_______________________________________________________________________________
_______________________________________________________________________________
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 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 of incorporation) (I.R.S. Employer 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 Outstanding Shares at October 28, 1997
(Title of each Class) 55,001,947
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
PART I. FINANCIAL INFORMATION
THOMAS & BETTS CORPORATION
Consolidated Balance Sheet
(In thousands)
September 28, December 29,
1997 1996
------------ ------------
ASSETS (Unaudited) (Audited)
Current Assets:
Cash and cash equivalents $ 76,084 $ 126,355
Marketable securities 69,460 35,940
Receivables, net 430,820 361,511
Inventories:
Finished goods 147,866 153,067
Work-in-process 72,722 64,979
Raw materials 155,250 145,260
------------ ------------
375,838 363,306
Deferred income taxes 41,767 62,121
Prepaid expenses 11,095 7,818
------------ ------------
Total Current Assets 1,005,064 957,051
Property, plant and equipment, at cost 1,073,114 999,976
Less accumulated depreciation 504,285 460,032
------------ ------------
Net property, plant and equipment 568,829 539,944
Intangible assets - net 522,536 519,276
Investments and other assets 125,496 114,966
------------ ------------
TOTAL ASSETS $2,221,925 $2,131,237
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank borrowings $ 41,304 $ 49,365
Current maturities of long-term debt 6,099 15,690
Accounts payable 182,103 190,184
Accrued liabilities 152,278 189,961
Income taxes 26,973 35,372
Dividends payable 15,380 11,328
------------ ------------
Total Current Liabilities 424,137 491,900
Long-term debt 730,295 645,096
Other long-term liabilities 98,727 100,676
Deferred income taxes 17,677 25,183
Shareholders' Equity:
Common stock 316,188 284,639
Retained earnings 638,248 569,869
Cumulative translation adjustment 1,279 15,084
Other (4,626) (1,210)
------------ ------------
Total Shareholders' Equity 951,089 868,382
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,221,925 $2,131,237
------------ ------------
------------ ------------
See accompanying notes to consolidated financial statements.
2
<PAGE>
THOMAS & BETTS CORPORATION
Consolidated Statement of Earnings
(In thousands except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
-------- -------- ---------- ----------
Net sales $520,395 $497,046 $1,582,161 $1,483,559
Costs and expenses:
Cost of sales 355,129 346,152 1,085,810 1,038,091
Marketing, general and
administrative 82,466 77,999 259,029 238,259
Research and development 12,698 11,247 39,558 35,465
Amortization of intangibles 4,285 3,824 12,907 11,411
-------- -------- ---------- ----------
454,578 439,222 1,397,304 1,323,226
-------- -------- ---------- ----------
Earnings from operations 65,817 57,824 184,857 160,333
Other expense - net 8,395 8,497 25,971 23,907
-------- -------- ---------- ----------
Earnings before income taxes 57,422 49,327 158,886 136,426
Income taxes 17,169 15,705 49,955 45,759
-------- -------- ---------- ----------
Net earnings $ 40,253 $ 33,622 $ 108,931 $ 90,667
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Share data:
Net earnings $ 0.73 $ 0.63 $ 1.99 $ 1.70
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Cash dividends declared $ 0.28 $ 0.28 $ 0.84 $ 0.84
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Average shares outstanding 54,952 53,174 54,630 52,989
-------- -------- ---------- ----------
-------- -------- ---------- ----------
See accompanying notes to consolidated financial statements.
3
<PAGE>
THOMAS & BETTS CORPORATION
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
Sept. 28, Sept. 29,
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $108,931 $ 90,667
Adjustments:
Depreciation and amortization 71,281 70,762
Deferred income taxes 11,531 8,705
Changes in operating assets and liabilities:
Receivables ( 68,740) (78,780)
Inventories ( 7,455) (24,645)
Accounts payable ( 7,298) 5,257
Accrued liabilities ( 41,546) (20,386)
Income taxes payable ( 9,583) 3,767
Other ( 5,015) ( 470)
--------- ---------
Net cash provided by operating activities 52,106 54,877
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of businesses ( 19,326) (230,183)
Purchases of property, plant and equipment ( 82,917) ( 80,845)
Proceeds from sale of property, plant
and equipment 5,799 33,594
Marketable securities acquired ( 63,805) ( 26,636)
Proceeds from matured marketable securities 30,584 14,836
--------- ---------
Net cash (used in) investing activities (129,665) (289,234)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in borrowings with
original maturities less than 90 days 8,843 9,702
Proceeds from long-term debt and other
borrowings 164,050 445,605
Repayment of long-term debt and other
borrowings (120,682) (160,352)
Stock options exercised 19,826 9,109
Cash dividends paid ( 41,517) ( 36,193)
--------- ---------
Net cash provided by financing activities 30,520 267,871
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 3,232) ( 3,291)
--------- ---------
Net increase (decrease) in cash and cash
equivalents ( 50,271) 30,223
Cash and cash equivalents at beginning of period 126,355 75,155
--------- ---------
Cash and cash equivalents at end of period $ 76,084 $105,378
--------- ---------
--------- ---------
See accompanying notes to consolidated financial statements.
4
<PAGE>
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
September 28, 1997 and December 29, 1996, and the results of operations and
cash flows for the periods ended September 28, 1997 and September 29, 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. These consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 29, 1996. The results of
operations for the periods ended September 28, 1997 and September 29, 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 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, "Earnings Per Share," effective for interim and annual
periods ending after December 15, 1997. The impact of this FASB Statement on
the financial statements of the Corporation is not expected to be material.
4. Acquisitions and Divestitures: The Corporation completed six acquisitions
during the first nine months of 1997 for total consideration of approximately
$62 million consisting of $19.3 million in cash and 793,560 shares of the
Corporation's common stock. Four of these acquisitions were accounted for
under the purchase method of accounting. The other two acquisitions were
accounted for as immaterial poolings of interest and the results of those two
acquisitions have been included in the Corporation's results as of the
beginning of 1997 without restating prior-years' results.
On December 11, 1996, Augat Inc. was merged with a subsidiary of the
Corporation. This merger was accounted for as a pooling of interests, and
the Corporation's financial statements, except dividends per share, have been
restated to include the results of Augat Inc. for all periods presented.
5. Subsequent Events: In October, the Corporation announced the formation of
a joint venture with Exemplar Manufacturing Company to manufacture and sell
power distribution, battery cable and wiring systems to the U.S. automotive
industry. The Corporation plans to contribute two product lines of its
automotive wiring business to the joint venture. The joint venture will be
accounted for using the equity method of accounting commencing in the fourth
quarter. The Corporation's revenues in the fourth quarter will be reduced by
the revenue amount of the contributed product lines, but near-term earnings
are not expected to be affected by the contribution to the joint venture.
Sales in the first three quarters of 1997 for the contributed product lines
were approximately $19 million, $25 million and $22 million, respectively.
5
<PAGE>
THOMAS & BETTS CORPORATION
Management's Discussion and Analysis of Results
of Operations and Financial Condition
RESULTS OF OPERATIONS
Thomas & Betts Corporation had record net earnings and earnings per share
for the third quarter 1997. Net earnings rose 20 percent, to $40.3 million,
and earnings per share increased 16 percent, to $0.73, compared with third
quarter 1996. For the first nine months of 1997, net earnings of $108.9
million were 20 percent higher and earnings per share of $1.99 were 17
percent higher, respectively, than for the same 1996 period.
Third-quarter sales increased five percent, to $520.4 million, from
1996's third quarter and were six percent higher if a $6.7 million negative
impact from foreign currency translation were excluded. The higher 1997
sales were the result of volume increases from existing products and newly
acquired businesses, partially offset by the foreign currency translation
impact. Sales outside of the U.S. represented 24 percent of third-quarter
sales compared with 22 percent in 1996. Sales for the first nine months of
1997 improved seven percent from the year earlier as a result of higher sales
volumes from existing and newly acquired product lines.
Both current and prior year results include the results of Augat Inc.,
which was acquired in December 1996 and accounted for as a pooling of
interests.
The Electronics/OEM Components segment had six percent lower sales in the
quarter compared with the 1996 quarter, despite significantly higher sales to
computer manufacturers in Southeast Asia, growth with electronics
distributors and strong professional electronics volumes in Europe.
Unfavorable foreign currency translations lowered segment sales by $6.4
million, accounting for one-half of the total sales decrease. Planned
reductions of auto wiring shipments due to a model phaseout, softness in
worldwide auto production, delays in several cable television installation
projects in the U.S. and abroad, and the discontinuation of certain product
lines in the prior year also contributed to lower year over year sales.
Sales for the nine-month period declined slightly from 1996's level as
year-to-date volume increases were offset primarily by weaker foreign
currencies, planned reductions of auto shipments due to a model phaseout, and
price decreases.
Continued strong volume increases, attributable to existing and recently
acquired product lines, market share gains and a solid North American
economy, caused sales of the Electrical Construction and Maintenance
Components segment to rise 15 percent over 1996's third quarter. Sales
increased in all end-user markets, with 11 to 15 percent increases in
industrial, commercial and residential markets and a doubling of sales to the
project market. Through nine months of 1997, sales were up 18 percent over
the same period of 1996 due to strong volume increases and recent
acquisitions.
Third-quarter sales of the Other Products and Components segment rose 11
percent over last year's period. Sales of core utility and mechanical
products were up 14 percent over the 1996 quarter reflecting volume gains in
all major product lines and increased marketing leverage from the 1996
acquisitions of Amerace Corporation and Reznor Europe. These gains were
6
<PAGE>
offset somewhat by the effects of planned phaseouts of low-margin contract-
manufacturing volumes related to divested product lines. Year-to-date sales
of Other Products and Components rose five percent over the same period of
1996. Higher sales volumes in the U.S. Reznor heating line and the November
1996 acquisition of Reznor Europe contributed to the increase, as did greater
sales of domestic utility products. These gains were reduced somewhat by the
phaseouts of low-margin contract-manufacturing volumes.
Third-quarter consolidated gross margin of 31.8 percent was 1.5
percentage points better than the prior year. The improvement stemmed from
restructuring cost savings, productivity improvements and the phaseout of
low-margin contract-manufacturing business. These factors and lower
commodity costs early in the year improved the year-to-date gross margin 1.5
percentage points from the prior year, to 31.4 percent.
Marketing, general and administrative expense as a percent of sales was
15.8 percent in the third quarter and 16.4 percent in the nine-month period
of 1997, compared with 15.7 percent and 16.1 percent, for the respective
periods of 1996. Expenses for marketing and advertising to support the
integration of Augat Inc. impacted the year-to-date comparison. Amortization
expense increased $0.5 million in the quarter and $1.5 million through nine
months due to additional goodwill related to 1996 and 1997 acquisitions.
The effective year-to-date income tax rate of 31.4 percent was lower than
the 1996 rate of 33.5 percent due to continued favorable results from state
and international tax planning initiatives. Management expects the
Corporation's effective income tax rate to be 31 percent for 1997 and to
continue at this rate for the next few years barring any significant effects
from future acquisitions or divestitures.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $52.1 million through the
first nine months of 1997. Accounts receivable increased from year-end to
support higher sales volumes, as a result of recent acquisitions and the
seasonal buildup of receivables from Reznor's early order program.
Capital expenditures for the first nine months totaled $82.9 million.
Expenditures were for productivity improvements and refurbishment projects.
Cash payments for business acquisitions totaled $19.3 million through nine
months of 1997, while dividends paid totaled $41.5 million.
As of September 28, 1997, marketable securities, cash and equivalents
totaled $145.5 million compared with $162.3 million as of December 29, 1996.
The Corporation has a revolving credit agreement with several banks providing
for a commitment of $500.0 million through March 2000. In June 1997 the
Corporation initiated a commercial paper program, which is backed by the
$500.0 million revolving credit agreement. As of September 28, 1997, $305.9
million of commercial paper was outstanding. The Corporation also has access
to funds under $280.0 million of uncommitted credit lines with a variety of
banks. Uncommitted borrowings under these lines totaled $95.0 million at the
end of September. The Corporation has a number of smaller committed and
uncommitted credit facilities to provide funding for its international
operations. Management believes that its resources are sufficient to meet
the Corporation's financing needs for the foreseeable future.
7
<PAGE>
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 third quarter of 1997, the Corporation expended $11.6 million for cash
severance and other employee benefit payments, with $5.9 million of
restructuring reserves remaining for cash-related restructuring activities
and $6.6 million remaining for noncash write-offs of equipment.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities
In July 1997, the Corporation issued 653,244 shares of the
Corporation's common stock to the former owners of privately held
businesses acquired by the Corporation. The shares represented the
purchase price for those acquisitions.
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 may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. 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 products that could affect
the Corporation's overall product mix, margins, plant utilization
levels and asset valuations; economic slowdown in the U.S. contrary
to the Corporation's expectations of continued economic growth
throughout 1997; economic slowdowns in the Corporation'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 or
other factors that could result in currency fluctuations including
fluctuations in the Canadian dollar, German mark, Japanese yen,
Swiss franc and U.K. pound; inflationary pressures that could raise
interest rates and consequently the Corporation's cost of funds;
unforeseen difficulties in completing identified restructuring
actions begun in 1996 in connection with the Augat Inc. merger,
8
<PAGE>
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 the Corporation's products, including steel, copper,
zinc, aluminum and plastic resins; increased downward pressure on
selling prices for the Corporation's products; unforeseen
difficulties arising from the integration of acquired businesses
with the Corporation's operations; changes in financial results and
consequently in equity income from the Corporation'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.
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
On July 25, 1997, the Corporation filed a Current Report on Form
8-K to report the termination of Deloitte & Touche LLP as
independent public accountants for Augat Inc., a public company
acquired by the Corporation in December 1996.
9
<PAGE>
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: November 11, 1997 /s/Fred R. Jones
Fred R. Jones
Vice President-Finance and Treasurer
EXHIBIT 12
<TABLE>
THOMAS & BETTS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
Nine Months For the Years Ended
Ended ----------------------------------------------------
Sept. 28, 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 $158,886 $ 90,878 $128,930 $40,194 $ 83,542 $ 62,738
Add:
Interest and related
debt charges
included in expense 38,301 50,745 33,970 32,437 36,071 40,974
Portion of rents
representative of
the interest factor 8,448 11,399 10,766 9,766 9,266 8,421
Deduct:
Interest capitalized
and undistributed
earnings from less-
than-50-percent-
owned entities (9,956) (8,642) (2,848) (1,863) - -
--------- --------- --------- -------- --------- ---------
Earnings
as adjusted $195,679 $144,380 $170,818 $80,534 $128,879 $112,133
--------- --------- --------- -------- --------- ---------
--------- --------- --------- -------- --------- ---------
Fixed charges:
Interest and related
debt charges
included in expense 38,301 50,745 33,970 32,437 36,071 40,974
Portion of rents
representative of
the interest factor 8,448 11,399 10,766 9,766 9,266 8,421
--------- --------- --------- -------- --------- ---------
Total fixed charges $ 46,749 $ 62,144 $ 44,736 $42,203 $ 45,337 $ 49,395
--------- --------- --------- -------- --------- ---------
--------- --------- --------- -------- --------- ---------
Ratio of earnings
to fixed charges 4.2x 2.3x 3.8x 1.9x 2.8x 2.3x
--------- --------- --------- -------- --------- ---------
--------- --------- --------- -------- --------- ---------
</TABLE>
(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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from SEC Form 10-Q for
the period ended September 28, 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-28-1997 DEC-28-1997 DEC-28-1997
<PERIOD-END> MAR-30-1997 JUN-29-1997 SEP-28-1997
<CASH> 96,999 143,715 76,084
<SECURITIES> 31,868 31,689 69,460
<RECEIVABLES> 396,440 435,279 453,467
<ALLOWANCES> (22,296) (24,606) (22,647)
<INVENTORY> 379,176 377,336 375,838
<CURRENT-ASSETS> 949,590 1,034,205 1,005,064
<PP&E> 1,019,540 1,049,216 1,073,114
<DEPRECIATION> (472,270) (489,727) (504,285)
<TOTAL-ASSETS> 2,155,515 2,233,701 2,221,925
<CURRENT-LIABILITIES> 463,608 488,186 424,137
<BONDS> 679,508 702,361 730,295
0 0 0
0 0 0
<COMMON> 299,916 308,681 316,188
<OTHER-SE> 593,374 616,289 634,901
<TOTAL-LIABILITY-AND-EQUITY> 2,155,515 2,233,701 2,221,925
<SALES> 515,919 1,061,766 1,582,161
<TOTAL-REVENUES> 515,919 1,061,766 1,582,161
<CGS> 356,898 730,681 1,085,810
<TOTAL-COSTS> 105,457 212,045 311,494
<OTHER-EXPENSES> (4,200) (8,073) (12,242)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 12,701 25,649 38,213
<INCOME-PRETAX> 45,063 101,464 158,886
<INCOME-TAX> 14,729 32,786 49,955
<INCOME-CONTINUING> 30,334 68,678 108,931
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 30,334 68,678 108,931
<EPS-PRIMARY> 0.56 1.26 1.99
<EPS-DILUTED> 0.56 1.26 1.99
</TABLE>
