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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
     
(Mark One)
   
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended March 31, 2011
 
or
     
o
  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
(State or other jurisdiction of
incorporation or organization)
  22-1326940
(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 þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
     
Large accelerated filer þ
  Accelerated filer o
Non-accelerated filer o
  Smaller reporting company o
(Do not check if a smaller reporting company)
   
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
     
    Outstanding Shares
Title of Each Class   at April 25, 2011
 
Common Stock, $.10 par value
  52,427,049
 


 

 
Thomas & Betts Corporation and Subsidiaries
 
TABLE OF CONTENTS
 
             
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PART II. OTHER INFORMATION
      27  
      27  
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    29  
 Statement Re Computation of Ratio of Earnings to Fixed Charges
 Certification of Principal Executive Officer Under Securities Exchange Act Rules 13a-14(a) or 15d-14(a)
 Certification of Principal Financial Officer Under Securities Exchange Act Rules 13a-14(a) or 15d-14(a)
 Certification of Principal Executive Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b)
 Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b)
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT


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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
 
This Report includes “forward-looking comments and statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts regarding Thomas & Betts Corporation and are subject to risks and uncertainties in our operations, business, economic and political environment. For further explanation of these risks and uncertainties, see Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, 2010. Forward looking statements contain words such as:
 
         
• “achieve”
  •“anticipates”   • “intends”
• “should”
  • “expects”   • “predict”
• “could”
  • “might”   • “will”
• “may”
  • “believes”  
•   other similar expressions
 
These forward-looking statements are not guarantees of future performance. Many factors could affect our future financial condition or results of operations. Accordingly, actual results, performance or achievements may differ materially from those expressed or implied by the forward-looking statements contained in this Report. We undertake no obligation to revise any forward-looking statement included in this Report to reflect any future events or circumstances.
 
A reference in this Report to “we”, “our”, “us”, “Thomas & Betts” or the “Corporation” refers to Thomas & Betts Corporation and its consolidated subsidiaries.


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PART I. FINANCIAL INFORMATION
 
Item 1.   Financial Statements
 
Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
                                 
    Quarter Ended March 31,              
    2011     2010              
 
Net sales
  $ 523,135     $ 453,629                  
Cost of sales
    359,532       319,029                  
                                 
Gross profit
    163,603       134,600                  
Selling, general and administrative
    104,101       88,479                  
                                 
Earnings from operations
    59,502       46,121                  
Interest expense, net
    (7,765 )     (8,371 )                
Other (expense) income, net
    (985 )     130                  
                                 
Earnings from continuing operations before income taxes
    50,752       37,880                  
Income tax provision
    15,226       11,565                  
                                 
Net earnings from continuing operations
    35,526       26,315                  
Earnings from discontinued operations, net
          1,637                  
                                 
Net earnings
  $ 35,526     $ 27,952                  
                                 
Basic earnings per share:
                               
Continuing operations
  $ 0.69     $ 0.51                  
Discontinued operations
          0.03                  
                                 
Net earnings
  $ 0.69     $ 0.54                  
                                 
Diluted earnings per share:
                               
Continuing operations
  $ 0.67     $ 0.50                  
Discontinued operations
          0.03                  
                                 
Net earnings
  $ 0.67     $ 0.53                  
                                 
Average shares outstanding:
                               
Basic
    51,546       52,067                  
Diluted
    52,917       53,005                  
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.


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Thomas & Betts Corporation and Subsidiaries

Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
                 
    March 31,
    December 31,
 
    2011     2010  
 
ASSETS
               
Current Assets
               
Cash and cash equivalents
  $ 434,283     $ 455,198  
Restricted cash
    359       358  
Receivables, net
    276,562       230,203  
Inventories
    258,514       220,250  
Deferred income taxes
    32,634       32,745  
Other current assets
    18,723       18,341  
                 
Total Current Assets
    1,021,075       957,095  
                 
Property, plant and equipment, net
    309,481       305,796  
Goodwill
    977,640       967,889  
Other intangible assets, net
    338,128       340,544  
Other assets
    60,629       61,069  
                 
Total Assets
  $ 2,706,953     $ 2,632,393  
                 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current Liabilities
               
Current maturities of long-term debt
  $ 326     $ 322  
Accounts payable
    185,917       190,839  
Accrued liabilities
    128,492       126,241  
Income taxes payable
    14,481       26,263  
                 
Total Current Liabilities
    329,216       343,665  
                 
Long-Term Liabilities
               
Long-term debt, net of current maturities
    574,077       574,090  
Long-term benefit plan liabilities
    139,969       141,998  
Deferred income taxes
    42,390       41,405  
Other long-term liabilities
    62,217       64,453  
Contingencies (Note 15)
               
Shareholders’ Equity
               
Common stock
    5,147       5,095  
Additional paid-in capital
    57,543       34,384  
Retained earnings
    1,556,371       1,520,845  
Accumulated other comprehensive income (loss)
    (59,977 )     (93,542 )
                 
Total Shareholders’ Equity
    1,559,084       1,466,782  
                 
Total Liabilities and Shareholders’ Equity
  $ 2,706,953     $ 2,632,393  
                 
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.


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Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
                 
    Quarter Ended
 
    March 31,  
    2011     2010  
 
Cash Flows from Operating Activities:
               
Net earnings
  $ 35,526     $ 27,952  
Adjustments:
               
Depreciation and amortization
    21,037       18,889  
Share-based compensation expense
    3,742       3,633  
Deferred income taxes
    3,599       1,882  
Incremental tax benefits from share-based payment arrangements
    (1,326 )     (598 )
Changes in operating assets and liabilities, net:
               
Receivables
    (41,364 )     (39,084 )
Inventories
    (35,505 )     (12,557 )
Accounts payable
    (7,487 )     (134 )
Accrued liabilities
    786       5,916  
Income taxes payable
    (11,001 )     3,002  
Other
    (5,213 )     4,750  
                 
Net cash provided by (used in) operating activities
    (37,206 )     13,651  
                 
Cash Flows from Investing Activities:
               
Purchases of businesses, net of cash acquired
          (21,395 )
Purchases of property, plant and equipment
    (12,111 )     (5,315 )
Other
    2       5  
                 
Net cash provided by (used in) investing activities
    (12,109 )     (26,705 )
                 
Cash Flows from Financing Activities:
               
Stock options exercised
    18,518       3,326  
Repayment of debt and other borrowings
    (78 )     (72 )
Incremental tax benefits from share-based payment arrangements
    1,326       598  
                 
Net cash provided by (used in) financing activities
    19,766       3,852  
                 
Effect of exchange-rate changes on cash and cash equivalents
    8,634       (2,887 )
                 
Net increase (decrease) in cash and cash equivalents
    (20,915 )     (12,089 )
Cash and cash equivalents, beginning of period
    455,198       478,613  
                 
Cash and cash equivalents, end of period
  $ 434,283     $ 466,524  
                 
Cash payments for interest
  $ 4,716     $ 5,603  
Cash payments for income taxes
  $ 26,768     $ 8,155  
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.


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Thomas & Betts Corporation and Subsidiaries
 
(Unaudited)
 
1.   Basis of Presentation
 
The financial information presented as of any date other than December 31 has been prepared from the books and records without audit. Financial information as of December 31 has been derived from the Corporation’s audited consolidated financial statements, but does not include all disclosures required by U.S. generally accepted accounting principles. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information for the periods indicated, have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. The results of operations for the periods ended March 31, 2011 and 2010 are not necessarily indicative of the operating results for the full year.
 
2.   Basic and Diluted Earnings Per Share
 
The following is a reconciliation of the basic and diluted earnings per share computations:
 
                 
    Quarter Ended
 
    March 31,  
    2011     2010  
 
(In thousands, except per share data)
               
Net earnings from continuing operations
  $ 35,526     $ 26,315  
Earnings from discontinued operations, net
          1,637  
                 
Net earnings
  $ 35,526     $ 27,952  
                 
Basic shares:
               
Average shares outstanding
    51,546       52,067  
                 
Basic earnings per share:
               
Continuing operations
  $ 0.69     $ 0.51  
Discontinued operations
          0.03  
                 
Net earnings
  $ 0.69     $ 0.54  
                 
Diluted shares:
               
Average shares outstanding
    51,546       52,067  
Additional shares on the potential dilution from stock options, nonvested restricted stock and performance units
    1,371       938  
                 
      52,917       53,005  
                 
Diluted earnings per share:
               
Continuing operations
  $ 0.67     $ 0.50  
Discontinued operations
          0.03  
                 
Net earnings
  $ 0.67     $ 0.53  
                 
 
The Corporation had stock options that were out-of-the-money which were excluded because of their anti-dilutive effect. Such out-of-the money stock options were associated with 0.3 million shares of common stock for the first quarter of 2011 and 2.2 million shares of common stock for the first quarter of 2010.


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3.   Acquisitions & Divestitures
 
In January 2010, the Corporation acquired JT Packard & Associates, Inc. (“JT Packard”), the nation’s largest independent service provider for critical power equipment used by industrial and commercial enterprises in a broad array of markets, for approximately $21 million. The purchase price allocation resulted in goodwill of approximately $6 million and other intangible assets of approximately $11 million, all of which was assigned to the Corporation’s Electrical segment. The results of these operations have been included in the consolidated financial statements of the Corporation since the acquisition date.
 
During 2010, the Corporation divested of its non-strategic communications products business. The operations associated with this business have been reflected as discontinued operations in the Corporation’s consolidated statements of operations. Discontinued operations in the first quarter of 2010 reflected net sales of approximately $16 million, earnings before income taxes of $2.5 million and net earnings of $1.6 million from the divested communications product business.
 
4.   Inventories
 
The Corporation’s inventories at March 31, 2011 and December 31, 2010 were:
 
                 
    March 31,
    December 31,
 
    2011     2010  
 
(In thousands)
               
Finished goods
  $ 118,779     $ 106,998  
Work-in-process
    32,546       23,636  
Raw materials
    107,189       89,616  
                 
Total inventories
  $ 258,514     $ 220,250  
                 
 
5.   Property, Plant and Equipment
 
The Corporation’s property, plant and equipment at March 31, 2011 and December 31, 2010 were:
 
                 
    March 31,
    December 31,
 
    2011     2010  
 
(In thousands)
               
Land
  $ 33,709     $ 32,775  
Building
    205,044       201,866  
Machinery and equipment
    677,358       663,642  
Construction-in-progress
    16,433       12,412  
                 
Gross property, plant and equipment
    932,544       910,695  
Less: Accumulated depreciation
    623,063       604,899  
                 
Net property, plant and equipment
  $ 309,481     $ 305,796  
                 


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6.   Goodwill and Other Intangible Assets
 
The following table reflects activity for goodwill by segment during the first quarter of 2011:
 
                                 
    Quarter Ended March 31, 2011  
                Other —
       
    Balance at
          Primarily
    Balance at
 
    Beginning of
          Currency
    End of
 
    Period     Additions     Translation     Period  
 
(In thousands)
                               
Electrical
  $ 902,478     $      —     $ 9,710     $ 912,188  
Steel Structures
    64,759                   64,759  
HVAC
    652             41       693  
                                 
    $ 967,889     $     $ 9,751     $ 977,640  
                                 
 
The following table reflects activity for other intangible assets during the first quarter of 2011:
 
                                         
    Quarter Ended March 31, 2011  
                      Other —
       
    Balance at
                Primarily
    Balance at
 
    Beginning of
          Amortization
    Currency
    End of
 
    Period     Additions     Expense     Translation     Period  
 
(In thousands)
                                       
Intangible assets subject to amortization
  $ 328,177     $      —     $     $ 5,091     $ 333,268  
Accumulated amortization
    (91,370 )           (8,453 )     (499 )     (100,322 )
                                         
      236,807             (8,453 )     4,592       232,946  
Other intangible assets not subject to amortization
    103,737                   1,445       105,182  
                                         
Total
  $ 340,544     $     $ (8,453 )   $ 6,037     $ 338,128  
                                         
 
7.   Income Taxes
 
The Corporation’s income tax provision for the first quarter of 2011 was $15.2 million, or an effective rate of 30.0% of pre-tax income, compared to a tax provision in the first quarter of 2010 of $11.6 million, or an effective rate of 30.5% of pre-tax income. The effective rate for each period reflects benefits from the Puerto Rican manufacturing operations, which have a significantly lower effective tax rate than the Corporation’s blended statutory tax rate in other jurisdictions.
 
During the first quarter of 2011, the Corporation concluded a Canada Revenue Agency audit of the Corporation’s Canadian income tax returns for the tax years 2005 — 2009, resulting in an $8.2 million assessment, including interest. The Corporation expects to settle the Canadian tax assessment in the second quarter of 2011. The Canadian tax assessment is offset by an expected recovery of U.S. federal and state income taxes of $7.4 million, resulting from the Corporation’s petition for tax relief under the competent authority administrative process.
 
The Corporation had net deferred tax assets totaling $5.0 million as of March 31, 2011 and $12.4 million as of December 31, 2010. Realization of the deferred tax assets is dependent upon the Corporation’s ability to generate sufficient future taxable income. Management believes that it is


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more-likely-than-not that future taxable income, based on tax laws in effect as of March 31, 2011, will be sufficient to realize the recorded deferred tax assets, net of any valuation allowance.
 
8.   Comprehensive Income
 
Total comprehensive income and its components are as follows:
 
                 
    Quarter Ended
 
    March 31,  
    2011     2010  
 
(In thousands)
               
Net earnings
  $ 35,526     $ 27,952  
Net unrealized gains (losses) on cash flow hedge, net of tax
    2,119       64  
Foreign currency translation adjustments
    30,044       (7,544 )
Amortization of net prior service costs and net actuarial
losses, net of tax
    1,402       2,559  
                 
Comprehensive income
  $ 69,091     $ 23,031  
                 
 
9.   Fair Value of Financial Instruments
 
The Corporation’s financial instruments include cash and cash equivalents, restricted cash, marketable securities, short-term receivables and payables and debt. Financial instruments also include an interest rate swap agreement, which is discussed further in Note 10 below. The carrying amounts of the Corporation’s financial instruments generally approximated their fair values at March 31, 2011 and December 31, 2010, except that, based on the borrowing rates available to the Corporation under current market conditions, the fair value of long-term debt (including current maturities) was approximately $588 million at March 31, 2011 and December 31, 2010.
 
10.   Derivative Instruments
 
The Corporation is exposed to market risk from changes in interest rates, foreign exchange rates and raw material prices, among others. At times, the Corporation may enter into various derivative instruments to manage certain of those risks. The Corporation does not enter into derivative instruments for speculative or trading purposes.
 
Interest Rate Swap Agreement
 
During 2007, the Corporation entered into a forward-starting amortizing interest rate swap for a notional amount of $390 million. The notional amount reduced to $325 million on December 15, 2010, and reduces to $200 million on December 15, 2011 and $0 on October 1, 2012. The interest rate swap hedges the Corporation’s exposure to changes in interest rates on borrowings under its $750 million revolving credit facility. The Corporation has designated the receive variable/pay fixed interest rate swap as a cash flow hedge for accounting purposes. Under the interest rate swap, the Corporation receives one-month London Interbank Offered Rate (“LIBOR”) and pays an underlying fixed rate of 4.86%. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the applicable periods during which the hedged transaction affects earnings. Gains or losses on the derivative representing hedge ineffectiveness are recognized in current period earnings.
 
The Corporation values the interest rate swap at fair value. Fair value is the price received to transfer an asset or paid to transfer a liability in an orderly transaction between market participants at


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the measurement date. Measuring fair value involves a hierarchy of valuation inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly; and, Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring a company to develop its own valuation assumptions.
 
The Corporation’s interest rate swap was reflected in the Corporation’s consolidated balance sheet in other long-term liabilities at its fair value of $17.8 million as of March 31, 2011 and $21.3 million as of December 31, 2010. This swap is measured at fair value at the end of each reporting period. The Corporation’s fair value estimate was determined using significant unobservable inputs and assumptions (Level 3) and, in addition, the liability valuation reflects the Corporation’s credit standing. The valuation technique utilized by the Corporation to calculate the swap fair value is the income approach. Using inputs for current market expectations of LIBOR rates, Eurodollar futures prices, treasury yields and interest rate swap spreads, this approach compares the present value of a constructed zero coupon yield curve and the present value of an extrapolated forecast of future interest rates. This determined value is then reduced by a credit valuation adjustment that takes into effect the current credit risk of the interest rate swap counterparty or the Corporation, as applicable.
 
The Corporation’s balance of accumulated other comprehensive income has been reduced by $11.0 million, net of tax of $6.7 million, as of March 31, 2011 and $13.1 million, net of tax of $8.0 million, as of December 31, 2010 to reflect the above interest rate swap liability.
 
The following is a reconciliation associated with the interest rate swap of the fair value activity using Level 3 inputs during the first quarter of 2011 and 2010:
 
                 
    Quarter Ended  
    March 31,
    March 31,
 
    2011     2010  
 
(In millions)
               
Asset (liability) at beginning of period
  $ (21.3 )   $ (28.7 )
Total realized/unrealized gains or losses:
               
Included in earnings
    (3.7 )     (4.5 )
Increase (decrease) in fair value included in
comprehensive income
    3.4       0.1  
Settlements
    3.8       4.5  
                 
Asset (liability) at end of period
  $ (17.8 )   $ (28.6 )
                 
 
The ineffective portion of the swap reflected in interest expense, net during the first quarter of 2011 and the first quarter of 2010 was immaterial.
 
Forward Foreign Exchange Contracts
 
The Corporation had no outstanding forward sale or purchase contracts as of March 31, 2011 or December 31, 2010. The Corporation is exposed to the effects of changes in exchange rates primarily from the Canadian dollar and European currencies. From time to time, the Corporation utilizes forward foreign exchange contracts for the sale or purchase of foreign currencies to mitigate this risk.


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Commodities Futures Contracts
 
The Corporation had no outstanding commodities futures contracts as of March 31, 2011 or December 31, 2010. The Corporation is exposed to risk from fluctuating prices for certain materials used to manufacture its products, such as: steel, aluminum, copper, zinc, resins and rubber compounds. At times, some of the risk associated with usage of aluminum, copper and zinc has been mitigated through the use of futures contracts that mitigate the price exposure to these commodities.
 
11.   Debt
 
The Corporation’s long-term debt at March 31, 2011 and December 31, 2010 was:
 
                 
    March 31,
    December 31,
 
    2011     2010  
 
(In thousands)
               
Senior credit facility(a)
  $ 325,000     $ 325,000  
Unsecured notes:
               
5.625% Senior Notes due 2021(b)
    248,371       248,301  
Other, including capital leases
    1,032       1,111  
                 
Long-term debt (including current maturities)
    574,403       574,412  
Less current maturities
    326       322  
                 
Long-term debt, net of current maturities
  $ 574,077     $ 574,090  
                 
 
(a) Interest is paid monthly.
 
(b) Interest is paid semi-annually.
 
As of March 31, 2011 and December 31, 2010, the Corporation had outstanding $250 million of 5.625% Senior Notes due 2021. The indentures underlying the unsecured notes contain standard covenants such as restrictions on mergers, liens on certain property, sale-leaseback of certain property and funded debt for certain subsidiaries. The indentures also include standard events of default such as covenant default and cross-acceleration.
 
The Corporation has a revolving credit facility with total availability of $750 million and a five-year term expiring in October 2012. All borrowings and other extensions of credit under the Corporation’s revolving credit facility are subject to the satisfaction of customary conditions, including absence of defaults and accuracy in material respects of representations and warranties. The proceeds of any loans under the revolving credit facility may be used for general operating needs and for other general corporate purposes in compliance with the terms of the facility. The Corporation pays an annual commitment fee to maintain this facility of 10 basis points. At March 31, 2011 and December 31, 2010, $325 million was outstanding under this facility.
 
Fees to access the facility and letters of credit under the facility are based on a pricing grid related to the Corporation’s debt ratings with Moody’s, S&P, and Fitch during the term of the facility.
 
The Corporation’s revolving credit facility requires that it maintain:
 
  •  a maximum leverage ratio of 3.75 to 1.00; and
 
  •  a minimum interest coverage ratio of 3.00 to 1.00.


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It also contains customary covenants that could restrict the Corporation’s ability to: incur additional indebtedness; grant liens; make investments, loans, or guarantees; declare dividends; or repurchase company stock.
 
Outstanding letters of credit, which reduced availability under the credit facility, amounted to $21.6 million at March 31, 2011. The letters of credit relate primarily to third-party insurance claims processing.
 
The Corporation has a EUR 10 million (approximately US$14.0 million) committed revolving credit facility with a European bank. The Corporation pays an annual commitment fee of 20 basis points on the undrawn balance to maintain this facility. This credit facility contains standard covenants similar to those contained in the $750 million credit agreement and standard events of default such as covenant default and cross-default. This facility has an indefinite maturity, and no borrowings were outstanding as of March 31, 2011 and December 31, 2010. Outstanding letters of credit which reduced availability under the European facility amounted to EUR 1.0 million (approximately US $1.4 million) at March 31, 2011.
 
The Corporation has a CAN 30 million (approximately US$30.7 million) committed revolving credit facility with a Canadian bank. The Corporation pays an annual commitment fee of 12.5 basis points on the undrawn balance to maintain this facility. This credit facility contains standard covenants similar to those contained in the $750 million credit agreement and standard events of default such as covenant default and cross-default. This facility matures in June 2011, and no borrowings were outstanding as of March 31, 2011 and December 31, 2010.
 
As of March 31, 2011, the Corporation’s aggregate availability of funds under its credit facilities is approximately $446.7 million, after deducting outstanding letters of credit. The Corporation has the option, at the time of drawing funds under any of the credit facilities, of selecting an interest rate based on a number of benchmarks including LIBOR, the federal funds rate, or the prime rate of the agent bank.
 
As of March 31, 2011, the Corporation also had letters of credit in addition to those discussed above that do not reduce availability under the Corporation’s credit facilities. The Corporation had $19.2 million of such additional letters of credit that relate primarily to environmental assurances, third-party insurance claims processing, performance guarantees and acquisition obligations.
 
12.   Share-Based Payment Arrangements
 
Share-based compensation expense, net of tax, of $2.3 million was charged against income during the first quarter of 2011 and 2010. During the first quarter of 2011, the Corporation had 511,039 stock options exercised at a weighted average exercise price of $36.22 per share and had 12,103 stock options forfeited or expired.


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13.   Pension and Other Postretirement Benefits
 
Net periodic cost for the Corporation’s pension and other postretirement benefits included the following components:
 
                                 
    Quarter Ended  
          Other
 
          Postretirement
 
    Pension Benefits     Benefits  
    March 31,
    March 31,
    March 31,
    March 31,
 
    2011     2010     2011     2010  
 
(In thousands)
                               
Service cost
  $ 1,039     $ 2,888     $     $ 2  
Interest cost
    7,344       7,217       203       255  
Expected return on plan assets
    (8,524 )     (8,208 )            
Plan net loss (gain)
    1,596       2,845       58       74  
Prior service cost (gain)
    283       282       (63 )     (63 )
Transition obligation (asset)
    (5 )     (4 )     192       192  
Settlement loss (gain)
          199              
                                 
Net periodic benefit cost
  $ 1,733     $ 5,219     $ 390     $ 460  
                                 
 
Contributions to our qualified pension plans during the quarters ended March 31, 2011 and 2010 were not significant. We expect required contributions to our qualified pension plans during the remainder of 2011 to be minimal.
 
14.   Segment Disclosures
 
The Corporation has three reportable segments:  Electrical, Steel Structures and HVAC. The Corporation’s reportable segments are based primarily on product lines and represent the primary mode used to assess allocation of resources and performance. The Corporation evaluates its business segments primarily on the basis of segment earnings, with segment earnings defined as earnings before corporate expense, depreciation and amortization expense, share-based compensation expense, interest, income taxes and certain other items. Corporate expense includes legal, finance and administrative costs. The Corporation has no material inter-segment sales.
 
The Electrical segment designs, manufactures and markets thousands of different electrical connectors, components and other products for industrial, construction and utility applications. The Steel Structures segment designs, manufactures and markets highly engineered steel transmission structures. The HVAC segment designs, manufactures and markets heating and ventilation products for commercial and industrial buildings. The Corporation’s U.S. Electrical and International Electrical operating segments have been aggregated in the Electrical reporting segment since they have similar economic characteristics as well as similar products and services, production processes, types of customers and methods used for distributing their products.
 


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    Quarter Ended
 
    March 31,  
    2011     2010  
 
(In thousands)
               
Net Sales
               
Electrical
  $ 443,520     $ 367,246  
Steel Structures
    50,945       59,897  
HVAC
    28,670       26,486  
                 
Total
  $ 523,135     $ 453,629  
                 
Segment Earnings
               
Electrical
  $ 86,936     $ 63,888  
Steel Structures
    4,292       9,890  
HVAC
    4,562       4,291  
                 
Segment earnings
    95,790       78,069  
Corporate expense
    (11,509 )     (9,887 )
Depreciation and amortization expense
    (21,037 )     (18,460 )
Share-based compensation expense
    (3,742 )     (3,601 )
Interest expense, net
    (7,765 )     (8,371 )
Other (expense) income, net
    (985 )     130  
                 
Earnings before income taxes
  $ 50,752     $ 37,880  
                 
 
15.   Contingencies
 
Legal Proceedings
 
The Corporation is involved in legal proceedings and litigation arising in the ordinary course of business. In those cases where the Corporation is the defendant, plaintiffs may seek to recover large or sometimes unspecified amounts or other types of relief and some matters may remain unresolved for several years. Such matters may be subject to many uncertainties and outcomes which are not predictable with assurance. The Corporation has provided for losses to the extent probable and estimable. The legal matters that have been recorded in the Corporation’s consolidated financial statements are based on gross assessments of expected settlement or expected outcome and do not reflect possible recovery from insurance companies or other parties. Additional losses, even though not anticipated, could have a material adverse effect on the Corporation’s financial position, results of operations or liquidity in any given period.
 
Guarantee and Indemnification Arrangements
 
The Corporation generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time and usage of the product depending on the nature of the product, the geographic location of its sale and other factors. The accrued product warranty costs are based primarily on historical experience of actual warranty claims as well as current information on repair costs.

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The following table provides the changes in the Corporation’s accruals for estimated product warranties:
 
                 
    Quarter Ended
 
    March 31,  
    2011     2010  
 
(In thousands)
               
Balance at beginning of period
  $ 2,574     $ 3,064  
Liabilities accrued for warranties issued during the period
    455       394  
Warranty claims paid during the period
    (258 )     (714 )
Changes in liability for pre-existing warranties during the period, including expirations
    (64 )     3  
                 
Balance at end of period
  $ 2,707     $ 2,747  
                 
 
The Corporation also continues to monitor events that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under the guarantees and indemnifications at fair value when those losses are estimable.


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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Executive Overview
 
Thomas & Betts Corporation is a leading designer and manufacturer of essential components used to manage the connection, distribution, transmission and reliability of electrical products in industrial, construction and utility applications. We are also a leading producer of commercial heating and ventilation units used in commercial and industrial buildings and highly engineered steel structures used for utility transmission. We have operations in over 20 countries. Manufacturing, marketing and sales activities are concentrated primarily in North America and Europe.
 
Critical Accounting Policies
 
The preparation of financial statements contained in this report requires the use of estimates and assumptions to determine certain amounts reported as net sales, costs, expenses, assets or liabilities and certain amounts disclosed as contingent assets or liabilities. Actual results may differ from those estimates or assumptions. Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. We believe our critical accounting policies include the following:
 
  •  Revenue Recognition:  We recognize revenue when products are shipped and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. We recognize revenue for service agreements over the applicable service periods. Sales discounts, quantity and price rebates, and allowances are estimated based on contractual commitments and experience and recorded as a reduction of revenue in the period in which the sale is recognized. Quantity rebates are in the form of volume incentive discount plans, which include specific sales volume targets or year-over-year sales volume growth targets for specific customers. Certain distributors can take advantage of price rebates by subsequently reselling our products into targeted construction projects or markets. Following a distributor’s sale of an eligible product, the distributor submits a claim for a price rebate. A number of distributors, primarily in our Electrical segment, have the right to return goods under certain circumstances and those returns, which are reasonably estimable, are accrued as a reduction of revenue at the time of shipment. We analyze historical returns and allowances, current economic trends and specific customer circumstances when evaluating the adequacy of accounts receivable related reserves and accruals. We provide allowances for doubtful accounts when credit losses are both probable and estimable.
 
  •  Inventory Valuation:  Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. To ensure inventories are carried at the lower of cost or market, we periodically evaluate the carrying value of our inventories. We also periodically perform an evaluation of inventory for excess and obsolete items. Such evaluations are based on management’s judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales history and forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.
 
  •  Goodwill and Other Intangible Assets:  We apply the acquisition (purchase) method of accounting for all business combinations. Under this method, all assets and liabilities acquired in a business combination, including goodwill, indefinite-lived intangibles and other intangibles, are recorded at fair value. The purchase price allocation requires subjective


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  judgments concerning estimates of the fair value of the acquired assets and liabilities. Goodwill consists principally of the excess of cost over the fair value of net assets acquired in business combinations and is not amortized. For each amortizable intangible asset, we use a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed. If that pattern cannot be reliably determined, the straight-line amortization method is used. We perform an annual impairment test of goodwill and indefinite-lived intangible assets. We perform our annual impairment assessment as of the beginning of the fourth quarter of each year, unless circumstances dictate more frequent interim assessments. In evaluating when an interim assessment of goodwill is necessary, we consider, among other things, the trading level of our common stock, changes in expected future cash flows and mergers and acquisitions involving companies in our industry. In evaluating when an interim assessment of indefinite-lived intangible assets is necessary, we review for significant events or significant changes in circumstances. Our evaluation process did not result in an interim assessment of goodwill or long-lived intangible assets for recoverability for the quarter ended March 31, 2011.
 
In conjunction with each test of goodwill we determine the fair value of each reporting unit and compare the fair value to the reporting unit’s carrying amount. A reporting unit is defined as an operating segment or one level below an operating segment. We determine the fair value of our reporting units using a combination of three valuation methods: market multiple approach; discounted cash flow approach; and comparable transactions approach. The market multiple approach provides indications of value based on market multiples for public companies involved in similar lines of business. The discounted cash flow approach calculates the present value of projected future cash flows using appropriate discount rates. The comparable transactions approach provides indications of value based on an examination of recent transactions in which companies in similar lines of business were acquired. The fair values derived from these three valuation methods are then weighted to arrive at a single value for each reporting unit. Relative weights assigned to the three methods are based upon the availability, relevance and reliability of the underlying data. We then reconcile the total values for all reporting units to our market capitalization and evaluate the reasonableness of the implied control premium.
 
To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired, and we must perform a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date.
 
Methods used to determine fair values for indefinite-lived intangible assets involve customary valuation techniques that are applicable to the particular class of intangible asset and apply inputs and assumptions that we believe a market participant would use.
 
  •  Long-Lived Assets:  We review long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Indications of impairment require significant judgment by management. For purposes of recognizing and measuring impairment of long-lived assets, we evaluate assets at the lowest level of identifiable cash flows for associated product groups. If the sum of the undiscounted expected future cash flows over the remaining useful life of the primary asset in the associated product groups is less than the carrying amount of the assets,


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  the assets are considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. When fair values are not available, we estimate fair values using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to dispose.
 
  •  Pension and Other Postretirement Benefit Plan Actuarial Assumptions:  We recognize the overfunded or underfunded status of benefit plans in our consolidated balance sheets. For purposes of calculating pension and postretirement medical benefit obligations and related costs, we use certain actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement. We evaluate these assumptions annually. Other assumptions include employee demographic factors (retirement patterns, mortality and turnover), rate of compensation increase and the healthcare cost trend rate. See additional information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations — Qualified Pension Plans.
 
  •  Income Taxes:  We use the asset and liability method of accounting for income taxes. This method recognizes the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities and requires an evaluation of asset realizability based on a more-likely-than-not criteria. We have valuation allowances for deferred tax assets primarily associated with foreign net operating loss carryforwards and foreign income tax credit carryforwards. Realization of the deferred tax assets is dependent upon our ability to generate sufficient future taxable income. We believe that it is more-likely-than-not that future taxable income, based on enacted tax laws in effect as of March 31, 2011, will be sufficient to realize the recorded deferred tax assets net of existing valuation allowances.
 
  •  Environmental Costs:  Environmental expenditures that relate to current operations are expensed or capitalized, as appropriate. Remediation costs that relate to an existing condition caused by past operations are accrued when it is probable that those costs will be incurred and can be reasonably estimated based on evaluations of currently available facts related to each site. The operation of manufacturing plants involves a high level of susceptibility in these areas, and requires subjective judgments by management in assessing environmental or occupational health and safety liabilities.


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Summary of Consolidated Results
 
                                 
    Quarter Ended March 31,  
    2011     2010  
          % of Net
          % of Net
 
    In Thousands     Sales     In Thousands     Sales  
 
Net sales
  $ 523,135       100.0     $ 453,629       100.0  
Cost of sales
    359,532       68.7       319,029       70.3  
                                 
Gross profit
    163,603       31.3       134,600       29.7  
Selling, general and administrative
    104,101       19.9       88,479       19.5  
                                 
Earnings from operations
    59,502       11.4       46,121       10.2  
Interest expense, net
    (7,765 )     (1.5 )     (8,371 )     (1.9 )
Other (expense) income, net
    (985 )     (0.2 )     130        
                                 
Earnings from continuing operations before income taxes
    50,752       9.7       37,880       8.3  
Income tax provision
    15,226       2.9       11,565       2.5  
                                 
Net earnings from continuing operations
    35,526       6.8       26,315       5.8  
Earnings from discontinued
operations, net
                1,637       0.4  
                                 
Net earnings
  $ 35,526       6.8     $ 27,952       6.2  
                                 
Basis earnings per share:
                               
Continuing operations
  $ 0.69             $ 0.51          
Discontinued operations
                  0.03          
                                 
Net earnings
  $ 0.69             $ 0.54          
                                 
Diluted earnings per share:
                               
Continuing operations
  $ 0.67             $ 0.50          
Discontinued operations
                  0.03          
                                 
Net earnings
  $ 0.67             $ 0.53          
                                 
 
2011 Compared with 2010
 
Overview
 
Net sales in the first quarter of 2011 increased 15.3% over the prior-year period primarily reflecting the positive impact of the 2010 acquisitions of JT Packard (January 2010), PMA AG (“PMA”) (April 2010) and Cable Management Group, Ltd. (“CMG”) (October 2010) and higher organic sales volumes in our Electrical segment, which were partially offset by a decrease in net sales in our Steel Structures segment.
 
Earnings from operations, both in dollars and as a percent of sales, increased from the prior-year period. These improvements reflect the impact of the 2010 acquisitions, a favorable shift in product mix in our Electrical segment, previous actions taken to manage costs and improved manufacturing leverage from increased production volumes. Earnings from operations in the first quarter of 2011 and 2010 include charges related to facility consolidations.
 
Net earnings in the first quarter of 2011 were $35.5 million ($0.67 per diluted share) compared to net earnings of $28.0 million ($0.53 per diluted share) in the first quarter of 2010. Net earnings include net after-tax facility consolidation charges, as described below, of $2.3 million ($0.04 per


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diluted share) in the first quarter of 2011 and $2.1 million ($0.04 per diluted share) in the first quarter of 2010. Net earnings in 2010 also reflect $1.6 million ($0.03 per diluted share) of earnings from discontinued operations.
 
Net Sales and Gross Profit
 
Net sales in the first quarter of 2011 were $523.1 million, up 15.3%, from the prior-year period. The sales increase from the prior-year period attributable to the 2010 acquisitions was 7.0% or $31.7 million. Higher volumes in our Electrical segment, which were partially offset by decreased sales volumes in our Steel Structures segment, also positively impacted year-over-year sales. A weaker U.S. dollar positively impacted sales by approximately $5.5 million in the first quarter of 2011 when compared to the prior-year period. The impact of price on year-over-year consolidated sales was negligible as the positive price impact from our Electrical segment was largely offset by negative price in our Steel Structures segment.
 
Gross profit in the first quarter of 2011 was $163.6 million, or 31.3% of net sales, compared to $134.6 million, or 29.7% of net sales, in the first quarter of 2010. The year-over-year increase in gross margin reflects the positive impact from the 2010 acquisitions, the favorable shift in product mix in our Electrical segment, previous actions taken to manage costs and improved manufacturing leverage from increased production volumes. Gross profit in the first quarter of 2011 and 2010 includes pre-tax charges for facility consolidations of $2.4 million in 2011 and $3.2 million in 2010.
 
Selling, General and Administrative
 
Selling, general and administrative (“SG&A”) expense in the first quarter of 2011 was $104.1 million, or 19.9% of net sales, compared to $88.5 million, or 19.5% of net sales, in the prior-year period. SG&A as a percent of sales in 2011 reflects increased amortization expense associated with the 2010 acquisitions. SG&A in the first quarter of 2011 also includes pre-tax charges of $0.8 million for facility consolidations.
 
Interest Expense, Net
 
Interest expense, net was $7.8 million for the first quarter of 2011, down $0.6 million from the prior-year period, reflecting lower average debt levels in the current year period. Interest income included in interest expense, net was $0.7 million for the first quarter of 2011 and $1.0 million for the first quarter of 2010.
 
Income Taxes
 
The effective tax rate from continuing operations in the first quarter of 2011 was 30.0% compared to 30.5% in the first quarter of 2010. The effective rate for both periods also reflects benefits from our Puerto Rican manufacturing operations.
 
Net Earnings
 
Net earnings in the first quarter of 2011 were $35.5 million, or $0.67 per diluted share, compared to net earnings of $28.0 million, or $0.53 per diluted share, in the first quarter of 2010. Net earnings in the first quarter of 2011 include a net after-tax charge totaling $2.3 million ($0.04 per diluted share) associated with facility consolidations. Net earnings in the first quarter of 2010 included a net after-tax charge totaling $2.1 million ($0.04 per diluted share) associated with facility consolidations. Net earnings in 2010 also reflect $1.6 million ($0.03 per diluted share) of earnings from discontinued operations.


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Summary of Segment Results
 
Net Sales
 
                                 
    Quarter Ended March 31,  
    2011     2010  
    In
    % of Net
    In
    % of Net
 
    Thousands     Sales     Thousands     Sales  
 
Electrical
  $ 443,520       84.8     $ 367,246       81.0  
Steel Structures
    50,945       9.7       59,897       13.2  
HVAC
    28,670       5.5       26,486       5.8  
                                 
    $ 523,135       100.0     $ 453,629       100.0  
                                 
 
Segment Earnings
 
                                 
    Quarter Ended March 31,  
    2011     2010  
    In
    % of Net
    In
    % of Net
 
    Thousands     Sales     Thousands     Sales  
 
Electrical
  $ 86,936       19.6     $ 63,888       17.4  
Steel Structures
    4,292       8.4       9,890       16.5  
HVAC
    4,562       15.9       4,291       16.2  
                                 
Segment earnings
    95,790       18.3       78,069       17.2  
Corporate expense
    (11,509 )             (9,887 )        
Depreciation and amortization expense
    (21,037 )             (18,460 )        
Share-based compensation expense
    (3,742 )             (3,601 )        
Interest expense, net
    (7,765 )             (8,371 )        
Other (expense) income, net
    (985 )             130          
                                 
Earnings before income taxes
  $ 50,752             $ 37,880          
                                 
 
We have three reportable segments: Electrical, Steel Structures and HVAC. We evaluate our business segments primarily on the basis of segment earnings, with segment earnings defined as earnings before corporate expense, depreciation and amortization expense, share-based compensation expense, interest, income taxes and certain other items.
 
Our segment earnings are significantly influenced by the operating performance of our Electrical segment that accounted for more than 80% of our consolidated net sales and consolidated segment earnings during the periods presented.
 
Electrical Segment
 
Electrical segment net sales in the first quarter of 2011 were $443.5 million, up $76.3 million, or 20.8%, from the first quarter of 2010. The sales increase from the prior-year period attributable to the 2010 acquisitions of JT Packard, PMA, and CMG was 8.6%, or $31.7 million. Increased volumes also positively impacted year-over-year sales and reflect improved industrial and utility distribution demand. Net sales also reflect a weaker U.S. dollar, which positively impacted sales by approximately $6 million. Price positively impacted sales by approximately $3 million when compared to the prior-year period.


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Electrical segment earnings in the first quarter of 2011 were $86.9 million, up $23.0 million, or 36.1%, from the first quarter of 2010. Segment earnings as a percent of sales increased to 19.6% in the first quarter of 2011 compared to 17.4% in the prior-year period. Segment earnings reflect pre-tax facility consolidation charges of $2.5 million in the first quarter of 2011 and $3.2 million in the prior-year period. The increase in year-over-year segment earnings reflects the contribution from 2010 acquisitions, a favorable shift in product mix, productivity improvements associated with prior-year facility consolidations and manufacturing leverage from increased volume.
 
Steel Structures Segment
 
Net sales in the first quarter of 2011 in our Steel Structures segment were $50.9 million, down $9.0 million, or 14.9%, from the first quarter of 2010. The net sales decrease reflects decreased sales volumes along with the negative price impact from lower year-over-year plate steel costs and continued competitive pricing conditions. Segment earnings in the first quarter of 2010 were $4.3 million, down $5.6 million from the first quarter of 2010. Segment earnings as a percent of sales decreased to 8.4% in the first quarter of 2011 compared to 16.5% in the prior-year period.
 
HVAC Segment
 
Net sales in the first quarter of 2011 in our HVAC segment were $28.7 million, up $2.2 million, or 8.2%, from the first quarter of 2010. HVAC segment earnings in the first quarter of 2011 were $4.6 million, up $0.3 million, or 6.3%, from the first quarter of 2010. Segment earnings as a percent of sales decreased to 15.9% in the first quarter of 2011 compared to 16.2% in the prior-year period. Segment earnings in the current year period reflect a pre-tax facility consolidation charge of $0.7 million.
 
Liquidity and Capital Resources
 
We had cash and cash equivalents of $434.3 million and $455.2 million at March 31, 2011 and December 31, 2010, respectively.
 
The following table reflects the primary category totals in our Consolidated Statements of Cash Flows:
 
                 
    Quarter Ended
 
    March 31,  
    2011     2010  
 
(In thousands)
               
Net cash provided by (used in) operating activities
  $ (37,206 )   $ 13,651  
Net cash provided by (used in) investing activities
    (12,109 )     (26,705 )
Net cash provided by (used in) financing activities
    19,766       3,852  
Effect of exchange-rate changes on cash
    8,634       (2,887 )
                 
Net increase (decrease) in cash and cash equivalents
  $ (20,915 )   $ (12,089 )
                 
 
Operating Activities
 
Operating activities in the first quarter of 2011 included net earnings of $35.5 million, depreciation and amortization of $21.0 million and share-based compensation expense of $3.7 million, which were offset by negative net changes in working capital (accounts receivable, inventories and accounts payable) as well as accrued liabilities of $83.6 million. The working capital changes reflect the seasonal timing of payments for annual volume incentives and an intentional


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build in inventory to maintain service levels as we complete certain in-process facility consolidations.
 
Operating activities in the first quarter of 2010 included net earnings of $28.0 million, depreciation and amortization of $18.9 million and share-based compensation expense of $3.6 million, which were offset by negative net changes in working capital (accounts receivable, inventories and accounts payable) as well as accrued liabilities of $45.9 million.
 
Investing Activities
 
Investing activities in the first quarter of 2011 included capital expenditures to support our ongoing business plans totaling $12.1 million. We expect capital expenditures to be in the mid- $60 million range for the full year 2011, which includes a significant capacity expansion in our Steel Structures segment. Investing activities in the first quarter of 2010 included the acquisition of JT Packard for approximately $21 million. During the first quarter of 2010, we had capital expenditures to support our ongoing business plans totaling $5.3 million.
 
Financing Activities
 
Financing activities in the first quarter of 2011 included 511,039 stock options exercised at a weighted average exercise price of $36.22 per share totaling $18.5 million. Financing activities in the first quarter of 2010 included 166,848 stock options exercised at a weighted average exercise price of $19.93 per share totaling $3.3 million.
 
$750 million Credit Facility
 
Our revolving credit facility has total availability of $750 million and a five-year term expiring in October 2012. All borrowings and other extensions of credit under our revolving credit facility are subject to the satisfaction of customary conditions, including absence of defaults and accuracy in material respects of representations and warranties. The proceeds of any loans under the revolving credit facility may be used for general operating needs and for other general corporate purposes in compliance with the terms of the facility. At March 31, 2011 and December 31, 2010, $325 million was outstanding under this facility.
 
In 2007, we entered into an interest rate swap to hedge our exposure to changes in the London Interbank Offered Rate (“LIBOR”) rate on $390 million of borrowings under this facility. During 2010, a $65 million notional amount matured under the interest rate swap. See Item 3. “Quantitative and Qualitative Disclosures about Market Risk”.
 
Fees to access the facility and letters of credit under the facility are based on a pricing grid related to our debt ratings with Moody’s, S&P, and Fitch during the term of the facility.
 
Our revolving credit facility requires that we maintain:
 
  •  a maximum leverage ratio of 3.75 to 1.00; and
 
  •  a minimum interest coverage ratio of 3.00 to 1.00.
 
It also contains customary covenants that could restrict our ability to: incur additional indebtedness; grant liens; make investments, loans, or guarantees; declare dividends; or repurchase company stock. We do not expect these covenants to restrict our liquidity, financial condition, or access to capital resources in the foreseeable future.


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Outstanding letters of credit, which reduced availability under the credit facility, amounted to $21.6 million at March 31, 2011. The letters of credit relate primarily to third-party insurance claims processing.
 
Other Credit Facilities
 
We have a EUR 10 million (approximately US$14.0 million) committed revolving credit facility with a European bank. This credit facility contains standard covenants similar to those contained in the $750 million credit agreement and standard events of default such as covenant default and cross-default. This facility has an indefinite maturity, and no borrowings were outstanding as of March 31, 2011 and December 31, 2010. Outstanding letters of credit which reduced availability under the European facility amounted to EUR 1.0 million (approximately US $1.4 million) at March 31, 2011.
 
We have a CAN 30 million (approximately US$30.7 million) committed revolving credit facility with a Canadian bank. This credit facility contains standard covenants similar to those contained in the $750 million credit agreement and standard events of default such as covenant default and cross-default. This facility matures in June 2011, and no borrowings were outstanding as of March 31, 2011 and December 31, 2010.
 
Other Letters of Credit
 
As of March 31, 2011, we also had letters of credit in addition to those discussed above that do not reduce availability under our credit facilities. We had $19.2 million of such additional letters of credit that relate primarily to environmental assurances, third-party insurance claims processing, performance guarantees and acquisition obligations.
 
Compliance and Availability
 
We are in compliance with all covenants or other requirements set forth in our credit facilities. However, if we fail to be in compliance with the financial or other covenants of our credit agreements, then the credit agreements could be terminated, any outstanding borrowings under the agreements could be accelerated and immediately due, and we could have difficulty obtaining immediate credit availability to repay the accelerated obligations and in obtaining credit facilities in the future. As of March 31, 2011, the aggregate availability of funds under our credit facilities is $446.7 million, after deducting outstanding letters of credit. Availability is subject to the satisfaction of various covenants and conditions to borrowing.
 
Credit Ratings
 
As of March 31, 2011, we had investment grade credit ratings from Standard & Poor’s (BBB rating), Moody’s Investor Service (Baa2 rating) and Fitch Ratings (BBB rating) on our senior unsecured debt. Should these credit ratings drop, repayment under our credit facilities and securities will not be accelerated; however, our credit costs may increase. Similarly, if our credit ratings improve, we could potentially have a decrease in our credit costs. The maturity of any of our debt securities does not accelerate in the event of a credit downgrade.
 
Debt Securities
 
Thomas & Betts had the following unsecured debt securities outstanding as of March 31, 2011:
 
                 
Issue Date   Amount   Interest Rate   Interest Payable   Maturity Date
 
November 2009
  $250.0 million   5.625%   May 15 and November 15   November 2021


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The indentures underlying the unsecured debt securities contain standard covenants such as restrictions on mergers, liens on certain property, sale-leaseback of certain property and funded debt for certain subsidiaries. The indentures also include standard events of default such as covenant default and cross-acceleration. We are in compliance with all covenants and other requirements set forth in the indentures.
 
Qualified Pension Plans
 
Contributions to our qualified pension plans during the first quarter of 2011 were not significant. We expect required contributions to our qualified pension plans in 2011 to be minimal.
 
Acquisition
 
In January 2010, the Corporation acquired JT Packard, the nation’s largest independent service provider for critical power equipment used by industrial and commercial enterprises in a broad array of markets, for approximately $21 million.
 
Other
 
We do not currently pay cash dividends. Future decisions concerning the payment of cash dividends on the common stock will depend upon our results of operations, financial condition, strategic investment opportunities, continued compliance with credit facilities and other factors that the Board of Directors may consider relevant.
 
As of March 31, 2011, we have approximately $434 million in cash and cash equivalents and approximately $447 million of aggregate availability under our credit facilities. We renewed our effective universal shelf registration statement with the Securities and Exchange Commission on December 3, 2008, utilizing the well-known seasoned issuer (WKSI) process. The registration permits us to issue common stock, preferred stock and debt securities. The registration is effective for a period of three years from the date of filing. We continue to have cash requirements to, among other things, support working capital and capital expenditure needs, service debt and fund our retirement plans as required. We generally intend to use available cash and internally generated funds to meet these cash requirements and may borrow under existing credit facilities or access the capital markets as needed for liquidity. We believe that we have sufficient liquidity to satisfy both short-term and long-term requirements.
 
Off-Balance Sheet Arrangements
 
As of March 31, 2011, we did not have any off-balance sheet arrangements.
 
Refer to Note 15 in the Notes to Consolidated Financial Statements for information regarding our guarantee and indemnification arrangements.


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Item 3.   Quantitative and Qualitative Disclosures About Market Risk
 
Market Risk and Financial Instruments
 
Thomas & Betts is exposed to market risk from changes in interest rates, foreign exchange rates and raw material prices, among others. At times, we may enter into various derivative instruments to manage certain of these risks. We do not enter into derivative instruments for speculative or trading purposes.
 
For the period ended March 31, 2011, the Corporation has not experienced any material changes since December 31, 2010 in market risk that affect the quantitative and qualitative disclosures presented in our 2010 Annual Report on Form 10-K.
 
Item 4.   Controls and Procedures
 
(a)   Evaluation of Disclosure Controls and Procedures
 
We have established disclosure controls and procedures to ensure that material information relating to the Corporation is made known to the Chief Executive Officer and Chief Financial Officer who certify the Corporation’s financial reports.
 
Our Chief Executive Officer and Chief Financial Officer have evaluated the Corporation’s disclosure controls and procedures as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.
 
(b)   Changes in Internal Control over Financial Reporting
 
There have been no significant changes in internal control over financial reporting that occurred during the quarter covered by this report that have materially affected or are reasonably likely to materially affect the Corporation’s internal control over financial reporting.


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PART II. OTHER INFORMATION
 
Item 1.   Legal Proceedings
 
See Note 15, “Contingencies,” in the Notes to Consolidated Financial Statements, which is incorporated herein by reference. See also Item 3. “Legal Proceedings,” in the Corporation’s 2010 Annual Report on Form 10-K, which is incorporated herein by reference.
 
Item 1A.   Risk Factors
 
There have been no material changes from the risk factors as previously set forth in our 2010 Annual Report on Form 10-K under Item 1A. “Risk Factors,” which is incorporated herein by reference.
 
Item 2.   Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
The following table reflects activity related to equity securities purchased by the Corporation during the quarter ended March 31, 2011:
 
Issuer Purchases of Equity Securities
 
                                 
            Total Number
  Maximum
            of Common
  Number
            Shares
  of Common
    Total
  Average
  Purchased
  Shares that
    Number of
  Price Paid
  as Part of
  May Yet Be
    Common
  per
  Publicly
  Purchased
    Shares
  Common
  Announced
  Under
Period   Purchased   Share   Plans   the Plans
 
September 2010 Plan (3,000,000 common shares authorized)
                               
Total for the quarter ended March 31, 2011
        $             2,500,000  
 
Item 6.   Exhibits
 
The Exhibit Index that follows the signature page of this Report is incorporated herein by reference.


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SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Corporation has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Thomas & Betts Corporation
(Registrant)
 
  By: 
/s/  William E. Weaver, Jr.
William E. Weaver, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
 
Date: April 29, 2011


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EXHIBIT INDEX
 
 
         
Exhibit No.   Description of Exhibit
 
  12     Statement re Computation of Ratio of Earnings to Fixed Charges
  31 .1   Certification of Principal Executive Officer Under Securities Exchange Act Rules 13a-14(a) or 15d-14(a)
  31 .2   Certification of Principal Financial Officer Under Securities Exchange Act Rules 13a-14(a) or 15d-14(a)
  32 .1   Certification of Principal Executive Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and furnished solely pursuant to 18 U.S.C. § 1350 and not filed as part of the Report or as a separate disclosure document
  32 .2   Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and furnished solely pursuant to 18 U.S.C. §1350 and not filed as part of the Report or as a separate disclosure document
  101*     Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Operations for the Quarter Ended March 31, 2011 and 2010, (ii) the Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010, (iii) the Consolidated Statements of Cash Flows for the Quarter Ended March 31, 2011 and 2010 and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text
 
* Pursuant to Rule 406T of Regulation S-T, the interactive data included in Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections


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