE> 5
AMERACE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1994
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss before extraordinary item $ (0.7) $ (6.7)
Adjustments to reconcile income (loss) from continuing operations to
net cash flow from operating activities:
Depreciation and amortization 10.0 9.7
Undistributed earnings of joint ventures (2.6) (2.4)
Proceeds from sale of accounts receivable -- 22.3
Cash effects of changes in other working capital balances and
other long-term liabilities (1.8) 5.0
-------- -------
Net cash from continuing operating activities 4.9 27.9
Net cash from discontinued operations -- 0.9
-------- -------
Net cash from operations 4.9 28.8
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7.0) (4.6)
Other 0.3 2.2
-------- -------
Net cash used in investing activities (6.7) (2.4)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (2.5) --
Repayment of senior subordinated debt -- (79.1)
Repayment of senior credit facility -- (38.0)
Capital contribution from parent -- 122.4
Net advances from (payments to) affiliate 2.6 (34.7)
-------- -------
Net cash from (used in) financing activities 0.1 (29.4)
-------- -------
CHANGE IN CASH AND CASH EQUIVALENTS (1.7) (3.0)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3.2 5.8
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1.5 $ 2.8
======== =======
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
5
<PAGE> 6
AMERACE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial
Statements of Amerace Corporation (the "Company") 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 generally accepted accounting
principles for a complete set of financial statements. In the opinion
of management, all adjustments considered necessary, consisting only of
normal recurring adjustments are included for fair presentation.
Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of results that may be expected for the full
year. The unaudited Condensed Consolidated Financial Statements for
the nine months ended September 30, 1995 and 1994 should be read in
conjunction with the audited Consolidated Financial Statements of the
Company for the year ended December 31, 1994.
(2) INVENTORIES
Inventory consists of the following (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- ------------
(UNAUDITED)
<S> <C> <C>
Raw materials and supplies $ 8.8 $ 10.7
Work in process 5.8 6.2
Finished goods 8.0 7.6
------ ------
$ 22.6 $ 24.5
====== ======
</TABLE>
(3) SUBSEQUENT EVENT
In November 1995, Eagle Industries, Inc., the Company's parent,
entered into an agreement for the sale of the Company. The sale was
consummated in January 1996.
6
<PAGE> 1
Exhibit 7(b)
THOMAS & BETTS CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying pro forma condensed consolidated statement of
earnings for the year ended January 1, 1995 has been prepared by combining the
consolidated statement of earnings of Thomas & Betts Corporation ("the
Corporation") for the year ended January 1, 1995 with the consolidated
statement of income of Amerace Corporation ("Amerace") for the year ended
December 31, 1994, adjusted to give effect to the acquisition described below
as if it had occurred on January 3, 1994. The pro forma condensed consolidated
statement of earnings for the nine months ended October 1, 1995 has been
prepared combining the consolidated statement of earnings of the Corporation
for the nine months ended October 1, 1995 with the consolidated statement of
income of Amerace for the nine months ended September 30, 1995, adjusted to
give effect to the acquisition as if it had occurred on January 3, 1994.
The accompanying pro forma condensed consolidated balance sheet as of
October 1, 1995 has been prepared by combining the consolidated balance sheet
of the Corporation as of October 1, 1995 with the consolidated balance sheet of
Amerace as of September 30, 1995 adjusted to give effect to the acquisition as
if it had occurred on October 1, 1995.
The accompanying historical and pro forma condensed consolidated
financial statements of the Corporation do not reflect the financial position
or results of operations of Catamount, which was acquired by the Corporation on
October 27, 1995 in a transaction to be accounted for as an immaterial pooling
of interest.
On January 2, 1996 the Corporation acquired all of the outstanding
capital stock of Amerace, along with Amerace's trade accounts receivable
previously sold pursuant to an asset securitization program, for cash
consideration of approximately $221 million (the "Acquisition"). At or prior
to closing, Amerace redeemed its previously outstanding preferred stock,
intercompany debts with Eagle were settled, and liens on its assets related to
Eagle indebtedness were released. The Acquisition was financed with borrowings
from the Corporation's revolving credit facility. The Acquisition has been
accounted for in these pro forma condensed consolidated financial statements
using the purchase method of accounting. The total purchase cost has been
allocated to the assets and liabilities acquired based upon their respective
estimated fair values. Such allocations may be revised based on studies which
have not yet been finalized. Accordingly, the allocation of the purchase cost
included in the accompanying pro forma condensed consolidated financial
statements is preliminary. Management is also studying approaches to
integrating the
<PAGE> 2
operations of Amerace into those of the Corporation, but such studies have not
yet been finalized. The costs of integrating Amerace operations are expected
to result in a further increase in the amount of the purchase price allocated
to goodwill.
The pro forma condensed consolidated financial statements do not
purport to represent what the Corporation's financial position or results of
operations would actually have been if the Acquisition had occurred on October
1, 1995 or January 3, 1994, respectively, or to project the Corporation's
financial position at any future date or its results of operations for any
future period.
The pro forma adjustments are based on available financial information
and certain estimates and assumptions; therefore, it is likely that the actual
adjustments will differ from the pro forma adjustments. Management believes
that such assumptions provide a reasonable basis for presenting all of the
significant effects of the transactions as contemplated and that the pro forma
adjustments give appropriate effect to those assumptions and are properly
applied in the pro forma condensed consolidated financial statements. The pro
forma condensed consolidated financial statements and accompanying notes should
be read in conjunction with the historical consolidated financial statements of
the Corporation and Amerace, including the notes thereto.
2. Pro forma statements of earnings' adjustments relating to the
acquisition as if it had occurred on January 3, 1994 are as follows:
(a) Increase in depreciation charges based on estimates of fair
values.
(b) The management fees included in Amerace's historical
statements for the year ended December 31, 1994 and the nine
months ended September 30, 1995 represent an allocation of
the cost of Eagle's corporate management and other corporate
administrative services to Amerace. These have been eliminated
and replaced in the pro forma statements with the
Corporation's best estimate of expenses for general
management, accounting, auditing, cash management, risk
management, human resource, legal and tax services that would
result from the integration of Amerace's operations with those
of the Corporation.
(c) Decrease in goodwill amortization to reflect amortization over
a 40-year period of the purchase price allocated to goodwill.
(d) Decrease in interest expense as a result of the financing of
the Acquisition using net funds drawn from the revolving
credit facility:
2
<PAGE> 3
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
January 1, 1995 October 1, 1995
($000) ($000)
--------------- -----------------
<S> <C> <C>
Borrowings under Revolving
Credit Facility at an average
interest rate of 6.125% $13,508 $ 10,131
Less historic interest expense
of Amerace 18,300 16,400
-------- ---------
Adjustment to interest expense ($ 4,792) ($ 6,269)
-------- ---------
</TABLE>
(e) Income tax effect of the pro forma adjustments noted above to
3. Pro forma balance sheet adjustments relating to the acquisition as if
it had occurred on October 1, 1995 are as follows:
(a) Cash balance to be retained by the seller.
(b) Allocation of the total purchase price to the trade accounts
receivable acquired by the Corporation at the closing date
pursuant to a related receivables sales agreement.
(c) Preliminary estimated fair values of inventories and property,
plant and equipment. The adjustment to inventories is
considered to be nonrecurring and, accordingly, has not been
reflected in the pro forma statement of earnings.
<TABLE>
(d) Pro forma allocation of purchase price:
<S> <C> <C>
($ In Thousands)
Total cash purchase price $220,550
Plus Acquisition costs capitalized 3,300
--------
$223,850
--------
Amerace's historical net assets:
Total assets $339,600
Less total liabilities 74,100
-------
265,500
Less cash and advances to
affiliates not transferred 72,100
-------
193,400
Less Amerace's recorded goodwill 158,000
-------
$ 35,400 35,400
=======
Plus cost attributable to trade
accounts receivable acquired 26,811
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C>
Purchase accounting adjustments:
Inventory $ 4,648
Fixed assets 43,092
Restructuring accrual (12,000)
Pension/welfare adjustment 6,118
Deferred income taxes (15,504)
------
$26,354 26,354
====== -------
Fair value of net assets acquired 88,565
-------
Excess of purchase price over
fair value of underlying assets
acquired 135,285
Amerace recorded goodwill 158,000
-------
Adjustment to goodwill $(22,715)
=======
</TABLE>
(e) Elimination of Amerace's shareholders' equity and intercompany
accounts.
(f) Preliminary estimate of accruals related to the costs of the
Acquisition ($3.3 million) and certain other expected costs of
integrating Amerace's operations into those of the Company
($12 million).
(g) Initial borrowings under the revolving credit facility of
$220,550.
(h) To eliminate the postretirement benefit liability for plans
not assumed and to adjust the liability for those plans to be
assumed.
(i) Adjustment to deferred income taxes related to the purchase
accounting adjustments.
4. UNUSUAL EVENTS
Earnings from continuing operations of the Corporation for the year
ended January 1, 1995 included a pretax charge of $79 million for restructuring
operations and a pretax operating write-down of $11 million related to
previously vacated facilities. In addition, net earnings (not shown herein)
included a pretax gain of $99 million from the sale of the Corporation's
Vitramon subsidiary in July, 1994. These three items effectively were
financially offsetting on an after-tax basis.
5. CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
The pro forma ratio of earnings to fixed charges represents the number
of times fixed charges are covered by earnings from continuing operatons, all
on a pro forma basis. For purposes of computing this ratio, earnings consist
of earnings from continuing operations before income taxes plus fixed charges
and less equity in earnings of non- consolidated investees. Fixed
4
<PAGE> 5
charges consist of interest expense, including deferred loan cost amortization
and such portions of rental expense which the Corporation estimates to be
representative of the interest factor attributable to such rental expense.
The Corporation's ratio for the year ended January 1, 1995 was 0.96x
on a historical basis, inadequate to cover fixed charges by $1.4 million. This
is due to a provision for restructured operations of $79 million provided in
the third quarter of that year.
6. EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Pro forma earnings per share from continuing operations has been
calculated by dividing pro forma earnings from continuing operations by the
weighted average shares of common stock outstanding during the period. The
effect on earnings per share from continuing operations resulting from the
assumed exercise of outstanding options is not material.
5
<PAGE> 6
THOMAS & BETTS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Giving Effect to the Acquisition
For the Year Ended January 1, 1995
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
--------------------
Thomas & Pro Forma Pro Forma
Betts Amerace Adjustments Combined
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $1,076,165 $200,100 $1,276,265
Costs and expenses:
Cost of sales 710,864 148,000 4,099 (a) 862,963
Marketing, general and administrative 229,897 22,300 1,400 (b) 253,597
Research and development 20,787 4,200 24,987
Amortization of intangibles 11,040 4,700 (1,318)(c) 14,422
Management fees to affiliate 0 9,400 (9,400)(b) 0
Provision for restructured operations 79,011 0 79,011
---------- -------- ------- ----------
1,051,599 188,600 (5,219) 1,234,980
---------- -------- ------- ----------
Earnings from operations 24,566 11,500 5,219 41,285
Interest expense (26,852) (18,300) 4,792 (d) (40,360)
Other income (expense), net 2,780 3,200 5,980
---------- -------- ------- ----------
Earnings (loss) from continuing
operations before income taxes 494 (3,600) 10,011 6,905
Income taxes (benefit) (1,393) 1,500 3,300 (e) 3,407
---------- -------- ------- ----------
Earnings (loss) from continuing operations $ 1,887 ($5,100) $ 6,711 $ 3,498
========== ======== ======= ==========
Ratio of earnings to fixed charges 0.96x 1.03x
Share Data:
Earnings per share from continuing operations $ 0.10 $ 0.18
Average shares outstanding 19,304 19,304
Other Operating Data:
Depreciation and amortization $ 53,532 $ 12,900 $ 2,781 $ 69,213
Purchases of property, plant and equipment 59,109 7,200 66,309
</TABLE>
6
<PAGE> 7
THOMAS & BETTS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
Giving Effect to the Acquisition
For the Nine Months Ended October 1, 1995
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
--------------------
Thomas & Pro Forma Pro Forma
Betts Amerace Adjustments Combined
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $903,831 $166,500 $1,070,331
Costs and expenses:
Cost of sales 594,873 122,300 3,074 (a) 720,247
Marketing, general and administrative 185,874 18,100 1,050 (b) 205,024
Research and development 17,251 4,000 21,251
Amortization of intangibles 7,380 3,500 (963)(c) 9,917
Management fees to affiliate 0 4,800 (4,800)(b) 0
Provision for restructured operations 0 0 0
-------- -------- ------- ----------
805,378 152,700 (1,639) 956,439
-------- -------- ------- ----------
Earnings from operations 98,453 13,800 1,639 113,892
Interest expense (20,432) (16,400) 6,269 (d) (30,563)
Other income (expense), net 5,451 4,200 9,651
-------- -------- ------- ----------
Earnings (loss) from continuing
operations before income taxes 83,472 1,600 7,908 92,980
Income taxes (benefit) 26,722 2,300 2,636 (e) 31,658
-------- -------- ------- ----------
Earnings (loss) from continuing operations $ 56,750 ($700) $ 5,272 $ 61,322
======== ======== ======= ==========
Ratio of earnings to fixed charges 4.0x 3.4x
Share Data:
Earnings per share from continuing operations $ 2.89 $ 3.12
Average shares outstanding 19,642 19,642
Other Operating Data:
Depreciation and amortization $ 41,421 $ 10,000 $ 2,111 $ 53,532
Purchases of property, plant and equipment $ 61,663 $ 7,000 $ 68,663
</TABLE>
7
<PAGE> 8
THOMAS & BETTS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
Giving Effect to the Acquisition
As of October 1, 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Historical
--------------------
Thomas & Pro Forma Pro Forma
Betts Amerace Adjustments Combined
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 53,496 $ 1,500 ($1,500)(a) $53,496
Marketable securities 52,048 0 52,048
Receivables, net 195,688 2,700 26,811 (b) 225,199
Inventories 212,501 22,600 4,648 (c) 239,749
Other current assets 36,701 5,900 42,601
---------- --------- ------- ----------
Total current assets 550,434 32,700 29,959 613,093
Net property, plant and equipment 300,988 49,900 43,092 (c) 393,980
Intangible assets, net 316,315 158,000 (22,715)(d) 451,600
Advances to affiliate 0 70,600 (70,600)(e) 0
Investments and other assets 70,524 28,400 98,924
---------- --------- ------- ----------
Total assets $1,238,261 $339,600 ($20,264) $1,557,597
========== ========= ======= ==========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term bank borrowings and
current maturities of long-term debt $23,183 $0 $23,183
Accounts payable 105,836 13,600 119,436
Accrued liabilities 98,807 9,800 15,300 (f) 123,907
Income taxes 15,033 0 15,033
Dividends payable 11,021 0 11,021
---------- --------- ------- ----------
Total current liabilities 253,880 23,400 15,300 292,580
Long-term debt, net 343,853 0 220,550 (g) 564,403
Other long-term liabilities 43,036 50,700 (6,118)(h) 87,618
Deferred income taxes 16,028 0 15,504 (i) 31,532
Mandatory Redeemable Preferred Stock 0 24,500 (24,500)(e) 0
Shareholders' equity:
Common stock 9,857 0 9,857
Additional paid-in capital 172,224 281,400 (281,400)(e) 172,224
Retained earnings (accumulated deficit) 396,456 (43,400) 43,400 (e) 396,456
Unrealized gain on marketable securities 1,344 0 1,344
Foreign currency translation adjustment 3,872 3,700 (3,700)(e) 3,872
Minimum pension liability adjustment 0 (700) 700 (e) 0
Cost of treasury stock (2,289) 0 (2,289)
---------- --------- ------- ----------
Total shareholders' equity 581,464 241,000 (241,000) 581,464
---------- --------- ------- ----------
Total liabilities and shareholders' equity $1,238,261 $339,600 ($20,264) $1,557,597
========== ========= ======= ==========
</TABLE>
8
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the registration statements (No. 33-44153 and No. 33-64957) on
Form S-3 of Thomas & Betts Corporation of our report dated December 29, 1995,
with respect to the consolidated balance sheets of Amerace Corporation and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, stockholder's equity and cash for each of the years in
the three-year period ended December 31, 1994, which report appears in the Form
8-K/A of Thomas & Betts Corporation dated January 22, 1996. It should be noted
that we have not audited any financial statements of the company subsequent to
December 31, 1994 or performed any audit procedures subsequent to the date of
our report.
/s/ Arthur Andersen LLP
-----------------------
Chicago, Illinois
January 22, 1996
