<PAGE>
- -------------------------------------------------------------------------------
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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
OCTOBER 3, 1999, 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.)
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 Outstanding Shares at November 8, 1999
(TITLE OF EACH CLASS) 57,817,879
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THOMAS & BETTS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 3, JANUARY 3,
1999 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 69,675 $ 64,028
Marketable securities 16,065 42,478
Receivables, net 477,383 404,784
Inventories:
Finished goods 214,252 202,368
Work-in-process 93,315 95,436
Raw materials 181,393 171,837
--------- ---------
488,960 469,641
Deferred income taxes 59,903 61,829
Prepaid expenses 29,558 15,642
--------- ---------
Total Current Assets 1,141,544 1,058,402
Property, plant and equipment 1,262,340 1,162,942
Less accumulated depreciation 594,580 531,920
--------- ---------
Property, plant and equipment - net 667,760 631,022
Intangible assets - net 614,728 621,487
Investments in unconsolidated companies 155,840 142,251
Other assets 60,819 46,425
--------- ---------
TOTAL ASSETS $2,640,691 $2,499,587
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 75,655 $ 75,068
Current maturities of long-term debt 4,378 22,589
Accounts payable 315,139 262,483
Accrued liabilities 165,258 155,815
Income taxes 17,998 55,674
Dividends payable 16,169 15,920
--------- ---------
Total Current Liabilities 594,597 587,549
Long-term debt 837,103 790,963
Other long-term liabilities 95,330 93,788
Deferred income taxes 22,422 12,182
Shareholders' Equity:
Common stock 5,781 5,678
Additional paid-in capital 332,160 322,018
Retained earnings 785,697 710,474
Unearned compensation - restricted stock (4,507) (4,534)
Accumulated other comprehensive income (27,892) (18,531)
--------- ---------
Total Shareholders' Equity 1,091,239 1,015,105
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,640,691 $2,499,587
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
THOMAS & BETTS CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
----------------------------- ------------------------------
OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
1999 1998 1999 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $642,697 $539,797 $1,903,253 $1,637,475
Costs and expenses:
Cost of sales 502,353 410,186 1,398,230 1,178,459
Marketing, general and
administrative 104,157 99,939 316,491 267,992
Research and development 11,923 11,810 36,908 37,621
Amortization of intangibles 4,313 4,114 13,618 12,606
Provision (recovery) -
restructured operations (4,285) 62,096 (5,736) 62,096
------- ------- ---------- ----------
618,461 588,145 1,759,511 1,558,774
------- ------- ---------- ----------
Earnings (loss) from operations 24,236 (48,348) 143,742 78,701
Income from unconsolidated
companies 7,141 5,243 23,857 19,895
Other expense - net 7,418 9,590 39,008 38,654
--------- -------- ---------- ----------
Earnings (loss) before
income taxes 23,959 (52,695) 128,591 59,942
Income taxes (26,096) (15,227) 2,531 18,564
-------- -------- ---------- ----------
Net earnings (loss) $ 50,055 $(37,468) $ 126,060 $ 41,378
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Net earnings (loss) per share:
Basic $ 0.87 $ (0.66) $ 2.19 $ 0.73
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Diluted $ 0.86 $ (0.66) $ 2.18 $ 0.73
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Average shares outstanding:
Basic 57,718 56,732 57,651 56,650
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Diluted 58,017 56,732 57,891 57,006
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Cash dividends declared
per share $ 0.28 $ 0.28 $ 0.84 $ 0.84
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
Note: Prior-year amounts have been reclassified to conform to the current-
year presentation. Amounts in 1999 have been restated as of the
beginning of 1999 to include the August 31, 1999 acquisition of L.E.
Mason Co., accounted for as an immaterial pooling of interests,
except for cash dividends per share, which reflect the Corporation's
historical per share amount .
See accompanying notes to consolidated financial statements.
3
<PAGE>
THOMAS & BETTS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
OCTOBER 3, OCTOBER 4,
1999 1998
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $126,060 $ 41,378
Adjustments:
Depreciation and amortization 76,096 71,935
Provision (recovery) - restructured operations 5,736 62,096
Accrued provision for special charges - 46,393
Income from unconsolidated companies (15,357) (8,716)
Non-cash one-time charges 19,196 -
Deferred income taxes 13,699 (33,624)
Changes in operating assets and liabilities, net:
Receivables (88,058) (65,546)
Inventories (40,124) (46,176)
Accounts payable 42,531 (7,836)
Accrued liabilities (24,362) (17,088)
Income taxes payable 10,988 (520)
Other (20,561) (13,784)
-------- --------
Net cash provided by operating activities 105,844 28,512
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of and investments in businesses, net of
$7,220 cash in 1999 (17,049) (75,249)
Purchases of property, plant and equipment (98,298) (96,822)
Proceeds from sale of property, plant and equipment 21,489 5,267
Marketable securities acquired - (27,598)
Proceeds from matured marketable securities 26,106 19,371
-------- --------
Net cash used in investing activities (67,752) (175,031)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in borrowings with
original maturities less than 90 days (15,810) 16,335
Proceeds from long-term debt and other
borrowings 149,000 174,894
Repayment of long-term debt and other
borrowings (124,292) (19,223)
Stock options exercised 6,098 5,678
Cash dividends paid (48,688) (49,966)
-------- --------
Net cash provided by (used in) financing activities ( 33,692) 127,718
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,247 (894)
-------- --------
Net increase (decrease) in cash and cash
equivalents 5,647 (19,695)
Cash and cash equivalents at beginning of period 64,028 45,225
------- --------
Cash and cash equivalents at end of period $ 69,675 $ 25,530
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
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, (which consist of normal recurring
adjustments with the exception in 1999 of those adjustments described in Note
6) necessary for the fair presentation of the financial position of the
Corporation as of October 3, 1999 and January 3, 1999, and the results of
operations and cash flows for the periods ended October 3, 1999 and October 4,
1998.
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, as amended by
its Form 10-K/A, for the fiscal year ended January 3, 1999. Also see Note 6 for
a discussion of certain charges and credits recorded as of October 3, 1999. The
results of operations for the periods ended October 3, 1999 and October 4, 1998
are not necessarily indicative of the operating results for the full year.
On October 26, 1999, the Corporation announced that certain
one-time items and other charges and credits would be recorded as of October
3, 1999, and that the Corporation might restate its financial statements for
the first and second fiscal quarters of 1999 and prior fiscal years. The
Corporation is reviewing with its independent auditors the amounts and
attributions of these charges and credits to prior periods. A substantial
portion of that review is completed. After consultation with its independent
auditors and the audit committee of the board of directors, the Corporation
decided to restate the previously issued financial statements for the quarter
ended April 4, 1999. A decision regarding possible restatement of financial
statements for other periods will be made upon completion of the review. The
remaining review could possibly also result in changes to the preliminary
conclusions regarding attributions of costs to the first quarter of 1999;
accordingly, changes, if material, in preliminary attributions to the first
quarter could affect financial results for prior periods and the current
quarter. If adjustments currently recorded in the quarter ended October 3,
1999 are later determined to be attributable to prior periods, such
adjustments will be made in the relevant prior period and eliminated in the
current quarter.
The charges and credits are being taken to correct various
accounting errors the Corporation identified during the third quarter of
1999. The reasons for and financial impacts of these corrections are
described in Note 6 to these consolidated financial statements.
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.
5
<PAGE>
The following is a reconciliation of the numerators and denominators of
the per share computations:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
------------------------------ ----------------------------
OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
(In thousands except per share data) 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net earnings (loss) $50,055 $(37,468) $126,060 $41,378
------- -------- -------- -------
Average shares outstanding 57,718 56,732 57,651 56,650
------- -------- -------- -------
Basic EPS $ 0.87 $ (0.66) $ 2.19 $ 0.73
------- -------- -------- -------
------- -------- -------- -------
Average shares outstanding 57,718 56,732 57,651 56,650
Plus assumed exercise of
stock options 299 0 240 356
------- -------- ------- -------
58,017 56,732 57,891 57,006
------- -------- ------- -------
Diluted EPS $ 0.86 $ (0.66) $ 2.18 $ 0.73
------- -------- -------- -------
------- -------- -------- -------
</TABLE>
3. COMPREHENSIVE INCOME
Total comprehensive income and its components are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
(In thousands) 1999 1998 1999 1998
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net earnings (loss) $50,055 $(37,468) $126,060 $41,378
Foreign currency translation
adjustments 5,887 (3,723) (8,610) (11,506)
Minimum pension liability adjustment - - (551) -
Unrealized holding gains (losses)
on securities (193) 136 (200) 253
------- ------- ------- -------
Comprehensive income (loss) $55,749 $(41,055) $116,699 $30,125
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
4. ACQUISITIONS
The Corporation completed three acquisitions during the first nine
months of 1999 for total consideration of approximately $24 million in cash and
approximately 870,000 shares of the Corporation's common stock. Two of the
acquisitions were accounted for under the purchase method of accounting;
accordingly, results of their operations have been included in the consolidated
statement of earnings since the dates of acquisition. The aggregate purchase
price has been allocated to the assets and liabilities based on estimated fair
values at the date of acquisition and the excess of approximately $14 million
was allocated to goodwill. The goodwill is being amortized on a straight-line
basis over 40 years. One of the acquisitions was accounted for as an immaterial
pooling of interests, and its results of operations have been included in the
Corporation's results as of the beginning of 1999 without restating prior years'
results.
6
<PAGE>
5. RESTRUCTURING AND SPECIAL CHARGES
During the third quarter of 1998, the Corporation recorded pretax
restructuring and special charges of $108.5 million primarily related to a
program to reduce costs by consolidating several facilities and product-line
operations, terminating employees at affected locations, downsizing
administrative functions and writing down idle facilities. The charges were
comprised of a $62.1 million provision for restructuring operations and $46.4
million of other special charges, of which $30.3 million was charged to cost of
sales and $16.1 million to marketing, general and administrative expense. The
components of those charges and usage through October 3, 1999 were:
<TABLE>
<CAPTION>
CHARGES TO REMAINING
CHARGES TO RESERVES DURING BALANCE AT
ORIGINAL RESERVES NINE MONTHS ENDED OCTOBER 3,
(In millions) PROVISION DURING 1998 OCTOBER 3, 1999 1999
--------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
Severance and employee-related costs $ 26.6 $ (5.1) $(12.2) $ 9.3
Property, plant and equipment write-offs 25.7 (7.0) (1.7) 17.0
Other facility exit costs 9.8 (2.3) (0.9) 6.6
------ ------ ------ -----
Provision for restructured operations 62.1 (14.4) (14.8) 32.9
------ ------ ------ -----
Inventory write-offs related to restructuring 25.6(1) (14.4) (5.5) 5.7
Costs related to previously idled facilities:
Write-downs 4.7(1) (1.5) (0.4) 2.8
Carrying costs 10.4(2) (0.7) (0.2) 9.5
Other 5.7(2) - (3.9) 1.8
------ ------ ------ -----
Special charge 46.4 (16.6) (10.0) 19.8
------ ------ ------ -----
Total $108.5 $(31.0) $(24.8) $52.7
------ ------ ------ -----
------ ------ ------ -----
</TABLE>
- -------------------
Charged to (1) cost of sales and (2) marketing, general and administrative
expense.
Severance and other employee-related costs involve actions that will
result in a net reduction of approximately 400 jobs, including administrative
positions at plants and corporate headquarters. As of October 3, 1999, the
Corporation had realized a net reduction of approximately 263 jobs. The
property, plant and equipment write-downs reduced the carrying value of fixed
assets not relocated in conjunction with their associated manufacturing
processes to fair value. Assets written down as part of the cost-reduction
program remain classified as property, plant and equipment until idled; the
adjusted carrying value of the assets still in use was $25.3 million. The effect
of suspending depreciation on facilities idled was $0.1 million of depreciation
expense reduction in the first nine months of 1999.
Inventory write-offs primarily relate to items that became obsolete due
to modifications of manufacturing processes for product lines being relocated;
items not cost-effective to relocate; and, to a lesser degree, inventory
associated with discontinued products.
Costs related to previously idled and written-down facilities were
based on management's current estimates of costs necessary to ultimately dispose
of, and satisfy obligations related to, such facilities. The majority of those
costs are lease-related, and will generally be incurred ratably over an
eight-year period.
The cost-reduction program commenced in 1998 is now expected to be
completed early in 2000, with disposal of idle facilities anticipated by the end
of 2000. Certain other costs, primarily relating to the relocation of inventory,
equipment and personnel, are not accruable until incurred. Such costs, which
were not included in the $108.5 million provision, amounted to $10.6 million in
the first nine months of 1999. Future revenues are not expected to be
significantly affected, since the cost-reduction program is primarily intended
to relocate operations rather than discontinue operations.
7
<PAGE>
During the fourth quarter of 1996 as part of the pooling of
interests accounting for Augat Inc., the Corporation recorded a restructuring
charge of $24.5 million for the integration of Augat and for initiatives
affecting Augat and other of the Corporation's operations. While most of
these initiatives were implemented, in late 1998 and in 1999 decisions were
made not to execute all of the originally planned phases of certain projects
provided for by this charge. These decisions resulted in reductions to the
restructuring reserve in 1999 of $5.7 million. All other projects included in
this restructuring effort are now substantially complete.
6. ONE-TIME ITEMS AND OTHER CHARGES AND CREDITS
In late 1997 Thomas & Betts embarked on a global effort to align the
Corporation's core information technology systems with its strategic plans
and its organization structure in order to meet the information, analysis and
decision-making needs of the Corporation and to prepare the Corporation for
web-based electronic commerce. As part of that overall plan, in January 1998,
Thomas & Betts began converting its legacy financial reporting software
system to an Oracle-based financial reporting system. The conversion was
prompted to ensure Year-2000 compliance, to accommodate the increased size,
complexity and organization structure of Thomas & Betts and to avoid
potential control problems arising from non-integrated financial systems. The
magnitude of the implementation and the rapid timetable on which it was
achieved were directly or indirectly responsible for a number of accounting
errors.
By the third quarter of 1999 the Corporation had virtually completed
implementation of its Oracle-based system. With the new system's improved
capabilities, during the third quarter management identified accounting
errors and mis-estimates (a) which arose from the extensive systems
conversion processes or (b) which were then detectable as a result of both
more effective analytical capabilities with the new system and
decentralization of the accounting control function. These errors, which are
more fully described below, resulted from (i) system start-up problems and
user errors, (ii) diversion of key accounting personnel to the design,
implementation and trouble-shooting activities for the new system, (iii)
simultaneous changes in other information technology systems, (iv) concurrent
integration of acquisitions into the reporting structure and (v) initial
problems encountered in implementing organizational structure changes,
including the decentralization of the accounting control function into the
divisions within the Corporation's reporting segments. During the third
quarter, the Corporation recorded charges to correct those errors and to make
other adjustments identified by the new financial reporting system.
8
<PAGE>
In addition, several one-time items occurred in the quarter ended
October 3, 1999. The aggregate effects of the one-time items and the
adjustments recorded in the third quarter and in the quarter ended April 4,
1999 are as follows:
<TABLE>
<CAPTION>
INCOME/(LOSS) IMPACTS OF ONE-TIME
ITEMS AND OTHER CHARGES & CREDITS
--------------------------------------
PRETAX AFTER TAXES
---------- ------------
<S> <C> <C>
QUARTER ENDED OCTOBER 3, 1999
- ------------------------------
Tax Refunds and Reduction in
Taxes Payable (a) $ 30,700
Acquisition & Divestiture Income (b) $ 8,615 5,021
TDI Inventory Adjustments (c) (9,542) (5,916)
Other Adjustments (d) (42,533) (27,508)
--------- ---------
Total (43,460) 2,297
QUARTER ENDED APRIL 4, 1999
- ----------------------------
Other Adjustments (d) (7,583) (5,854)
--------- ---------
Total One-Time and Other Adjustments $(51,043) $ (3,557)
--------- ---------
--------- ---------
</TABLE>
- -------------------
These one-time items and other charges and credits arose as follows:
(a) $12.5 million of the reduction in tax provision resulted from approval of
substantially all tax refund claims filed for previous years and $18.2
million resulted from favorable completion of several routine exams during
the quarter and a favorable worldwide reassessment of tax exposures.
(b) Acquisition and divestiture income and expense amounts include the
transaction income and expense associated with two unconsummated
acquisitions, a completed acquisition and divestiture of three amplifier
product lines:
<TABLE>
<CAPTION>
INCOME/(LOSS) IMPACTS FOR
ACQUISITION/DIVESTITURE ACTIVITY
FOR QUARTER ENDED OCTOBER 3, 1999
---------------------------------------
PRETAX AFTER TAXES
--------- -----------
<S> <C> <C>
Termination fee from AFC Cable, net of
related costs and costs associated
with another unconsummated acquisition
possibility $ 12,483 $ 7,739
Transaction costs related to a pooling
of interests with L.E. Mason Co. (1,708) (1,058)
Net loss on disposition of three amplifier
product lines (2,160) (1,660)
------ ------
Earnings impact from
acquisition and divestiture activity $ 8,615 $ 5,021
------ ------
------ ------
</TABLE>
During the third quarter of 1999 the planned merger with AFC Cable Systems,
Inc. (AFC) was terminated by AFC to enable it to accept another offer. As a
result, the Corporation received a $16 million cash termination fee from
AFC. Partially offsetting that termination fee income were costs associated
with that terminated transaction and a second unconsummated acquisition.
Transaction costs associated with the pooling of interests with L.E. Mason
were
9
<PAGE>
expensed in the quarter. A net loss was incurred in conjunction with
the third-quarter dispositions for cash of three cable-television amplifier
product lines.
(c) These adjustments relate to Telecommunications Devices Inc. (TDI), which
was acquired by Thomas & Betts in July 1998. In the second quarter of
1999 the Corporation reported alleged wrongdoing of executives in TDI's
battery pack operation in Dundee, Scotland. Following the discovery of
the alleged wrongdoing in Dundee and in connection with a review of all
TDI operations, the Corporation conducted physical inventory counts for
battery pack operations in its Romeoville, Illinois plant during the
quarter. The inventory count resulted in a $9.2 million reduction of
inventory carrying value. Additional adjustments netting to $0.3 million
were recorded in the current quarter.
The Corporation's corrective actions in response to findings in its battery
operations include appointment of new management, improvement of cost
accounting control and a scheduled upgrade of manufacturing systems during
the first quarter of 2000. Management does not expect any further charges
stemming from past operations of TDI.
(d) These adjustments predominately relate directly or indirectly to
information technology systems' conversions, and they fall into three
general areas as follows:
1. SYSTEMS' CONVERSION ISSUES RELATED TO OPERATIONS IN EUROPE. In October
1998 a new order entry system was launched in Europe, and its data
output was interfaced with the other newly installed systems. A number
of billing errors were generated by the new order entry system as a
result of database errors and interface errors with other new systems.
A total of $5.7 million of negative adjustments were recorded to
reflect the impact of processing the remaining backlog of credits for
billing errors for which a definitive estimate was completed during
the quarter. Of the total amount, $3.0 million expense was attributed
to the first quarter of 1999. Another adjustment resulting from
systems' conversions in Europe relates to incorrect recording of
inter-company inventory transfers, which increased cost of goods sold
by $1.0 million in the current quarter.
2. CONVERSION ISSUES RELATED TO THE ELECTRICAL SEGMENT. Disconnects in
the flow of information with regard to promotional discounts and
volume incentive discounts gave rise to cumulative adjustments in the
third quarter of 1999 of $5.7 million and $4.5 million, respectively.
Of these amounts, $0.9 million of expense is attributable to the first
quarter of 1999. Management has since changed procedures to correct
for these disconnects.
3. OTHER CONVERSION ISSUES. As the Oracle system matured, management
deployed account analysis capabilities and exception
10
<PAGE>
reports and reassigned accounting personnel who had been working on
the Oracle systems implementation to decentralized accounting and
control functions. The deployment of these resources to the divisions
resulted in the identification of a number of both increases and
decreases in various balance sheet accounts totaling net charges of
$18.7 million, including such items as the following:
- Analyses of inventory balances resulted in an $8.9 million
write-down in the carrying value of inventory in Mexico believed
to be related to numerous product line relocations to plants in
Mexico.
- The Corporation recognized an additional $4.9 million of
commissions expense to correct data entry errors. Concurrent
changes in the Corporation's sales representative organization
had obscured the errors. The portion attributable to the first
quarters of 1999 is $2.1 million.
- The Corporation recognized an additional $2.3 million of costs
related to a canceled product-line start-up in Mexico and
cumulative booking errors related to product line moves between
U.S. and Mexican plants. The portion attributable to the first
quarter of 1999 is $1.3 million. An additional $1.0 million of
costs related to inventory transfers between U.S. and Canadian
operations was expensed in the current quarter.
- Cash discount expense accruals were increased by $1.6 million in
the current quarter to correct an error created by a design flaw
in the new financial reporting system.
In addition to correcting errors resulting from conversion of
information systems, the following reserve balance adjustments and
write-downs were made:
- Restructuring and special charge reserves established in 1996
were reduced by $6.6 million because of decisions not to execute
all the originally planned phases of certain projects for
economic reasons. Some $1.5 million of these credits were
attributed to the first quarter of 1999.
- An increase in the current quarter of $6.6 million to inventory
reserves for excess and obsolete inventory, predominately in
Mexico and Europe.
- A reduction of $5.6 million of accounts receivable to correct
billing and other errors and for specific accounts deemed
uncollectible.
- Increases aggregating $3.1 million in the current quarter for
corporate self-insurance and warranty reserves reflecting recent
re-assessments by actuaries and Corporation personnel based on
loss experience.
- Other adjustments totaling $5.7 million of which $1.8 million is
attributable to the first quarter of 1999.
Upon consideration of the foregoing matters, and after consultation with
its independent auditors and board of directors' audit committee, the
Corporation determined to restate its consolidated financial statements for
the
11
<PAGE>
fiscal quarter ended April 4, 1999. This restatement, which affects financial
statements included in this filing, affected net earnings in the first
quarter as follows:
<TABLE>
<CAPTION>
AS PREVIOUSLY REPORTED AS REVISED
------------------------------------- -----------------------------------
NET EARNINGS/ EARNINGS PER NET EARNINGS/ EARNINGS PER
(LOSS) SHARE-DILUTED (LOSS) SHARE-DILUTED
------------- -------------- --------------- ----------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Quarter ended April 4, 1999 $37,970 $0.67 $32,300 $0.56
------- ----- ------- -----
</TABLE>
The cumulative impact on the balance sheet as of October 3, 1999 related to
the aforementioned one-time items and other charges and credits is as follows:
<TABLE>
<CAPTION>
Increase/
(Decrease)
------------
(in thousands)
<S> <C>
Accounts receivable $(23,992)
Inventory (22,162)
Accrued liabilities 18,822
Accounts payable 2,067
Notes payable (16,000)
Taxes payable (31,660)
Deferred tax liability (15,826)
Shareholders' equity (3,557)
</TABLE>
12
<PAGE>
Management believes that several factors and recent procedures and
actions which it has implemented should ensure that these types of accounting
errors are avoided in the future:
- The new Oracle-based financial reporting system improved control,
visibility and analysis capabilities, and is now performing well with
experienced users.
- Management has decentralized the control organization to better
monitor and address potential issues.
- Management has clearly assigned responsibilities within the newly
decentralized financial organization for maintenance, control and
reconciliation of all financial accounts.
- Exception reports have been added to the Oracle system to highlight
potential issues.
- In conjunction with the new financial reporting system, management
has modified operating procedures to tighten controls.
- The internal audit function has expanded its scope to include review
of contra sales and selling expense accruals maintained at the
divisional level.
7. SEGMENT AND OTHER RELATED DISCLOSURES
The Corporation has three reportable segments: Electrical, Electronic
Original Equipment Manufacturers (Electronic OEM) and Communications. Some
business activities cannot be classified in the aforementioned segments and are
shown under "All other." The Corporation's reportable segments are based on
channels to market and represent the primary mode used to assess allocation of
resources and performance. Management evaluates each segment's profit or loss
performance based on earnings before interest, taxes, loss on sale of accounts
receivable, restructure and special charges, foreign exchange gains and losses
and acquisition-related transaction expenses.
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
------------------------------ -------------------------------
SEGMENT INFORMATION OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
(In thousands) 1999 1998 1999 1998
--------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Net Sales:
Electrical $337,833 $270,120 $1,031,878 $ 806,053
Electronic OEM 176,097 150,763 500,960 479,600
Communications 79,459 63,733 210,543 201,077
All other 49,308 55,181 159,872 150,745
------- ------- -------- ---------
Total $642,697 $539,797 $1,903,253 $1,637,475
------- ------- -------- ---------
------- ------- -------- ---------
Segment Earnings:
Electrical $ 44,568 $ 44,250 $ 140,439 137,873
Electronic OEM (721) 12,981 26,689 41,214
Communications (6,862) 3,788 (7,066) 14,883
Related to all other sales 2,724 6,372 14,925 12,625
------ ------ --------- ---------
Total $ 39,709 $ 67,391 $ 174,987 $ 206,595
------- ------- --------- ---------
------- ------- --------- ---------
</TABLE>
13
<PAGE>
The following are reconciliations of the total of reportable segments
to the consolidated Corporation:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
---------------------------- ---------------------------
RECONCILIATION TO TOTAL CORPORATION OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
(In thousands) 1999 1998 1999 1998
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net Sales:
Total reportable segment net sales $593,389 $484,616 $1,743,381 $1,486,730
Other sales 49,308 55,181 159,872 150,745
------- ------- --------- ---------
Total $642,697 $539,797 $1,903,253 $1,637,475
------- ------- --------- ---------
------- ------- --------- ---------
Earnings (loss) before income taxes:
Total reportable segment earnings $ 36,985 $ 61,019 $ 160,062 $ 193,970
Earnings on other sales 2,724 6,372 14,925 12,625
Restructure and special charges 4,285 (108,487) 5,736 (108,487)
Interest expense (17,010) (13,141) (49,600) (36,448)
Loss on sale of receivables (4,086) (2,193) (8,599) (6,780)
Interest income 1,200 818 5,391 4,072
Foreign currency exchange gains (losses) (217) 3,498 665 1,451
Other 78 (581) 11 (461)
------- ------- --------- ---------
Total $ 23,959 $(52,695) $ 128,591 $ 59,942
------- ------- --------- ---------
------- ------- --------- ---------
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Thomas & Betts Corporation had net earnings of $50.1 million, or
$0.86 per share on a diluted basis, for its third quarter ended October 3,
1999. Those results compare with a net loss of $37.5 million, or $0.66 per
share, in 1998's third quarter. Several one-time items and other adjustments
impacted 1999's third-quarter-net earnings. The net effect of those items was
to increase earnings by $2.3 million, or $.04 per share. Giving rise to those
one-time items and other adjustments were approvals of tax refunds and a
reduction in taxes payable, acquisition and divestiture activity, revaluation
of inventory in the Corporation's TDI battery operations and other
adjustments as more fully described in Note 6. The restatement of amounts in
the first quarter of 1999 as described in Note 6 to the Consolidated
Financial Statements is reflected in the following discussions of results for
the nine months ended October 3, 1999. In 1998's third quarter Thomas & Betts
recorded pretax special charges of $108.5 million related primarily to an
aggressive cost-reduction program that decreased net earnings by $77.0
million, or $1.35 per share.
Excluding one-time items and other adjustments from results of the 1999
quarter and special charges from results of the 1998 quarter, 1999's results
topped those of the prior-year quarter by 20.7%. Third-quarter 1999 net earnings
were $47.8 million, or $0.82 per share, if one-time items and other charges are
excluded. Those results compare with 1998's third-quarter net earnings before
special charges of $39.6 million, or $0.70 per share.
Third-quarter net sales in the 1999 quarter were $642.7 million, up
19.1%, including $20.7 million of negative adjustments, or 22.9% higher
excluding those adjustments, compared with $539.8 million in the prior-year
quarter. Sales improved significantly year over year in the Corporation's three
segments. Growth drivers are described below in the discussion of segment
results.
On a geographic basis, the Corporation recorded significantly higher
year-over-year sales in Canada due to the late 1998 Kaufel acquisition, strong
demand for its electrical package and professional electronics products and
economic resurgence of the oil-producing region of that country. Sales to Latin
American customers continued their sharp upward trend as a result of the
Corporation's expanded sales and marketing presence in that region. Sales in
Europe increased from the prior-year quarter due to strong demand for newer
products from electronic OEMs and an electrical acquisition. Thomas & Betts
increased sales to the Asia/Pacific region over the third quarter of 1998,
reflecting recovery of that region's economies.
15
<PAGE>
Both the 1999 and 1998 periods include special items. In 1999, those
items were: $33.9 million of additional cost of sales expense, $4.3 million
additional MG&A expense and a $4.3 million recovery of provision for
restructured operations in addition to the previously mentioned $20.7 million
charge to sales. These adjustments are explained in Note 6. The 1998 quarter
included special charges of $108.5 million allocated as follows: $30.3
million of cost of sales, $16.1 million of MG&A and $62.1 million of
provision for restructured operations. Excluding unusual items from both
periods, the gross margin in 1999's third quarter was 29.4%, essentially the
same as the 29.6% in 1998's quarter. In the 1999 and 1998 quarters,
respectively, the Corporation had operating margins of 11.9% and 11.1% if
unusual items are excluded from both periods. The slightly higher margin in
1999 reflects lower MG&A expense as a percent of sales.
Third-quarter 1999 income from unconsolidated companies increased
36.2% from the prior year as a result of gains in all of the Corporation's
equity investments. Other expense-net was $2.2 million lower than prior year,
but the component pieces of other expense differed greatly. In the 1999
quarter, the net benefit of acquisition and divestiture activity in the
quarter, described in Note 6, more than offset higher interest expense of
$3.9 million. Interest expense was $17.0 million and $13.1 million in the
1999 and 1998 third quarters, respectively. Interest expense rose as a result
of higher rates on floating rate debt and higher outstanding debt levels in
1999.
The effective tax rate on operating income for the third quarter was
29.2%. However, the provision included a one-time $30.7 million reduction in
taxes resulting from approval of substantially all of $12.5 million of
tax-refund claims filed for previous years and $18.2 million resulting from
favorable completion during the quarter of several routine tax exams and a
favorable worldwide reassessment of tax exposures.
Through nine months, consolidated sales, including adjustments, were
$1,903.3 million, 16.2% above 1998's level for the same period, primarily due
to the acquisition of Kaufel, and higher volumes in all of the Corporation's
business segments. Gross margins through nine months of 1999 and 1998 were
26.5% and 28.0%, respectively, and operating margins were 7.6% and 4.8%,
respectively. Excluding recovery for provision of restructured operations
from 1999's results and special charges from 1998's results, gross margins
were 26.5% and 29.9% and operating margins were 7.3% and 11.4%, respectively.
Margins decreased in 1999 from 1998 primarily due to charges associated with
the adjustments detailed in Note 6. Nine-month income from unconsolidated
companies increased 19.9% as a result of higher earnings from all of the
Corporation's equity investments. Other expense-net was 0.9% above that of
the year-earlier period due to higher interest expense offset by a $16.0
million fee received from AFC Cable Systems, Inc. for termination of their
merger agreement with the Corporation (see Note 6). Interest expense rose as
a result of higher rates on floating rate debt and higher outstanding debt
levels in 1999. Net earnings for the first nine months of 1999 were $126.1
million compared with $41.4 million and diluted EPS were $2.18, versus $0.73,
in the same 1998 period. Absent the recovery of provision for restructured
operations in 1999 and special charges in 1998, 1999's nine-month earnings
were 3.5% higher than in 1998.
16
<PAGE>
COST-REDUCTION PROGRAM
Net savings in the nine months ended October 3, 1999 exceeded net
savings anticipated at the outset of the cost-reduction program initiated in
1998 due to lower-than-anticipated project expenses, as shown in the
following table:
<TABLE>
<CAPTION>
Nine Months Ended
October 3, 1999
-----------------
Originally
(In millions) Anticipated Actual
----------- ------
<S> <C> <C>
Savings:
Salaries $ 9.4 $ 7.6
Manufacturing labor 27.0 21.2
Depreciation 0.8 0.5
Overhead (3.9) (2.4)
---- ----
Total 33.3 26.9
Related project expenses 21.4 10.6
---- ----
Net savings $11.9 $16.3
==== ====
</TABLE>
Project expenses are primarily relocation and training costs which
must be expensed as incurred because they are expected to provide future
value. The lower level of project expenses actually incurred in the first
nine months of 1999 reflects re-sequencing of the particular projects
undertaken to obtain a greater initial benefit. Net savings for the fourth
quarter are expected to be approximately $10.4 million, reflecting lower
project expenses than originally anticipated. Full-year 1999 net savings are
expected to be substantially the same as originally anticipated at the outset
of the program.
Cash disbursements which were charged against reserves for severance
and facility exit costs in the nine months ended October 3, 1999 were
approximately $13.1 million compared to $22.4 million originally anticipated.
The lower expenditure reflects the later timing of facility closures in the
nine months ended October 3, 1999.
SEGMENT RESULTS
Sales of the Electrical segment grew 25.1% to $337.8 million for the
quarter, and segment earnings rose .7% to $44.6 million. Sales from acquired
businesses, together with improved demand from industrial end-users,
accounted for the segment's increases. Segment earnings include adjustments
to account for systems conversion and other issues described in detail in
Note 6. Those adjustments negatively impacted third quarter 1999 segment
earnings by $9.4 million and nine-month earnings by $14.7 million. Absent
those adjustments, Electrical segment sales and earnings increased 29.4% and
22.0% year over year, respectively. Through nine months, sales increased
28.0% from the prior-year period to $1,031.9 million with most of the gain
resulting from the Kaufel acquisition and solid improvements in volumes sold
to utility customers. Segment earnings for the nine months were 1.9% higher
at $140.4 million.
The Electronic OEM segment showed solid growth year over year in the
third quarter with segment sales increasing 16.8% to $176.1 million. Strong
sales of battery packs to cellular handset OEMs and components to computer
manufacturers led the year-over-year increase. The Electronics OEM segment
recorded a loss for the third quarter of $(0.7) million, compared with
17
<PAGE>
$13.0 million in the prior-year quarter. The segment loss include charges of
$20.1 million and $21.9 million in the 1999 quarter, and nine-month period,
respectively, to account for TDI, systems conversion and other issues
described in detail in Note 6. Absent those charges, Electronic OEM segment
sales and earnings increased 19.3% and 49.5% year over year, respectively. On
a year-to-date basis, the segment had sales of $501.0 million, up 4.5% from
1998's first nine months. During the first nine months of 1999, higher
volumes of battery packs and computer components more than offset lower
prices. Year-to-date segment earnings declined 35.2% from 1998's level.
Sales of the Communications segment were $79.5 million in 1999's
third quarter, 24.7% above same-quarter 1998 sales. Heavy sales of amplifier
product lines in advance of the divestitures of those businesses and solid
demand for passive cable television components boosted sales in the quarter.
Segment earnings include charges of $12.7 million and $14.6 million in the
1999 quarter, and nine-month period, respectively, to account for systems
conversion and other issues described in detail in Note 6. As a result of
those charges, the Communications segment had a loss of $6.9 million in the
quarter compared with earnings of $3.8 million in 1998's third quarter.
Absent those charges, Communications segment sales and earnings increased
31.5% and 54.6% year over year, respectively. Through nine months of 1999,
Communication sales were $210.5 million, 4.7% above the same period of 1998
as gains in the U.S. cable television market and higher data communications
sales offset weak international demand for telecommunications products and
depressed sales to U.S. customers involved in telecommunications industry
consolidation. For the first nine months of 1999, the segment had a loss of
$7.1 million, versus earnings of $14.9 million in the 1998 period. The
year-over-year change in profitability of the segment is due to the
aforementioned charges as well as an unfavorable shift of sales to
lower-margin cable television amplifier products and lower sales to
telecommunications customers.
In the quarter, the Corporation completed sales of its three cable
amplifier product lines to Scientific Atlanta and ACI Communication. Those
dispositions allow Thomas & Betts to return its focus within the cable
television business to its core hardware product lines. The three product
lines had 1998 sales of $44.7 million and had $66.1 million in sales through
the first nine months of 1999.
Other sales in the third quarter were $49.3 million, a decrease of
10.6% from 1998's third-quarter level. Earnings on those sales were 57.3%
lower or $2.7 million. Earnings on other sales include charges of $4.1
million in the 1999 quarter, to account for systems conversion and other
issues described in detail in Note 6. Absent those charges, other sales
decreased 9.2% and earnings on other sales increased 7.2% year over year.
Through nine months of 1999, other sales totaled $159.9 million, 6.1% greater
than the same 1998 period, due to solid demand from traditional utility
customers. Earnings on other sales increased 18.2% to $14.9 million in the
first nine months due to manufacturing efficiencies in steel structures and
heating units.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided cash of $105.8 million through the
first nine months of 1999. Through nine months accounts receivable rose $88.1
million primarily as a result of:
- higher sales volumes; and
- the acquisitions of Ocal and Shamrock; less
- adjustments as described in Note 6.
The Corporation's inventory levels increased $40.1 million from
year-end 1998 levels due to:
- increases to support higher sales volumes; and
- the acquisitions of Ocal and Shamrock; less
- revaluation of inventory in the Corporation's TDI battery
operations; and
- other adjustments as described in Note 6.
Accounts payable increased $42.5 million from year-end 1998,
reflecting:
- additional purchases in support of higher sales and inventory
levels; and
- extension of payment terms.
Capital expenditures for the first nine months of 1999 totaled $98.3
million, just slightly more than the same period of 1998. Dividends paid
during the nine months of 1999 totaled $48.7 million for dividends declared
in 1998's fourth quarter and 1999's first and second quarters.
As of October 3, 1999, marketable securities, cash and equivalents
totaled $85.7 million, compared with $106.5 million as of January 3, 1999.
The cash balance was reduced as a result of improved banking and cash
management arrangements related to recent acquisitions and current operations.
Thomas & Betts maintains a commercial paper program, which is backed
by revolving-credit agreements. At October 3, 1999, $100.8 million of
commercial paper was outstanding, backed by $560 million of revolving-credit
agreements. In June 1999, the Corporation replaced an expiring $200 million
364-day revolving-credit agreement with a new $260 million, 364-day
revolving-credit agreement with a group of banks. Thomas & Betts has numerous
other uncommitted lines of credit in the U.S. and overseas. Management
believes that its external financial resources and internally generated funds
are sufficient to meet the Corporation's short-term capital needs. Longer
term, Thomas & Betts will continue to finance future acquisitions through
issuance of private or public debt, common stock, other equity instruments,
internally generated funds or a combination of those sources.
19
<PAGE>
In February 1999, the Corporation issued $150 million of 10-year
medium-term notes at par with a coupon of 6.39%. The Corporation used the
proceeds from that sale to reduce borrowings under its commercial paper
program and other uncommitted lines of credit and for other general corporate
purposes.
OTHER EVENTS
On January 27, 1999, the Corporation entered into an agreement to
acquire the outstanding common stock of AFC Cable Systems, Inc. (AFC) in a
stock-for-stock merger. AFC terminated that agreement to accept a higher
offer during the third quarter. The termination resulted in payment of a $16
million fee by AFC to Thomas & Betts.
YEAR-2000 READINESS PROGRAM
Thomas & Betts is actively engaged in a corporate-wide program to
ensure that its systems and products are Year-2000 compliant. The Year-2000
issue is the result of computer programs being written using two digits
rather than four to define the applicable year. As a result, computer
programs that have time-sensitive software are at risk to recognize a date
using "00" as the year 1900 rather than the year 2000. Thomas & Betts is
taking steps that it believes will ensure no disruption to its operations. In
1997, the Corporation began a worldwide-technology upgrade of its order-entry
and financial-reporting computer systems. As part of that project, Thomas &
Betts has completed an assessment of its Year-2000 issue and is modifying or
replacing portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter.
Thomas & Betts' plan to resolve the Year-2000 issue involves four
phases: assessment, remediation, testing and implementation. In 1998, Thomas
& Betts had completed its assessment of all significant computer systems that
could be affected by the Year-2000 issue. The assessment indicated that many
of the Corporation's important information technology systems could be
affected, and that software used in certain manufacturing equipment was at
risk. Thomas & Betts is currently completing correction of those systems and
manufacturing equipment that present a risk.
As of July 4, 1999, Thomas & Betts had completed the remediation
phase for all non-compliant legacy programs. As of October 3, 1999, the
Corporation had completed testing of all and implementation of all but one of
its information technology systems. The one remaining system was
implemented on November 4, 1999.
With respect to operating equipment, at July 4, 1999 Thomas & Betts
had completed an assessment of equipment that could be affected by the
Year-2000 issue, had completed 100% of the remediation phase and had
completed 100% of the testing of that equipment.
Thomas & Betts has surveyed its important suppliers, vendors and
customers, either by mail or telephone, to assess their Year-2000 readiness.
To date, the Corporation is not aware of any problems within those groups
that would materially affect results of Thomas & Betts' operations.
The Corporation is utilizing both internal and external resources to
reprogram or replace, test and implement the software and operating equipment
for Year-2000 modifications. As part of the previously mentioned
20
<PAGE>
worldwide-technology upgrade that began in 1997, the Corporation has been and
is installing new systems with greatly enhanced functionality that will also
solve potential Year-2000 problems in those areas. Management estimates that
its costs to modify existing software for Year-2000 compliance has
approximated $2 million to date.
The Corporation has contingency plans to address situations that may
result if the Corporation is unable to maintain Year-2000 readiness of its
critical operating systems. Those contingency plans cover the critical order
processing and distribution systems, as well as plant operating systems. A
majority of those plans involve redundant systems. For example, the
Corporation has remediated existing systems in parallel with development of
Year-2000 compliant replacement systems for order processing and distribution.
In the event that the Corporation's actions to correct potential
Year-2000 issues are incomplete and its contingency plans fail, the incorrect
recognition of the year 2000 by time-sensitive software could result in a
system failure or miscalculations causing disruptions of operations --
including, among other things, a temporary inability to process orders,
prepare invoices or engage in normal business activities. The Corporation
expects that any such disruption would be temporary and likely not material,
as any previously undetected root cause for such disruption could likely be
identified and fixed in a relatively short period of time. However, if both
the Corporation's Year-2000 solutions and contingency plans fail for a
critical system for a prolonged period, the impact on the Corporation would
be material.
Despite assurances from outside parties of their timely readiness,
the Corporation cannot ensure that its suppliers, vendors and customers will
resolve all Year-2000 issues. Given the responses to date from its suppliers,
vendors and customers, Thomas & Betts believes it is unlikely that a large
number of them will experience significant problems due to unresolved
Year-2000 issues. Should such an event occur, the Corporation can adjust its
order processing cycle to accommodate manual orders from its customers while
those third parties resolve outstanding issues. Consequently, the failure by
some parties to complete their Year-2000 readiness process would not likely
have a material impact on the Corporation. In the event that a large number
of customers suffer Year-2000 compliance issues over a prolonged period, the
impact on the Corporation would be material.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European
Union established fixed-conversion rates between their existing sovereign
currencies and the euro, and began an effort to fully adopt the euro as their
common legal currency by January 1, 2002.
The Corporation has successfully programmed its information
technology and other systems to accommodate euro-denominated transactions. To
date, the euro conversion has not materially impacted these systems or the
Corporation's competitive position, currency exchange risk, material
contracts, tax position or accounting policies. The Corporation cannot
predict the long-term impact of the euro conversion on its operations or
financial results.
21
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On September 14, 1999, the Corporation issued 85,566 shares of its
common stock to the former owners of Shamrock Conduit Products,
Inc. (Shamrock), a company acquired by the Corporation. The shares
represented a portion of the purchase price for all the issued and
outstanding shares of Shamrock and were not registered under the
Securities Act of 1933 as of October 3, 1999. These shares are
exempt from registration because they were issued in a private
placement in accordance with section 4(2) of the Securities Act of
1933.
ITEM 5. OTHER INFORMATION
(a) Forward-Looking Statements May Prove Inaccurate
This document includes various forward-looking statements about the
Corporation which are subject to risks and uncertainties.
Forward-looking statements include information concerning future
results of operations and cost savings. Statements that contain
words such as "believes," "expects," "anticipates," "intends,"
"estimates" or similar expressions are forward-looking statements.
These forward-looking statements are subject to risks and
uncertainties, and many factors could affect the future financial
results of the Corporation. Accordingly, actual results may differ
materially from those expressed or implied by the forward-looking
statements contained in this document. For these statements, the
Corporation claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
There are many important factors that could cause actual results to
differ materially from those in forward-looking statements, some of
which are beyond the control of the Corporation. These factors
include, but are not limited to:
- Negative economic conditions in the countries where the
Corporation sells its products which may affect performance;
- Materially adverse changes in economic or industry
conditions generally or in the specific markets served by
the Corporation, and economic slowdown in the U.S. or
economic slowdowns in the Corporation's major offshore
markets, including Europe (particularly Germany and the
United Kingdom), Canada, Japan and Taiwan;
- Adverse regulatory, environmental, monetary or other
governmental policies in the U.S. and abroad which could
result in currency fluctuations -- including fluctuations
in the Canadian dollar, Euro, Japanese yen, Swiss franc
and British pound -- which, in turn, could adversely
affect the Corporation's revenues and cost of sales;
22
<PAGE>
- Significant changes in any number of governmental policies
domestically and abroad which could create trade restrictions,
patent enforcement issues, adverse tax-rate changes and changes
to tax treatment of items such 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;
- Changes in environmental regulations, including emissions to
air, discharge to waters and the generation and handling of
waste, which could impact expectations of remediation expenses,
and potentially significant expenditures required to comply
with environmental regulations and policies that may be adopted
or imposed in the future;
- Rapid expansion through acquisitions and joint ventures which
may result in integration difficulties;
- Inflationary pressures which could raise interest rates and
consequently the Corporation's cost of funds;
- Disagreements and changes in the Corporation's relationships
with its joint venture partners and changes in financial
results from its joint ventures and other equity investments,
including ventures in Taiwan, Japan, Belgium, Egypt and the
U.S.;
- Strain on management resources and on other resources because
of continued rapid growth of the Corporation;
- Undiscovered liabilities arising from acquired businesses;
- Future acquisitions which could result in potentially dilutive
issuances of equity securities, the incurrence of debt and
contingent liabilities and amortization expenses related to
goodwill and other intangible assets, which could materially
adversely affect operating results and financial condition;
- Competition which may negatively affect financial performance;
- Increased downward pressure on the selling prices for the
Corporation's products;
- Unforeseeable changes in customer demand for various products
of the Corporation, which could affect the Corporation's
overall product mix, margins, plant utilization levels and
asset valuations;
- Availability of raw materials (especially steel, copper, zinc,
aluminum, gold and plastic resins) and significant price
fluctuations in the cost of raw materials which could adversely
affect the Corporation's financial results;
- Delayed cost-reduction initiatives or unforeseen difficulties
in completing cost-reduction actions, including disposal of
idle facilities, geographic shifts of production locations and
closure of redundant administrative facilities; and
23
<PAGE>
- Failure of Year 2000 date-sensitive logic in computer programs
and equipment within the Corporation or third parties with whom
the Corporation does business and unexpected problems with
information technology systems integration and conversions
which may disrupt business activities and operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this form:
(27.1) Financial Data Schedule (for SEC use only)
(27.2) Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On September 8, 1999, the Corporation filed a current report on
Form 8-K, Items 5 and 7, announcing updated information
regarding its terminated merger with AFC Cable Systems, Inc.
On July 7, 1999, the Corporation filed a current report on
Form 8-K, Items 5 and 7, announcing updated information regarding
its pending merger with AFC Cable Systems, Inc.
24
<PAGE>
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 17, 1999 /s/ Fred R. Jones
----------------- ----------------------------
Fred R. Jones
Vice President-Chief Financial Officer
DATE: NOVEMBER 17, 1999 /s/ Jerry Kronenberg
----------------- ----------------------------
Jerry Kronenberg
Vice President-General Counsel
and Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM SEC FORM 10-Q FOR THE
PERIODS ENDED OCTOBER 3, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. AMOUNTS IN 1999 HAVE BEEN RESTATED AS OF THE
BEGINNING OF 1999 TO INCLUDE THE AUGUST 31, 1999 ACQUISITION OF L.E. MASON CO.,
ACCOUNTED FOR AS AN IMMATERIAL POOLING OF INTERESTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JAN-02-2000 JAN-02-2000 JAN-02-2000
<PERIOD-START> JAN-04-1999 JAN-04-1999 JAN-04-1999
<PERIOD-END> APR-04-1999 JUL-04-1999 OCT-03-1999
<CASH> 37,055 72,346 69,675
<SECURITIES> 26,666 19,001 16,065
<RECEIVABLES> 477,064 486,015 523,615
<ALLOWANCES> (44,784) (41,954) (46,232)
<INVENTORY> 493,965 492,811 488,960
<CURRENT-ASSETS> 1,065,881 1,107,422 1,141,544
<PP&E> 1,207,987 1,232,658 1,262,340
<DEPRECIATION> 560,970 577,468 594,580
<TOTAL-ASSETS> 2,530,703 2,578,854 2,640,691
<CURRENT-LIABILITIES> 561,816 578,069 594,597
<BONDS> 850,672 854,711 837,103
0 0 0
0 0 0
<COMMON> 5,686 5,690 5,781
<OTHER-SE> 999,121 1,025,184 1,085,458
<TOTAL-LIABILITY-AND-EQUITY> 2,530,703 2,578,854 2,640,691
<SALES> 607,896 1,260,555 1,903,253
<TOTAL-REVENUES> 607,896 1,260,555 1,903,253
<CGS> 433,113 895,877 1,398,230
<TOTAL-COSTS> 555,696 1,141,050 1,759,511
<OTHER-EXPENSES> (9,983) (17,716) (34,449)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 15,982 32,590 49,600
<INCOME-PRETAX> 46,202 104,631 128,591
<INCOME-TAX> 13,901 28,628 2,531
<INCOME-CONTINUING> 32,300 76,004 126,060
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 32,300 76,004 126,060
<EPS-BASIC> 0.56 1.32 2.19
<EPS-DILUTED> 0.56 1.31 2.18
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM SEC FORM 10-Q FOR THE
PERIODS ENDED OCTOBER 4, 1998, 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> JAN-03-1999 JAN-03-1999 JAN-03-1999
<PERIOD-START> DEC-29-1997 DEC-29-1997 DEC-29-1997
<PERIOD-END> APR-05-1998 JUL-05-1998 OCT-04-1998
<CASH> 60,254 21,147 25,530
<SECURITIES> 51,692 66,268 60,830
<RECEIVABLES> 325,927 404,014 392,570
<ALLOWANCES> (41,177) (28,097) (27,943)
<INVENTORY> 429,919 436,324 419,647
<CURRENT-ASSETS> 877,723 947,364 954,388
<PP&E> 1,106,863 1,134,469 1,125,448
<DEPRECIATION> 520,737 533,080 542,347
<TOTAL-ASSETS> 2,136,321 2,282,235 2,278,448
<CURRENT-LIABILITIES> 406,129 432,751 520,240
<BONDS> 585,831 692,284 659,773
0 0 0
0 0 0
<COMMON> 0 5,669 5,674
<OTHER-SE> 1,024,005 1,038,091 982,277
<TOTAL-LIABILITY-AND-EQUITY> 2,136,321 2,282,235 2,278,448
<SALES> 544,508 1,097,678 1,637,475
<TOTAL-REVENUES> 544,508 1,097,678 1,637,475
<CGS> 383,412 768,269 1,178,459
<TOTAL-COSTS> 486,427 970,232 1,558,774
<OTHER-EXPENSES> (6,598) (8,498) (17,689)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 10,927 23,307 36,448
<INCOME-PRETAX> 53,752 112,637 59,942
<INCOME-TAX> 16,449 33,791 18,564
<INCOME-CONTINUING> 37,303 78,846 41,378
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 37,303 78,846 41,378
<EPS-BASIC> 0.66 1.39 0.73
<EPS-DILUTED> 0.65 1.38 0.73
</TABLE>
