UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4682
THOMAS & BETTS CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 22-1326940
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
1555 Lynnfield Road, Memphis, Tennessee 38119
(Address of principal executive offices) (Zip Code)
(901) 682-7766
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock -No Par Value 54,020,464
(Title of each class) (Outstanding at May 9, 1997)
PART I. FINANCIAL INFORMATION
THOMAS & BETTS CORPORATION
Consolidated Balance Sheet
(In thousands)
March 30, December 29,
1997 1996
ASSETS (Unaudited) (Audited)
Current Assets:
Cash and cash equivalents $ 97,078 $ 126,355
Marketable securities 31,868 35,940
Receivables, net 366,487 361,511
Inventories:
Finished goods 148,693 153,067
Work-in-process 70,180 64,979
Raw materials 152,152 145,260
371,025 363,306
Deferred income taxes 55,819 62,121
Prepaid expenses 10,797 7,818
Total Current Assets 933,074 957,051
Property, plant and equipment, at cost 1,010,202 999,976
Less accumulated depreciation 469,999 460,032
Net property, plant and equipment 540,203 539,944
Intangible assets - net 521,958 519,276
Investments and other assets 128,003 114,966
TOTAL ASSETS $2,123,238 $2,131,237
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank borrowings $ 53,904 $ 49,365
Current maturities of long-term debt 6,704 15,690
Accounts payable 171,570 190,184
Accrued liabilities 171,288 189,961
Income taxes 30,591 35,372
Dividends payable 15,043 11,328
Total Current Liabilities 449,100 491,900
Long-term debt 670,935 645,096
Other long-term liabilities 97,625 100,676
Deferred income taxes 20,813 25,183
Shareholders' Equity:
Common stock 300,057 284,639
Retained earnings 584,397 569,869
Cumulative translation adjustment 6,741 15,084
Other (6,430) (1,210)
Total Shareholders' Equity 884,765 868,382
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,123,238 $2,131,237
See accompanying notes to consolidated financial statements.
THOMAS & BETTS CORPORATION
Consolidated Statement of Earnings
(In thousands except per share data)
(Unaudited)
Quarter Ended
March 30, March 31,
1997 1996
Net sales $504,255 $486,733
Costs and expenses:
Cost of sales 349,919 343,435
Marketing, general and administrative 86,670 79,323
Research and development 12,434 12,388
Amortization of intangibles 4,283 3,745
453,306 438,891
Earnings from operations 50,949 47,842
Other expense - net 7,461 7,957
Earnings before income taxes 43,488 39,885
Income taxes 13,917 13,805
Net earnings $ 29,571 $ 26,080
Share data:
Net earnings $ 0.55 $ 0.49
Cash dividends declared $ 0.28 $ 0.28
Average shares outstanding 53,548 52,797
See accompanying notes to consolidated financial statements.
THOMAS & BETTS CORPORATION
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Quarter Ended
March 30, March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 29,571 $ 26,080
Adjustments:
Depreciation and amortization 24,243 22,369
Deferred income taxes 2,126 5,237
Changes in operating assets and liabilities:
Receivables (6,680) (33,452)
Inventories (7,395) (22,680)
Accounts payable (22,716) (2,052)
Accrued liabilities (17,638) (6,595)
Income taxes payable (4,494) 8,555
Other (8,637) (4,760)
Net cash provided by (used in) operating activities (11,620) ( 7,298)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of businesses (17,497) (237,382)
Purchases of property, plant and equipment (25,046) (25,387)
Proceeds from sale of property, plant
and equipment 587 593
Marketable securities acquired (6,569) (2,760)
Proceeds from matured marketable securities 10,192 1,045
Net cash provided by (used in) investing activities (38,333) (263,891)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in borrowings with
original maturities less than 90 days (2,391) 21,195
Proceeds from long-term debt and other
borrowings 109,424 274,042
Repayment of long-term debt and other
borrowings (82,138) (9,459)
Stock options exercised 9,610 3,774
Cash dividends paid (11,328) (12,023)
Net cash provided by (used in) financing activities 23,177 277,529
EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,501) (2,856)
Net increase (decrease) in cash and cash
equivalents (29,277) 3,484
Cash and cash equivalents at beginning of period 126,355 75,155
Cash and cash equivalents at end of period $ 97,078 $ 78,639
See accompanying notes to consolidated financial statements.
THOMAS & BETTS CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. In the opinion of Management, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary for the fair presentation of the financial position as
of March 30, 1997 and December 29, 1996, and the results of operations and
cash flows for the three-month periods ended March 30, 1997 and March 31,
1996.
2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Corporation's Annual
Report to Shareholders for the fiscal year ended December 29, 1996. The
results of operations for the periods ended March 30, 1997 and March 31,
1996 are not necessarily indicative of the operating results for the full
year.
3. Earnings Per Share: Earnings per share is computed by dividing net
earnings by the weighted average number of shares of common stock outstanding
during the reporting period. The effect on earnings per share resulting from
the assumed exercise of outstanding stock options is not material.
In February of 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share," effective for interim and annual
periods ending after December 15, 1997. Its impact on the financial
statements of the Corporation is not expected to be significant.
4. Acquisitions and Divestitures: In the first quarter of 1997, acquisitions
were made for cash totaling $17.5 million. All were accounted for using the
purchase method of accounting.
On December 11, 1996, Augat Inc. was merged with a subsidiary of the
Corporation. Augat is a worldwide manufacturer of electronic connectors
and devices used in markets such as automotive, information processing,
cable television and telecommunications. This merger was accounted for as
a pooling of interests and the Corporation's financial statements have been
restated to include the results of Augat for all periods presented except
dividends per share which reflect the Corporation's historical per share
amount.
THOMAS & BETTS CORPORATION
Management's Discussion and Analysis of Results
of Operations and Financial Condition
RESULTS OF OPERATIONS
QUARTERLY COMPARISON
Thomas and Betts had record sales and earnings for the first quarter
of 1997. First quarter sales increased four percent to $504.3 million from
$486.7 million in 1996 and earnings rose 13 percent, to $29.6 million, or
$0.55 per share, from $26.1 million, or $0.49 per share last year.
Both current and prior-year results include Augat Inc., acquired in
December 1996 and accounted for as a pooling of interests. The four
percent increase in consolidated sales included a five percent increase
primarily due to sales volume increases plus volume from new businesses
acquired, offset by a one percent unfavorable translation impact of weaker
foreign currencies compared to last year. The overall impact of price
changes was not significant. Total sales outside the U.S. represented 24
percent of consolidated sales in both 1997 and 1996.
Sales of the Electronic/OEM Components segment declined two percent in
the quarter as compared to the same period last year. Volume in traditional
electronics markets in North America and Southeast Asia and in coaxial cable
connector products acquired with Augat rose an average of 35 percent and
would have increased sales of this segment by seven percent in the quarter
absent other factors. More than offsetting these gains were planned
reductions of auto wiring shipments due to a model phase-out and lower retail
demand, a shift in emphasis in certain product lines from volume growth to
profit growth, economic weakness in Europe affecting both automotive and
professional electronics markets, unfavorable currency exchange rates and
normal price declines.
Sales of Electrical Construction and Maintenance Components rose 17
percent from first quarter 1996 predominantly due to significant volume
gains in both the U.S. and Canada. Volume increased 14 percent in existing
product lines due to strong market conditions, market share gains and in
part, better weather conditions during 1997's winter months compared with
conditions in 1996. Incremental sales from acquisitions provided the bulk
of the remaining increase.
Sales of Other Products and Components decreased four percent in the
quarter. Higher sales of the Reznor heating line, resulting from higher
volumes and incremental sales from last November's acquisition of Reznor
Europe, together with higher sales of utility and telecommunications
components would have increased segment sales by eight percent in the absence
of other factors. Planned phase-outs of low-margin contract-manufacturing
volumes related to divested product lines and an anticipated decline in the
sales of Elastimold products more than offset these gains. Sales of
Elastimold products declined because of above-average shipments made in the
first quarter of 1996 to reduce excessive backlog and improve customer
service in the then newly-acquired business.
Consolidated gross margin of 30.6 percent for the first quarter was over
one percentage point better than 29.4 percent for first quarter 1996 due to
restructure related cost savings, lower raw material commodity costs and a
higher proportion of sales of high margin Electrical Construction and
Maintenance Components products.
Consolidated marketing, general and administrative expense as a percent
of sales was 17.2 percent, up almost one percent compared to 16.3 percent
last year due primarily to increased spending on marketing and advertising to
support the integration of Augat. Research and development expense, at 2.5
percent of sales, was even with last year. First-quarter amortization
expense increased slightly versus last year due to additional goodwill from
1996 purchase acquisitions.
Other expense-net in the first quarter declined slightly from last year
due to higher equity investment income. The first quarter's effective tax
rate of 32.0 percent declined from 34.6 percent last year due to domestic
and foreign tax planning initiatives and changes in the Corporation's legal
structure.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation has access to funds made available under a $500 million
revolving credit facility, which expires in March 2000. The Corporation
continues to fund its capital and operating needs with cash flows from
operations augmented by borrowing under this credit facility and from other
sources.
Net cash flow from operating activities was a negative $11.6 million in
the first quarter. Payments of $11.0 million for change-of-control costs
related to the Augat acquisition were made out of reserves set up as part of
the 1996 special charge, with reserves of $3.1 million remaining for
anticipated future payments. Payments of $4.0 million for restructuring
activities were also made out of reserves set up by the 1996 special charge.
Working capital investment in receivables and inventory were made to support
business growth and recent business acquisitions, while accounts payable
declined as outstanding amounts established by December activity were
settled.
Capital spending totaled $25.0 million for normal productivity
improvements and refurbishment projects. Cash payments for business
acquisitions totaled $17.5 million in the first quarter and dividends paid
in the quarter totaled $11.3 million.
RESTRUCTURING
Activities related to the $24.5 million restructuring charge taken in
the fourth quarter of 1996 generally proceeded as anticipated. Through the
end of the first quarter of 1997, the Corporation expended $4.0 million for
cash severance and other employee benefit payments, with $13.9 million of
restructuring reserves remaining for cash related restructure activities and
$6.6 million remaining for non-cash write-off's of equipment.
PART II. OTHER INFORMATION
THOMAS & BETTS CORPORATION
Item 5. Other Information
(a) FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q and in written and oral
statements made by the Corporation ("T&B") may constitute "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. The words "believe," "expect" and "anticipate" and
similar expressions identify forward-looking statements. Although
these statements reflect the Corporation's current views with
respect to future events and financial performance, they are
subject to many uncertainties and factors relating to the
Corporation's operations and business environment which may cause
the actual results of the Corporation to be materially different
from any future results expressed or implied by such forward-
looking statements.
Examples of such uncertainties include, but are not limited to:
changes in customer demand for various T&B products that could
affect its overall product mix, margins, plant utilization levels
and asset valuations; economic slowdown in the U.S. contrary to
T&B's expectations of continued economic growth throughout 1997;
or economic slowdowns in T&B's major offshore markets, including
Canada, Western Europe (particularly Germany and the U.K.), Japan
and Taiwan; effects of significant changes in monetary and fiscal
policies in the U.S. and abroad which could result in currency
fluctuations including fluctuations in the Canadian dollar, German
mark, Japanese yen, Swiss franc and U.K. pound; inflationary
pressures which could raise interest rates and consequently T&B's
cost of funds; unforeseen difficulties in completing identified
restructuring actions begun in 1996 in connection with the Augat
merger, including disposal of idle facilities, geographic shifts
of production locations and integration of new distribution
facilities; availability and pricing of commodities and materials
needed for production of T&B's products, including steel, copper,
zinc, aluminum and plastic resins; increased downward pressure on
selling prices for T&B's products; unforeseen difficulties arising
from the integration of acquired businesses with T&B's operations;
changes in financial results and consequently in equity income
from T&B's equity investments in Taiwan, Japan, Belgium and the
U.S.; changes in environmental regulations and policies that could
impact projections of remediation expenses; significant changes in
governmental policies domestically and abroad that could create
trade restrictions, patent enforcement issues, tax rate changes
and changes in tax treatment of such items as tax credits,
withholding taxes, transfer pricing and other income and expense
recognition for tax purposes, including changes in taxation on
income generated in Puerto Rico.
The Corporation does not, by making any forward-looking
statements, undertake any obligation to update them (whether as a
result of new information, future events or otherwise).
(b) RATIO OF EARNINGS TO FIXED CHARGES
For the
Quarter
Ended For the Years Ended
March 30, Dec. 29, Dec. 31, Jan. 1, Jan. 2, Dec. 31,
1997 1996 1995 1995 1994 1992
Ratio of
earnings to
fixed
charges(1) 3.7x 2.3x 3.8x 1.9x 2.8x 2.3x
(1) The ratio of earnings to fixed charges represents the number of
times fixed charges are covered by earnings from continuing
operations. For purposes of computing this ratio, earnings consist
of earnings from continuing operations before income taxes, plus
fixed charges less capitalized interest and less undistributed
earnings from less-than-50-percent-owned entities. Fixed charges
consist of interest expense and such portion of rental expense
which the Corporation estimates to be representative of the interest
factor attributable to such rental expense. See Exhibit 12.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this form:
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
- Form 8-K, dated February 25, 1997, reporting financial information
on combined sales and net income of Augat and Thomas & Betts for
30 days of post-acquisition combined operations from December 30,
1996 through January 28, 1997.
THOMAS & BETTS CORPORATION
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 thereunto duly authorized.
THOMAS & BETTS CORPORATION
(Registrant)
DATE: May 14, 1997 /s/Fred R. Jones
Fred R. Jones
Vice President-Finance and Treasurer
DATE: May 14, 1997 /s/Jerry Kronenberg
Jerry Kronenberg
Vice President-General Counsel
EXHIBIT 12
THOMAS & BETTS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
<TABLE>
Quarter
Ended For the Years Ended
March 30, Dec 29, Dec. 31, Jan. 1, Jan. 2, Dec. 31,
1997 1996 1995 1995 1994 1992
<S> <C> <C> <C> <C> <C> <C>
Earnings from
continuing
operations before
income taxes $43,488 $ 90,878 $128,930 $40,194 $ 83,542 $ 62,738
Add:
Interest and related
debt charges
included in expense 12,274 50,745 33,970 32,437 36,071 40,974
Portion of rents
representative of
the interest factor 2,661 11,399 10,766 9,766 9,266 8,421
Deduct:
Interest capitalized
and undistributed
earnings from less-
than-50-percent-
owned entities (3,207) (8,642) (2,848) (1,863) -
Earnings
as adjusted $55,216 $144,380 $170,818 $80,534 $128,879 $112,133
Fixed charges:
Interest and related
debt charges
included in expense 12,274 50,745 33,970 32,437 36,071 40,974
Portion of rents
representative of
the interest factor 2,661 11,399 10,766 9,766 9,266 8,421
Total fixed charges $14,935 $ 62,144 $ 44,736 $42,203 $ 45,337 $ 49,395
Ratio of earnings
to fixed charges 3.7x 2.3x 3.8x 1.9x 2.8x 2.3x
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from SEC Form 10-Q
for the period ended March 30, 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-30-1997
<CASH> 97,078
<SECURITIES> 31,868
<RECEIVABLES> 388,700
<ALLOWANCES> (22,213)
<INVENTORY> 371,025
<CURRENT-ASSETS> 933,074
<PP&E> 1,010,202
<DEPRECIATION> 469,999
<TOTAL-ASSETS> 2,123,238
<CURRENT-LIABILITIES> 449,100
<BONDS> 670,935
0
0
<COMMON> 300,057
<OTHER-SE> 584,708
<TOTAL-LIABILITY-AND-EQUITY> 2,123,238
<SALES> 504,255
<TOTAL-REVENUES> 504,255
<CGS> 349,919
<TOTAL-COSTS> 103,387
<OTHER-EXPENSES> (4,777)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,238
<INCOME-PRETAX> 43,488
<INCOME-TAX> 13,917
<INCOME-CONTINUING> 29,571
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,571
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
