Attached files

file filename
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR34.htm
EX-12 - STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - THOMAS & BETTS CORPd84771exv12.htm
EX-32.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14(B) OR RULE 15D-14(B) - THOMAS & BETTS CORPd84771exv32w2.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER UNDER SECURITIES EXCHANGE ACT RULES 13A-14(A) OR 15D-14(A) - THOMAS & BETTS CORPd84771exv31w1.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER UNDER SECURITIES EXCHANGE ACT RULES 13A-14(A) OR 15D-14(A) - THOMAS & BETTS CORPd84771exv31w2.htm
EX-32.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(B) OR RULE 15D-14(B) - THOMAS & BETTS CORPd84771exv32w1.htm
EXCEL - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPFinancial_Report.xls
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR4.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR8.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR5.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR1.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR2.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR9.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR7.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR3.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR14.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR17.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR13.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR49.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR12.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR32.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR36.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR10.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR20.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR25.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR44.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR27.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR46.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR30.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR15.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR33.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR26.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR47.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR48.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR31.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR21.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR22.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR38.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR16.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR40.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR39.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR43.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR29.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR19.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR45.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR35.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR11.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR42.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR24.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR41.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR23.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR28.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR37.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR6.htm
XML - IDEA: XBRL DOCUMENT - THOMAS & BETTS CORPR18.htm
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 September 30, 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
  22-1326940
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
8155 T&B Boulevard
   
Memphis, Tennessee
(Address of principal
executive offices)
  38125
(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 October 24, 2011
 
Common Stock, $.10 par value
  52,049,867
 


 

 
Thomas & Betts Corporation and Subsidiaries
 
TABLE OF CONTENTS
 
             
        Page
 
       
      3  
        3  
        4  
        5  
        6  
      19  
      33  
      33  
 
PART II. OTHER INFORMATION
      34  
      34  
      34  
      34  
    35  
    36  
 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
 EX-101 DEFINITION LINKBASE DOCUMENT


1


Table of Contents

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.


2


Table of Contents

 
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
    Nine Months Ended
 
    September 30,     September 30,  
    2011     2010     2011     2010  
 
Net sales
  $ 604,426     $ 518,233     $ 1,693,903     $ 1,471,842  
Cost of sales
    412,927       352,096       1,168,878       1,013,310  
                                 
Gross profit
    191,499       166,137       525,025       458,532  
Selling, general and administrative
    110,389       97,470       313,656       289,880  
                                 
Earnings from operations
    81,110       68,667       211,369       168,652  
Interest expense, net
    (8,476 )     (9,042 )     (24,200 )     (26,315 )
Other (expense) income, net
    1,387       (975 )     (315 )     90  
                                 
Earnings from continuing operations before income taxes
    74,021       58,650       186,854       142,427  
Income tax provision
    19,688       16,056       53,538       41,324  
                                 
Net earnings from continuing operations
    54,333       42,594       133,316       101,103  
Earnings from discontinued operations, net
          1,510             4,554  
                                 
Net earnings
  $ 54,333     $ 44,104     $ 133,316     $ 105,657  
                                 
Basic earnings per share:
                               
Continuing operations
  $ 1.05     $ 0.83     $ 2.58     $ 1.95  
Discontinued operations
          0.02             0.09  
                                 
Net earnings
  $ 1.05     $ 0.85     $ 2.58     $ 2.04  
                                 
Diluted earnings per share:
                               
Continuing operations
  $ 1.03     $ 0.81     $ 2.51     $ 1.91  
Discontinued operations
          0.03             0.09  
                                 
Net earnings
  $ 1.03     $ 0.84     $ 2.51     $ 2.00  
                                 
Average shares outstanding:
                               
Basic
    51,900       51,602       51,772       51,863  
Diluted
    52,990       52,641       53,108       52,912  
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.


3


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
                 
    September 30,
    December 31,
 
    2011     2010  
 
ASSETS
               
Current Assets
               
Cash and cash equivalents
  $ 465,449     $ 455,198  
Receivables, net
    303,962       230,203  
Inventories
    276,158       220,250  
Deferred income taxes
    31,669       32,745  
Other current assets
    23,475       18,699  
                 
Total Current Assets
    1,100,713       957,095  
                 
Property, plant and equipment, net
    298,149       305,796  
Goodwill
    975,536       967,889  
Other intangible assets, net
    335,466       340,544  
Other assets
    49,252       61,069  
                 
Total Assets
  $ 2,759,116     $ 2,632,393  
                 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current Liabilities
               
Current maturities of long-term debt
  $ 335     $ 322  
Accounts payable
    181,411       190,839  
Accrued liabilities
    137,236       126,241  
Income taxes payable
    14,954       26,263  
                 
Total Current Liabilities
    333,936       343,665  
                 
Long-Term Liabilities
               
Long-term debt, net of current maturities
    574,489       574,090  
Long-term benefit plan liabilities
    134,930       141,998  
Deferred income taxes
    43,165       41,405  
Other long-term liabilities
    51,950       64,453  
Contingencies (Note 15)
               
Shareholders’ Equity
               
Common stock
    5,140       5,095  
Additional paid-in capital
    48,378       34,384  
Retained earnings
    1,654,161       1,520,845  
Accumulated other comprehensive income (loss)
    (87,033 )     (93,542 )
                 
Total Shareholders’ Equity
    1,620,646       1,466,782  
                 
Total Liabilities and Shareholders’ Equity
  $ 2,759,116     $ 2,632,393  
                 
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.


4


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
                 
    Nine Months Ended
 
    September 30,  
    2011     2010  
 
Cash Flows from Operating Activities:
               
Net earnings
  $  133,316     $ 105,657  
Adjustments:
               
Depreciation and amortization
    63,386       60,031  
Share-based compensation expense
    9,227       8,730  
Deferred income taxes
    6,693       (6,491 )
Incremental tax benefits from share-based payment arrangements
    (2,460 )     (942 )
Changes in operating assets and liabilities, net:
               
Receivables
    (65,693 )     (56,707 )
Inventories
    (50,608 )     (26,463 )
Accounts payable
    (14,286 )     12,258  
Accrued liabilities
    8,955       18,724  
Income taxes payable
    (11,624 )     21,885  
Other
    (5,522 )     8,238  
                 
Net cash provided by (used in) operating activities
    71,384       144,920  
                 
Cash Flows from Investing Activities:
               
Purchases of businesses, net of cash acquired
    (29,184 )     (98,910 )
Purchases of property, plant and equipment
    (30,784 )     (22,253 )
Other
    2,067       37  
                 
Net cash provided by (used in) investing activities
    (57,901 )     (121,126 )
                 
Cash Flows from Financing Activities:
               
Stock options exercised
    23,909       5,162  
Repurchase of common shares
    (21,155 )     (42,853 )
Debt issuance costs
    (2,231 )      
Repayment of debt and other borrowings
    (304 )     (36,092 )
Incremental tax benefits from share-based payment arrangements
    2,460       942  
                 
Net cash provided by (used in) financing activities
    2,679       (72,841 )
                 
Effect of exchange-rate changes on cash and cash equivalents
    (5,911 )     5,655  
                 
Net increase (decrease) in cash and cash equivalents
    10,251       (43,392 )
Cash and cash equivalents, beginning of period
    455,198       478,613  
                 
Cash and cash equivalents, end of period
  $ 465,449     $ 435,221  
                 
Cash payments for interest
  $ 21,482     $ 23,769  
Cash payments for income taxes
  $ 63,768     $ 27,031  
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.


5


Table of Contents

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 September 30, 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
    Nine Months Ended
 
    September 30,     September 30,  
    2011     2010     2011     2010  
 
(In thousands, except per share data)
                               
Net earnings from continuing operations
  $ 54,333     $ 42,594     $ 133,316     $ 101,103  
Earnings from discontinued operations, net
          1,510             4,554  
                                 
Net earnings
  $ 54,333     $ 44,104     $ 133,316     $ 105,657  
                                 
Basic shares:
                               
Average shares outstanding
    51,900       51,602       51,772       51,863  
                                 
Basic earnings per share:
                               
Continuing operations
  $ 1.05     $ 0.83     $ 2.58     $ 1.95  
Discontinued operations
          0.02             0.09  
                                 
Net earnings
  $ 1.05     $ 0.85     $ 2.58     $ 2.04  
                                 
Diluted shares:
                               
Average shares outstanding
    51,900       51,602       51,772       51,863  
Additional shares on the potential dilution from stock options, nonvested restricted stock and performance units
    1,090       1,039       1,336       1,049  
                                 
      52,990       52,641       53,108       52,912  
                                 
Diluted earnings per share:
                               
Continuing operations
  $ 1.03     $ 0.81     $ 2.51     $ 1.91  
Discontinued operations
          0.03             0.09  
                                 
Net earnings
  $ 1.03     $ 0.84     $ 2.51     $ 2.00  
                                 
 
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 0.7 million


6


Table of Contents

 
shares of common stock for the third quarter of 2011 and 1.8 million shares of common stock for the third quarter of 2010. Out-of-the money stock options were associated with 0.3 million shares of common stock for the first nine months of 2011 and 1.8 million shares of common stock for the first nine months of 2010.
 
3.   Acquisitions & Divestitures
 
2011 Acquisition
 
In July 2011, the Corporation acquired the AmbiRad Group (“AmbiRad”), a leading manufacturer of specialized commercial and industrial heating and ventilation products, which are sold throughout Europe and exported to other global markets, for approximately $30 million. The purchase price allocation resulted in goodwill of approximately $7 million and other intangible assets of approximately $19 million, all of which was assigned to the Corporation’s HVAC segment. The results of these operations have been included in the consolidated financial statements of the Corporation since the acquisition date.
 
2010 Acquisitions
 
In April 2010, the Corporation acquired PMA AG (“PMA”), a leading European manufacturer of technologically advanced cable protection systems, for approximately $114 million. The purchase price consisted of cash of approximately $78 million and debt assumed of approximately $36 million. The purchase price allocation resulted in goodwill of approximately $33 million and other intangible assets of approximately $60 million, all of which was assigned to the Company’s Electrical segment. The results of these operations have been included in the consolidated financial statements of the Corporation since the acquisition date.
 
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 third quarter of 2010 reflected net sales of approximately $15 million, earnings before income taxes of $2.3 million and net earnings of $1.5 million from the divested communications product business. Discontinued operations in the first nine months of 2010 reflected net sales of approximately $45 million, earnings before income taxes of $6.9 million and net earnings of $4.6 million from the divested communications product business.


7


Table of Contents

 
4.   Inventories
 
The Corporation’s inventories at September 30, 2011 and December 31, 2010 were:
 
                 
    September 30,
    December 31,
 
    2011     2010  
 
(In thousands)
               
Finished goods
  $ 121,335     $ 106,998  
Work-in-process
    33,310       23,636  
Raw materials
    121,513       89,616  
                 
Total inventories
  $ 276,158     $ 220,250  
                 
 
5.   Property, Plant and Equipment
 
The Corporation’s property, plant and equipment at September 30, 2011 and December 31, 2010 were:
 
                 
    September 30,
    December 31,
 
    2011     2010  
 
(In thousands)
               
Land
  $ 33,068     $ 32,775  
Building
    204,809       201,866  
Machinery and equipment
    677,112       663,642  
Construction-in-progress
    14,953       12,412  
                 
Gross property, plant and equipment
    929,942       910,695  
Less: Accumulated depreciation
    631,793       604,899  
                 
Net property, plant and equipment
  $ 298,149     $ 305,796  
                 
 
6.   Goodwill and Other Intangible Assets
 
The following table reflects activity for goodwill by segment during the third quarter of 2011:
 
                                 
    Quarter Ended September 30, 2011  
                Other —
       
    Balance at
          Primarily
    Balance at
 
    Beginning of
          Currency
    End of
 
    Period     Additions     Translation     Period  
 
(In thousands)
                               
Electrical
  $ 911,263     $     $ (8,376 )   $ 902,887  
Steel Structures
    64,759                   64,759  
HVAC
    702       7,434       (246 )     7,890  
                                 
    $ 976,724     $ 7,434     $ ( 8,622 )   $ 975,536  
                                 


8


Table of Contents

 
 
The following table reflects activity for goodwill by segment during the first nine months of 2011:
 
                                 
    Nine Months Ended September 30, 2011  
                Other —
       
    Balance at
          Primarily
    Balance at
 
    Beginning of
          Currency
    End of
 
    Period     Additions     Translation     Period  
 
(In thousands)
                               
Electrical
  $ 902,478     $     $ 409     $ 902,887  
Steel Structures
    64,759                   64,759  
HVAC
    652       7,434       (196 )     7,890  
                                 
    $ 967,889     $ 7,434     $ 213     $ 975,536  
                                 
 
The following table reflects activity for other intangible assets during the third quarter of 2011:
 
                                         
    Quarter Ended September 30, 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
  $ 333,834     $ 12,208     $     $ (4,164 )   $ 341,878  
Accumulated amortization
    (108,727 )           (9,131 )     694       (117,164 )
                                         
      225,107       12,208       (9,131 )     (3,470 )     224,714  
Other intangible assets not subject to amortization
    105,400       6,603             (1,251 )     110,752  
                                         
Total
  $ 330,507     $ 18,811     $ (9,131 )   $ (4,721 )   $ 335,466  
                                         
 
The following table reflects activity for other intangible assets during the first nine months of 2011:
 
                                         
    Nine Months Ended September 30, 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     $ 12,208     $     $ 1,493     $ 341,878  
Accumulated amortization
    (91,370 )           (25,983 )     189       (117,164 )
                                         
      236,807       12,208       (25,983 )     1,682       224,714  
Other intangible assets not subject to amortization
    103,737       6,603             412       110,752  
                                         
Total
  $ 340,544     $ 18,811     $ (25,983 )   $ 2,094     $ 335,466  
                                         


9


Table of Contents

 
7.   Income Taxes
 
The Corporation’s income tax provision for the third quarter of 2011 was $19.7 million, or an effective rate of 26.6% of pre-tax income, compared to an income tax provision in the third quarter of 2010 of $16.1 million, or an effective rate of 27.4% of pre-tax income. The Corporation’s income tax provision for the nine months ended September 30, 2011 was $53.5 million, or an effective rate of 28.7% of pre-tax income, compared to an income tax provision for the nine months ended September 30, 2010 of $41.3 million, or an effective rate of 29.0% of pre-tax income. The decrease in the effective tax rate for the third quarter and first nine months of 2011 primarily reflects the impact of shifts in the estimated global distribution of our current year annual pre-tax earnings. The effective tax rate for the third quarter and first nine months of 2010 reflects the favorable impact of the release of a $1.5 million tax reserve associated with an outstanding tax issue. The effective tax rate for each period also 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 assessment of approximately $8 million, including interest. Substantially all of this assessment was paid during the second quarter of 2011. The Canadian tax assessment is offset by an expected recovery of U.S. federal and state income taxes of approximately $7 million, resulting from the Corporation’s petition for tax relief under the competent authority administrative process.
 
The Corporation had deferred tax liabilities in excess of its deferred tax assets totaling $5.6 million as of September 30, 2011 and net deferred tax assets totaling $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 more-likely-than-not that future taxable income, based on tax laws in effect as of September 30, 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
    Nine Months Ended
 
    September 30,     September 30,  
    2011     2010     2011     2010  
 
(In thousands)
                               
Net earnings
  $ 54,333     $ 44,104     $ 133,316     $ 105,657  
Net unrealized gains (losses) on cash flow hedge, net of tax
    2,330       1,100       6,302       1,829  
Foreign currency translation adjustments
    (31,836 )     34,027       (3,731 )     4,433  
Amortization of net prior service costs and net actuarial losses, net of tax
    1,268       2,104       3,938       6,766  
                                 
Comprehensive income
  $ 26,095     $ 81,335     $ 139,825     $ 118,685  
                                 
 
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 11 below. The carrying amounts of the Corporation’s financial instruments generally approximated their fair values at September 30, 2011 and December 31, 2010, except that, based on the borrowing rates available to


10


Table of Contents

 
the Corporation under current market conditions, the fair value of long-term debt (including current maturities) was approximately $622 million at September 30, 2011 and $588 million at December 31, 2010.
 
10.   Debt
 
The Corporation’s long-term debt at September 30, 2011 and December 31, 2010 was:
 
                 
    September 30,
    December 31,
 
    2011     2010  
 
(In thousands)
               
Senior credit facility due August 2016(a)
  $     $  
Senior credit facility due October 2012(a)
    325,000       325,000  
Unsecured 5.625% Senior Notes due 2021(b)
    248,505       248,301  
Other, including capital leases
    1,319       1,111  
                 
Long-term debt (including current maturities)
    574,824       574,412  
Less current maturities
    335       322  
                 
Long-term debt, net of current maturities
  $ 574,489     $ 574,090  
                 
 
(a) Interest is paid monthly.
 
(b) Interest is paid semi-annually.
 
As of September 30, 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.
 
During the third quarter of 2011, the Corporation entered into a new $500 million unsecured, senior credit facility (“new revolving credit facility”) with a five year term expiring in August 2016. At September 30, 2011, no borrowings were outstanding under this facility. Under the new revolving credit facility agreement, the Corporation will select an interest rate at the time of its initial draw reflecting LIBOR plus a margin based on the Corporation’s credit rating or the highest rate based on several other benchmark rates, including: (i) JPMorgan Chase Bank’s New York Prime rate, (ii) the federal funds effective rate, or (iii) an adjusted LIBOR rate.
 
All borrowings and other extensions of credit under the Corporation’s new 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 facility may be used for general operating needs and for other general corporate purposes in compliance with the terms of the facility agreement. The Corporation pays an annual commitment fee to maintain the facility of 20 basis points.
 
Fees to access the facility and letters of credit 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 new 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.


11


Table of Contents

 
 
The new revolving credit facility 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 new revolving credit facility, amounted to $4.7 million at September 30, 2011. The letters of credit relate primarily to environmental assurances.
 
Concurrent to entering into the new revolving credit facility, the Corporation amended its existing unsecured, senior credit facility (“existing revolving credit facility”) to reduce the total availability under this facility from $750 million to the $325 million of debt outstanding plus open letters of credit outstanding under the facility at the time of the amendment. Letters of credit under this facility at September 30, 2011 amounted to $17.6 million. The letters of credit relate primarily to third-party insurance claims processing. As borrowings and letters of credit under the facility are reduced, the amount of the facility will decrease.
 
The amendment to the existing revolving credit facility conformed all covenants and obligations to those found in the new revolving credit facility, except those related to interest on borrowings and fees, which remain unchanged. At September 30, 2011 and December 31, 2010, $325 million was outstanding under this facility. The existing revolving credit facility has a five-year term expiring October 2012.
 
The Corporation has a EUR 10 million (approximately US$13.6 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 and events of default such as covenant default and cross-default. This facility has an indefinite maturity, and no borrowings were outstanding as of September 30, 2011 and December 31, 2010. Outstanding letters of credit which reduced availability under the European facility amounted to EUR 0.9 million (approximately US$1.2 million) at September 30, 2011.
 
The Corporation has a CAN 30 million (approximately US$29.4 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 and events of default such as covenant default and cross-default. This facility matures in December 2011, and no borrowings were outstanding as of September 30, 2011 and December 31, 2010.
 
As of September 30, 2011, the Corporation’s aggregate availability of funds under its credit facilities is approximately $537 million, after deducting outstanding letters of credit.
 
As of September 30, 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 approximately $19 million of such additional letters of credit that relate primarily to environmental assurances, third-party insurance claims processing, performance bonds, performance guarantees and acquisition obligations.
 
11.   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.


12


Table of Contents

 
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 in December 2010, and reduces to $200 million in December 2011 and $0 in October 2012. The interest rate swap hedges the Corporation’s exposure to changes in interest rates on $325 million of borrowings under its existing 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 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 $11.0 million as of September 30, 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 $6.8 million, net of tax of $4.2 million, as of September 30, 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.


13


Table of Contents

 
The following is a reconciliation associated with the interest rate swap of the fair value activity using Level 3 inputs during the third quarter and first nine months of 2011 and 2010:
 
                                 
    Quarter Ended     Nine Months Ended  
    September 30,
    September 30,
    September 30,
    September 30,
 
    2011     2010     2011     2010  
 
(In millions)
                               
Asset (liability) at beginning of period
  $ (14.8 )   $ (27.5 )   $ (21.3 )   $ (28.7 )
Total realized/unrealized gains or losses:
                               
Included in earnings
    (3.8 )     (4.6 )     (11.4 )     (13.6 )
Increase (decrease) in fair value included in comprehensive income
    3.7       1.9       10.2       3.0  
Settlements
    3.9       4.5       11.5       13.6  
                                 
Asset (liability) at end of period
  $ (11.0 )   $ (25.7 )   $ (11.0 )   $ (25.7 )
                                 
 
The ineffective portion of the swap reflected in interest expense, net during the third quarter and the first nine months of 2011 and 2010 was immaterial.
 
Forward Foreign Exchange Contracts
 
The Corporation had no outstanding forward sale or purchase contracts as of September 30, 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.
 
Commodities Futures Contracts
 
The Corporation had no outstanding commodities futures contracts as of September 30, 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.
 
12.   Share-Based Payment Arrangements
 
Share-based compensation expense, net of tax, of $1.5 million and $1.4 million was charged against income during the third quarter of 2011 and 2010, respectively. Share-based compensation expense, net of tax, of $5.7 million and $5.4 million was charged against income during the first nine months of 2011 and 2010, respectively.
 
During the third quarter of 2011, the Corporation had 18,179 stock options exercised at a weighted average exercise price of $26.14 per share and had 4,269 stock options forfeited or expired. During the first nine months of 2011, the Corporation had 672,257 stock options exercised at a weighted average exercise price of $35.55 per share and had 18,750 stock options forfeited or


14


Table of Contents

 
expired. During the first nine months of 2011, the Corporation granted 4,367 nonvested shares (restricted stock) with a weighted average grant date fair value of $52.66 per share.
 
Compensation expense, net of tax, of $0.3 million was charged to selling, general and administrative expense as of the grant date for stock awards under the Corporation’s Non-Employee Directors Equity Compensation Plan during the first nine months of both 2011 and 2010. The Corporation granted non-employee members of the Board of Directors a total of 8,082 shares of common stock with a weighted average grant date fair value of $55.66 during the first nine months of 2011.
 
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  
    September 30,
    September 30,
    September 30,
    September 30,
 
    2011     2010     2011     2010  
 
(In thousands)
                               
Service cost
  $ 1,006     $ 2,768     $ 1     $ 2  
Interest cost
    7,313       7,315       197       229  
Expected return on plan assets
    (8,541 )     (8,298 )            
Plan net loss (gain)
    1,599       3,094       27       (31 )
Prior service cost (gain)
    227       283       (63 )     (63 )
Transition obligation (asset)
    (5 )     (4 )     192       192  
Net curtailment/settlement loss (gain)
    (165 )                  
                                 
Net periodic benefit cost
  $ 1,434     $ 5,158     $ 354     $ 329  
                                 
 
                                 
    Nine Months Ended  
          Other
 
          Postretirement
 
    Pension Benefits     Benefits  
    September 30,
    September 30,
    September 30,
    September 30,
 
    2011     2010     2011     2010  
 
(In thousands)
                               
Service cost
  $ 3,072     $ 8,045     $ 4     $ 4  
Interest cost
    22,015       21,745       593       688  
Expected return on plan assets
    (25,692 )     (24,692 )            
Plan net loss (gain)
    4,810       9,248       81       (93 )
Prior service cost (gain)
    685       847       (189 )     (189 )
Transition obligation (asset)
    (15 )     (12 )     575       575  
Net curtailment/settlement loss (gain)
    830       1,213              
                                 
Net periodic benefit cost
  $ 5,705     $ 16,394     $ 1,064     $ 985  
                                 


15


Table of Contents

 
 
Contributions to our qualified pension plans during the nine months ended September 30, 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.
 
                                 
    Quarter Ended
    Nine Months Ended
 
    September 30,     September 30,  
    2011     2010     2011     2010  
 
(In thousands)
                               
Net Sales
                               
Electrical
  $ 500,693     $ 439,172     $ 1,427,992     $ 1,235,759  
Steel Structures
    66,893       57,232       176,604       166,753  
HVAC
    36,840       21,829       89,307       69,330  
                                 
Total
  $ 604,426     $ 518,233     $ 1,693,903     $ 1,471,842  
                                 
Segment Earnings
                               
Electrical
  $ 105,165     $ 89,588     $ 285,281     $ 237,786  
Steel Structures
    10,497       11,092       19,078       29,027  
HVAC
    3,024       2,868       10,047       9,466  
                                 
Segment earnings
    118,686       103,548       314,406       276,279  
Corporate expense
    (13,709 )     (12,615 )     (30,424 )     (40,205 )
Depreciation and amortization expense
    (21,426 )     (20,054 )     (63,386 )     (58,775 )
Share-based compensation expense
    (2,441 )     (2,212 )     (9,227 )     (8,647 )
Interest expense, net
    (8,476 )     (9,042 )     (24,200 )     (26,315 )
Other (expense) income, net
    1,387       (975 )     (315 )     90  
                                 
Earnings before income taxes
  $ 74,021     $ 58,650     $ 186,854     $ 142,427  
                                 
 
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


16


Table of Contents

 
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.
 
The following table provides the changes in the Corporation’s accruals for estimated product warranties:
 
                                 
    Quarter Ended
    Nine Months Ended
 
    September 30,     September 30,  
    2011     2010     2011     2010  
 
(In thousands)
                               
Balance at beginning of period
  $ 3,107     $ 2,798     $ 2,574     $ 3,064  
Acquired liabilities for warranties
    609             609        
Liabilities accrued for warranties issued during the period
    853       404       2,444       1,141  
Warranty claims paid during the period
    (1,595 )     (453 )     (2,577 )     (1,471 )
Changes in liability for pre-existing warranties during the period, including expirations
    14       10       (62 )     25  
                                 
Balance at end of period
  $ 2,988     $ 2,759     $ 2,988     $ 2,759  
                                 
 
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.
 
16.   Share Repurchase Plan
 
In September 2010, the Corporation’s Board of Directors approved a share repurchase plan that authorized the Corporation to buy up to 3,000,000 of its common shares. To-date through September 30, 2011, the Corporation repurchased, with available cash resources, 1,000,000 common shares through open-market transactions under this plan. During the third quarter and first nine months of 2011, the Corporation repurchased, with available cash resources, 500,000 common shares through open-market transactions under this plan. The timing of future repurchases, if any, will depend upon a variety of factors, including market conditions. This authorization expires in December 2012.


17


Table of Contents

 
17.   Recently Issued Accounting Standards
 
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”. This standard eliminates the option to report other comprehensive income and its components in the statement of changes in equity and instead requires that such information be presented in either (1) a single continuous statement of comprehensive income, or (2) in two separate but consecutive statements. This new guidance is effective beginning in 2012 and must be applied retrospectively. This standard concerns financial statement presentation only and will not have a material impact on the consolidated financial position or results of operations.


18


Table of Contents

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Executive Overview
 
Thomas & Betts Corporation is a global leader in the design, manufacture, and marketing of essential components used to manage the connection, distribution, transmission and reliability of electrical power 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


19


Table of Contents

  intangibles, are recorded at fair value. The purchase price allocation requires subjective 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 September 30, 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


20


Table of Contents

  primary asset in the associated product groups is less than the carrying amount of the assets, 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 September 30, 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.


21


Table of Contents

 
Summary of Consolidated Results
 
                                 
    Quarter Ended September 30,  
    2011     2010  
          % of Net
          % of Net
 
    In Thousands     Sales     In Thousands     Sales  
 
Net sales
  $ 604,426       100.0     $ 518,233       100.0  
Cost of sales
    412,927       68.3       352,096       67.9  
                                 
Gross profit
    191,499       31.7       166,137       32.1  
Selling, general and administrative
    110,389       18.3       97,470       18.8  
                                 
Earnings from operations
    81,110       13.4       68,667       13.3  
Interest expense, net
    (8,476 )     (1.4 )     (9,042 )     (1.8 )
Other (expense) income, net
    1,387       0.2       (975 )     (0.2 )
                                 
Earnings from continuing operations before income taxes
    74,021       12.2       58,650       11.3  
Income tax provision
    19,688       3.2       16,056       3.1  
                                 
Net earnings from continuing operations
    54,333       9.0       42,594       8.2  
Earnings from discontinued operations, net
                1,510       0.3  
                                 
Net earnings
  $ 54,333       9.0     $ 44,104       8.5  
                                 
Basic earnings per share:
                               
Continuing operations
  $ 1.05             $ 0.83          
Discontinued operations
                  0.02          
                                 
Net earnings
  $ 1.05             $ 0.85          
                                 
Diluted earnings per share:
                               
Continuing operations
  $ 1.03             $ 0.81          
Discontinued operations
                  0.03          
                                 
Net earnings
  $ 1.03             $ 0.84          
                                 
 
                                 
    Nine Months Ended September 30,  
    2011     2010  
          % of Net
          % of Net
 
    In Thousands     Sales     In Thousands     Sales  
 
Net sales
  $ 1,693,903       100.0     $ 1,471,842       100.0  
Cost of sales
    1,168,878       69.0       1,013,310       68.8  
                                 
Gross profit
    525,025       31.0       458,532       31.2  
Selling, general and administrative
    313,656       18.5       289,880       19.7  
                                 
Earnings from operations
    211,369       12.5       168,652       11.5  
Interest expense, net
    (24,200 )     (1.5 )     (26,315 )     (1.8 )
Other (expense) income, net
    (315 )           90        
                                 
Earnings from continuing operations before income taxes
    186,854       11.0       142,427       9.7  
Income tax provision
    53,538       3.1       41,324       2.8  
                                 
Net earnings from continuing operations
    133,316       7.9       101,103       6.9  
Earnings from discontinued operations, net
                4,554       0.3  
                                 
Net earnings
  $ 133,316       7.9     $ 105,657       7.2  
                                 
Basic earnings per share:
                               
Continuing operations
  $ 2.58             $ 1.95          
Discontinued operations
                  0.09          
                                 
Net earnings
  $ 2.58             $ 2.04          
                                 
Diluted earnings per share:
                               
Continuing operations
  $ 2.51             $ 1.91          
Discontinued operations
                  0.09          
                                 
Net earnings
  $ 2.51             $ 2.00          
                                 


22


Table of Contents

2011 Compared with 2010
 
Overview
 
Net sales in the third quarter and the first nine months of 2011 increased from the prior-year periods primarily reflecting higher organic sales volumes in our Electrical segment, the positive impact of the 2011 acquisition of AmbiRad (July 2011), the 2010 acquisitions of JT Packard (January 2010), PMA AG (“PMA”) (April 2010) and Cable Management Group, Ltd. (“CMG”) (October 2010), the positive impact of current year price increases and a weaker U.S. dollar.
 
Earnings from operations, both in dollars and as a percentage of sales, increased from the respective prior-year periods. These improvements reflect the impact of increased organic sales volumes, a favorable shift in product mix in our Electrical segment, improved manufacturing leverage from increased production volumes, especially in our Electrical segment, and the impact of acquisitions, which were partially offset by lower segment earnings in our Steel Structures segment. The first nine months of 2011 included a benefit from legal settlements, in addition to charges related to facility consolidations. The first nine months of 2010 included a charge for environmental remediation and facility consolidation charges.
 
Net earnings in the third quarter of 2011 were $54.3 million ($1.03 per diluted share) compared to net earnings of $44.1 million ($0.84 per diluted share) in the third quarter of 2010. The third quarter of 2010 included the favorable impact of the release of a $1.5 million ($0.03 per diluted share) tax reserve.
 
Net earnings in the first nine months of 2011 were $133.3 million ($2.51 per diluted share) compared to net earnings of $105.7 million ($2.00 per diluted share) in the prior-year period. Net earnings in the first nine months of 2011 included net after-tax facility consolidation charges in the first and second quarter of $2.3 million ($0.04 per diluted share) and $2.0 million ($0.04 per diluted share), respectively, and a net after-tax benefit from legal settlements in the second quarter of $3.0 million ($0.06 per diluted share). Net earnings in the first nine months of 2010 included net after-tax facility consolidation charges in the first quarter of $2.1 million ($0.04 per diluted share) and a net after-tax environmental remediation charge in the second quarter of $3.3 million ($0.06 per diluted share) in addition to the third quarter release of a tax reserve.
 
Net earnings in the third quarter and first nine months of 2010 also reflect $1.5 million ($0.03 per diluted share) and $4.6 million ($0.09 per diluted share) of earnings from discontinued operations, respectively.
 
Net Sales and Gross Profit
 
Net sales in the third quarter of 2011 were $604.4 million, up 16.6%, from the prior-year period. For the first nine months of 2011, net sales were $1.7 billion, up 15.1% from the prior-year period. Higher organic sales volumes in our Electrical segment positively impacted year-over-year sales in both 2011 periods. The third quarter and first nine months sales increase from the prior-year periods attributable to the 2011 and 2010 acquisitions was approximately $23 million and $66 million, respectively. A weaker U.S. dollar positively impacted sales by approximately $18 million and $41 million in the third quarter and first nine months of 2011, respectively, when compared to the prior-year periods. Price had a positive impact on year-over-year consolidated sales for the third quarter and first nine months of 2011 primarily in our Electrical and Steel Structures segments.
 
Gross profit in the third quarter of 2011 was $191.5 million, or 31.7% of net sales, compared to $166.1 million or 32.1% of net sales, in the third quarter of 2010. Gross profit in the first nine


23


Table of Contents

months of 2011 was $525.0 million, or 31.0% of net sales, compared to $458.5 million, or 31.2% of net sales, in the first nine months of 2010. The year-over-year decreases in gross profit as a percentage of sales for both periods reflects increased facility consolidation charges and lower earnings in our Steel Structures segment due to project mix and a more competitive pricing environment. Gross profit as a percentage of sales in the third quarter of 2011 also reflects the impact from acquisition accounting adjustments related to the AmbiRad acquisition. Gross profit in both 2011 periods benefited from the positive impact from acquisitions, actions taken to manage costs and improved manufacturing leverage from increased production volumes. Gross profit in the first nine months of 2011 and 2010 included pre-tax charges for facility consolidations of $5.1 million (first and second quarter) and $3.2 million (first quarter), respectively.
 
Selling, General and Administrative
 
Selling, general and administrative (“SG&A”) expense in the third quarter of 2011 was $110.4 million, or 18.3% of net sales, compared to $97.5 million, or 18.8% of net sales, in the prior-year period. SG&A expense as a percentage of sales in the third quarter of 2011 reflects the leverage impact of incremental sales volumes on our fixed cost base. SG&A expense for the third quarter of 2011 also reflects increased corporate costs associated with a revision of an estimate for a legacy environmental remediation site.
 
SG&A expense in the first nine months of 2011 was $313.7 million, or 18.5% of net sales, compared to $289.9 million, or 19.7% of net sales, in the prior-year period. SG&A expense as a percentage of sales in the first nine months of 2011 reflects the leverage impact of incremental sales volumes on our fixed cost base. In addition to the increase in corporate costs in the third quarter of 2011 noted above, SG&A expense in the first nine months of 2011 included a pre-tax benefit in the second quarter of $4.8 million from legal settlements and pre-tax charges in the first and second quarters of $1.2 million for facility consolidations. SG&A expense in the first nine months of 2010 included second quarter pre-tax charges of $5.3 million for environmental remediation.
 
Interest Expense, Net
 
Interest expense, net was $8.5 million for the third quarter of 2011 and $24.2 million for the first nine months of 2011 compared to $9.0 million and $26.3 million in the corresponding prior-year periods. The decreases in both periods reflect lower average debt levels in the current year periods in addition to increased interest income associated with higher cash balances in the current year. Interest income included in interest expense, net was $0.7 million for the third quarter of 2011 and $0.5 million for the prior-year period. Interest income included in interest expense, net was $2.1 million for the first nine months of 2011 and $1.8 million for the prior-year period.
 
Income Taxes
 
The effective tax rate from continuing operations in the third quarter of 2011 was 26.6% compared to 27.4% in the third quarter of 2010. The effective tax rate from continuing operations for the first nine months of 2011 was 28.7% compared to 29.0% in the first nine months of 2010. The decrease in the effective tax rate for the third quarter and first nine months of 2011 primarily reflects the impact of shifts in the estimated global distribution of our current year annual pre-tax earnings. The effective rate for both periods also reflects benefits from our Puerto Rican manufacturing operations.


24


Table of Contents

Net Earnings
 
Net earnings in the third quarter of 2011 were $54.3 million, or $1.03 per diluted share, compared to net earnings of $44.1 million, or $0.84 per diluted share, in the third quarter of 2010. Net earnings in the third quarter of 2010 included the favorable impact of the release of a $1.5 million ($0.03 per diluted share) tax reserve.
 
Net earnings in the first nine months of 2011 were $133.3 million, or $2.51 per diluted share, compared to net earnings of $105.7 million, or $2.00 per diluted share, in the first nine months of 2010. Net earnings in the first nine months of 2011 included first and second quarter net after-tax facility consolidation charges of $2.3 million ($0.04 per diluted share) and $2.0 million ($0.04 per diluted share), respectively, and a net after-tax benefit from legal settlements in the second quarter of $3.0 million ($0.06 per diluted share). Net earnings in the first nine months of 2010 included net after-tax facility consolidation charges in the first quarter of $2.1 million ($0.04 per diluted share) and a net after-tax environmental remediation charge in the second quarter of $3.3 million ($0.06 per diluted share) in addition to the third quarter release of a tax reserve.
 
Net earnings in the third quarter and first nine months of 2010 also reflect $1.5 million ($0.03 per diluted share) and $4.6 million ($0.09 per diluted share) of earnings from discontinued operations, respectively.


25


Table of Contents

Summary of Segment Results
 
Net Sales
 
                                                                 
    Quarter Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010  
    In
    % of Net
    In
    % of Net
    In
    % of Net
    In
    % of Net
 
    Thousands     Sales     Thousands     Sales     Thousands     Sales     Thousands     Sales  
 
Electrical
  $ 500,693       82.8     $ 439,172       84.8     $ 1,427,992       84.3     $ 1,235,759       84.0  
Steel Structures
    66,893       11.1       57,232       11.0       176,604       10.4       166,753       11.3  
HVAC
    36,840       6.1       21,829       4.2       89,307       5.3       69,330       4.7  
                                                                 
    $ 604,426       100.0     $ 518,233       100.0     $ 1,693,903       100.0     $ 1,471,842       100.0  
                                                                 
                                                         
Segment Earnings
                                                       
    Quarter Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010  
    In
    % of Net
    In
    % of Net
    In
    % of Net
    In
    % of Net
 
    Thousands     Sales     Thousands     Sales     Thousands     Sales     Thousands     Sales  
 
Electrical
  $ 105,165       21.0     $ 89,588       20.4     $ 285,281       20.0     $ 237,786       19.2  
Steel Structures
    10,497       15.7       11,092       19.4       19,078       10.8       29,027       17.4  
HVAC
    3,024       8.2       2,868       13.1       10,047       11.2       9,466       13.7  
                                                                 
Segment earnings
    118,686       19.6       103,548       20.0       314,406       18.6       276,279       18.8  
Corporate expense
    (13,709 )             (12,615 )             (30,424 )             (40,205 )        
Depreciation and amortization expense
    (21,426 )             (20,054 )             (63,386 )             (58,775 )        
Share-based compensation expense
    (2,441 )             (2,212 )             (9,227 )             (8,647 )        
Interest expense, net
    (8,476 )             (9,042 )             (24,200 )             (26,315 )        
Other (expense) income, net
    1,387               (975 )             (315 )             90          
                                                                 
Earnings before income taxes
  $ 74,021             $ 58,650             $ 186,854             $ 142,427          
                                                                 
 
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 consolidated segment earnings are significantly influenced by the operating performance of our Electrical segment that accounts for a substantial portion of our consolidated net sales and consolidated segment earnings during the periods presented.


26


Table of Contents

Electrical Segment
 
Electrical segment net sales in the third quarter of 2011 were $501.0 million, up $61.5 million, or 14.0%, from the third quarter of 2010. Electrical segment net sales in the first nine months of 2011 were $1.4 billion, up $192.2 million, or 15.6%, from the prior-year period. Increased volumes, primarily for our industrial and utility distribution products, positively impacted year-over-year sales. The third quarter and first nine months sales increases from the prior-year periods attributable to the 2010 acquisitions were approximately $11 million and $54 million, respectively. Net sales benefited from a weaker U.S. dollar, which positively impacted sales by approximately $17 million in the third quarter of 2011 and approximately $40 million in the first nine months of 2011. Price increases, primarily to offset rising raw material costs, positively impacted net sales when compared to the respective prior-year periods.
 
Electrical segment earnings in the third quarter of 2011 were $105.2 million, up $15.6 million, or 17.4%, from the third quarter of 2010. Electrical segment earnings in the first nine months of 2011 were $285.3 million, up $47.5 million, or 20.0%, from the prior-year period. Segment earnings as a percentage of sales increased to 21.0% in the third quarter of 2011 compared to 20.4% in the prior-year period. Segment earnings as a percentage of sales increased to 20.0% in the first nine months of 2011 compared to 19.2% in the prior-year period. Year-over-year segment earnings for both periods reflect the contribution from 2010 acquisitions, improved product mix, manufacturing leverage from increased volume, and the benefits of current- and prior-year right-sizing actions. Segment earnings in the first nine months of 2011 and 2010 also reflect pre-tax facility consolidation charges of $4.8 million (first and second quarter) and $3.2 million (first quarter), respectively.
 
Steel Structures Segment
 
Net sales in the third quarter of 2011 in our Steel Structures segment were $66.9 million, up $9.7 million, or 16.9%, from the third quarter of 2010. Net sales in the first nine months of 2011 were $176.6 million, up $9.9 million, or 5.9%, from the prior-year period. The net sales increase in the third quarter and first nine months of 2011 primarily reflects the positive price impact from the pass-through of higher year-over-year plate steel costs.
 
Steel Structures segment earnings in the third quarter of 2011 were $10.5 million, down $0.6 million, or 5.4%, from the prior-year period. Segment earnings in the first nine months of 2011 were $19.1 million, down $9.9 million, or 34.3%, from the prior-year period. The decrease in year-over-year segment earnings in dollars and as a percentage of sales in both 2011 periods reflects declines in project margins due to project mix and a more competitive pricing environment.
 
HVAC Segment
 
Net sales in the third quarter of 2011 in our HVAC segment were $36.8 million, up $15.0 million, or 68.8%, from the third quarter of 2010. Net sales in the first nine months of 2011 in our HVAC segment were $89.3 million, up $20.0 million, or 28.8%, from the prior-year period. The third quarter and first nine months sales increase from the prior-year periods attributable to the July 2011 acquisition of AmbiRad was approximately $12 million. Additionally, increased volumes and favorable foreign currency positively impacted year-over-year sales.
 
HVAC segment earnings in the third quarter of 2011 were $3.0 million, up $0.2 million, or 5.4%, from the third quarter of 2010. Segment earnings in the first nine months of 2011 were $10.0 million, up $0.6 million, or 6.1%, from the prior-year period. Lower year-over-year segment earnings as a percentage of sales in both 2011 periods reflect the acquisition accounting adjustments


27


Table of Contents

related to the AmbiRad acquisition partially offset by improved mix and manufacturing leverage from increased volume. Segment earnings in the first nine months of 2011 also reflect pre-tax facility consolidation charges in the first and second quarter of $1.5 million.
 
Liquidity and Capital Resources
 
We had cash and cash equivalents of approximately $465 million and $455 million at September 30, 2011 and December 31, 2010, respectively.
 
The following table reflects the primary category totals in our Consolidated Statements of Cash Flows:
 
                 
    Nine Months Ended
 
    September 30,  
    2011     2010  
 
(In thousands)
               
Net cash provided by (used in) operating activities
  $ 71,384     $ 144,920  
Net cash provided by (used in) investing activities
    (57,901 )     (121,126 )
Net cash provided by (used in) financing activities
    2,679       (72,841 )
Effect of exchange-rate changes on cash
    (5,911 )     5,655  
                 
Net increase (decrease) in cash and cash equivalents
  $ 10,251     $ (43,392 )
                 
 
Operating Activities
 
Operating activities in the first nine months of 2011 included net earnings of $133.3 million, depreciation and amortization of $63.4 million and share-based compensation expense of $9.2 million, which were offset by a negative net change in working capital (accounts receivable, inventories and accounts payable), as well as accrued liabilities, of $121.6 million. Additionally, operating activities for the first nine months of 2011 reflect increased cash income taxes resulting from the tax payment associated with the 2010 divestiture of the communications products business and payment of an assessment from a Canada Revenue Agency audit.
 
Operating activities in the first nine months of 2010 included net earnings of $105.7 million, depreciation and amortization of $60.0 million and share-based compensation expense of $8.7 million. A net change in working capital (accounts receivable, inventories and accounts payable), which negatively impacted cash in the first nine months of 2010, was partially offset by higher accrued liabilities, including benefit plan liabilities, and income taxes payable.
 
Investing Activities
 
Investing activities in the first nine months of 2011 included approximately $30 million to acquire AmbiRad. During the first nine months of 2011, we had capital expenditures to support our ongoing business plans totaling $30.8 million. We expect capital expenditures to be in the $55-$60 million range for the full year 2011. Investing activities in the first nine months of 2010 included approximately $78 million to acquire PMA (cash portion of the purchase price) and approximately $21 million to acquire JT Packard. During the first nine months of 2010, we also had capital expenditures to support our ongoing business plans totaling $22.3 million.


28


Table of Contents

Financing Activities
 
Financing activities in the first nine months of 2011 included 672,257 stock options exercised at a weighted average exercise price of $35.55 per share totaling $23.9 million and the repurchase of 500,000 common shares for $21.2 million. Financing activities in the first nine months of 2010 included 253,074 stock options exercised at a weighted average exercise price of $20.39 per share totaling $5.2 million, the repurchase of 1,075,000 common shares for $42.9 million and repayment of approximately $36 million to retire debt assumed as part of the PMA acquisition.
 
Credit Facilities
 
As of September 30, 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.
 
During the third quarter of 2011, the Corporation entered into a new $500 million unsecured, senior credit facility (“new revolving credit facility”) with a five year term expiring in August 2016. At September 30, 2011, no borrowings were outstanding under this facility. Under the new revolving credit facility agreement, the Corporation will select an interest rate at the time of its initial draw reflecting LIBOR plus a margin based on the Corporation’s credit rating or the highest rate based on several other benchmark rates, including: (i) JPMorgan Chase Bank’s New York Prime rate, (ii) the federal funds effective rate, or (iii) an adjusted LIBOR rate.
 
All borrowings and other extensions of credit under the Corporation’s new 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 facility may be used for general operating needs and for other general corporate purposes in compliance with the terms of the facility agreement. The Corporation pays an annual commitment fee to maintain the facility of 20 basis points.
 
Fees to access the facility and letters of credit 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 new 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.
 
The new revolving credit facility 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 new revolving credit facility, amounted to $4.7 million at September 30, 2011. The letters of credit relate primarily to environmental assurances.
 
Concurrent to entering into the new revolving credit facility, the Corporation amended its existing unsecured, senior credit facility (“existing revolving credit facility”) to reduce the total availability under this facility from $750 million to the $325 million of debt outstanding plus the letters of credit outstanding under the facility at the time of the amendment. Letters of credit under this facility at September 30, 2011 amounted to $17.6 million. The letters of credit relate primarily


29


Table of Contents

to third-party insurance claims processing. As borrowings and letters of credit under the facility are reduced, the amount of the facility will decrease.
 
The amendment to the existing revolving credit facility conformed all covenants and obligations to those found in the new revolving credit facility, except those related to interest on borrowings and fees, which remain unchanged. At September 30, 2011 and December 31, 2010, $325 million was outstanding under this facility. The existing revolving credit facility has a five-year term expiring October 2012.
 
Other Credit Facilities
 
The Corporation has a EUR 10 million (approximately US$13.6 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 and events of default such as covenant default and cross-default. This facility has an indefinite maturity, and no borrowings were outstanding as of September 30, 2011 and December 31, 2010. Outstanding letters of credit which reduced availability under the European facility amounted to EUR 0.9 million (approximately US$1.2 million) at September 30, 2011.
 
The Corporation has a CAN 30 million (approximately US$29.4 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 and events of default such as covenant default and cross-default. This facility matures in December 2011, and no borrowings were outstanding as of September 30, 2011 and December 31, 2010.
 
Other Letters of Credit
 
As of September 30, 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 approximately $19 million of such additional letters of credit that relate primarily to environmental assurances, third-party insurance claims processing, performance bonds, 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 September 30, 2011, the aggregate availability of funds under our credit facilities is approximately $537 million, after deducting outstanding letters of credit. Availability is subject to the satisfaction of various covenants and conditions to borrowing.
 
Credit Ratings
 
As of September 30, 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.


30


Table of Contents

Debt Securities
 
Thomas & Betts had the following unsecured debt securities outstanding as of September 30, 2011:
 
                 
Issue Date   Amount   Interest Rate   Interest Payable   Maturity Date
 
November 2009
  $250.0 million   5.625%   May 15 and November 15   November 2021
 
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 nine months of 2011 were not significant. We expect required contributions to our qualified pension plans in 2011 to be minimal.
 
Acquisitions
 
In July 2011, the Corporation acquired AmbiRad, a leading manufacturer of specialized commercial and industrial heating and ventilation products, which are sold throughout Europe and exported to other global markets, for approximately $30 million.
 
In April 2010, the Corporation acquired PMA, a leading European manufacturer of technologically advanced cable protection systems, for approximately $114 million including cash used in the acquisition of approximately $78 million and cash used to retire debt assumed of approximately $36 million.
 
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
 
In September 2010, the Corporation’s Board of Directors approved a share repurchase plan that authorized the Corporation to buy up to 3,000,000 of its common shares. To-date through September 30, 2011, the Corporation repurchased, with available cash resources, 1,000,000 common shares through open-market transactions under this plan. During the third quarter and first nine months of 2011, the Corporation repurchased, with available cash resources, 500,000 common shares through open-market transactions under this plan. The timing of future repurchases, if any, will depend upon a variety of factors, including market conditions. This authorization expires in December 2012.
 
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 September 30, 2011, we have approximately $465 million in cash and cash equivalents and approximately $537 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


31


Table of Contents

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 September 30, 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.


32


Table of Contents

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 September 30, 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.


33


Table of Contents

 
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 September 30, 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)
                               
September 8, 2011 to September 15, 2011
    500,000     $ 42.29       500,000       2,000,000  
                                 
Total for the quarter ended September 30, 2011
    500,000     $ 42.29       500,000       2,000,000  
                                 
 
Item 6.   Exhibits
 
The Exhibit Index that follows the signature page of this Report is incorporated herein by reference.


34


Table of Contents

 
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: October 28, 2011


35


Table of Contents

 
EXHIBIT INDEX
 
 
         
Exhibit No.   Description of Exhibit
 
  10 .1   Third Amended and Restated Credit Agreement dated August 11, 2011, among Thomas & Betts Corporation, as Borrower, the Lenders party hereto, and Wells Fargo Bank, National Association, as Administrative Agent, and Bank of America, N.A., Regions Bank and SunTrust Bank as Co-Syndication Agents (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated August 11, 2011 and incorporated herein by reference).
  10 .2   Credit Agreement dated August 11, 2011, among Thomas & Betts Corporation, as Borrower, the Lenders party hereto, and JPMorgan Chase Bank, N.A. as Administrative Agent, and Wells Fargo Bank, National Association and Bank of America, N.A. as Co-Syndication Agents (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K dated August 11, 2011 and incorporated herein by reference).
  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 and Nine Months Ended September 30, 2011 and 2010, (ii) the Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, (iii) the Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 and (iv) the Notes to Consolidated Financial Statements
 
* 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


36