UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 5, 1998
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.)
8155 T&B Boulevard, Memphis, Tennessee 38125
(Address of principal executive offices) (Zip Code)
(901) 252-8000
(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-$0.10 Par Value 55,246,778
(Title of each class) (Outstanding at May 11, 1998)
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
THOMAS & BETTS CORPORATION
Consolidated Balance Sheet
(In thousands)
April 5, December 28,
1998 1997
ASSETS (Unaudited) (Audited)
Current Assets:
Cash and cash equivalents $ 59,909 $ 43,872
Marketable securities 51,692 52,382
Receivables - net 260,369 273,565
Inventories:
Finished goods 177,149 157,095
Work-in-process 91,871 66,726
Raw materials 131,421 150,156
400,441 373,977
Deferred income taxes 38,524 43,452
Prepaid expenses 12,220 8,902
Total Current Assets 823,155 796,150
Property, plant and equipment 1,098,561 1,074,591
Less accumulated depreciation 517,051 504,829
Property, plant and equipment - net 581,510 569,762
Intangible assets - net 501,146 505,225
Investments in unconsolidated companies 132,040 127,703
Other assets 38,285 39,835
TOTAL ASSETS $2,076,136 $2,038,675
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 27,725 $ 25,997
Current maturities of long-term debt 4,727 5,256
Accounts payable 170,844 208,056
Accrued liabilities 128,639 140,584
Income taxes 37,204 44,514
Dividends payable - 15,401
Total Current Liabilities 369,139 439,808
Long-term debt 585,580 502,813
Other long-term liabilities 93,735 92,206
Deferred income taxes 26,619 26,467
Shareholders' Equity:
Common stock 324,845 316,922
Retained earnings 688,024 668,189
Accumulated other comprehensive income (4,573) (2,809)
Unearned compensation (7,233) (4,921)
Total Shareholders' Equity 1,001,063 977,381
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,076,136 $2,038,675
See accompanying notes to consolidated financial statements.
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THOMAS & BETTS CORPORATION
Consolidated Statement of Earnings
(In thousands except per share data)
(Unaudited)
Quarter Ended
April 5, March 30,
1998 1997
Net sales $501,264 $515,919
Costs and expenses:
Cost of sales 343,179 356,898
Marketing, general and administrative 86,257 88,607
Research and development 12,338 12,434
Amortization of intangibles 4,382 4,416
446,156 462,355
Earnings from operations 55,108 53,564
Income from unconsolidated companies 8,527 3,207
Other expense - net (12,488) (11,708)
Earnings before income taxes 51,147 45,063
Income taxes 15,865 14,729
Net earnings $ 35,282 $ 30,334
Net earnings per common share:
Basic $ 0.64 $ 0.56
Diluted $ 0.64 $ 0.56
Average shares outstanding:
Basic 55,078 54,279
Diluted 55,546 54,583
Cash dividends declared per share $ 0.28 $ 0.28
See accompanying notes to consolidated financial statements.
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THOMAS & BETTS CORPORATION
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Quarter Ended
April 5, March 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 35,282 $ 30,334
Adjustments:
Depreciation and amortization 26,612 24,243
Deferred income taxes 5,227 2,126
Changes in operating assets and liabilities, net:
Receivables 13,222 (6,680)
Inventories (26,410) (7,395)
Accounts payable (36,736) (22,716)
Accrued liabilities (11,619) (17,638)
Income taxes payable (7,093) (4,494)
Other (6,135) (9,479)
Net cash provided by (used in) operating activities (7,650) (11,699)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of businesses, net (1,098) (17,497)
Purchases of property, plant and equipment (33,978) (25,046)
Marketable securities acquired (10,330) (6,569)
Proceeds from matured marketable securities 11,020 10,192
Other - 587
Net cash used in investing activities (34,386) (38,333)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in borrowings with
original maturities less than 90 days 5,568 (2,391)
Proceeds from long-term debt and other
borrowings 86,063 109,424
Repayment of long-term debt and other
borrowings (7,124) (82,138)
Stock options exercised 4,605 9,610
Cash dividends paid (30,854) (11,328)
Net cash provided by financing activities 58,258 23,177
EFFECT OF EXCHANGE RATE CHANGES ON CASH (185) (2,501)
Net increase (decrease) in cash and cash
equivalents 16,037 (29,356)
Cash and cash equivalents at beginning of period 43,872 126,355
Cash and cash equivalents at end of period $ 59,909 $ 96,999
See accompanying notes to consolidated financial statements.
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THOMAS & BETTS CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
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
April 5, 1998 and December 28, 1997, and the results of operations and cash
flows for the three-month periods ended April 5, 1998 and March 30, 1997.
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 28, 1997. The
results of operations for the periods ended April 5, 1998 and March 30, 1997
are not necessarily indicative of the operating results for a full year.
2. EARNINGS PER SHARE ("EPS")
Basic EPS for each period are computed by dividing net earnings by the
weighted-average number of shares of common stock outstanding during the
period. Diluted EPS for each period are computed by dividing net earnings by
the sum of (1) the weighted-average number of shares outstanding during the
period and (2) the dilutive effect of the assumed exercise of stock options
using the treasury stock method.
The following is a reconciliation of the numerators and denominators of
the per share computations:
Quarter Ended
April 5, March 30,
(In thousands except per share data) 1998 1997
Net earnings $35,282 $30,334
Average shares outstanding 55,078 54,279
Basic EPS $ 0.64 $ 0.56
Average shares outstanding 55,078 54,279
Plus assumed exercise of stock options 468 304
55,546 54,583
Diluted EPS $ 0.64 $ 0.56
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THOMAS & BETTS CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
3. COMPREHENSIVE INCOME
The Corporation adopted Statement of Financial Accounting Standards No.
130, "Comprehensive Income," as of the beginning of fiscal 1998. Total
comprehensive income and its components are as follows:
Quarter Ended
April 5, March 30,
(In thousands) 1998 1997
Net earnings $35,282 $30,334
Foreign currency translation adjustment (1,764) (8,326)
Unrealized holding gains (losses) on securities - (247)
Comprehensive income $33,518 $21,761
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ITEM 2. 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
(EPS) for the first quarter 1998. First-quarter 1998 net earnings of $35.3
million rose 16% over prior-year results. Both basic and diluted EPS for the
first quarter 1998 were $0.64, an increase of 14% from first-quarter 1997
basic and diluted EPS of $0.56.
Reported net sales for the first quarter were lowered $25.2 million by the
deconsolidation of automotive electronics businesses contributed at year-end
1997 to the Exemplar/Thomas & Betts Electrical Systems (ET&B) joint venture.
In addition to the deconsolidation, sales for the quarter were reduced by the
previously announced, planned phase-out of a large automotive platform, which
lowered sales by $5.0 million, a refocusing of sales efforts for steel
structures, which accounted for $11.6 million of the reduced sales, and $8.2
million of foreign currency shifts. Net sales of $501.3 million, reflecting
the aforementioned items, were 3% below the $515.9 million reported in the
prior-year quarter. Excluding the impact of those same items, first-quarter
sales increased 7% from the 1997 period. First-quarter sales outside the
U.S. were 24.4% of total sales, versus last year's 23.6%.
Sales of the Electrical Construction and Maintenance Components segment
grew 11% in the first quarter versus last year's quarter. The Corporation
had higher year-over-year sales in all end-markets -- commercial, industrial,
project and general line distributors -- as generally favorable economic
conditions throughout North America and greater market penetration of the
Corporation's broad product offering resulted in solid volume increases in
the segment.
First-quarter sales of the Electronic/OEM Components segment improved 2%
from the first-quarter 1997 level if results are adjusted for sales of
businesses contributed to the ET&B joint venture, sales related to the
phased-out automotive platform and unfavorable currency shifts. On a
reported basis, sales of the Electronics segment were 14% lower in the first
quarter than the prior-year period. Sales to the professional electronics
channel were flat, as a solid volume gain was offset by unfavorable foreign
currency shifts and modestly lower pricing. Sales to cable television (CATV)
markets improved across all geographic regions from soft second-half 1997
levels to post only a 3% decline versus a very strong prior-year sales
figure. In April, subsequent to the close of the first quarter, the
Corporation announced that it had obtained a number of exclusive marketing
agreements with CATV distributors for its entire hard-line package and a
multi-year contract with MediaOne for its advanced broadband technology
solutions. Management believes that those advancements should benefit sales
in 1998 and over the next several years in addition to providing solid
evidence that its strategy to be a full line provider of CATV hardware and
technologically innovative broadband products is working. Excluding the
impact of the joint venture deconsolidation and model phase-out, sales to
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automobile manufacturers rose 2% from the 1997-quarter. The Corporation's
earnings on sales generated by businesses contributed to the ET&B joint
venture were included as income from unconsolidated companies in the
1998-quarter. On a reported basis, sales to automobile manufacturers were
34% lower than the prior-year period. The Corporation was recently awarded a
sizeable contract to supply a major automotive manufacturer with product for
an upcoming platform. The Corporation will fill 70% of the contract directly
and 30% will be sourced through its ET&B joint venture. This marks the first
award to the Corporation as a result of its expanded sourcing capabilities
provided by the joint venture.
Excluding the decline in steel structure sales, first-quarter sales of
Other Products and Components rose 7% from 1997's level. Including the
impact of refocusing the steel structures business, segment sales were 4%
below the prior-year level. However, solid sales gains were reported for
mechanical products and the utility and telecommunications markets. The
increase in mechanical products sales resulted from higher sales of specialty
heating and ventilation units and construction products. The improvement in
utility sales was attributed to increased demand for core products that more
than offset weak Asian sales. The Corporation experienced strong sales to
Asian telecommunications markets that supplanted lower domestic demand in
that market.
After closely examining market conditions in steel structures, management
adjusted manufacturing capacity and redirected marketing efforts to cultivate
new markets, including wind generation, international and previously untapped
segments of the utility markets. Through those steps and as a result of
strengthening utility project work with alliance partners, the Corporation
built a backlog to support second-half 1998 steel-structure sales above
second-half 1997 levels. Management believes that the broader, refocused
business base should provide a platform for strong sales and significantly
improved profitability in this channel in the second half of 1998 and beyond.
With the reclassification of earnings from sales contributed to the ET&B
joint venture, first-quarter 1998 earnings from operations rose 3%, to $55.1
million, from $53.6 million in the 1997 quarter, while earnings from
consolidated operations and unconsolidated companies increased 12% year over
year, to $63.6 million.
Actions implemented throughout 1997, including relocating production to
lower cost locations, caused first-quarter gross and operating margins to
improve from those same measures in the prior-year quarter. The 1998 gross
margin was 31.5% compared with 1997's 30.8%, and 1998's operating margin rose
to 11.0%, versus an operating margin of 10.4% in 1997's quarter.
Income from unconsolidated companies rose dramatically from the prior-year
as a result of the inclusion of the ET&B joint venture earnings and continued
strong equity income from the Corporation's investment in Leviton.
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The first quarter 1998 effective income tax rate of 31.0% was lower than
the first quarter 1997 rate of 32.7% due to favorable results from state and
international tax planning initiatives. The Corporation's effective income
tax rate was 31% for the full-year 1997, with the rate in the second half of
1997 adjusted to achieve the 31% overall rate for the full year.
Liquidity and Capital Resources
Net cash used by operating activities was $7.7 million through the first
three months of 1998. Accounts receivable declined from year-end 1997 as a
result of seasonally lower sales and improved collection rates. Inventory
levels increased from year-end levels due to the addition of safety stock in
conjunction with product line moves from one plant to another for
manufacturing cost reductions, seasonal increases in certain product lines
for the upcoming construction season and increases to accommodate higher
volumes and new product introductions.
Capital expenditures for the first three months totaled $34.0 million,
slightly higher than in previous quarters, partially because of incremental
spending on enhanced information systems. Management expects capital
expenditures during 1998 to be about $20 million higher than the normal run
rate of 5% of sales due to expenditures for information technology systems.
Spending for those systems will span three years beginning in 1997, with
spending concentrated in 1998. Those information technology projects should
play a strategic role in enhancing the Corporation's competitiveness and all
will be Year 2000 compliant. Dividends paid during the first quarter of 1998
totaled $30.9 million for dividends declared in the fourth quarter of 1997
and the first quarter of 1998.
As of April 5, 1998, marketable securities, cash and equivalents totaled
$111.6 million, compared with $96.3 million as of December 28, 1997.
The Corporation has a revolving-credit facility with a group of banks that
provides for a commitment of $500.0 million through March 29, 2000. As of
April 5, 1998, $62.1 million of commercial paper was outstanding, which was
backed by the revolving-credit facility.
In December 1997, the Corporation entered into an asset-securitization
agreement permitting the continual sale of accounts receivable through
December 19, 2002, to a maximum of $150.0 million. As of April 5, 1998, the
maximum had been sold under this program.
The Corporation has access to $285.0 million of funds under uncommitted
credit lines with a variety of banks. Uncommitted borrowings under these
lines totaled $140.5 million at the end of the quarter. The Corporation has
a number of smaller committed and uncommitted credit facilities to provide
funding for its international operations.
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In February 1998, the company issued $60.0 million of 5-year medium-term
notes priced at par, having a yield of 6.29%. During May 1998, the
Corporation issued $115.0 million of 10-year medium-term notes with an issue
price of 99.75% of par, having a yield of 6.66%. Proceeds from this sale
were used to reduce borrowing under the Corporation's commercial paper
program and under uncommitted lines of credit.
Management believes that the Corporation's resources are sufficient to
meet the Corporation's financing needs for the forseeable future.
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PART II. OTHER INFORMATION
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 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 products of the Corporation
that could affect its overall product mix, margins, plant
utilization levels and asset valuations; economic slowdown in the
U.S. (contrary to the Corporation's expectations of favorable
economic conditions throughout 1998) or 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 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 the Corporation's
cost of funds; unforeseen difficulties in completing identified
restructuring actions initiated in 1996 in connection with the
Augat merger, including disposal of idle facilities, geographic
shifts of production locations and closure of redundant
administrative facilities; unforeseen problems in the Corporation's
computer systems and from third parties with whom the Corporation
deals on financial transactions, specifically those related to
"Year 2000" date-recognition ability in time-sensitive software;
availability and pricing of commodities and materials needed for
production of the Corporation's products, including steel, copper,
zinc, aluminum, gold 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 of, or possibly the relationships with, the Corporation's
joint ventures and other 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, adverse tax rate changes and changes in tax treatment of
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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) Statement re Computation of Ratio of Earnings to Fixed
Charges (Filed as Exhibit 12 to the Corporation's Current
Report on Form 8-K, dated May 4, 1998, Commission File No.
1-4682, and incorporated herein by reference.)
(27) Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On February 5, 1998 and on February 10, 1998, the Corporation filed
a Current Report on Form 8-K, in connection with the issuance of
medium-term notes under the Corporation's Registration Statement on
Form S-3 (No. 33-44153). The February 5 Form 8-K was filed under
Item 5 and Item 7 and the February 10 Form 8-K was filed under Item
7.
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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 19, 1998 /s/FRED R. JONES
Fred R. Jones
Vice President-Finance and Treasurer
DATE: May 19, 1998 /s/JERRY KRONENBERG
Jerry Kronenberg
Vice President-General Counsel and Secretary
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements 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> JAN-03-1999
<PERIOD-END> APR-05-1998
<CASH> 59,909
<SECURITIES> 51,692
<RECEIVABLES> 288,289
<ALLOWANCES> (27,920)
<INVENTORY> 400,441
<CURRENT-ASSETS> 823,155
<PP&E> 1,098,561
<DEPRECIATION> 517,051
<TOTAL-ASSETS> 2,076,136
<CURRENT-LIABILITIES> 369,139
<BONDS> 585,580
0
0
<COMMON> 324,845
<OTHER-SE> 676,218
<TOTAL-LIABILITY-AND-EQUITY> 2,076,136
<SALES> 501,264
<TOTAL-REVENUES> 501,264
<CGS> 343,179
<TOTAL-COSTS> 102,977
<OTHER-EXPENSES> (8,944)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,955
<INCOME-PRETAX> 51,147
<INCOME-TAX> 15,865
<INCOME-CONTINUING> 35,282
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<NET-INCOME> 35,282
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
</TABLE>
