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 June 29, 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 54,962,762
(Title of each class) (Outstanding at August 11, 1997)
PART I. FINANCIAL INFORMATION
THOMAS & BETTS CORPORATION
Consolidated Balance Sheet
(In thousands)
June 29, December 29,
1997 1996
ASSETS (Unaudited) (Audited)
Current Assets:
Cash and cash equivalents $ 143,537 $ 126,355
Marketable securities 31,689 35,940
Receivables, net 406,288 361,511
Inventories:
Finished goods 148,187 153,067
Work-in-process 74,422 64,979
Raw materials 150,989 145,260
373,598 363,306
Deferred income taxes 59,248 62,121
Prepaid expenses 11,126 7,818
Total Current Assets 1,025,486 957,051
Property, plant and equipment, at cost 1,041,421 999,976
Less accumulated depreciation 488,410 460,032
Net property, plant and equipment 553,011 539,944
Intangible assets - net 517,375 519,276
Investments and other assets 114,372 114,966
TOTAL ASSETS $2,210,244 $2,131,237
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank borrowings $ 65,431 $ 49,365
Current maturities of long-term debt 10,726 15,690
Accounts payable 178,545 190,184
Accrued liabilities 176,582 189,961
Income taxes 33,012 35,372
Dividends payable 15,145 11,328
Total Current Liabilities 479,441 491,900
Long-term debt 694,311 645,096
Other long-term liabilities 94,335 100,676
Deferred income taxes 23,242 25,183
Shareholders' Equity:
Common stock 308,681 284,639
Retained earnings 610,176 569,869
Cumulative translation adjustment 5,697 15,084
Other (5,639) (1,210)
Total Shareholders' Equity 918,915 868,382
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,210,244 $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 Six Months Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
Net sales $537,753 $499,780 $1,046,234 $986,513
Costs and expenses:
Cost of sales 368,309 348,504 721,392 691,939
Marketing, general and
administrative 87,180 80,937 174,942 160,260
Research and development 14,425 11,830 26,859 24,218
Amortization of intangibles 4,055 3,842 8,337 7,587
473,969 445,113 931,530 884,004
Earnings from operations 63,784 54,667 114,704 102,509
Other expense - net 8,377 7,453 15,901 15,410
Earnings before income taxes 55,407 47,214 98,803 87,099
Income taxes 17,703 16,249 31,619 30,054
Net earnings $ 37,704 $ 30,965 $ 67,184 $ 57,045
Share data:
Net earnings $ 0.70 $ 0.58 $ 1.25 $ 1.07
Cash dividends declared $ 0.28 $ 0.28 $ 0.56 $ 0.56
Average shares outstanding 54,108 53,017 53,872 52,903
See accompanying notes to consolidated financial statements.
THOMAS & BETTS CORPORATION
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 29, June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 67,184 $ 57,045
Adjustments:
Depreciation and amortization 46,993 46,451
Deferred income taxes 987 3,919
Changes in operating assets and liabilities:
Receivables (43,791) (45,385)
Inventories ( 5,582) (24,651)
Accounts payable (17,902) ( 9,448)
Accrued liabilities (13,608) ( 4,281)
Income taxes payable ( 1,964) 7,009
Other 2,577 ( 5,295)
Net cash provided by operating activities 34,894 25,364
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of businesses (19,326) (238,372)
Purchases of property, plant and equipment (51,594) ( 55,827)
Proceeds from sale of property, plant and equipment 3,469 25,626
Marketable securities acquired (10,230) ( 23,138)
Proceeds from matured marketable securities 14,225 1,513
Net cash (used in) investing activities (63,456) (290,198)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in borrowings with original
maturities less than 90 days 13,270 17,422
Proceeds from long-term debt and other borrowings 138,610 431,648
Repayment of long-term debt and other borrowings ( 94,276) (142,101)
Stock options exercised 18,002 7,126
Cash dividends paid ( 26,371) ( 24,094)
Net cash provided by financing activities 49,235 290,001
EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 3,491) ( 3,712)
Net increase (decrease) in cash and cash equivalents 17,182 21,455
Cash and cash equivalents at beginning of period 126,355 75,155
Cash and cash equivalents at end of period $143,537 $ 96,610
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
June 29, 1997 and December 29, 1996, and the results of operations and cash
flows for the periods ended June 29, 1997 and June 30, 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 June 29, 1997 and June 30, 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 (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 significant.
4. Acquisitions and Divestitures: The Corporation completed four
acquisitions during the first six months of 1997 for total consideration of
approximately $26.8 million consisting of cash and shares of the
Corporation's common stock. Three of these acqusitions were accounted for
under the purchase method of accounting, while the fourth was treated as an
immaterial pooling of interest without restating prior-years' results.
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
amounts.
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 net sales and net earnings for the second
quarter of 1997. Second-quarter sales increased eight percent to $537.8
million from $499.8 million in 1996 and earnings rose 22 percent, to $37.7
million, or $0.70 per share, from $31.0 million, or $0.58 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 eight percent
increase in consolidated sales is primarily due to sales volume increases
plus volume from new businesses acquired, partially 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 23 percent of consolidated sales in 1997 and 24
percent in 1996.
Sales of the Electronic/OEM Components segment declined one percent in
the quarter as compared to the same period last year. Sales of
communications and professional electronics applications experienced strong
growth compared with 1996's second quarter, reflecting market share gains and
strong demand from U.S. cable television system operators and computer
manufacturers in North America and Southeast Asia. However, these sales
gains were dampened by lower sales to automotive customers as a result of
planned reductions of auto wiring shipments due to a model phase-out,
unfavorable impacts of foreign currency translations, continued weak European
business conditions and reduced demand from automobile manufacturers.
Sales of Electrical Construction and Maintenance Components rose 21
percent from second quarter 1996 predominantly due to significant volume
gains in both the U.S. and Canada. Volume increased 10 percent in existing
product lines due to strong market conditions compared with conditions in
1996. Incremental sales from acquisitions provided the bulk of the remaining
increase.
Sales of Other Products and Components increased six percent from the
same quarter in 1996. Sales of core utility and mechanical products rose 10
percent, but were offset by planned phase-outs of low-margin contract-
manufacturing volumes related to transitions of previously divested product
lines.
Consolidated gross margin of 31.5 percent for the second quarter was
better than last year's corresponding 30.3 percent due to restructure-related
cost savings, lower raw material commodity costs and a higher proportion of
sales of higher-margin Electrical Construction and Maintenance Components
products.
Consolidated marketing, general and administrative expense as a percent
of sales was 16.2 percent in both 1997 and 1996. Research and development
expense, at 2.7 percent of sales, increased slightly from 2.4 percent last
year. Second-quarter amortization expense increased slightly versus last
year due to additional goodwill from 1996 and 1997 acquisitions.
YEAR-TO-DATE COMPARISON
Sales for the first six months of 1997 were up six percent to $1,046.2
million from $986.5 million in 1996. Earnings improved 18 percent, to $67.2
million, or $1.25 per share, from $57.0 million, or $1.07 per share in 1996.
Electronic/OEM Components segment sales declined one percent from the
comparable period last year. Volume increases were offset by slight price
decreases and weakening currencies.
Electrical Construction and Maintenance Components segment results
reflect the first and second quarters' strong performance in the U.S. and
Canada, as sales were up 20 percent versus the first six months of 1996.
Sales of Other Products and Components increased 2 percent versus last
year. 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 domestic mechanical products were offset by
planned phase-outs mentioned in the quarterly comparison.
Consolidated gross margin of 31.0 percent was better than last year's
29.9 percent due to restructure-related cost savings, lower commodity costs
and a greater proportion of sales of higher-margin products. Marketing,
general and administrative expense increased from 16.2 percent of sales in
1996 to 16.7 percent of sales in 1997 due primarily to increased first-quarter
spending on marketing and advertising to support the integration of Augat.
Research and development expense increased to 2.6 percent of sales in 1997
from 2.5 percent of sales in 1996. Amortization expense for the first six
months of 1997 increased slightly over 1996's level due to acquisitions.
The year-to-date effective tax rate of 32.0 percent is lower than last year's
34.5 percent 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.
In June 1997 the Corporation launched a $500 million Section 4(2)
commercial paper program. The program is rated A-2/P-2 and is backed by the
existing $500 million revolving credit facility.
Net cash flow from operating activities was $34.9 million in the first
six months. Payments of $13.9 million for merger and change-of-control
costs and $9.8 million for restructuring activities related to the Augat
acquisition were made out of reserves set up as part of the 1996 special
charge. Working capital investments 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 $51.6 million for normal productivity
improvements and refurbishment projects. Cash payments for business
acquisitions totaled $19.3 million in the first six months and dividends paid
in the first six months totaled $26.4 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 second quarter of 1997, the Corporation expended $9.8 million for
cash severance and other employee benefit payments, with $8.1 million of
restructuring reserves remaining for cash related restructure activities and
$6.6 million remaining for non-cash write-offs of equipment.
PART II. OTHER INFORMATION
THOMAS & BETTS CORPORATION
Item 2. Changes in Securities
(c) Recent Sales of Unregistered Securities
On June 27, 1997, the Corporation issued 147,032 shares of the
Corporation's common stock to individuals who were former owners of
privately held businesses acquired by the Corporation. The shares
represented part of the purchase price for those acquisitions.
These shares were not registered by the Corporation under the
Securities Act of 1933 as of June 29, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
The matters which were voted upon at the Annual Meeting of
Shareholders held on May 7, 1997, and the results of the voting are
set forth below:
1. Each of the following persons were nominated and elected to
serve as director for one year and the results of the vote
taken were as follows:
Nominees for Director For Withheld
Ernest H. Drew 48,863,168 159,630
T. Kevin Dunnigan 48,850,289 172,509
Jeananne K. Hauswald 48,850,209 172,589
Thomas W. Jones 48,864,015 158,783
Robert A. Kenkel 48,860,430 162,368
John N. Lemasters 48,853,147 169,651
Kenneth R. Masterson 48,846,024 176,774
Thomas C. McDermott 48,855,596 167,202
Clyde R. Moore 48,857,498 165,300
Jean-Paul Richard 47,829,822 1,192,976
Ian M. Ross 48,858,960 163,838
William H. Waltrip 47,848,595 1,174,203
2. A proposal to amend the 1993 Management Stock Ownership Plan by
setting a maximum grant amount of 200,000 shares of common
stock per employee in any given year received 47,710,868 votes
for and 891,701 votes against, with 420,229 abstentions.
3. A proposal to ratify the appointment of KPMG Peat Marwick LLP
as independent public accountants received 48,867,750 votes
for and 58,177 votes against, with 96,871 abstentions.
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
Six Months
Ended For the Years Ended
June 29, Dec. 29, Dec. 31, Jan. 1, Jan. 2, Dec. 31,
1997 1996 1995 1995 1994 1992
Ratio of
earnings to
fixed
charges(1) 4.0x 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
There were no reports on Form 8-K filed for the three months ended
June 29, 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: August 13, 1997 /s/Fred R. Jones
Fred R. Jones
Vice President-Finance and Treasurer
DATE: August 13, 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>
Six Months
Ended For the Years Ended
June 29, 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 $ 98,803 $ 90,878 $128,930 $40,194 $ 83,542 $ 62,738
Add:
Interest and related
debt charges included
in expense 24,947 50,745 33,970 32,437 36,071 40,974
Portion of rents
representative of the
interest factor 5,565 11,399 10,766 9,766 9,266 8,421
Deduct:
Interest capitalized
and undistributed
earnings from less-
than-50-percent-owned
entities (6,365) (8,642) (2,848) (1,863) - -
Earnings
as adjusted $122,950 $144,380 $170,818 $80,534 $128,879 $112,133
Fixed charges:
Interest and related
debt charges included
in expense 24,947 50,745 33,970 32,437 36,071 40,974
Portion of rents
representative of the
interest factor 5,565 11,399 10,766 9,766 9,266 8,421
Total fixed charges $ 30,512 $ 62,144 $ 44,736 $42,203 $ 45,337 $ 49,395
Ratio of earnings
to fixed charges 4.0x 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 June 29, 1997, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-29-1996 DEC-29-1996
<PERIOD-END> MAR-30-1997 JUN-29-1997
<CASH> 97,080 143,537
<SECURITIES> 31,868 31,689
<RECEIVABLES> 391,770 430,838
<ALLOWANCES> (22,213) (24,550)
<INVENTORY> 375,109 373,598
<CURRENT-ASSETS> 940,595 1,025,486
<PP&E> 1,011,991 1,041,421
<DEPRECIATION> (471,127) (488,411)
<TOTAL-ASSETS> 2,131,663 2,210,244
<CURRENT-LIABILITIES> 454,273 479,441
<BONDS> 671,108 694,311
0 0
0 0
<COMMON> 299,916 308,681
<OTHER-SE> 587,928 610,234
<TOTAL-LIABILITY-AND-EQUITY> 2,131,663 2,210,244
<SALES> 508,481 1,046,234
<TOTAL-REVENUES> 508,481 1,046,234
<CGS> 353,082 721,392
<TOTAL-COSTS> 104,478 210,138
<OTHER-EXPENSES> (4,779) (8,998)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,303 24,899
<INCOME-PRETAX> 43,396 98,803
<INCOME-TAX> 13,916 31,619
<INCOME-CONTINUING> 29,480 67,184
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 29,480 67,184
<EPS-PRIMARY> 0.55 1.25
<EPS-DILUTED> 0.55 1.25
</TABLE>
