10-K 1 d273127d10k.htm FORM 10-K FORM 10-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

 

  þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

or

 

  ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission file number 1-4682

Thomas & Betts Corporation

(Exact name of registrant as specified in its charter)

 

Tennessee   22-1326940
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
incorporation or organization)    

8155 T&B Boulevard

Memphis, Tennessee

  38125
(Address of principal executive offices)   (Zip Code)

(901) 252-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange

    on which Registered    

Common Stock, $.10 par value   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  þ        No   ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ¨        No  þ

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  ¨

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                              Yes  þ         No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                                                                                         þ

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  ¨

Non-accelerated filer  ¨

(Do not check if a smaller reporting company)

  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  ¨        No   þ

As of June 30, 2011, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $2,807,586,551 based on the closing price as reported on the New York Stock Exchange.

As of February 13, 2012, 52,201,342 shares of the registrant’s common stock were outstanding.

Documents Incorporated by Reference

Within 120 days after the end of the fiscal year covered by this report, an amendment to this Form 10-K will be filed or portions of the Definitive Proxy Statement will be filed and are incorporated by reference into Part III.

 

 

 


Table of Contents

Thomas & Betts Corporation and Subsidiaries

TABLE OF CONTENTS

 

          Page  
   Caution Regarding Forward-Looking Statements      3   
  

PART I

  

Item 1.

   Business      4   

Item 1A.

   Risk Factors      10   

Item 1B.

   Unresolved Staff Comments      14   

Item 2.

   Properties      14   

Item 3.

   Legal Proceedings      15   

Item 4.

   Mine Safety Disclosures      16   
  

PART II

  

Item 5.

   Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities      17   

Item 6.

   Selected Financial Data      20   

Item 7.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      21   

Item 7A.

   Quantitative and Qualitative Disclosures About Market Risk      38   

Item 8.

   Financial Statements and Supplementary Data      39   

Item 9.

   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure      90   

Item 9A.

   Controls and Procedures      90   

Item 9B.

   Other Information      90   
  

PART III

  

Item 10.

   Directors, Executive Officers and Corporate Governance      91   

Item 11.

   Executive Compensation      92   

Item 12.

   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      92   

Item 13.

   Certain Relationships, Related Transactions and Director Independence      94   

Item 14.

   Principal Accounting Fees and Services      94   
  

PART IV

  

Item 15.

   Exhibits, Financial Statement Schedules      95   

Signatures

     96   

EXHIBIT INDEX

     E-1   

 

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Report includes “forward-looking comments and statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts regarding Thomas & Betts Corporation and are subject to risks and uncertainties in our operations, business, economic and political environment. — See Item 1A. “Risk Factors.” Forward-looking statements contain words such as:

 

• “achieve”

  

• “anticipates”

   • “intends”

• “should”

  

• “expects”

   • “predict”

• “could”

  

• “might”

   • “will”

• “may”

  

• “believes”

   • other similar expressions

These forward-looking statements are not guarantees of future performance. Many factors could affect our future financial condition or results of operations. Accordingly, actual results, performance or achievements may differ materially from those expressed or implied by the forward-looking statements contained in this Report. We undertake no obligation to revise any forward-looking statement included in this Report to reflect any future events or circumstances.

A reference in this Report to “we”, “our”, “us”, “Thomas & Betts” or the “Corporation” refers to Thomas & Betts Corporation and its consolidated subsidiaries.

 

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PART I

Item 1.    BUSINESS

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. We pursue growth through market penetration, new product development and acquisitions.

We sell our products through the following channels:

 

   

electrical, utility, telephone, cable, and heating, ventilation and air-conditioning distributors;

 

   

mass merchandisers, catalog merchandisers and home improvement centers; and

 

   

directly to original equipment manufacturers, utilities and certain end-users.

Thomas & Betts was established in 1898 as a sales agency for electrical wires and raceways, and was incorporated and began manufacturing products in New Jersey in 1917. We were reincorporated in Tennessee in 1996. Our corporate offices are maintained at 8155 T&B Boulevard, Memphis, Tennessee 38125, and the telephone number at that address is 901-252-8000.

On January 29, 2012, Thomas & Betts Corporation, Swiss-based ABB Ltd (“ABB”) and a wholly owned subsidiary of ABB entered into a merger agreement. At the closing of the merger contemplated by the merger agreement, (i) the Corporation will become a wholly owned indirect subsidiary of ABB, and (ii) each common share of the Corporation will be converted into the right to receive $72.00 in cash (approximately $3.9 billion total purchase consideration), without interest. The closing of the merger is subject to customary conditions, including approval of the shareholders of the Corporation’s common stock and expiration or termination of the applicable waiting period under antitrust laws. There is no assurance that the merger will be completed in a timely manner or at all.

Available Information

Our internet address is www.tnb.com where interested parties can find our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments, if any, to those reports. These materials are free of charge and are made available as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). We will provide electronic or paper copies of our filings free of charge upon request.

General Segment Information

We classify our products into the following business segments based primarily on product lines. Our segments are:

 

   

Electrical,

 

   

Steel Structures, and

 

   

Heating, Ventilation and Air-Conditioning (“HVAC”).

The majority of our products, especially those sold in the Electrical segment, have region-specific standards and are sold mostly in North America or in other regions sharing North American electrical codes. No customer accounted for 10% or more of our consolidated net sales for 2011, 2010 or 2009.

 

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Electrical Segment

Our Electrical segment’s markets include industrial MRO (maintenance, repair and operations) and OEM (original equipment manufacturers), construction and utility markets. This segment’s sales are concentrated primarily in North America and Europe. The Electrical segment typically experiences modest seasonal increases in sales during the second and third quarters reflecting the construction season. Net sales for the Electrical segment for the past three years were:

 

     2011     2010     2009  

Segment Sales (in thousands)

   $ 1,905,221      $ 1,678,645      $ 1,488,334   

Percent of Consolidated Net Sales

     82.9     83.7     81.2

The Electrical segment designs, manufactures and markets thousands of different connectors, components and other products for industrial, construction, and utility applications. We have a market-leading position for many of our products. Products in the Electrical segment include:

 

   

fittings and accessories;

 

   

fastening products, such as plastic and metallic ties for bundling wire, and flexible tubing;

 

   

connectors, such as compression and mechanical connectors for high-current power and grounding applications;

 

   

indoor and outdoor switch and outlet boxes, covers and accessories;

 

   

floor boxes;

 

   

metal framing used as structural supports for conduits, cable tray and electrical enclosures;

 

   

emergency and hazardous lighting;

 

   

utility distribution connectors and switchgear;

 

   

power quality equipment and services; and

 

   

other products, including insulation products, wire markers, and application tooling products.

These products are sold under a variety of well-known brand names, such as Adaptaflex®, Carlon®, Color-Keyed®, Cyberex®, Elastimold®, Emergi-Lite®, Furse®, Harnessflex®, Homac®, Iberville®, Joslyn Hi-Voltage®, Kopex®, Kindorf®, Marrette®, Ocal®, PMA®, Red Dot®, Sta-Kon®, Steel City®, Superstrut®, T&B® and Ty-Rap®.

Demand for electrical products follows general economic conditions and is sensitive to activity in construction markets, industrial production levels and spending by utilities for replacement, expansion and efficiency improvement. The segment’s product lines are predominantly sold through major distributor chains, independent distributors and to retail home centers and hardware outlets. They are also sold directly to original equipment manufacturers, utilities and telecommunications companies. We have strong relationships with our distributors as a result of the breadth and quality of our product lines, our market-leading service programs, our strong history of product innovation, and the high degree of brand-name recognition for our products among end-users.

Steel Structures Segment

Our Steel Structures segment designs, manufactures and markets highly engineered steel transmission structures. These products are primarily sold to the following types of end-users:

 

   

investor-owned utilities;

 

   

cooperatives, which purchase power from utilities and manage its distribution to end-users; and

 

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municipal utilities.

These products are marketed primarily under the Meyer®, Lehigh® and Thomas & Betts® brand names. Net sales for the Steel Structures segment for the past three years were:

 

     2011     2010     2009  

Segment Sales (in thousands)

   $ 250,785      $ 219,897      $ 234,462   

Percent of Consolidated Net Sales

     10.9     11.0     12.8

HVAC Segment

Our HVAC segment designs, manufactures and markets heating, ventilation and air conditioning products for commercial and industrial buildings. Products in this segment include:

 

   

gas, oil and electric unit heaters;

 

   

gas-fired duct furnaces;

 

   

indirect and direct gas-fired make-up air;

 

   

infrared heaters; and

 

   

evaporative cooling and heat recovery products.

These products are sold primarily under the Reznor® and AmbiRad® brand names through HVAC, mechanical and refrigeration distributors throughout North America and Europe. Demand for HVAC products tends to be higher when these regions are experiencing cold weather and, as a result, HVAC typically has higher sales in the first and fourth quarters. To reduce the impact of seasonality on operations, the segment offers an off-season sales promotional program with its distributors. Net sales for the HVAC segment for the past three years were:

 

     2011     2010     2009  

Segment Sales (in thousands)

   $ 141,525      $ 105,824      $ 109,912   

Percent of Consolidated Net Sales

     6.2     5.3     6.0

Manufacturing and Distribution

We employ advanced processes for manufacturing quality products. Our manufacturing processes include high-speed stamping, precision molding, machining, plating, pressing, welding and automated assembly. Our internal processes utilize lean manufacturing techniques designed to reduce waste and improve operating efficiencies in our facilities. We also make extensive use of computer-aided design and computer-aided manufacturing (CAD/CAM) software and equipment to link product engineering with our manufacturing facilities. Additionally, we utilize other advanced equipment and techniques in the manufacturing and distribution process, including computer software for scheduling, material requirements planning, shop floor control, capacity planning, and the warehousing and shipment of products.

Our products have historically enjoyed a reputation for quality in the markets in which they are sold. To ensure we maintain these high quality standards, all facilities embrace quality programs, and approximately 80% meet either ISO 9001 2000 or ISO 9001 2008 standards as of December 31, 2011, with future certifications to be performed under ISO 9001 2008 standards as applicable. Additionally, we have implemented quality control processes in our design, manufacturing, delivery and other operations in order to further improve product quality and customer service levels.

 

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Raw Materials

We purchase a wide variety of raw materials for the manufacture of our products including steel, aluminum, zinc, copper, resins and rubber compounds. Sources for raw materials and component parts are well established and, with the exception of steel and certain resins, are sufficiently numerous to avoid serious future interruptions of production in the event that current suppliers are unable to sufficiently meet our needs. However, we could encounter manufacturing disruptions in each of our segments from interruptions by steel and resin suppliers. In addition, we could encounter price increases that we may not be able to pass on to our customers.

Research and Development

We have a long-standing reputation for innovation and value based upon our ability to develop products that meet the needs of the marketplace. Each of our business segments maintain research, development and engineering capabilities intended to directly respond to specific market needs.

Research, development and engineering expenditures invested into new and improved products and processes are shown below. These expenditures are included in cost of sales in the Consolidated Statements of Operations.

 

     2011     2010     2009  

R&D Expenditures (in thousands)

   $ 37,374      $ 35,712      $ 33,545   

Percent of Consolidated Net Sales

     1.6     1.8     1.8

Working Capital Practices

We maintain sufficient inventory to enable us to provide a high level of service to our customers. Our inventory levels, payment terms and return policies are in accordance with general practices associated with the industries in which we operate.

Patents, Trademarks and Domain Names

We own approximately 2,000 active patent registrations and applications worldwide. We have over 1,500 active trademark registrations and applications worldwide and domain names, including: Thomas & Betts, T&B, T&B Access, Adaptaflex, AmbiRad, Blackburn, Canstrut, Carlon, Catamount, Color-Keyed, Cyberex, Deltec, DuraGard, Elastimold, Emergi-Lite, E-Z-Code, Flex-Cuf, Furse, Harnessflex, Hazlux, Homac, Iberville, Joslyn Hi-Voltage, JT Packard, Kindorf, Kopex, Lehigh, Marr, Marrette, Meyer, Ocal, PMA, Red Dot, Reznor, Russellstoll, Shield-Kon, Shrink-Kon, Signature Service, Site Light, Sta-Kon, Star Teck, Steel City, Superstrut, Ty-Duct, Ty-Rap and Zip-Box.

While we consider our patents, trademarks, domain names and trade dress to be valuable assets, we do not believe that our competitive position is dependent solely on intellectual property, or that any business segment or our operations as a whole is dependent solely on intellectual property alone. However, the Carlon, Color-Keyed, Elastimold, Iberville, Kindorf, Ocal, Sta-Kon, Steel City, Superstrut, T&B and Ty-Rap trademarks are important to the Electrical segment; the Meyer trademark is important to the Steel Structures segment; and the Reznor trademark is important to the HVAC segment. In addition, we do not consider any of our individual licenses, franchises or concessions to be material to our business as a whole or to any business segment.

 

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Competition

Our ability to continue to meet customer needs by enhancing existing products and developing and manufacturing new products is critical to our prominence in our primary market, the electrical products industry. We have robust competition in all areas of our business, and the methods and levels of competition, such as price, service, warranty and product performance, vary among our markets. While no single company competes with us in all of our product lines, various companies compete with us in one or more product lines. Some of these competitors have substantially greater sales and assets and greater access to capital than we do. We believe Thomas & Betts is among the industry leaders in service to its customers.

Although we believe that we have specific technological and other advantages over some of our competitors, our competitors’ ability to develop new product offerings with competitive price and performance characteristics could lead to increased downward pressure on the selling prices for our products.

The abilities of our competitors to enhance their own products, coupled with any unforeseeable changes in customer demand for various products of Thomas & Betts, could affect our overall product mix, pricing, margins, plant utilization levels and asset valuations. We believe that industry consolidation could further increase competitive pressures.

Employees

As of December 31, 2011, we had approximately 9,400 full-time employees worldwide. Employees of our foreign subsidiaries comprise approximately 50% of all employees. Approximately 15% of our U.S. and approximately 45% of our non-U.S. employees are represented by trade unions. We believe our relationships with our employees and trade unions are good.

Executive Officers of the Registrant

The following persons are executive officers of Thomas & Betts, and are elected by and serve at the discretion of the Board of Directors.

Dominic J. Pileggi, 60

Chairman and Chief Executive Officer

Mr. Pileggi was elected Chief Executive Officer in January 2004, and Chairman of the Board effective January 2006. Mr. Pileggi has held several executive positions with the Corporation, including President and Chief Operating Officer from 2003 to 2004, and Senior Vice President and Group President – Electrical from 2000 to 2003. He also held various executive positions with Thomas & Betts from 1979 to 1995. Mr. Pileggi was employed by Viasystems Group, Inc., as Executive Vice President from 1998 to 2000 and President – EMS Division of Viasystems in 2000. From 1995 to 1998, he also held various executive positions with Casco Plastic, Inc. and Jordan

Telecommunications.

Charles L. Treadway, 46

President and Chief Operating Officer

Mr. Treadway was elected President and Chief Operating Officer in February 2011. Previously, he held the position of Senior Vice President and Group President – Electrical from March 2009 to 2011. Mr. Treadway was employed by Schneider Electric from 2006 to 2009 where he led the company’s Custom Sensors and Technology business. Prior to that time, he was President and Chief Executive Officer of Prettl International, a subsidiary of German-based Prettl GMBH from 2001 to 2005 and he was President of Groupo Tesa Mexico, a division of Yale Security (Americas), Inc. from 1999 to 2001.

 

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William E. Weaver, Jr., 48

Senior Vice President and Chief Financial Officer

Mr. Weaver was elected Chief Financial Officer in October 2009. Previously, he held the position of Vice President – Controller from November 2008 to October 2009. Mr. Weaver was employed by First Horizon Home Loans/MetLife Home Loans from 2006 to 2008. Prior to that time, he was a partner with KPMG LLP from 2002 to 2006 and held various positions including partner with Arthur Andersen LLP from 1984 to 2002.

Imad Hajj, 51

Senior Vice President – International and Operational Development

Mr. Hajj was elected Senior Vice President – International and Operational Development in February 2011. Previously, he held several executive positions within the Corporation, including Senior Vice President – Global Operations 2008 to 2011 and Vice President and Chief Development Officer 2006 to 2008. He also held the position of President – HVAC Division dating back to 2004. Between 1983 and 2004, Mr. Hajj held executive and managerial positions in manufacturing, supply chain, information technology and global electrical manufacturing operations. In addition, he has served as President of the Company’s European Middle East and Asia business.

Peggy P. Gann, 63

Senior Vice President – Human Resources and Administration

Ms. Gann was elected Senior Vice President – Human Resources and Administration in May 2010. Ms. Gann was employed by Schneider Electric from 1989 to 2008 where she led the company’s human resources, communication and administration functions for the North American Division. Prior to that time, she held various human resources leadership positions at Johns Manville Corporation from 1966 to 1989.

J.N. Raines, 68

Vice President, General Counsel and Secretary

Mr. Raines was elected Vice President – General Counsel & Secretary in December 2001. Prior to that time, he was a partner of the law firm of Glankler Brown PLLC from 1976 to 2001. He has also served as an assistant United States attorney for the Western District of Tennessee and as a trial lawyer for the anti-trust division of the U.S. Department of Justice.

Stanley P. Locke, 52

Vice President – Business Development and Strategic Planning

Mr. Locke was elected Vice President – Business Development and Strategic Planning in November 2008. Previously, he held the positions of Vice President – Controller and Vice President – Corporate Controller from 2004 to 2008. Prior to that time, he held various positions in finance and corporate development with Sara Lee Corporation, beginning in 1985, as well as with a consulting advisory firm from 2003 to 2004.

Compliance with Environmental Regulations

We are subject to federal, state, local and foreign environmental laws and regulations that govern the discharge of pollutants into the air, soil and water, as well as the handling and disposal of solid and

 

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hazardous wastes. We believe that we are in compliance, in all material respects, with applicable environmental laws and regulations and that the costs of maintaining such compliance will not be material to our financial position.

Financial Information About Foreign and U.S. Operations

Export sales originating in the U.S. were approximately $76 million in 2011, $74 million in 2010, and $55 million in 2009. For additional financial information about international and U.S. operations, please refer to Note 17 in the Notes to Consolidated Financial Statements.

NYSE Certifications

Our CEO certified to the New York Stock Exchange in 2011 that we were in compliance with the NYSE listing standards. Our CEO and CFO have executed the certification required by section 302 of the Sarbanes-Oxley Act of 2002, which is contained herein as an exhibit to this Form 10-K for the fiscal year ended December 31, 2011.

Item 1A.    RISK FACTORS

There are many factors that could pose a material risk to our business, its operating results, its financial condition and its ability to execute its business plan, some of which are beyond our control. These factors include, but are not limited to:

Negative economic conditions could have a material adverse effect on our operating results and financial condition.

The success of Thomas & Betts’ business is directly linked to positive economic conditions in the countries where we sell our products. We do business in geographically diverse markets. In 2011, approximately 40% of our net sales were generated outside of the United States. A decline in economic activity could adversely affect demand for products in each of our business segments, thereby having a material adverse impact on our operating results and financial condition. Additionally, these conditions could also impair the ability of those with whom we do business to satisfy their obligations to us. Finally, a decline in economic activity could result in adverse changes to our current stock market-related fundamentals and current projected future operating results that are used to assess asset valuations (including goodwill and other intangible assets). Such revisions could lead to potentially significant financial impairment charges for these assets in future periods. Material adverse changes in economic (including further financial instability in Europe, the potential negative impact of higher interest rates and availability of credit on capital spending in the markets we serve) or industry conditions generally or in the specific markets served by Thomas & Betts could have a material adverse effect on our operating results and financial condition.

A significant reduction in the supply of commodity raw materials could materially disrupt our business and rising and volatile costs for commodity raw materials and energy could have a material adverse effect on our profitability.

In recent years, we have experienced rising and, at times, volatile costs for commodity raw materials (steel, aluminum, copper, zinc, resins and rubber compounds) and energy. Additionally, increased worldwide demand for steel has, at times, caused the availability of steel to be a concern, and resin supply has, at times, been disrupted by natural disasters. Any significant accidents, labor disputes, fires, severe weather, floods or other difficulties encountered by our principal suppliers could result in

 

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production delays or the inability to fulfill orders on a timely basis. We may also not be able to fully offset in the future the effects of rising and at times volatile costs for commodity raw materials and energy through price increases for our products, productivity improvements or other cost reductions.

Significant changes in customer demand due to increased competition could have a material adverse effect on our operating results and financial condition.

As Thomas & Betts works to enhance its product offerings, its competitors will most likely continue to improve their products and will likely develop new offerings with competitive price and performance characteristics. Because of the intensity of the competition in the product areas and geographic markets that we serve, we could experience increased downward pressure on the selling prices for certain of our products.

Additionally, enhanced product offerings by competitors, coupled with any unforeseeable significant changes in customer demand for products of Thomas & Betts, could impact overall product mix, pricing, margins, plant utilization levels and asset valuations, thereby having a material adverse impact on our operating results and financial condition.

Potential work stoppages at our union facilities.

A work stoppage could occur at our unionized facilities as a result of disputes under existing collective bargaining agreements with labor unions or in connection with the negotiation of new collective bargaining agreements. Although we believe our relationships with labor unions are good, a work stoppage or interruption of production at one of our unionized facilities due to a labor dispute could substantially adversely affect our financial condition and results of operations.

Deterioration in the credit quality of several major customers could have a material adverse effect on our operating results and financial condition.

A significant asset included in our working capital is accounts receivable from customers. If customers responsible for a significant amount of accounts receivable become insolvent or otherwise unable to pay for products and services, or become unwilling or unable to make payments in a timely manner, our operating results and financial condition could be adversely affected. A significant deterioration in the economy could have an adverse effect on the servicing of these accounts receivable, which could result in longer payment cycles, increased collection costs and defaults in excess of management’s expectations. Although we are not dependent on any one customer for more than 10% of our sales, deterioration in the credit quality of several major customers at the same time could have a material adverse effect on operating results and financial condition.

Unforeseen adverse regulatory, environmental, monetary and other governmental policies could have a material adverse effect on our profitability.

Thomas & Betts is subject to governmental regulations and policies throughout the world. Unforeseen changes in these governmental regulations and policies could reduce our profitability. Namely, significant changes in monetary or fiscal policies in the U.S. and abroad could result in currency fluctuations, including fluctuations in the Canadian dollar, Euro and British pound, which, in turn, could have a negative impact on our net sales, costs and expenses. Furthermore, significant changes in any number of governmental policies could create trade restrictions, patent enforcement issues, adverse tax rate changes and changes to tax treatment of items such as tax credits, withholding taxes and transfer pricing. These changes might limit our ability to sell products in certain markets, and could have a material adverse effect on our business, operating results and financial condition.

 

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In addition, our operations are subject to or could become subject to, international, federal, state and local laws and regulations governing environmental matters, including emissions and discharges of pollutants (including green house gases) into the air, soil and water and the generation and handling of waste. Thomas & Betts is also subject to laws relating to occupational health and safety. The operation of manufacturing plants involves a high level of susceptibility in these areas, and there is no assurance that we will not incur material environmental or occupational health and safety liabilities in the future. Moreover, expectations of remediation expenses could be affected by, and potentially significant expenditures could be required to comply with, environmental regulations and health and safety laws that may be adopted or imposed in the future. Future remediation technology advances could adversely impact expectations of remediation expenses.

Unfavorable litigation outcomes could have a material adverse effect on our profitability.

We are and may in the future be party to legal proceedings and claims, including those involving product liability, intellectual property and contractual disputes. Given the inherent uncertainty of litigation, we cannot offer any assurance that existing litigation or future adverse developments may not have a material adverse effect on our business, operating results and financial condition.

Inability to access capital markets may adversely impact our business.

Our ability to invest in our businesses and make strategic acquisitions may require access to capital markets. If we are unable to access the capital markets as needed, we could experience a material adverse impact on our business.

Our facilities or facilities of our customers could be susceptible to natural disasters.

Thomas & Betts has operations in over 20 countries and sells to customers throughout the world. Should a natural disaster such as a hurricane, tornado, earthquake or flood severely damage a major manufacturing, distribution or headquarters facility of Thomas & Betts, or damage a major facility of one or more of our significant customers or important suppliers, our business could be materially disrupted.

Possible inadequate insurance coverage.

In accordance with its risk management practices, Thomas & Betts continually reevaluates risks, their potential cost and the cost of minimizing them. To reduce the Corporation’s exposure to material risks, in certain circumstances, we purchase insurance. Certain risks are inherent in the manufacturing of our products and our insurance may not be adequate to cover potential claims against us involving our products. Thomas & Betts is also exposed to risks inherent in the packaging and distribution of products. Although we maintain liability insurance, we cannot assure that the coverage limits under these insurance programs will be adequate to protect Thomas & Betts against future claims, or that we will be able to obtain this insurance on acceptable terms in the future.

Terrorist Acts and Acts of War could adversely impact our business and operating results.

Terrorist acts and acts of war (wherever located around the world) may cause damage or disruption to our employees, facilities, suppliers, distributors or customers, which could significantly impact our net sales, costs and expenses and financial condition. The potential for future terrorist attacks, the national and international responses to terrorist attacks, and other acts of war or hostility have created many economic and political uncertainties, which could adversely impact our business and results of operations in ways that cannot presently be predicted. In addition, as a global company with headquarters and significant operations located in the United States, we may be impacted by

 

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actions against the United States. We are uninsured for losses and interruptions caused by acts of war and have policy limits for losses caused by terrorist acts.

Risks and uncertainties related to the Corporation’s operations in Mexico could negatively impact the Corporation’s operating results.

The Corporation has extensive manufacturing operations located in Mexico, a country in which there are potential risks related to geo-political events, political instability, corruption, economic volatility, drug cartel and gang-related violence, social and ethnic unrest, enforcement of property rights, governmental regulations, and public safety and security, among others. As in many developing markets, there are also uncertainties in how local law is applied, including areas most relevant to commercial transactions and foreign investment. As a result, events could occur in Mexico, which are beyond the Corporation’s control, which could restrict the Corporation’s ability to operate its manufacturing locations in Mexico or significantly reduce the Corporation’s ability to transport products manufactured at these locations out of Mexico. Such events could have a material adverse effect on our business, operating results and financial position.

Failure to complete the proposed merger with ABB could negatively impact our stock price and our future business and financial results.

On January 29, 2012, we entered into a merger agreement with ABB under which we would become a wholly owned indirect subsidiary of ABB. If completed, the merger would result in each outstanding share of our common stock being converted into the right to receive $72.00 in cash. However, there is no assurance that our shareholders will approve the merger agreement, and there is no assurance that the other conditions to the completion of the merger will be satisfied. If the merger is not completed, our ongoing business may be adversely affected and we would be subject to a number of risks, including the following:

 

   

the current market price of our common stock reflects a market assumption that the merger will occur, and a failure to complete the merger could result in a decline in the market price of our common stock;

 

   

we may be required to pay ABB a termination fee of $116 million if the merger is terminated under certain circumstances; and

 

   

matters relating to the merger (including integration planning) may require substantial commitments of time and resources by our management, which would otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company.

There can be no assurance that the risks described above will not materialize, and if any of them do, they may adversely affect our business, operating results and stock price.

Pending litigation could prevent or delay the closing of the merger or otherwise negatively impact our business and operations.

Shortly after the announcement of the merger, two putative class action lawsuits challenging the merger were filed in the Chancery Court for Shelby County, 20th Judicial District, for State of Tennessee, against Thomas & Betts Corporation, ABB, Edison Acquisition Corp. and the individual members of Thomas & Betts’ Board of Directors. The complaints generally allege, among other things, that, in connection with merger, the members of the Thomas & Betts Board of Directors breached their fiduciary duties owed to Thomas & Betts’ shareholders, and that Thomas & Betts, ABB and Edison Acquisition Corp. aided and abetted such breaches of fiduciary duties. The complaints generally seek, among other things, declaratory and injunctive relief, preliminary injunctive relief prohibiting or delaying the defendants from consummating the merger, and other forms of equitable relief. It is

 

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possible that additional lawsuits may be filed against us asserting similar or different claims. There is no assurance that we or any of the other defendants will be successful in the outcome of the pending or any potential future lawsuits. For more detailed information concerning this litigation, see Item 3 – Legal Proceedings.

Item 1B.    UNRESOLVED STAFF COMMENTS

None.

Item 2.    PROPERTIES

We have operations in over 20 countries and, as of December 31, 2011, occupy approximately 5 million square feet of manufacturing space. Our manufacturing locations by segment as of December 31, 2011 were as follows:

 

          Approximate
Area in
Square Feet
(000s)
 

Segment

  

Location

   Leased      Owned  

Electrical

   Arkansas              286   
   California      113           
   Florida              189   
   Mississippi              237   
   New Jersey              134   
   New Mexico              100   
   North Carolina              22   
   Puerto Rico      68         28   
   Tennessee              497   
   Virginia      100           
   Australia      30         29   
   Canada      48         739   
   France              52   
   Germany      15           
   Hungary      88           
   Japan      20           
   Mexico      337           
   Netherlands      8         39   
   Saudi Arabia              49   
   Switzerland              59   
   United Kingdom      36         181   

Steel Structures

   Alabama              240   
   South Carolina              132   
   Texas              139   
   Wisconsin              195   

HVAC

   Pennsylvania              227   
   Belgium      140           
   United Kingdom      207           
   France      25           
   Mexico      214           

 

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As of December 31, 2011, the Corporation has 2.4 million square feet of office, distribution, storage and other space. Included in this total are three owned primary distribution centers located in Belgium (0.1 million square feet), Canada (0.3 million square feet) and Byhalia, Mississippi (0.9 million square feet). We also have sales offices, warehouses, storage and other facilities in approximately 0.9 million square feet of space, most of which is leased, and approximately 0.2 million square feet of leased space in Memphis, Tennessee, which includes our corporate headquarters.

Item 3.    LEGAL PROCEEDINGS

Shortly after the announcement of the merger, two putative class action lawsuits challenging the merger were filed in the Chancery Court for Shelby County, 20th Judicial District, for the State of Tennessee, against Thomas & Betts, ABB, Edison Acquisition Corp. (ABB’s acquisition vehicle), and the individual members of Thomas & Betts’ Board of Directors. The complaints are captioned Employees Retirement System of the City of Providence v. Thomas & Betts Corporation et. al, Case No. CH-12-0164-1, and Coyne v. Pileggi et al., Case No. CH-12-0189-3. The complaints generally allege that the members of the Thomas & Betts Board of Directors breached their fiduciary duties to Thomas & Betts’ shareholders by entering into the merger agreement, approving the proposed merger and failing to take steps to maximize Thomas & Betts’ value to its shareholders, and that Thomas & Betts, ABB and Edison Acquisition Corp. aided and abetted such breaches of fiduciary duties. In addition, the complaints allege that the proposed merger improperly favors ABB and that certain provisions of the merger agreement unduly restrict Thomas & Betts’ ability to negotiate with other potential bidders. The complaints generally seek, among other things, declaratory and injunctive relief, preliminary injunctive relief prohibiting or delaying the defendants from consummating the merger, and other forms of equitable relief. The defendants believe that these lawsuits are without merit and plan to defend them vigorously. Additional lawsuits arising out of or relating to the merger agreement or the merger may be filed in the future. There is no assurance that we or any of the other defendants will be successful in the outcome of the pending or any potential future lawsuits.

We are involved in legal proceedings and litigation arising in the ordinary course of business. In those cases where we are the defendant, plaintiffs may seek to recover large and 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 certainty. We have provided for losses to the extent probable and estimable. The legal matters that have been recorded in our 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 our financial position, results of operations or liquidity in any given period.

Environmental Matters

Owners and operators of sites containing hazardous substances, as well as generators of hazardous substances, are subject to broad and retroactive liability for investigatory and cleanup costs and damages arising out of past disposal activities. Such liability in many cases may be imposed regardless of fault or the legality of the original disposal activity.

We are the owner or operator, or former owner or operator, of various manufacturing locations that we are currently evaluating for the presence, or extent, of contamination that may require remediation or are in process of remediation. These sites include former or inactive facilities or properties in Alabama; Connecticut; Indiana; Massachusetts; New Hampshire; New Jersey; Pennsylvania; Ohio; and South Carolina. The sites further include active manufacturing locations in California; Florida and New Jersey.

 

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We have been notified by the United States Environmental Protection Agency or similar state environmental regulatory agencies or private parties that we, in many instances along with others,

may currently be potentially responsible for the remediation of sites pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, similar federal and state environmental statutes, or common law theories. We, along with others, may be held jointly and severally liable for all costs relating to investigation and remediation of eight other sites pursuant to these environmental laws.

In conjunction with certain acquisitions, we assumed responsibility for legacy environmental matters.

We have provided for environmental liabilities to the extent probable and estimable, but we are not able to predict the extent of our ultimate liability with respect to all of these pending or future environmental matters.

Item 4.    MINE SAFETY DISCLOSURES

Not applicable.

 

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PART II

 

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on the New York Stock Exchange under the symbol TNB. The following table sets forth by quarter for the last two years the high and low sales prices of our common stock as reported by the NYSE.

At February 13, 2012, the closing price of our common stock on the NYSE was $71.95.

 

     2011      2010  

First Quarter

     

Market price high

   $ 59.47       $ 39.24   

Market price low

   $ 47.28       $ 33.37   

Second Quarter

     

Market price high

   $ 61.00       $ 43.62   

Market price low

   $ 49.38       $ 34.70   

Third Quarter

     

Market price high

   $ 55.82       $ 41.45   

Market price low

   $ 37.95       $ 33.86   

Fourth Quarter

     

Market price high

   $ 55.35       $ 49.70   

Market price low

   $ 38.15       $ 40.74   

Holders

At February 13, 2012, we had 2,256 shareholders of record, not including shares held in security position listings, or “street name.”

Dividends

We do not currently pay cash dividends. Future decisions concerning the payment of cash dividends will depend upon our results of operations, financial condition, strategic investment opportunities, capital expenditure plans, terms of credit agreements, and other factors that the Board of Directors may consider relevant.

 

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PERFORMANCE GRAPH

This graph shows, from the end of 2006 to the end of 2011, changes in the value of $100 invested in each of Thomas and Betts’ common stock, Standard & Poor’s (“S&P”) Midcap 400 Composite Index and a peer group consisting of five companies whose businesses are representative of our business segments. The companies in the peer group are: Amphenol Corporation, Cooper Industries, Ltd., Eaton Corporation, Hubbell Incorporated and Rockwell Automation Corporation.

 

LOGO

 

     Dec-06     Dec-07     Dec-08     Dec-09     Dec-10     Dec-11  

Thomas & Betts Corporation

  $ 100      $ 104      $ 51      $ 76      $ 102      $ 115   

S&P Midcap 400

  $ 100      $ 108      $ 69      $ 95      $ 120      $ 118   

Peer Group (5 Stocks)

  $ 100      $ 126      $ 67      $ 102      $ 147      $ 138   

The Custom Peer Group has been weighted in accordance with each company’s market capitalization as of the beginning of each of the five years covered by the performance graph. The weighted return was calculated by summing the products obtained by multiplying (i) the percentage that each company’s market capitalization represents of the total market capitalization for all companies in the index by (ii) the total shareholder return for that company.

 

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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. The Corporation repurchased, with available cash resources, 1,500,000 (1,000,000 in 2011; 500,000 in 2010) common shares, through open-market transactions. The timing of future repurchases, if any, will depend upon a variety of factors, including market conditions. This authorization expires in December 2012.

Issuer Purchases of Equity Securities

The following table provides information relating to the Corporation’s repurchases of common stock in the fourth quarter of 2011.

 

     Total
Number of
Common
Shares
Purchased
     Average
Price Paid
per Common
Share
     Total
Number
of Common
Shares
Purchased
as Part of
Publicly
Announced
Plans
     Maximum
Number
of Common
Shares
that May
Yet Be
Purchased
Under
the Plans
 

September 2010 Plan (3,000,000 common shares authorized)

           

4th Quarter 2011:

           

October 2011

     50,000       $ 49.04         50,000         1,950,000   

November 2011

     450,000       $ 50.73         450,000         1,500,000   
  

 

 

       

 

 

    

Plan total in the 4th Quarter 2011

     500,000       $ 50.56         500,000         1,500,000   
  

 

 

       

 

 

    

 

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Item 6.    SELECTED FINANCIAL DATA

Thomas & Betts Corporation and Subsidiaries

 

(In thousands, except per share data)    2011      2010      2009      2008      2007  

Net sales

   $ 2,297,531       $ 2,004,366       $ 1,832,708       $ 2,392,093       $ 2,046,060   

Net earnings from continuing operations

   $ 190,153       $ 137,736       $ 100,935       $ 265,604       $ 175,010   

Total assets

   $ 2,823,721       $ 2,632,393       $ 2,453,407       $ 2,410,602       $ 2,567,786   

Long-term debt including current maturities

   $ 574,755       $ 574,412       $ 638,536       $ 660,944       $ 811,205   

Per share earnings from continuing operations:

              

Basic

   $ 3.68       $ 2.66       $ 1.93       $ 4.70       $ 3.02   

Diluted

   $ 3.60       $ 2.61       $ 1.91       $ 4.65       $ 2.98   

Note: Selected financial data reflects the impact of acquisitions by the Corporation in 2011, 2010, 2008 and 2007 for consideration of approximately $30 million, $245 million, $90 million and $750 million, respectively. Net earnings from continuing operations in 2008 reflects a pre-tax gain of approximately $170 million from the Corporation’s sale of its minority interest in Leviton Manufacturing Company.

 

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Item 7. 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. We believe our critical accounting policies include the following:

 

   

Revenue Recognition:    We recognize revenue when products are shipped and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. We recognize revenue for service agreements over the applicable service periods. Sales discounts, quantity and price rebates, and allowances are estimated based on contractual commitments and experience and recorded as a reduction of revenue in the period in which the sale is recognized. Quantity rebates are in the form of volume incentive discount plans, which include specific sales volume targets or year-over-year sales volume growth targets for specific customers. Certain distributors can take advantage of price rebates by subsequently reselling our products into targeted construction projects or markets. Following a distributor’s sale of an eligible product, the distributor submits a claim for a price rebate. A number of distributors, primarily in our Electrical segment, have the right to return goods under certain circumstances and those returns, which are reasonably estimable, are accrued as a reduction of revenue at the time of shipment. We analyze historical returns and allowances, current economic trends and specific customer circumstances when evaluating the adequacy of accounts receivable related reserves and accruals. We provide allowances for doubtful accounts when credit losses are both probable and estimable.

 

   

Inventory Valuation:    Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. To ensure inventories are carried at the lower of cost or market, we periodically evaluate the carrying value of our inventories. We also periodically perform an evaluation of inventory for excess and obsolete items. Such evaluations are based on management’s judgment and use of estimates. Such estimates incorporate inventory quantities on-hand, aging of the inventory, sales history and forecasts for particular product groupings, planned dispositions of product lines and overall industry trends.

 

   

Goodwill and Other Intangible Assets:    We apply the acquisition (purchase) method of accounting for all business combinations. Under this method, all assets and liabilities acquired in a business combination, including goodwill, indefinite-lived intangibles and other intangibles, are recorded at fair value. The purchase price allocation requires subjective judgments concerning estimates of the fair value of the acquired assets and liabilities. Goodwill

 

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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, our market capitalization, 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.

In conjunction with each test of goodwill we determine the fair value of each reporting unit and compare the fair value to the reporting unit’s carrying amount. A reporting unit is defined as an operating segment or one level below an operating segment. We determine the fair value of our reporting units using a combination of three valuation methods: market multiple approach; discounted cash flow approach; and comparable transactions approach. The market multiple approach provides indications of value based on market multiples for public companies involved in similar lines of business. The discounted cash flow approach calculates the present value of projected future cash flows using appropriate discount rates. The comparable transactions approach provides indications of value based on an examination of recent transactions in which companies in similar lines of business were acquired. The fair values derived from these three valuation methods are then weighted to arrive at a single value for each reporting unit. Relative weights assigned to the three methods are based upon the availability, relevance and reliability of the underlying data. We then reconcile the total values for all reporting units to our market capitalization and evaluate the reasonableness of the implied control premium.

To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired, and we must perform a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date.

Methods used to determine fair values for indefinite-lived intangible assets involve customary valuation techniques that are applicable to the particular class of intangible asset and apply inputs and assumptions that we believe a market participant would use.

 

   

Long-Lived Assets:    We review long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Indications of impairment require significant judgment by management. For purposes of recognizing and measuring impairment of long-lived assets, we evaluate assets at the lowest level of identifiable cash flows for associated product groups. If the sum of the undiscounted expected future cash flows over the remaining useful life of the primary asset in the associated product groups is less than the carrying amount of the assets, 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

 

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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 the realizability of deferred income tax assets 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 December 31, 2011, will be sufficient to realize the recorded deferred tax assets net of existing valuation allowances.

 

   

Environmental Costs:    Environmental expenditures that relate to current operations are expensed or capitalized, as appropriate. Remediation costs that relate to an existing condition caused by past operations are accrued when it is probable that those costs will be incurred and can be reasonably estimated based on evaluations of currently available facts related to each site. The operation of manufacturing plants involves a high level of susceptibility in these areas, and requires subjective judgements by management in assessing environmental or occupational health and safety liabilities.

 

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Summary of Consolidated Results

 

     2011     2010     2009  
     In
Thousands
    % of Net
Sales
    In
Thousands
    % of Net
Sales
    In
Thousands
    % of Net
Sales
 

Net sales

   $ 2,297,531        100.0      $ 2,004,366        100.0      $ 1,832,708        100.0   

Cost of sales

     1,579,011        68.7        1,387,334        69.2        1,279,474        69.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     718,520        31.3        617,032        30.8        553,234        30.2   

Selling, general and administrative

     428,726        18.7        396,269        19.8        367,022        20.0   

Intangible asset impairment

                                 5,794        0.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations

     289,794        12.6        220,763        11.0        180,418        9.8   

Interest expense, net

     (32,012     (1.4     (35,124     (1.7     (35,483     (1.9

Loss on extinguishment of debt

                                 (6,391     (0.3

Other (expense) income, net

     742        0.1        (299            1,846        0.1   
  

 

 

     

 

 

     

 

 

   

Earnings from continuing operations before income taxes

     258,524        11.3        185,340        9.3        140,390        7.7   

Income tax provision

     68,371        3.0        47,604        2.4        39,455        2.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings from continuing operations

     190,153        8.3        137,736        6.9        100,935        5.5   

Earnings from discontinued operations, net

                   7,904        0.4        6,975        0.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $ 190,153        8.3      $ 145,640        7.3      $ 107,910        5.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share:

            

Continuing operations

   $ 3.68        $ 2.66        $ 1.93     

Discontinued operations

              0.16          0.14     
  

 

 

     

 

 

     

 

 

   

Net earnings

   $ 3.68        $ 2.82        $ 2.07     
  

 

 

     

 

 

     

 

 

   

Diluted earnings per share:

            

Continuing operations

   $ 3.60        $ 2.61        $ 1.91     

Discontinued operations

              0.15          0.13     
  

 

 

     

 

 

     

 

 

   

Net earnings

   $ 3.60        $ 2.76        $ 2.04     
  

 

 

     

 

 

     

 

 

   

Year 2011 Compared with 2010

Overview

Net sales in 2011 increased from 2010 primarily reflecting the higher organic sales volumes, especially in our Electrical segment, the positive impact of the 2011 acquisition of AmbiRad (July 2011) in our HVAC segment, the annualization of the 2010 acquisitions of JT Packard (January 2010), PMA AG (“PMA”) (April 2010) and Cable Management Group, Ltd. (“CMG”) (October 2010) in our Electrical segment, the positive impact of current year price increases, which were primarily to offset commodity cost increases, and a weaker U.S. dollar.

Earnings from operations in 2011 increased from 2010, both in dollars and as a percent of sales. This improvement reflects the impact of 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. Earnings from operations in 2011 included a benefit from legal settlements, in addition to charges related to facility consolidations in our Electrical and HVAC segments. Earnings from operations in 2010 included charges related to facility consolidations in our Electrical and HVAC segments and a charge for environmental remediation.

 

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Net earnings in 2011 were $190.2 million ($3.60 per diluted share) compared to net earnings of $145.6 million ($2.76 per diluted share) in 2010. Net earnings in 2011 included net after-tax facility consolidation charges of $4.3 million ($0.08 per diluted share), a net after-tax benefit from legal settlements of $3.0 million ($0.05 per diluted share) and the favorable impact of a $4.0 million ($0.08 per diluted share) reduction in the annual effective tax rate resulting from routine income tax estimate refinements for 2010 tax returns. Net earnings in 2010 included net after-tax facility consolidation charges of $5.8 million ($0.11 per diluted share), a net after-tax environmental remediation charge of $3.3 million ($0.06 per diluted share) and a $1.5 million ($0.03 per diluted share) benefit related to the release of a tax reserve.

Net Sales and Gross Profit

Net sales in 2011 were $2.3 billion, up 14.6% from 2010. Higher sales volumes in each of our segments, especially the Electrical segment, positively impacted year-over-year sales. The sales increase from the prior year attributable to the 2011 acquisition and the annualization of 2010 acquisitions was approximately $79 million. Price had a positive impact on year-over-year consolidated sales, primarily in Electrical and Steel Structures segments. A weaker U.S. dollar positively impacted sales by approximately $40 million in 2011 when compared to 2010.

Gross profit in 2011 was $718.5 million, or 31.3% of net sales, compared to $617.0 million, or 30.8% of net sales, in 2010. The year-over-year increase in gross profit, both in dollars and as a percentage of sales, reflects higher organic sales volumes, improved product mix, the positive impact from acquisitions, actions taken to manage costs and improved manufacturing leverage from increased production volumes. Gross profit in 2011 includes pre-tax charges of $5.1 million for facility consolidations compared to $9.1 million of pre-tax facility consolidation charges in 2010.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expense in 2011 was $428.7 million, or 18.7% of net sales, compared to $396.3 million, or 19.8% of net sales, in the prior year. SG&A as a percent of sales in both periods reflects the leverage impact of incremental volumes on our fixed cost base and our continued overall efforts to tightly manage expenses. SG&A expense in 2011 includes a pre-tax benefit of $4.8 million from legal settlements and pre-tax charges of $1.2 million for facility consolidations. SG&A expenses in 2010 were impacted by pre-tax environmental remediation charges of $5.3 million.

Interest Expense, Net

Interest expense, net was $32.0 million in 2011, down 8.9% from 2010. The decrease reflects the impact of lower average debt levels in 2011 in addition to increased interest income associated with higher cash balances in the current year. Interest income included in interest expense, net was $2.9 million in 2011 and $2.5 million in 2010. Interest expense was $34.9 million for 2011 and $37.6 million for 2010.

Income Taxes

The effective tax rate from continuing operations in 2011 was 26.4% compared to 25.7% in 2010. The effective rate for 2011 reflects the favorable impact of a $4.0 million benefit resulting from routine

 

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income tax estimate refinements for 2010 tax returns. The effective rate for 2010 reflects the favorable impact of a $1.5 million benefit related to the release of a tax reserve. The effective tax rate from continuing operations for both years also reflects benefits from our Puerto Rican manufacturing operations.

Net Earnings

Net earnings in 2011 were $190.2 million, or $3.60 per diluted share, compared to net earnings of $145.6 million, or $2.76 per diluted share, in 2010. Net earnings from continuing operations in 2011 include a net after-tax benefit totaling $2.7 million ($0.05 per diluted share) associated with facility consolidations ($0.08 per diluted share), a benefit from legal settlements ($0.05 per diluted share) and a benefit from the reduction in the annual effective tax rate resulting from routine income tax estimate refinements for 2010 tax returns ($0.08 per diluted share). Net earnings from continuing operations in 2010 include a net after-tax charge totaling $7.6 million ($0.14 per diluted share) associated with facility consolidations ($0.11 per diluted share), an environmental remediation charge ($0.06 per diluted share) and a benefit related to the release of a tax reserve ($0.03 per diluted share).

Earnings from discontinued operations, net in 2010 were $7.9 million, or $0.15 per diluted share. Earnings from discontinued operations, net in 2010 included a $3.3 million gain on sale in conjunction with the divesture of the non-strategic communications products business.

Year 2010 Compared with 2009

Overview

Net sales in 2010 increased from 2009 primarily reflecting the positive impacts of the 2010 acquisitions in the Electrical segment and higher sales volumes in the Electrical segment, which were partially offset by a decrease in net sales in our Steel Structures and HVAC segments.

Earnings from operations in 2010 increased from 2009, both in dollars and as a percent of sales. This improvement reflects the 2010 acquisitions, higher sales and production volumes, previous actions to manage costs, headcount and capacity, as well as the impact of a weaker U.S. dollar. Earnings from operations in 2010 included charges related to facility consolidations in our Electrical and HVAC segments and a charge for environmental remediation. Earnings from operations in 2009 included a charge related to a facility consolidation in our Electrical segment, a charge for intangible asset impairment, a charge for environmental remediation and a charge related to a debt refinancing.

Net earnings from continuing operations in 2010 were $137.7 million ($2.61 per diluted share) compared to net earnings of $100.9 million ($1.91 per diluted share) in 2009. Net earnings from continuing operations in 2010 include a net after-tax charge totaling $7.6 million ($0.14 per diluted share), as described below. Net earnings from continuing operations in 2009 included a net after-tax charge totaling $12.4 million ($0.23 per diluted share), as described below.

Net Sales and Gross Profit

Net sales in 2010 were $2.0 billion, up 9.4% from 2009. The sales increase from the prior year attributable to 2010 acquisitions was 5.4% or $98.7 million. Higher volumes in our Electrical segment also positively impacted year-over-year sales. A weaker U.S. dollar positively impacted sales by approximately $35 million in 2010 when compared to 2009.

Gross profit in 2010 was $617.0 million, or 30.8% of net sales, compared to $553.2 million, or 30.2% of net sales, in 2009. The year-over-year increase in gross profit reflects the positive impact

 

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from the 2010 acquisitions, higher sales and production volumes, continued pricing discipline, improved product mix and previous actions taken to manage costs, headcount and capacity. Gross profit in 2010 includes pre-tax charges of $9.1 million for facility consolidations compared to $3.6 million of pre-tax facility consolidation charges in 2009.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expense in 2010 was $396.3 million, or 19.8% of net sales, compared to $367.0 million, or 20.0% of net sales, in the prior-year. SG&A expenses in 2010 were impacted by pre-tax environmental remediation charges of $5.3 million in 2010 and $4 million in 2009. SG&A as a percent of sales in both periods reflects our continued overall efforts to tightly manage expenses and the leverage impact of incremental volumes on our fixed cost base.

Interest Expense, Net

Interest expense, net was $35.1 million in 2010, down modestly from 2009. The decrease reflects the impact of increased interest income from higher average cash balances in 2010. Interest income included in interest expense, net was $2.5 million in 2010 and $0.8 million in 2009. Interest expense was $37.6 million for 2010 and $36.3 million for 2009.

Income Taxes

The effective tax rate from continuing operations in 2010 was 25.7% compared to 28.1% in 2009. The decreased effective rate for 2010 reflects the favorable impact related to the release of a $1.5 million tax reserve assumed with a 2007 acquisition. The effective tax rate from continuing operations for both years also reflects benefits from our Puerto Rican manufacturing operations.

Net Earnings

Net earnings from continuing operations in 2010 were $137.7 million, or $2.61 per diluted share, compared to net earnings from continuing operations of $100.9 million, or $1.91 per diluted share, in 2009. Net earnings from continuing operations in 2010 include a net after-tax charge totaling $7.6 million ($0.14 per diluted share) associated with facility consolidations ($0.11 per diluted share), an environmental remediation charge ($0.06 per diluted share) and a benefit related to the release of a tax reserve ($0.03 per diluted share). Net earnings from continuing operations in 2009 included a net after-tax charge totaling $12.4 million ($0.23 per diluted share) associated with debt refinancing ($0.08 per diluted share), a facility consolidation ($0.04 per diluted share), a non-cash charge for intangible asset impairment ($0.07 per diluted share), and an environmental remediation charge ($0.04 per diluted share).

Earnings from discontinued operations, net was $7.9 million, or $0.15 per diluted share, in 2010 compared to $7.0 million, or $0.13 per diluted share, in 2009. Earnings from discontinued operations, net in 2010 included a $3.3 million gain on sale in conjunction with the divesture of the non-strategic communications products business.

Net earnings in 2010 were $145.6 million, or $2.76 per diluted share. Net earnings in 2009 were $107.9 million, or $2.04 per diluted share.

 

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    Summary of Segment Results        
    2011     2010     2009  

Net Sales

  In
Thousands
    % of Net
Sales
    In
Thousands
    % of Net
Sales
    In
Thousands
    % of Net
Sales
 

Electrical

  $ 1,905,221        82.9      $ 1,678,645        83.7      $ 1,488,334        81.2   

Steel Structures

    250,785        10.9        219,897        11.0        234,462        12.8   

HVAC

    141,525        6.2        105,824        5.3        109,912        6.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 2,297,531        100.0      $ 2,004,366        100.0      $ 1,832,708        100.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    2011     2010     2009  

Segment Earnings

  In
Thousands
    % of Net
Sales
    In
Thousands
    % of Net
Sales
    In
Thousands
    % of Net
Sales
 

Electrical

  $ 382,169        20.1      $ 316,201        18.8      $ 257,447        17.3   

Steel Structures

    30,657        12.2        34,935        15.9        47,433        20.2   

HVAC

    20,886        14.8        16,145        15.3        18,213        16.6   
 

 

 

     

 

 

     

 

 

   

Segment earnings

    433,712        18.9        367,281        18.3        323,093        17.6   

Corporate expense

    (43,147       (52,318       (47,423  

Depreciation and amortization expense

    (84,346       (79,596       (73,296  

Share-based compensation expense

    (16,425       (14,604       (16,162  

Intangible asset impairment

                      (5,794  

Interest expense, net

    (32,012       (35,124       (35,483  

Loss on extinguishment of debt

                      (6,391  

Other (expense) income, net

    742          (299       1,846     
 

 

 

     

 

 

     

 

 

   

Earnings from continuing operations before income taxes

  $ 258,524        $ 185,340        $ 140,390     
 

 

 

     

 

 

     

 

 

   

We have three reportable segments: Electrical, Steel Structures and HVAC. We evaluate our business segments primarily on the basis of segment earnings, with segment earnings defined as earnings before corporate expense, depreciation and amortization expense, share-based compensation expense, interest, income taxes and certain other items.

Our segment earnings are significantly influenced by the operating performance of our Electrical segment that accounted 80% or more of our consolidated net sales and consolidated segment earnings during 2011, 2010 and 2009.

Electrical Segment

Year 2011 Compared with 2010

Electrical segment net sales in 2011 were $1.9 billion, up $226.6 million, or 13.5%, from 2010. The year-over-year sales growth was primarily attributable to increased volumes, especially for our industrial and utility distribution products. The sales increase from the prior year attributable to the annualization of the 2010 acquisitions was approximately $54 million. The weaker U.S. dollar positively impacted net sales by approximately $39 million in 2011. Price increases, primarily to offset rising raw material costs, positively impacted net sales when compared to the prior year.

 

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Electrical segment earnings in 2011 were $382.2 million, up 20.9% from 2010. Segment earnings reflect pre-tax facility consolidation charges of $4.8 million in 2011 (first and second quarter) and $7.4 million in 2010 (first and fourth quarter). The increase in 2011 segment earnings compared to 2010 reflects the contribution from the annualization of the 2010 acquisitions, improved product mix, manufacturing leverage from increased volume, and the benefits of current- and prior-year right-sizing actions.

Year 2010 Compared with 2009

Electrical segment net sales in 2010 were $1.7 billion, up $190.3 million, or 12.8%, from 2009. The sales increase from the prior year attributable to the 2010 acquisitions of JT Packard & Associates, Inc. (“JT Packard”), PMA AG (“PMA”) and Cable Management Group, Ltd. (“CMG”) was 6.6% or approximately $98.7 million. Increased volumes also positively impacted year-over-year sales and reflect improved industrial and utility distribution demand. The weaker U.S. dollar positively impacted net sales by approximately $37 million in 2010.

Electrical segment earnings in 2010 were $316.2 million, up 22.8% from 2009. Segment earnings reflect pre-tax facility consolidation charges of $7.4 million in 2010 and $3.6 million in 2009. The increase in 2010 segment earnings compared to 2009 reflects the contribution from the 2010 acquisitions, increased sales and production volumes, productivity improvements, improved product mix, and previous actions taken to manage costs, headcount and capacity.

Steel Structures Segment

Year 2011 Compared with 2010

Net sales in 2011 in our Steel Structures segment were $250.8 million, up $30.9 million, or 14.0%, from 2010. The net sales increase in 2011 primarily reflects increased production volumes, the positive price impact from the pass-through of higher year-over-year plate steel costs and an improved pricing environment during the second half of 2011. Segment earnings in 2011 were $30.7 million, down 12.2% from 2010, reflecting the declines in project margins due to project mix and a more competitive pricing environment.

Year 2010 Compared with 2009

Net sales in 2010 in our Steel Structures segment were $219.9 million, down $14.6 million, or 6.2%, from 2009. The benefit from higher year-over-year production levels was more than fully offset by the revenue impact of lower year-over-year steel prices and more competitive market conditions. The current competitive pricing environment is also expected to persist in 2011. Segment earnings in 2010 were $34.9 million, down 26.3% from 2009, compared to the unusually strong earnings performance in 2009 as well as the difficult pricing conditions experienced during 2010.

HVAC Segment

Year 2011 Compared with 2010

Net sales in 2011 in our HVAC segment were $141.5 million, up $35.7 million, or 33.7%, from 2010. The 2011 sales increase attributable to the July 2011 acquisition of AmbiRad was approximately $25 million. Additionally, increased volumes positively impacted year-over-year sales. HVAC segment earnings in 2011 were $20.9 million, up 29.4%, from 2010. Lower year-over-year segment earnings as a percent of sales reflect acquisition accounting adjustments related to the AmbiRad acquisition partially offset by improved manufacturing leverage from increased volume. Segment earnings reflect pre-tax facility consolidation charges of $1.5 million in 2011 (first and second quarter) and $1.7 million in 2010 (fourth quarter).

 

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Year 2010 Compared with 2009

Net sales in 2010 in our HVAC segment were $105.8 million, $4.1 million, or down 3.7%, from 2009. HVAC segment earnings in 2010 were $16.1 million, down 11.4% from 2009. The sales and earnings declines reflect lower sales volumes resulting from weak commercial construction markets. Segment earnings in 2010 include a pre-tax $1.7 million facility consolidation charge.

Liquidity and Capital Resources

We had cash and cash equivalents of approximately $552 million and $455 million at December 31, 2011 and 2010, respectively.

The following table reflects the primary category totals in our Consolidated Statements of Cash Flows.

 

(In thousands)    2011     2010     2009  

Net cash provided by (used in) operating activities

   $ 194,308      $ 275,712      $ 237,862   

Net cash provided by (used in) investing activities

     (72,570     (128,121     (35,091

Net cash provided by (used in) financing activities

     (15,255     (179,666     (53,110

Effect of exchange-rate changes on cash and cash equivalents

     (9,425     8,660        36,458   
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     97,058        (23,415     186,119   

Cash and cash equivalents, beginning of year

     455,198        478,613        292,494   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of year

   $ 552,256      $ 455,198      $ 478,613   
  

 

 

   

 

 

   

 

 

 

Operating Activities

Cash provided by operating activities in 2011 included net earnings of $190 million. Operating activities in 2011 included depreciation and amortization of $84 million and share-based compensation expense of $16 million. Net changes in working capital (accounts receivable, inventories and accounts payable) and accrued liabilities negatively impacted cash flows in 2011. Operating activities in 2011 also reflects $43 million of funding to qualified pension plans (including voluntary contributions of $39 million).

Cash provided by operating activities in 2010 was primarily attributable to net earnings of $146 million. Operating activities in 2010 included depreciation and amortization of $81 million, share-based compensation expense of $15 million and a gain on the sale of a divested business of $3 million. Net changes in working capital (accounts receivable, inventories and accounts payable) and accrued liabilities positively impacted cash flows in 2010.

Cash provided by operating activities in 2009 was primarily attributable to net earnings of $108 million. Operating activities in 2009 included depreciation and amortization of $75 million, share-based compensation expense of $16 million, loss on extinguishment of debt of $6 million and a non-cash charge for intangible asset impairment of $6 million. Net changes in working capital (accounts receivable, inventories and accounts payable) and accrued liabilities positively impacted cash flows in 2009. Funding to qualified pension plans of $52 million negatively impacted cash flows in 2009 (including voluntary contributions of $50 million).

Investing Activities

Investing activities in 2011 included cash paid of approximately $30 million to acquire AmbiRad during July 2011. During 2011, we had capital expenditures to support our ongoing business plans totaling approximately $45 million.

 

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Investing activities in 2010 included cash paid of approximately $78 million ($114 million purchase price less debt assumed and subsequently retired of $36 million) to acquire PMA, approximately $76 million ($110 million purchase price less debt assumed and subsequently retired of $34 million) to acquire CMG and approximately $21 million to acquire JT Packard. Investing activities in 2010 also reflected the sale of our non-strategic communications products business for proceeds of $78 million. During 2010, we had capital expenditures to support our ongoing business plans totaling $33 million.

During 2009, we had capital expenditures to support our ongoing business plans totaling $41 million.

Financing Activities

Financing activities in 2011 included the repurchase of 1.0 million common shares for $46 million and $27 million of cash proceeds from stock option exercises. Financing activities in 2011 resulted in no net change in the balance of our revolving credit facilities from year-end 2010 to year-end 2011.

Financing activities in 2010 included the repurchase of approximately 1.6 million common shares for $66 million, the repayment of approximately $36 million to retire debt assumed as part of the PMA acquisition and approximately $34 million to retire debt assumed as part of the CMG acquisitions, and $20 million of cash proceeds from stock option exercises. Additionally, during 2010 we paid down $65 million of outstanding indebtedness under the revolving credit facility.

Financing activities in 2009 included the repurchase of 1.0 million common shares for $25 million. During 2009, we issued $250 million of 5.625% senior notes due 2021 and used a portion of the net proceeds to retire $125 million of 7.25% notes due 2013 and repay $95 million of outstanding indebtedness on our revolving credit facility. During 2009, we repaid $148 million of debt using a combination of cash and borrowings under our revolving credit facility. Financing activities in 2009 resulted in no net change in the balance of our revolving credit facility from year-end 2008 to year-end 2009. During 2009, we reduced our total outstanding debt by approximately $26 million.

Credit Facilities

During the third quarter of 2011, we entered into a new $500 million unsecured, senior credit facility (“new revolving credit facility”) with a five-year term expiring in August 2016. At December 31, 2011, no borrowings were outstanding under this facility. Under the new revolving credit facility agreement, we will select an interest rate at the time of its initial draw reflecting LIBOR plus a margin based on our 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, plus a margin based on our credit rating.

All borrowings and other extensions of credit under our 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. We pay an annual commitment fee to maintain the facility of 20 basis points based upon our current credit rating.

Fees to access the facility and letters of credit are based on a pricing grid related to our debt ratings with Moody’s, S&P and Fitch during the term of the facility.

 

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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 our 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 $17.7 million at December 31, 2011. The letters of credit relate primarily to third-party insurance claims processing.

Concurrent to entering into the new revolving credit facility, we amended our 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 December 31, 2011 amounted to $2.4 million. The letters of credit relate primarily to environmental assurances. 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 December 31, 2011 and 2010, $325 million was outstanding under this facility. The existing revolving credit facility has a five-year term expiring October 2012.

Other Credit Facilities

We have a EUR 10 million (approximately US$13.1 million) committed revolving credit facility with a European bank. We pay 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 December 31, 2011 and 2010. Outstanding letters of credit which reduced availability under the European facility amounted to EUR 1.0 million (approximately US$1.4 million) at December 31, 2011.

We have a CAN 10 million (approximately US$9.8 million) committed revolving credit facility with a Canadian bank. We pay 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 matures in 2016, and no borrowings were outstanding as of December 31, 2011 and 2010.

Other Letters of Credit

As of December 31, 2011, we also had letters of credit in addition to those discussed above that do not reduce availability under the Corporation’s credit facilities. We had $2.8 million of such additional letters of credit that relate primarily to third-party insurance claims processing, performance guarantees, performance bonds and acquisition obligations.

 

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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 replacing those credit facilities or obtaining credit facilities in the future.

As of December 31, 2011, the aggregate availability of funds under our credit facilities is approximately $504 million, after deducting outstanding letters of credit. Availability is subject to the satisfaction of various covenants and conditions to borrowing.

Credit Ratings

As of December 31, 2011, we had investment grade credit ratings from Standard & Poor’s (BBB rating), Moody’s Investor Service (Baa2 rating) and Fitch Ratings (BBB rating) on our senior unsecured debt. Should these credit ratings drop, repayment under our credit facilities and securities will not be accelerated; however, our credit costs may increase. Similarly, if our credit ratings improve, we could potentially have a decrease in our credit costs. The maturity of any of our debt securities does not accelerate in the event of a credit downgrade.

Debt Securities

We had the following unsecured debt securities outstanding as of December 31, 2011:

 

Issue Date

  

Amount

  

Interest Rate

  

Interest Payable

  

Maturity Date

November 2009

   $250.0 million    5.625%    May 15 and November 15    November 2021

Other

In September 2010, our Board of Directors approved a share repurchase plan that authorized the Corporation to buy up to 3,000,000 of its common shares. Through December 31, 2011, we repurchased, with available cash resources, 1,500,000 (1,000,000 in 2011; 500,000 in 2010) common shares, through open-market transactions. As of December 31, 2011, 1,500,000 shares remain available under this authorization. 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 December 31, 2011, we have approximately $552 million in cash and cash equivalents and approximately $504 million of aggregate availability under our credit facilities. We renewed our shelf registration statement with the Securities and Exchange Commission on November 4, 2011, utilizing the well-known seasoned issuer (WKSI) process. The registration statement permits us to issue an indeterminate amount of common stock, preferred stock and debt securities. The registration statement is effective for a period of three years from the date of filing. We continue to have cash requirements to, among other things, support working capital and capital expenditure needs, service debt and fund our retirement plans as required. We generally intend to use available cash and internally generated funds to meet these cash requirements and may borrow under existing credit facilities or access the

 

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capital markets as needed for liquidity. We believe that we have sufficient sources of liquidity to satisfy both short-term and long-term requirements.

Off-Balance Sheet Arrangements

As of December 31, 2011, we did not have any off-balance sheet arrangements.

Refer to Note 18 in the Notes to Consolidated Financial Statements for information regarding our guarantee and indemnification arrangements.

Contractual Obligations

The following table reflects our total contractual cash obligations as of December 31, 2011:

 

(In millions)    Total      2012      2013
through
2014
     2015
through
2016
     Thereafter  

Long-Term Debt Including Current Maturities(a)

   $ 574.8       $ 325.3       $ 0.9       $       $ 248.6 (b) 

Estimated Interest Payments(c)

     164.1         23.6         36.8         35.1         68.6   

Operating Lease Obligations

     58.2         16.7         22.8         11.9         6.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Contractual Cash Obligations(d)

   $ 797.1       $ 365.6       $ 60.5       $ 47.0       $ 324.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) Includes capital leases.

 

(b) Principal amount excluding unamortized discount is $250 million.

 

(c) Reflects stated interest rates for fixed rate debt (including debt hedged via an interest rate swap) and year-end interest rates for variable rate debt.

 

(d) We have liabilities associated with our qualified and non-qualified pension and postretirement benefit plans reflected in our consolidated balance sheet. Future contribution obligations associated with these liabilities are not reflected in the table above due to the absence of scheduled maturities. Funding of these obligations will be dependent on future events such as the funded status of benefit plans, laws and regulations and the employment decisions of participants. Therefore, the timing of these payments cannot be precisely determined. We expect required contributions to our qualified pension plans in 2012 to be minimal.

Credit Risk

We continually evaluate the credit risk associated with our customers. Credit risk with respect to trade receivables is mitigated in part by the large number of customers comprising our customer base and their dispersion across many different industries and geographic areas. No customer receivable exceeds 10% of total accounts receivable as of December 31, 2011. See also Risk Factors.

Qualified Pension Plans

We have domestic and foreign qualified pension plans with domestic plans accounting for a substantial portion of total plan liabilities and assets. Our contributions to all qualified pension plans were $43 million (including $39 million of voluntary contributions) in 2011, $2 million in 2010 and $52 million (including $50 million of voluntary contributions) in 2009. We expect required

 

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contributions to our qualified pension plans in 2012 to be minimal. The following information indicates the funded status for our qualified pension plans:

All qualified pension plans:

 

(In millions)    December 31,
2011
     December 31,
2010
 

Benefit obligation

   $ 591       $ 535   

Fair value of plan assets

   $ 465       $ 456   

Our qualified pension plan assets at December 31, 2011 and 2010, were included in the following asset categories:

 

     Plan Assets  
     December 31,  
     2011     2010  

Asset Category

    

Domestic equity securities

     38     40

International equity securities

     20     21

Debt securities

     28     26

Other, including alternative investments

     14     13
  

 

 

   

 

 

 

Total

     100     100
  

 

 

   

 

 

 

The financial objectives of our investment policy is (1) to maximize returns in order to minimize contributions and long-term cost of funding pension liabilities, within reasonable and prudent levels of risk, (2) to match liability growth with the objective of fully funding benefits as they accrue and (3) to achieve annualized returns in excess of the policy benchmark. Our asset allocation targets are 43% U.S. domestic equity securities, 15% international equity securities, 26% fixed income and high yield debt securities and 16% other, including alternative investments.

The long-term rates of return we use for our qualified pension plans take into account expected forward-looking rates for the plans’ asset classes and the plans’ historical investment experience over a multi-year period, as well as mix of plan asset investment types, market conditions, investment practices of our Retirement Plans Committee and advice from investment professionals and actuarial advisors. The weighted-average long-term rates of return used to determine net periodic pension cost for all qualified pension plans are as follows:

 

     2011     2010     2009  

Weighted-average long-term rates of return used to determine net periodic pension cost

     7.7     8.0     8.6

Reflected in the rates above are domestic weighted-average long-term rates of return of 8.0% for 2011, 8.3% for 2010 and 8.8% for 2009.

The assumed discount rates we use for our qualified pension plans represent long-term high quality corporate bond rates commensurate with liability durations of our plans. Discount rates used to determine net periodic pension cost for all qualified pension plans are as follows:

 

     2011     2010     2009  

Discount rates used to determine net periodic pension cost

     5.2     5.7     6.4

 

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Reflected in the rates above are domestic discount rates to determine net periodic pension cost of 5.3% in 2011, 5.8% in 2010 and 6.3% in 2009.

Discount rates used to determine pension benefit obligations as of December 31, 2011, 2010 and 2009 for all qualified pension plans were 4.3%, 5.2% and 5.7%, respectively, and reflect domestic discount rates of 4.3% for 2011, 5.3% for 2010 and 5.8% for 2009.

The potential impact on the 2011 net periodic pension cost resulting from a hypothetical one-percentage-point change in the assumed weighted-average long-term rate of return while maintaining a constant discount rate would be approximately $4 million. The potential impact on the 2011 net periodic pension cost resulting from a hypothetical one-percentage-point increase in the assumed discount rate while maintaining a constant weighted-average long-term rate of return would be a decrease of approximately $2 million, and a hypothetical one-percentage-point decrease in the assumed discount rate while maintaining a constant weighted-average long-term rate of return would be an increase of approximately $1 million.

Effective January 1, 2011, pension plan benefit accruals have been suspended for the domestic non-bargaining plan participants under the Thomas & Betts Pension Plan. We will provide as a replacement benefit certain non-elective contributions, including certain transition benefits, under its existing domestic defined contribution plan. Additionally during 2011, the Corporation and the Union representing collectively bargained employees at one of the locations covered by the Thomas & Betts Corporation Pension Plan for Bargaining Unit Employees approved a plan to discontinue the future accrual of future benefits after December 31, 2011. We will provide as a replacement benefit certain non-elective contributions, including certain transition benefits, under its existing domestic defined contribution plan.

For additional information regarding our qualified and non-qualified pension plans and other post-retirement plans, refer to Note 13 in the Notes to Consolidated Financial Statements.

Discontinued Operations

In 2010, we divested our non-strategic communications products business for cash consideration of $78 million. The revenues and financial performance of the communications products business have been removed from the presentation of continuing operations and presented as a single line item in “Discontinued Operations”. This business was previously included in the Electrical segment, contributing $52.7 million of net sales and $7.9 million of net earnings in 2010, including a $3.3 million gain on divestiture. During 2009, this business contributed $66.0 million of net sales and net earnings of $7.0 million.

 

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Subsequent Event

On January 29, 2012, Thomas & Betts Corporation, Swiss-based ABB Ltd and a wholly owned subsidiary of ABB entered into a merger agreement. At the closing of the merger contemplated by the merger agreement, (i) the Corporation will become a wholly owned indirect subsidiary of ABB, and (ii) each common share of the Corporation will be converted into the right to receive $72.00 in cash (approximately $3.9 billion total purchase consideration), without interest. The closing of the merger is subject to customary conditions, including approval of the shareholders of the Corporation’s common stock and expiration or termination of the applicable waiting period under the Hart- Scott-Rodino Act and the antitrust laws of certain foreign jurisdictions. Among other things, the merger agreement contains certain termination rights for the Corporation and ABB, and further provides that, upon termination of the merger agreement under specified circumstances, the Corporation will be obligated to pay a termination fee to ABB of $116 million. There is no assurance that the merger will be completed in a timely manner or at all. See Risk Factors.

 

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Item 7A.    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. 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.

Interest Rate Risk

The Corporation has a forward-starting amortizing interest rate swap for a notional amount of $200 million. The interest rate swap agreement expires on October 1, 2012. The interest rate swap hedges the Corporation’s exposure to changes in interest rates on $200 million of borrowings under its existing 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%. As of December 31, 2011, we recorded a swap liability of $7.2 million and a related contra equity amount, net of tax, of $4.4 million in accumulated other comprehensive income. Interest expense, net reflects a negligible benefit in 2011, 2010 and 2009 for the ineffective portion of the swap.

The following table reflects our interest rate sensitive derivative financial instruments as of December 31, 2011:

 

     Expected Maturities During
Year Ended December 31,
  December  31,
2011
Fair Value
(Liability)
 
(In millions)    2012   2013   2014   2015   2016  

Maturities on floating to fixed interest rate swap

   $200           $ (7.2

Average pay rate

   4.86%          

Average receive rate

   1-month LIBOR          

Forward Foreign Exchange Contracts

The Corporation had no outstanding forward sale or purchase contracts as of December 31, 2011 or 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 December 31, 2011 or 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.

 

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Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX

 

Consolidated Financial Statements

  

Management’s Responsibility for Financial Statements

     40   

Management’s Report on Internal Control Over Financial Reporting

     40   

Reports of Independent Registered Public Accounting Firm

     41   

Consolidated Statements of Operations for 2011, 2010 and 2009

     43   

Consolidated Balance Sheets as of December 31, 2011 and 2010

     44   

Consolidated Statements of Cash Flows for 2011, 2010 and 2009

     45   

Consolidated Statements of Shareholders’ Equity and Comprehensive Income
for 2011,  2010 and 2009

     46   

Notes to Consolidated Financial Statements

     47   

Supplementary Financial Data (Unaudited)

     89   

 

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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

Management is responsible for the preparation, integrity and objectivity of the Corporation’s consolidated financial statements and related information appearing in this report. Management believes that the consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. The Corporation’s financial statements include amounts that are based on estimates and judgments which management believes are reasonable under the circumstances.

The independent registered public accounting firm, KPMG LLP, audits the Corporation’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).

The Board of Directors of the Corporation has an Audit Committee composed of non-management Directors. The committee meets periodically with financial management, the internal auditors and the independent registered public accounting firm to review accounting, control, auditing and financial reporting matters.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance that externally published financial statements can be relied upon and have been prepared in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision of and with the participation of management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment under the framework in Internal Control — Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2011. KPMG LLP, the independent registered public accounting firm that audited our consolidated financial statements, has issued an attestation report on our internal control over financial reporting as of December 31, 2011.

 

 

  

 

  

 

Dominic J. Pileggi    William E. Weaver, Jr.    David L. Alyea

Chairman and Chief

Executive Officer

(Principal Executive Officer)

  

Senior Vice President

and Chief Financial Officer (Principal Financial Officer)

   Vice President – Controller

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Thomas & Betts Corporation:

We have audited the accompanying consolidated balance sheets of Thomas & Betts Corporation and subsidiaries (the Corporation) as of December 31, 2011 and 2010, and the related consolidated statements of operations, cash flows, and shareholders’ equity and comprehensive income for each of the years in the three-year period ended December 31, 2011. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Thomas & Betts Corporation and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Thomas & Betts Corporation’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 17, 2012 expressed an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting.

/s/ KPMG LLP

KPMG LLP

Memphis, Tennessee

February 17, 2012

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Thomas & Betts Corporation:

We have audited Thomas & Betts Corporation’s (the Corporation) internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Thomas & Betts Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Thomas & Betts Corporation and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, cash flows, and shareholders’ equity and comprehensive income for each of the years in the three-year period ended December 31, 2011, and our report dated February 17, 2012 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

KPMG LLP

Memphis, Tennessee

February 17, 2012

 

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Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

 

     Years Ended December 31,  
     2011     2010     2009  

Net sales

   $ 2,297,531      $ 2,004,366      $ 1,832,708   

Cost of sales

     1,579,011        1,387,334        1,279,474   
  

 

 

   

 

 

   

 

 

 

Gross profit

     718,520        617,032        553,234   

Selling, general and administrative

     428,726        396,269        367,022   

Intangible asset impairment

                   5,794   
  

 

 

   

 

 

   

 

 

 

Earnings from operations

     289,794        220,763        180,418   

Interest expense, net

     (32,012     (35,124     (35,483

Loss on extinguishment of debt

                   (6,391

Other (expense) income, net

     742        (299     1,846   
  

 

 

   

 

 

   

 

 

 

Earnings from continuing operations before
income taxes

     258,524        185,340        140,390   

Income tax provision

     68,371        47,604        39,455   
  

 

 

   

 

 

   

 

 

 

Net earnings from continuing operations

     190,153        137,736        100,935   

Earnings from discontinued operations, net

            7,904        6,975   
  

 

 

   

 

 

   

 

 

 

Net earnings

   $ 190,153      $ 145,640      $ 107,910   
  

 

 

   

 

 

   

 

 

 

Basic earnings per share:

      

Continuing operations

   $ 3.68      $ 2.66      $ 1.93   

Discontinued operations

            0.16        0.14   
  

 

 

   

 

 

   

 

 

 

Net earnings

   $ 3.68      $ 2.82      $ 2.07   
  

 

 

   

 

 

   

 

 

 

Diluted earnings per share:

      

Continuing operations

   $ 3.60      $ 2.61      $ 1.91   

Discontinued operations

            0.15        0.13   
  

 

 

   

 

 

   

 

 

 

Net earnings

   $ 3.60      $ 2.76      $ 2.04   
  

 

 

   

 

 

   

 

 

 

Average shares outstanding:

      

Basic

     51,670        51,717        52,244   

Diluted

     52,783        52,777        52,958   

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

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Thomas & Betts Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands)

 

     As of December 31,  
     2011     2010  

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 552,256      $ 455,198   

Receivables, net of allowances of $85,569 and $78,766

     284,855        230,203   

Inventories

     236,409        220,250   

Deferred income taxes

     41,915        32,745   

Other current assets

     28,498        18,699   
  

 

 

   

 

 

 

Total Current Assets

     1,143,933        957,095   
  

 

 

   

 

 

 

Property, plant and equipment, net

     299,218        305,796   

Goodwill

     974,287        967,889   

Other intangible assets, net

     324,564        340,544   

Other assets

     81,719        61,069   
  

 

 

   

 

 

 

Total Assets

   $ 2,823,721      $ 2,632,393   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current Liabilities

    

Current maturities of long-term debt

   $ 339      $ 322   

Accounts payable

     213,052        190,839   

Accrued liabilities

     123,266        126,241   

Income taxes payable

     10,230        26,263   
  

 

 

   

 

 

 

Total Current Liabilities

     346,887        343,665   
  

 

 

   

 

 

 

Long-Term Liabilities

    

Long-term debt, net of current maturities

     574,416        574,090   

Long-term benefit plan liabilities

     207,705        141,998   

Deferred income taxes

     42,792        41,405   

Other long-term liabilities

     49,634        64,453   

Contingencies (Note 18)

    

Shareholders’ Equity

    

Common stock

     5,130        5,095   

Additional paid-in capital

     38,085        34,384   

Retained earnings

     1,710,998        1,520,845   

Accumulated other comprehensive income (loss)

     (151,926     (93,542
  

 

 

   

 

 

 

Total Shareholders’ Equity

     1,602,287        1,466,782   
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 2,823,721      $ 2,632,393   
  

 

 

   

 

 

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

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Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

 

     Years Ended December 31,  
     2011     2010     2009  

Cash Flows from Operating Activities:

      

Net earnings

   $ 190,153      $ 145,640      $ 107,910   

Adjustments:

      

Depreciation and amortization

     84,346        81,060        75,106   

Share-based compensation expense

     16,425        14,875        16,315   

Deferred income taxes

     11,722        (1,536     7,850   

Incremental tax benefits from share-based payment arrangements

     (6,437     (2,870     (247

Gain on sale of divested business

            (3,338       

Loss on extinguishment of debt

                   6,391   

Intangible asset impairment

                   5,794   

Changes in operating assets and liabilities, net of acquisitions and foreign exchange effects:

      

Receivables

     (48,085     (15,051     37,669   

Inventories

     (11,125     (6,013     74,815   

Accounts payable

     18,680        32,209        (36,456

Accrued liabilities

     (1,223     7,319        (40,109

Income taxes payable

     (15,250     4,348        1,580   

Pension and other postretirement benefits

     2,920        14,698        30,201   

Funding to qualified pension plans

     (42,599     (2,386     (51,655

Other

     (5,219     6,757        2,698   
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     194,308        275,712        237,862   
  

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities:

      

Purchases of property, plant and equipment

     (45,453     (33,397     (41,106

Purchases of businesses, net of cash acquired

     (29,184     (175,503       

Proceeds from sale of businesses

            78,000          

Proceeds from sale of property, plant and equipment

     1,815        219        949   

Other

     252        2,560        5,066   
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (72,570     (128,121     (35,091
  

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities:

      

Repurchase of common shares

     (46,445     (66,461     (24,907

Stock options exercised

     27,421        19,706        2,974   

Revolving credit facility proceeds (repayments), net

            (65,000       

Repayment of debt and other borrowings

     (437     (70,781     (273,760

Proceeds from issuance of debt

                   247,965   

Incremental tax benefits from share-based payment arrangements

     6,437        2,870        247   

Debt issuance costs

     (2,231            (2,607

Redemption premium on early retirement of debt

                   (3,022
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (15,255     (179,666     (53,110
  

 

 

   

 

 

   

 

 

 

Effect of exchange-rate changes on cash and cash equivalents

     (9,425     8,660        36,458   
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     97,058        (23,415     186,119   

Cash and cash equivalents, beginning of year

     455,198        478,613        292,494   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of year

   $ 552,256      $ 455,198      $ 478,613   
  

 

 

   

 

 

   

 

 

 

Cash payments for interest

   $ 33,365      $ 36,489      $ 36,940   

Cash payments for income taxes

   $ 78,797      $ 46,659      $ 31,240   

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

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Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

(In thousands)

 

    Common Stock     Additional
Paid-In
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income
(Loss)
    Comprehensive
Income
(Loss)
    Total  
    Shares     Amount            

Balance at December 31, 2008

    53,289      $ 5,263      $ 69,082      $ 1,267,295      $ (196,983     $ 1,144,657   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net earnings

                         107,910             $ 107,910        107,910   

Other comprehensive income (loss):

             

Cumulative translation adjustment

                                       70,537        70,537   

Unrealized gain (loss) on interest rate swap

                                       6,762        6,762   

Defined benefit pension and other post
retirement plans

                                       16,674        16,674   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

                                93,973        93,973          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

                                     $ 201,883          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Repurchase of common shares

    (1,000     (100     (24,807                     (24,907

Stock options and incentive awards

    310        14        3,512                        3,526   

Share-based compensation

           2        16,394                        16,396   

Tax benefits (deficits) realized from share-based
payment arrangements

                  (346                     (346
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Balance at December 31, 2009

    52,599      $ 5,179      $ 63,835      $ 1,375,205      $ (103,010     $ 1,341,209   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net earnings

                         145,640             $ 145,640        145,640   

Other comprehensive income (loss):

             

Cumulative translation adjustment

                                       5,205        5,205   

Unrealized gain (loss) on interest rate swap

                                       4,552        4,552   

Defined benefit pension and other post
retirement plans

                                       (289     (289
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

                                9,468        9,468          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

                                     $ 155,108          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Repurchase of common shares

    (1,575     (158     (66,303                     (66,461

Stock options and incentive awards

    839        73        19,643                        19,716   

Share-based compensation

           1        14,823                        14,824   

Tax benefits (deficits) realized from share-based
payment arrangements

                  2,386                        2,386   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Balance at December 31, 2010

    51,863      $ 5,095      $ 34,384      $ 1,520,845      $ (93,542     $ 1,466,782   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net earnings

                         190,153             $ 190,153        190,153   

Other comprehensive income (loss):

             

Cumulative translation adjustment

                                       (10,860     (10,860

Unrealized gain (loss) on interest rate swap

                                       8,669        8,669   

Defined benefit pension and other post
retirement plans

                                       (56,193     (56,193
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

                                (58,384     (58,384       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

                                     $ 131,769          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Repurchase of common shares

    (1,000     (100     (46,345                     (46,445

Stock options and incentive awards

    882        134        27,462                        27,596   

Share-based compensation

           1        16,353                        16,354   

Tax benefits (deficits) realized from share-based
payment arrangements

                  6,231                        6,231   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Balance at December 31, 2011

    51,745      $ 5,130      $ 38,085      $ 1,710,998      $ (151,926     $ 1,602,287   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Preferred Stock: Authorized 1,000,000 shares, par value $0.10 per share. None issued.

Common Stock: Authorized 250,000,000 shares, par value $0.10 per share.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

1.    Nature of Operations

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. The Corporation is 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. The Corporation has operations in over 20 countries. Manufacturing, marketing and sales activities are concentrated primarily in North America and Europe. Thomas & Betts pursues growth through market penetration, new product development and acquisitions.

The Corporation sells its products through the following channels: 1) electrical, utility and heating, ventilation and air-conditioning distributors; 2) through mass merchandisers, catalog merchandisers and home improvement centers; and 3) directly to original equipment manufacturers, utilities and certain end-users.

2.    Summary of Significant Accounting Policies

Basis of Presentation:    The consolidated financial statements include the accounts of the Corporation and its controlled domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to prior periods to conform to the current year presentation.

Use of Estimates:    The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the applicable reporting period. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates.

Cash and Cash Equivalents:    Cash equivalents consist of high-quality money market investments and other investments with maturities at the date of purchase of less than 90 days that have a low risk of change in value. Foreign currency cash flows have been converted to U.S. dollars at applicable weighted-average exchange rates or the exchange rates in effect at the time of the cash flows, where determinable.

Revenue Recognition:    The Corporation recognizes 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. The Corporation also recognizes 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 the Corporation’s 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,

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

2.    Summary of Significant Accounting Policies (Continued)

 

primarily in the 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. The Corporation provides allowances for doubtful accounts when credit losses are both probable and estimable.

Foreign Currency Translation:    Financial statements of international subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted-average exchange rate for each period for revenues, expenses, gains and losses. Where the local currency is the functional currency, translation adjustments are recorded as accumulated other comprehensive income (loss). Where the transaction currency differs from the functional currency, translation adjustments are recorded in income.

Credit Risk:    Credit risk with respect to trade receivables is not highly concentrated as a large number of customers comprise the Corporation’s customer base and they are dispersed across many different industries and geographic areas.

Inventory Valuation:    Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

Property, Plant and Equipment:    Property, plant and equipment are stated at cost. Expenditures for maintenance and repair are charged to expense as incurred. Major renewals and betterments that significantly extend the lives of assets are capitalized. Depreciation is computed principally on the straight-line method over the estimated useful lives of the assets, which range principally from five to 45 years for buildings, three to 10 years for machinery and equipment, and the lesser of the underlying lease term or 10 years for land and leasehold improvements.

Goodwill and Other Intangible Assets:    The Corporation applies the acquisition (purchase) method of accounting for all business combinations. Under this method, all assets and liabilities acquired in a business combination, including goodwill, indefinite-lived intangibles and other intangibles, are recorded at fair value. The purchase price allocation requires subjective 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. Other intangible assets as of December 31, 2011 and 2010 include identifiable intangible assets with indefinite lives totaling approximately $110 million and $104 million, respectively, and identifiable intangible assets with finite lives totaling approximately $214 million and $237 million, respectively. Intangible assets with indefinite lives are not amortized and intangible assets with finite lives are amortized over periods ranging from 2 to 15 years. For each amortizable intangible asset, the Corporation uses 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.

The Corporation performs an annual impairment test of goodwill and indefinite-lived intangible assets. The Corporation performs its 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, the Corporation considers, among other things, the trading level of its common stock, our market capitalization, changes in expected future cash flows

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

2.    Summary of Significant Accounting Policies (Continued)

 

and mergers and acquisitions involving companies in its industry. In evaluating when an interim assessment of indefinite-lived intangible assets is necessary, the Corporation reviews for significant events or significant changes in circumstances.

In conjunction with each test of goodwill the Corporation determines the fair value of each reporting unit and compares 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. The Corporation determines the fair value of its 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 assumptions consistent with those of market participants. 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. The Corporation’s determination of fair values as of the beginning of the fourth quarter of 2011 involved a weighting of 60% to the discounted cash flow approach and 30%—40% to the market multiple approach. Due to a low level of transactions during 2011, 0%—10% weighting was applied to the comparable transactions approach. The Corporation then reconciles the total values for all reporting units to its market capitalization and evaluates 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 the Corporation 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 management believes a market participant would use.

The Corporation’s annual assessment of goodwill and intangible assets with indefinite lives as of the beginning of the fourth quarter of 2011 and 2010 concluded that there was no impairment in either year.

Long-Lived Assets:    The Corporation reviews 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, the Corporation evaluates assets at the lowest level of identifiable cash flows for associated product groups. If the sum of the undiscounted expected future cash flows over the remaining useful life of the primary asset in the associated product groups is less than the carrying amount of the assets, the assets are considered to be

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

2.    Summary of Significant Accounting Policies (Continued)

 

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, the Corporation estimates fair values using the expected future discounted cash flows using assumptions consistent with those of market participants. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to dispose.

Income Taxes:    The Corporation uses the asset and liability method of accounting for income taxes. This method recognizes the expected future tax consequences of temporary differences between the book and tax bases of assets and liabilities and requires an evaluation of the realizability of deferred income tax assets based on a more-likely-than-not criteria. The Corporation recognizes the effect of income tax positions only if those positions are more-likely-than-not to be sustained upon examination by the relevant taxing authority.

The Corporation’s policy is to record interest and penalties associated with the underpayment of income taxes as a component of income tax expense.

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.

Pension and Other Postretirement Benefit Plans:    The Corporation and its subsidiaries have several defined benefit pension plans covering certain employees. These plans generally provide pension benefits that are based on compensation levels and years of service. Minimum annual required contributions to the plans, if any, are based on laws and regulations of the applicable countries. Substantially all domestic defined benefit pension plans are closed to new entrants. Future pension plan benefit accruals were suspended after December 31, 2010 in one of the Corporation’s major domestic pension plans covering non-bargaining employees and after December 31, 2011 at one location covered by Corporation’s domestic pension plan for bargaining unit employees.

The Corporation recognizes the overfunded or underfunded status of benefit plans in its consolidated balance sheets. Changes in funded status are recognized through comprehensive income in the year in which the change occurs. The Corporation uses the December 31 fiscal year end as the measurement date to account for the Corporation’s pension and other postretirement plans.

The Corporation provides certain health-care and life insurance benefits to certain retired employees. The Corporation is recognizing the estimated liability for those postretirement benefits over the estimated lives of the individuals covered and is not pre-funding that liability. All of these plans are closed to new entrants.

Earnings Per Share:    Basic earnings per share are computed by dividing net earnings (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share are computed by dividing net earnings by the sum of (1) the weighted-average number of shares of common stock outstanding during the period and (2) the potential dilution from stock options and nonvested restricted stock, using the treasury stock method.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

2.    Summary of Significant Accounting Policies (Continued)

 

Share-Based Payment Arrangements:    All share-based payments to employees are recognized as compensation expense in the Corporation’s consolidated financial statements based on their grant-date fair values over the requisite service period. Non-employee members of the Board of Directors are deemed to be employees for purposes of recognizing share-based compensation expense.

Fair Value Measurements:    The Corporation measures its “financial” assets and liabilities and certain “nonfinancial” assets and liabilities at fair value and utilizes the established GAAP framework for measuring fair value and disclosing information about fair value measurements. 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.

Derivative Instruments and Hedging Activities:    The Corporation recognizes all derivative instruments as either assets or liabilities in its consolidated balance sheets at fair value. Changes in fair value of derivatives are recorded currently in earnings unless specific hedge accounting criteria are met. For derivatives that qualify as cash flow hedges, the effective portion of changes in fair value of the derivative is reported in accumulated other comprehensive income and the ineffective portion is recognized in earnings in the current period. For derivatives that qualify as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. The Corporation formally assesses, both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective, the Corporation will discontinue hedge accounting prospectively.

3.    Acquisitions & Divestitures

2011 Acquisition

AmbiRad Group

In July 2011, the Corporation acquired 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

During 2010, the Corporation completed three acquisitions: Cable Management Group, Ltd. (“CMG”), PMA AG (“PMA”) and JT Packard & Associates, Inc. (“JT Packard”).

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

3.    Acquisitions & Divestitures (Continued)

 

The following is supplemental cash flow information regarding the Corporation’s acquisitions in 2010:

 

(In millions)

      

Fair value of assets acquired

   $ 318   

Less liabilities assumed

     (62
  

 

 

 

Net assets acquired

     256   

Less cash acquired

     (11
  

 

 

 

Total of purchase prices of businesses

     245   

Debt assumed (subsequently retired)

     (70
  

 

 

 

Purchases of businesses, net of cash acquired

   $ 175   
  

 

 

 

Cable Management Group, Ltd.

In October 2010, the Corporation acquired CMG, a leading global manufacturer of cable protection systems specified in industrial, infrastructure, and construction applications, for approximately $110 million. The purchase price consisted of cash of approximately $76 million and debt assumed of approximately $34 million. The debt assumed by the Corporation as part of this transaction was retired following completion of the acquisition.

CMG manufactures a broad range of metallic and non-metallic flexible conduit and fitting systems used to protect critical power and data systems from fire, dust, moisture, vibration and corrosion.

The results of CMG’s operations have been included in the consolidated financial statements of the Corporation since the acquisition date. Acquisition-related costs for the CMG acquisition (included in selling, general and administrative expenses) were not significant.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

3.    Acquisitions & Divestitures (Continued)

 

The following table summarizes fair values for the assets acquired and liabilities assumed at the date of acquisition:

 

(In millions)

      

Fair Value of Consideration:

  

Cash paid, net of cash acquired

   $ 76   
  

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

  

Current assets (primarily receivables and inventories)

   $ 15   

Property, plant and equipment

     7   

Identifiable intangible assets

     59   

Current liabilities

     (9

Debt assumed (subsequently retired)

     (34

Other long-term liabilities

     (17
  

 

 

 

Total identifiable net assets

     21   

Goodwill

     55   
  

 

 

 

Net cash paid

   $ 76   
  

 

 

 

The purchase price allocation resulted in goodwill of approximately $55 million and other intangible assets of approximately $59 million, all of which was assigned to the Corporation’s Electrical segment. Of the $59 million of intangible assets, approximately $11 million was assigned to intangible assets with indefinite lives (consisting of trade/brand names) and approximately $48 million was assigned to intangible assets with estimated lives up to 14 years (consisting primarily of customer relationships). Goodwill is not deductible for tax purposes.

PMA AG

In April 2010, the Corporation acquired 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 debt assumed by the Corporation as part of this transaction was retired following completion of the acquisition.

PMA manufactures high-quality polyamide resin-based flexible conduit and fittings used in a broad variety of industrial applications to protect energy and data cables from external forces such as vibration, heat, fire, cold and tensile stress.

The results of PMA’s operations have been included in the consolidated financial statements of the Corporation since the acquisition date. Acquisition-related costs for the PMA acquisition (included in selling, general and administrative expenses) were not significant.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

3.    Acquisitions & Divestitures (Continued)

 

The following table summarizes fair values for the assets acquired and liabilities assumed at the date of acquisition:

 

(In millions)

      

Fair Value of Consideration:

  

Cash paid, net of cash acquired

   $ 78   
  

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

  

Current assets (primarily receivables and inventories)

   $ 16   

Property, plant and equipment

     30   

Identifiable intangible assets

     60   

Current liabilities

     (6

Debt assumed (subsequently retired)

     (36

Other long-term liabilities

     (19
  

 

 

 

Total identifiable net assets

     45   

Goodwill

     33   
  

 

 

 

Net cash paid

   $ 78   
  

 

 

 

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 Corporation’s Electrical segment. Of the $60 million of intangible assets, approximately $12 million has been assigned to intangible assets with indefinite lives (consisting of trade/brand names) and approximately $48 million has been assigned to intangible assets with estimated lives up to 13 years (consisting primarily of customer relationships). Goodwill is not deductible for tax purposes.

JT Packard & Associates, Inc.

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. 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 JT Packard’s operations have been included in the consolidated financial statements of the Corporation since the acquisition date.

Divestiture

During 2010, the Corporation divested its non-strategic communications products business for $78 million. The operations associated with this business have been reflected as discontinued operations in the Corporation’s consolidated statements of operations. The sale resulted in a gain of $3.3 million that was included in discontinued operations. Discontinued operations in 2010 reflected net sales of approximately $53 million, earnings before income taxes of $35.0 million and net earnings of $7.9 million from the divested communications product business. Discontinued operations in 2009 reflected net sales of approximately $66 million, earnings before income taxes of $10.7 million and net earnings of $7.0 million from the divested communications product business.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

4.    Basic and Diluted Earnings Per Share

The following is a reconciliation of the basic and diluted earnings per share computations:

 

(In thousands, except per share data)    2011      2010      2009  

Net earnings from continuing operations

   $ 190,153       $ 137,736       $ 100,935   

Earnings from discontinued operations, net

             7,904         6,975   
  

 

 

    

 

 

    

 

 

 

Net earnings

   $ 190,153       $ 145,640       $ 107,910   
  

 

 

    

 

 

    

 

 

 

Basic shares:

        

Average shares outstanding

     51,670         51,717         52,244   
  

 

 

    

 

 

    

 

 

 

Basic earnings per share:

        

Continuing operations

   $ 3.68       $ 2.66       $ 1.93   

Discontinued operations

             0.16         0.14   
  

 

 

    

 

 

    

 

 

 

Net earnings

   $ 3.68       $ 2.82       $ 2.07   
  

 

 

    

 

 

    

 

 

 

Diluted shares:

        

Average shares outstanding

     51,670         51,717         52,244   

Additional shares on the potential dilution from stock options and nonvested restricted stock

     1,113         1,060         714   
  

 

 

    

 

 

    

 

 

 
     52,783         52,777         52,958   
  

 

 

    

 

 

    

 

 

 

Diluted earnings per share:

        

Continuing operations

   $ 3.60       $ 2.61       $ 1.91   

Discontinued operations

             0.15         0.13   
  

 

 

    

 

 

    

 

 

 

Net earnings

   $ 3.60       $ 2.76       $ 2.04   
  

 

 

    

 

 

    

 

 

 

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 options related to 269,000 shares of common stock in 2011, 1,811,000 shares in 2010 and 1,873,000 shares in 2009.

5.    Inventories

The following table reflects inventories at December 31, 2011 and 2010:

 

(In thousands)    2011      2010  

Finished goods

   $ 109,345       $ 106,998   

Work-in-process

     29,470         23,636   

Raw materials

     97,594         89,616   
  

 

 

    

 

 

 

Total inventories

   $ 236,409       $ 220,250   
  

 

 

    

 

 

 

 

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Notes to Consolidated Financial Statements

 

6.    Property, Plant and Equipment

The following table reflects property, plant and equipment at December 31, 2011 and 2010:

 

(In thousands)    2011      2010  

Land

   $ 32,590       $ 32,775   

Buildings

     206,239         201,866   

Machinery and equipment

     660,455         663,642   

Construction-in-progress

     12,293         12,412   
  

 

 

    

 

 

 

Gross property, plant and equipment

     911,577         910,695   

Less: Accumulated depreciation

     612,359         604,899   
  

 

 

    

 

 

 

Net property, plant and equipment

   $ 299,218       $ 305,796   
  

 

 

    

 

 

 

7.    Goodwill and Other Intangible Assets

The following table reflects activity for goodwill by segment during the three years ended December 31, 2011:

 

(In thousands)    Balance at
Beginning  of
Year
     Additions      Divestitures     Other  —
Primarily
Currency
Translation
    Balance at
End of
Year
 

2011

            

Electrical

   $ 902,478       $       $      $ (846   $ 901,632   

Steel Structures

     64,759                               64,759   

HVAC

     652         7,434                (190     7,896   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   $ 967,889       $ 7,434       $      $ (1,036   $ 974,287   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

2010

            

Electrical

   $ 836,582       $ 94,050       $ (28,317   $ 163      $ 902,478   

Steel Structures

     64,759                               64,759   

HVAC

     712                        (60     652   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   $ 902,053       $ 94,050       $ (28,317   $ 103      $ 967,889   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

2009

            

Electrical

   $ 814,948       $       $      $ 21,634      $ 836,582   

Steel Structures

     64,759                               64,759   

HVAC

     703                        9        712   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   $ 880,410       $       $      $ 21,643      $ 902,053   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The December 31, 2010 goodwill balance reflects a $28.3 million reduction as a result of the 2010 divestiture of the Corporation’s non-strategic communications business.

 

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Notes to Consolidated Financial Statements

 

7.    Goodwill and Other Intangible Assets (Continued)

 

The following table reflects activity for other intangible assets during the three years ended December 31, 2011:

 

(In thousands)   Balance at
Beginning  of
Year
    Additions     Impairment
Charges
    Amortization
Expense
    Other  —
Primarily
Translation
Adjustment
    Balance
at

End of
Year
 

2011

           

Intangible assets subject to amortization

  $ 328,177      $ 12,208      $      $      $ (287   $ 340,098   

Accumulated amortization

    (91,370                   (34,875     548        (125,697
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    236,807        12,208               (34,875     261        214,401   

Other Intangible assets not subject to amortization

    103,737        6,603                      (177     110,163   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 340,544      $ 18,811      $      $ (34,875   $ 84      $ 324,564   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2010

           

Intangible assets subject to amortization

  $ 227,920      $ 102,502      $      $      $ (2,245   $ 328,177   

Accumulated amortization

    (61,112                   (30,261     3        (91,370
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    166,808        102,502               (30,261     (2,242     236,807   

Other Intangible assets not subject to amortization

    77,122        27,627                      (1,012     103,737   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 243,930      $ 130,129      $      $ (30,261   $ (3,254   $ 340,544   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2009

           

Intangible assets subject to amortization

  $ 226,752      $      $      $      $ 1,168      $ 227,920   

Accumulated amortization

    (34,885                   (25,842     (385     (61,112
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    191,867                      (25,842     783        166,808   

Other Intangible assets not subject to amortization

    82,805               (5,794            111        77,122   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 274,672      $      $ (5,794   $ (25,842   $ 894      $ 243,930   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

During 2009, the Corporation concluded that the fair value associated with certain trade name intangible assets in the Electrical segment and HVAC segment were impaired by $4.6 million and $1.2 million, respectively.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

7.    Goodwill and Other Intangible Assets (Continued)

 

The following table reflects other intangible assets at December 31, 2011 and 2010:

 

(In thousands)    Gross
Amount
     Accumulated
Amortization
    Net
Amount
     Weighted
Average
Amortization
Period
 

2011

          

Other Intangible assets subject to amortization:

          

Customer Relationships

   $ 307,102       $ (107,992   $ 199,110         12 years   

Other

     32,996         (17,705     15,291         7 years   
  

 

 

    

 

 

   

 

 

    

Total

   $ 340,098       $ (125,697     214,401      
  

 

 

    

 

 

   

 

 

    

Other Intangible assets not subject to amortization:

          

Trade Names

          108,546      

Other

          1,617      
       

 

 

    

Total

          110,163      
       

 

 

    

Total other intangible assets

        $ 324,564      
       

 

 

    

2010

          

Other Intangible assets subject to amortization:

          

Customer Relationships

   $ 298,664       $ (77,714   $ 220,950         12 years   

Other

     29,513         (13,656     15,857         7 years   
  

 

 

    

 

 

   

 

 

    

Total

   $ 328,177       $ (91,370     236,807      
  

 

 

    

 

 

   

 

 

    

Other Intangible assets not subject to amortization:

          

Trade Names

          102,105      

Other

          1,632      
       

 

 

    

Total

          103,737      
       

 

 

    

Total other intangible assets

        $ 340,544      
       

 

 

    

Amortization of other intangible assets is included in selling, general and administrative (“SG&A”) expenses in the Corporation’s consolidated statements of operations.

Amortization expense estimates for each of the five years subsequent to 2011 are as follows:

 

(In millions)       

2012

   $ 34   

2013

     32   

2014

     30   

2015

     28   

2016

     25   

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

8.    Income Taxes

Overview

The Corporation’s income tax provisions on continuing operations for 2011, 2010 and 2009 were $68.4 million (effective rate of 26.4%), $47.6 million (effective rate of 25.7%), and $39.5 million (effective rate of 28.1%), respectively. The effective rate for all periods reflects benefits from the Corporation’s Puerto Rican manufacturing operations, which has a significantly lower effective tax rate than the Corporation’s overall blended tax rate. The 2010 effective rate reflects the impact of the release of a $1.5 million tax reserve associated with the resolution of an outstanding tax issue.

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.

Undistributed earnings of foreign subsidiaries amounted to $852 million at December 31, 2011. These earnings are considered to be indefinitely reinvested, and, accordingly, no provision for U.S. federal or state income taxes has been made.

Earnings from continuing operations before income taxes and income tax provision recorded by the Corporation in 2011, 2010 and 2009 is as follows:

 

(In thousands)    Pretax
Earnings
     Tax Provision      Tax
Rate
 

2011

   $ 258,524       $ 68,371         26.4

2010

   $ 185,340       $ 47,604         25.7

2009

   $ 140,390       $ 39,455         28.1

Discontinued operations in 2010 reflected income before taxes of $35.0 million, an income tax liability of $27.1 million (effective tax rate of 78%) and net earnings of $7.9 million. The effective tax rate reflects the impact from non-deductible goodwill associated with the divested communications products business and the reversal of a deferred tax asset associated with state tax credits which will not be realized due to the transaction.

Discontinued operations in 2009 reflected income before taxes of $10.7 million, an income tax liability of $3.7 million (effective tax rate of 35%) and net earnings of $7.0 million.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

8.    Income Taxes (Continued)

 

The relationship of domestic and foreign components of earnings from continuing operations before income taxes is as follows:

 

(In thousands)    2011      2010      2009  

Domestic(a)

   $ 25,733       $ 15,591       $ 15,535   

Foreign

     232,791         169,749         124,855   
  

 

 

    

 

 

    

 

 

 
   $ 258,524       $ 185,340       $ 140,390   
  

 

 

    

 

 

    

 

 

 

 

(a) Domestic earnings from continuing operations before income taxes in 2011, 2010 and 2009 included interest expense, net of $32.0 million, $35.1 million and $35.5 million, respectively. The amount of interest expense related to foreign earnings is negligible. Domestic earnings from continuing operations also include corporate expense of $43.1 million in 2011, $52.3 million in 2010 and $47.4 million in 2009.

The components of income tax provision (benefit) on earnings from continuing operations are as follows:

 

(In thousands)    2011     2010     2009  

Current

      

Federal

   $ (4,121   $ 4,820      $ 862   

Foreign

     59,919        44,701        29,313   

State

     968        1,175        1,016   
  

 

 

   

 

 

   

 

 

 

Total current provision

     56,766        50,696        31,191   
  

 

 

   

 

 

   

 

 

 

Deferred

      

Domestic

     14,865        (917     6,602   

Foreign

     (3,260     (2,175     1,662   
  

 

 

   

 

 

   

 

 

 

Total deferred provision (benefit)

     11,605        (3,092     8,264   
  

 

 

   

 

 

   

 

 

 
   $ 68,371      $ 47,604      $ 39,455   
  

 

 

   

 

 

   

 

 

 

The reconciliation between the U.S. federal statutory tax rate and the Corporation’s effective tax rate on earnings from continuing operations is as follows:

 

     2011     2010     2009  

Federal statutory tax rate

     35.0     35.0     35.0

Increase (reduction) resulting from:

      

State tax — net of federal tax benefit

     1.3        0.4        0.7   

Lower rate on income from Puerto Rico operations

     (4.9     (5.4     (6.7

Taxes on foreign earnings

     (4.8     (3.8     (2.3

Expiration/utilization of foreign net operating losses and tax credits

     1.0        (0.7     5.4   

Change in valuation allowance

     (0.9     0.7        (5.2

Other

     (0.3     (0.5     1.2   
  

 

 

   

 

 

   

 

 

 

Effective tax rate

     26.4     25.7     28.1
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

8.    Income Taxes (Continued)

 

The Corporation’s tax years are open for all U.S. state and federal jurisdictions from 2008 through 2011. Certain state tax years remain open for 2005 filings. International statutes vary widely, and the open years range from 2005 through 2011. Taxing authorities have the ability to review prior tax years to the extent utilized net operating loss and tax credit carryforwards relate to open tax years.

The components of the Corporation’s net deferred tax assets were:

 

(In thousands)    December 31,
2011
    December 31,
2010
 

Deferred tax assets

    

Pension and other benefit plans

   $ 78,276      $ 57,738   

Tax credit and loss carryforwards

     50,969        42,079   

Accrued employee benefits

     25,748        25,040   

Accounts receivable

     11,554        10,634   

Inventories

     11,731        12,307   

Interest rate swap liability

     2,618        7,969   

Self-insurance liabilities

     8,275        7,920   

Environmental liabilities

     5,038        4,360   

Other

     2,154        5,103   
  

 

 

   

 

 

 

Total gross deferred tax assets

     196,363        173,150   

Valuation allowance

     (21,402     (23,835
  

 

 

   

 

 

 

Net deferred tax assets

     174,961        149,315   
  

 

 

   

 

 

 

Deferred tax liabilities

    

Acquired intangibles

     (77,949     (79,685

Property, plant and equipment

     (33,747     (25,995

Goodwill

     (32,328     (25,486

Other

     (6,306     (5,779
  

 

 

   

 

 

 

Total deferred tax liabilities

     (150,330     (136,945
  

 

 

   

 

 

 

Net deferred tax assets

   $ 24,631      $ 12,370   
  

 

 

   

 

 

 

Balance Sheet Reconciliation

    

Current deferred income tax assets

   $ 41,915      $ 32,745   

Non-current deferred income tax assets

     27,417        22,850   

Current deferred income tax liabilities

     (1,909     (1,820

Long-term deferred income tax liabilities

     (42,792     (41,405
  

 

 

   

 

 

 

Net deferred tax assets

   $ 24,631      $ 12,370   
  

 

 

   

 

 

 

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

8.    Income Taxes (Continued)

 

A detail of net deferred tax assets associated with tax credits and loss carryforwards is as follows:

 

(In thousands)    December 31,
2011
     Expiration
Dates

Tax credit and loss carryforwards

     

U.S. federal net operating loss carryforwards

   $ 9,412       2031

U.S. federal income tax credits

     497       2031

U.S. state net operating loss carryforwards

     19,523       2012 – 2031

U.S. foreign income tax credits

     10,456       2015

U.S. state income tax credits

     2,121       2012 – 2026

Foreign net operating loss carryforwards with no expiration dates

     8,086      

Foreign net operating loss carryforwards

     874       2012 – 2019
  

 

 

    

Total tax credit and loss carryforwards

   $ 50,969      
  

 

 

    

The gross amount of net operating loss carryforwards is $340 million. The loss carryforwards are composed of $296 million of U.S. federal and state net operating loss carryforwards and $44 million of foreign net operating loss carryforwards.

As of December 31, 2011, the Corporation has no reserves for unrecognized tax benefits.

Valuation Allowances

The valuation allowance for deferred tax assets decreased by $2.4 million in 2011 primarily due to utilization and expiration of foreign net operating losses. The valuation allowance for deferred tax assets increased by $1.2 million in 2010 due to increased foreign net operating losses, and decreased by $7.3 million in 2009 due to expiration of foreign net operation losses and foreign tax credits. The majority of the $21.4 million valuation allowance as of December 31, 2011 relates to foreign net operating loss carryforwards and foreign income tax credit carryforwards and reflects management’s assessment that the probability of generating sufficient taxable income in certain foreign jurisdictions in the future does not meet the more-likely-than-not threshold.

Realization of the deferred tax assets is dependent upon the Corporation’s ability to generate sufficient future taxable income and, if necessary, execution of tax planning strategies. Management believes that it is more-likely-than-not that future taxable income, based on tax laws in effect as of December 31, 2011, will be sufficient to realize the recorded deferred tax assets, net of the existing valuation allowance, at December 31, 2011. Projected future taxable income is based on management’s forecast of the operating results of the Corporation, and there can be no assurance that such results will be achieved. Management periodically reviews such forecasts in comparison with actual results and expected trends. In the event management determines that sufficient future taxable income may not be generated to fully realize the net deferred tax assets, the Corporation will increase the valuation allowance by a charge to income tax expense in the period of such determination. Additionally, if events change in subsequent periods which indicate that a previously recorded valuation allowance is no longer needed, the Corporation will decrease the valuation allowance by providing an income tax benefit in the period of such determination.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

9.    Fair Value of Financial Instruments

The Corporation’s financial instruments include cash and cash equivalents, marketable securities, short-term trade receivables and payables and debt. Included in cash and cash equivalents are money market funds which are valued based on the published net asset value (“NAV”). 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 December 31, 2011 and 2010, except that, based on the borrowing rates available to the Corporation under current market conditions, the fair value of long-term debt (including current maturities) was approximately $601 million at December 31, 2011 and approximately $588 million at December 31, 2010.

10.    Debt

The Corporation’s long-term debt at December 31, 2011 and 2010 was:

 

 

(In thousands)    December 31,
2011
     December 31,
2010
 

Senior credit facility due August 2016(a)

   $       $   

Senior credit facility due October 2012(a)

     325,000         325,000   

Unsecured notes:

     

5.625% Senior Notes due 2021(b)

     248,570         248,301   

Other, including capital leases

     1,185         1,111   
  

 

 

    

 

 

 

Long-term debt (including current maturities)

     574,755         574,412   

Less current maturities

     339         322   
  

 

 

    

 

 

 

Long-term debt, net of current maturities

   $ 574,416       $ 574,090   
  

 

 

    

 

 

 

 

(a) Interest is paid monthly.

 

(b) Interest is paid semi-annually.

Principal payments due on long-term debt including capital leases consisted of the following at December 31, 2011:

 

 

(In thousands)       

2012

   $ 325,339   

2013

     678   

2014

     168   

2015

       

2016

       

Thereafter

     248,570   
  

 

 

 
   $ 574,755   
  

 

 

 

As of December 31, 2011 and 2010, the Corporation had outstanding $250 million of 5.625% Senior Notes due 2021. During 2009, the Corporation issued $250 million 5.625% senior notes due 2021 and used a portion of the net proceeds to retire $125 million of 7.25% notes due 2013 and

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

10.    Debt (Continued)

 

repay $95 million of outstanding indebtedness on its revolving credit facility. The Corporation recognized a loss on extinguishment of debt of $6.4 million during 2009 associated with the early repayment of notes due 2013.

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 December 31, 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, plus a margin based on our credit rating.

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 based upon our current credit rating.

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 $17.7 million at December 31, 2011. The letters of credit relate primarily to third-party insurance claims processing.

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 December 31, 2011 amounted to $2.4 million. The letters of credit relate primarily to environmental assurances. As borrowings and letters of credit under the facility are reduced, the amount of the facility will decrease.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

10.    Debt (Continued)

 

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 December 31, 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 outstanding balance of the existing revolving credit facility has been classified as long-term debt based on the Corporation’s ability and intent to refinance this debt on a long-term basis through use of funds available under its new revolving credit facility or through borrowings in private or public capital markets.

The Corporation has a EUR 10 million (approximately US$13.1 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 December 31, 2011 and 2010. Outstanding letters of credit which reduced availability under the European facility amounted to EUR 1.0 million (approximately US$1.4 million) at December 31, 2011.

The Corporation has a CAN 10 million (approximately US$9.8 million) committed revolving credit facility with a Canadian 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 matures in 2016, and no borrowings were outstanding as of December 31, 2011 and 2010.

As of December 31, 2011, the Corporation’s aggregate availability of funds under its credit facilities is approximately $504 million, after deducting outstanding letters of credit. The Corporation has the option, at the time of drawing funds under any of the credit facilities, of selecting an interest rate based on a number of benchmarks including LIBOR, the federal funds rate, or the prime rate of the agent bank.

As of December 31, 2011, the Corporation also had letters of credit in addition to those discussed above that do not reduce availability under the Corporation’s credit facilities. The Corporation had $2.8 million of such additional letters of credit that relate primarily to third-party insurance claims processing, performance guarantees, performance bonds 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.

Interest Rate Swap Agreements

The Corporation has a forward-starting amortizing interest rate swap for a notional amount of $200 million. The interest rate swap agreement expires on October 1, 2012. The interest rate swap hedges the Corporation’s exposure to changes in interest rates on $200 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”)

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

11.    Derivative Instruments (Continued)

 

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 $7.2 million as of December 31, 2011 and $21.3 million as of December 31, 2010. This swap is measured at fair value at the end of each reporting period. The Corporation’s fair value estimate was determined using significant unobservable inputs and assumptions (Level 3) and, in addition, the liability valuation reflects the Corporation’s credit standing. The valuation technique utilized by the Corporation to calculate the swap fair value is the income approach. Using inputs for current market expectations of LIBOR rates, Eurodollar futures prices, treasury yields and interest rate swap spreads, this approach compares the present value of a constructed zero coupon yield curve and the present value of an extrapolated forecast of future interest rates. This determined value is then reduced by a credit valuation adjustment that takes into effect the current credit risk of the interest rate swap counterparty or the Corporation, as applicable. The credit valuation adjustment was negligible as of December 31, 2011 and 2010.

The Corporation’s balance of accumulated other comprehensive income has been reduced by $4.4 million, net of tax of $2.7 million, as of December 31, 2011 and $13.1 million, net of tax of $8.0 million, as of December 31, 2010 to reflect the above interest rate swap liability.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

11.    Derivative Instruments (Continued)

 

The following is a reconciliation associated with the interest rate swap of the fair value activity using Level 3 inputs during 2011 and 2010:

 

 

     Fair Value
Measures
(Level 3)
 
(In millions)    December 31,
2011
    December 31,
2010
 

Asset (liability) at beginning of year

   $ (21.3   $ (28.7

Total realized/unrealized gains or losses:

    

Included in earnings

     (15.1     (18.0

Increase (decrease) in fair value included in comprehensive income

     14.0        7.3   

Settlements

     15.2        18.1   
  

 

 

   

 

 

 

Asset (liability) at end of year

   $ (7.2   $ (21.3
  

 

 

   

 

 

 

Interest expense, net reflects a negligible benefit in 2011, 2010 and 2009 for the ineffective portion of the swap.

Forward Foreign Exchange Contracts

The Corporation had no outstanding forward sale or purchase contracts as of December 31, 2011 or 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 December 31, 2011 or 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.

 

Page 67 of 96


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

12.    Share-Based Payment Arrangements

As of December 31, 2011, 2010 and 2009, the Corporation has equity compensation plans for key employees and for non-employee directors. Amounts recognized in the consolidated financial statements with respect to the Corporation’s plans are as follows:

 

 

(In thousands)    2011     2010     2009  

Total cost of share-based payment plans during the year

   $ 16,354      $ 14,553      $ 16,243   

Amounts capitalized in inventories during the year

     (1,483     (1,427     (1,476

Amounts recognized in income during the year for amount previously capitalized

     1,554        1,478        1,395   
  

 

 

   

 

 

   

 

 

 

Amounts charged against income during the year, before income tax benefit

     16,425        14,604        16,162   

Related income tax benefit recognized in income during the year

     (6,242     (5,550     (6,142
  

 

 

   

 

 

   

 

 

 

Share-based payments compensation expense, net of tax

   $ 10,183      $ 9,054      $ 10,020   
  

 

 

   

 

 

   

 

 

 

Awards granted with features that shorten the requisite service period, such as retirement eligibility, are amortized over the minimum period an employee is required to provide service to vest in the award. The 2011 net of tax share-based compensation expense reflected approximately $2 million of accelerated amortization over periods shorter than the stated service periods. The 2010 and 2009 net of tax share-based compensation expense reflected approximately $3 million each of accelerated amortization over periods shorter than the stated service periods.

Stock Options

The Corporation’s option grants qualify for classification as equity and such grants contain no provisions to allow an employee to force cash settlement by the Corporation. The Corporation’s stock options do not contain future market or performance conditions. The fair value of option grants has been estimated on the grant date using a Black-Scholes-Merton option-pricing model. The measurement date is the grant date. The Corporation has elected a straight-line amortization method over the requisite service period (vesting period). The Corporation’s current estimate of forfeitures ranges from 1.0% to 6.25%. Compensation expense associated with option grants was recorded as SG&A expense and cost of sales, similar to other compensation expense.

The Corporation has three homogenous groups which are expected to have different option exercise behaviors: executive management, non-executive management and the Board of Directors. Expected lives of share options were derived from historical data. The risk-free rate is based on the U.S. Treasury yield curve for the expected terms. Expected volatility is based on a combination of historical volatility of the Corporation’s common stock and implied volatility from traded options in the Corporation’s common stock.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

12.    Share-Based Payment Arrangements (Continued)

 

The following are assumptions used in Black-Scholes-Merton valuations:

 

 

     2011      2010      2009  

Weighted-average volatility

     40%         40%         40%-45%   

Expected dividends

     —%         —%         —%   

Expected lives in years

     4.5-5.5         4.5-5.5         4.0-5.0   

Risk-free rate

     1.00%         1.75%-2.5%         2.00%-2.25%   

The following is a summary of option transactions:

 

 

     Number of
Shares
    Weighted-
Average
Exercise
Price
     Weighted-
Average
Contractual
Term
     Aggregate
Intrinsic  Value
 
                  (Years)      (In thousands)  

Outstanding at December 31, 2010

     4,077,681      $ 34.30         6.81       $ 57,210   

Granted

     400,615        52.70         

Exercised

     (790,207     34.69         

Forfeited or expired

     (20,263     38.01         
  

 

 

   

 

 

       

Outstanding at December 31, 2011

     3,667,826      $ 36.21         6.62       $ 67,500   
  

 

 

   

 

 

       

Exercisable at December 31, 2011

     2,704,647      $ 32.50         5.74       $ 59,819   
  

 

 

   

 

 

       

The weighted-average grant date fair value of options granted during 2011 was $19.38 per share, during 2010 was $17.50 per share and during 2009 was $13.35 per share. The total intrinsic value of options exercised during 2011 was $15.8 million, during 2010 was $12.9 million and during 2009 was $1.6 million. As of December 31, 2011, there was $7.0 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted-average period of 2.1 years.

Nonvested Shares

The Corporation’s nonvested share (restricted stock) awards qualify for classification as equity and such awards contain no provisions to allow an employee to force cash settlement by the Corporation. The initial measurement date is the award date. The Corporation has elected a straight-line amortization method over the requisite service period (vesting period). The fair value of awards has been determined as the stock price on the award date. The Corporation’s current estimate of forfeitures is 1.0% to 6.25%. Compensation expense associated with nonvested restricted stock awards was recorded as SG&A expense and cost of sales, similar to other compensation expense.

 

Page 69 of 96


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

12.    Share-Based Payment Arrangements (Continued)

 

The following is a summary of nonvested shares (restricted stock) transactions:

 

 

     Number
of
Shares
    Weighted-
Average
Grant Date
Fair Value
 

Nonvested at December 31, 2010

     637,656      $ 31.69   

Granted

     90,883        52.96   

Vested

     (400,675     26.74   

Forfeited

     (8,815     30.83   
  

 

 

   

Nonvested at December 31, 2011

     319,049      $ 43.98   
  

 

 

   

As of December 31, 2011, there was $8.2 million of total unrecognized compensation cost related to nonvested restricted stock. That cost is expected to be recognized over a weighted-average period of 2.2 years. The total grant date fair value of restricted stock that vested during 2011 was $10.7 million, during 2010 was $6.3 million and during 2009 was $4.2 million.

Performance Units

The Corporation awarded 36,742 and 35,292 performance units in December 2011 and December 2010 to the executives and key management under the 2008 Stock Incentive Plan. The performance units are subject to a requisite 3-year service period beginning January 1 following each award date and are subject to a market condition calculated based on the Corporation’s relative total shareholder return (“TSR”) against the S&P 400 MidCap Index. Upon satisfaction of the vesting terms, units will convert to shares of the Corporation’s common stock with 50% payout upon achievement of TSR in the 35th percentile (minimum), 100% payout upon achievement of the 50th percentile (mid-point) and 200% payout upon achievement of the 80th percentile (maximum).

The Corporation recognized $0.9 million of share-based compensation in 2011 associated with the performance units awarded in 2010. The fair value of the performance units awarded in 2010 was $69.08 and was determined based upon Monte Carlo simulation technique. The assumptions used in determining the fair value include the stock price on the measurement date of $48.30; a dividend yield of 0%; expected volatility of approximately 49%; a risk-free interest rate of approximately 1% and an expected term of 3 years. Because the service inception date for the 2011 award did not begin until January 1, 2012, no share-based compensation expense was recognized in 2011 for these awards.

2008 Stock Incentive Plan

In May 2008, the Corporation’s shareholders approved the Thomas & Betts Corporation 2008 Stock Incentive Plan, which expires in 2018, unless terminated earlier. Pursuant to the terms of the plan, the Corporation may grant to certain employees and nonemployee directors of the Corporation and certain of its subsidiaries, incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock grants and stock credits. The maximum number of shares of the Corporation’s common stock available under the plan for all types of awards is 4,500,000. The maximum number of shares of the Corporation’s common stock available under the plan for restricted

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

12.    Share-Based Payment Arrangements (Continued)

 

stock, restricted stock units, stock grants and stock credits is 825,000. Restricted stock represents nonvested shares, with compensation expense recognized over the requisite service period (vesting period). Option grants to purchase common stock for cash have a term not to exceed 10 years and a strike price not less than the fair market value on the grant date. For awards to employees under the plan, nonvested restricted stock awards cliff-vest in three years from the award date. Stock option grants to purchase common stock have graded-vesting of one-third increments beginning on the anniversary of the date of grant. Nonvested restricted stock awards to nonemployee directors cliff-vest in one year from the award date.

Change of Control Provisions

Upon a change of control, as defined in the Corporation’s plans, the restrictions applicable to nonvested restricted shares immediately lapse and all outstanding stock options will become fully vested and immediately exercisable.

Upon a change of control, as defined in the Corporation’s plans, the service condition applicable to the performance units immediately lapses and all outstanding performance units will become fully vested. The date of the change in control is considered the last day of the performance period. The number of performance units that would convert to shares of the Corporation’s common stock upon a change in control is equal to the TSR measured as of the last day of the performance period multiplied by the applicable payout percentage, as discussed above.

Recognized Tax Benefits

During 2011, 2010 and 2009, the Corporation recognized tax benefits (deficits) of $6.2 million, $2.4 million and $(0.3) million, respectively, related to the exercise of stock options and vesting of restricted stock. These adjustments were reflected in additional paid-in capital.

13.    Pension and Other Postretirement Benefits

Effective January 1, 2011, pension plan benefit accruals have been suspended for the domestic non-bargaining plan participants under the Thomas & Betts Pension Plan. The Corporation will provide as a replacement benefit certain non-elective contributions, including certain transition benefits, under one of its existing domestic defined contribution plans. Additionally during 2011, the Corporation and the Union representing collectively bargained employees at one of the locations covered by the Thomas & Betts Corporation Pension Plan for Bargaining Unit Employees approved a plan to discontinue the future accrual of future benefits after December 31, 2011. The Corporation will provide as a replacement benefit certain non-elective contributions, including certain transition benefits, under an existing domestic defined contribution plan.

 

Page 71 of 96


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

The following is information regarding the Corporation’s 2011 and 2010 domestic and international pension benefit and other postretirement benefit obligations:

 

 

     Pension Benefits     Other
Postretirement
Benefits
 
     2011     2010     2011     2010  
(In thousands)                         

Change in benefit obligation

        

Benefit obligation at January 1

   $ 585,850      $ 533,422      $ 19,299      $ 21,845   

Service cost

     4,102        10,800        6        5   

Interest cost

     29,044        29,044        791        917   

Plan participants’ contributions

     690        430        649        905   

Plan amendments

            107                 

Acquisitions(a)

            12,858                 

Actuarial loss (gain)

     61,065        36,022        81        (871

Foreign-exchange impact

     530        180                 

Curtailments/settlements

     (6,038     (6,993              

Benefits paid

     (28,765     (30,020     (2,647     (3,502
  

 

 

   

 

 

   

 

 

   

 

 

 

Benefit obligation at December 31

     646,478        585,850        18,179        19,299   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in plan assets

        

Fair value of plan assets at January 1

     456,269        419,711                 

Actual return on plan assets

     (3,994     51,538                 

Acquisitions(a)

            11,265                 

Employer contributions:

        

Qualified pension plans

     42,599        2,386                 

Non-qualified pension plans

     2,476        7,836                 

Postretirement benefit plans

                   1,998        2,597   

Plan participants’ contributions

     690        430        649        905   

Foreign-exchange impact

     794        (314              

Curtailments/settlements

     (4,810     (6,563              

Benefits paid

     (28,765     (30,020     (2,647     (3,502
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of plan assets at December 31

     465,259        456,269                 
  

 

 

   

 

 

   

 

 

   

 

 

 

Funded status:

        

Benefit obligation in excess of plan assets

   $ 181,219      $ 129,581      $ 18,179      $ 19,299   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

(a) During 2010, the Corporation assumed the benefit obligations of PMA AG.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

Pre-tax amounts recognized in the consolidated balance sheet for pension and other postretirement benefits included the following components:

 

 

     Pension Benefits     Other
Postretirement
Benefits
 
     2011     2010     2011      2010  
(In thousands)                          

Prepaid benefit cost (non-current asset)

   $ (14,927   $ (3,504   $       $   

Accrued benefit liability:

         

Current liability

     4,557        8,098        2,063         2,288   

Non-current liability

     191,589        124,987        16,116         17,011   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total accrued benefit liability

     196,146        133,085        18,179         19,299   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net amount recognized

   $ 181,219      $ 129,581      $ 18,179       $ 19,299   
  

 

 

   

 

 

   

 

 

    

 

 

 

Pre-tax amounts recognized in accumulated other comprehensive income consist of:

 

     Pension
Benefits
    Other
Postretirement
Benefits
 
     2011     2010     2011      2010  
(In thousands)                          

Net actuarial loss (gain)

   $ 273,475      $ 180,951      $ 722       $ 736   

Prior service cost (credit)

     3,824        5,744        130         (122

Net transition obligation (asset)

     (8     (29     766         1,533   
  

 

 

   

 

 

   

 

 

    

 

 

 
   $ 277,291      $ 186,666      $ 1,618       $ 2,147   
  

 

 

   

 

 

   

 

 

    

 

 

 

Assumed weighted-average rates used in determining the benefit obligations were:

 

 

     Pension Benefits     Other
Postretirement Benefits
 
     December 31,
2011
    December 31,
2010
    December 31,
2011
    December 31,
2010
 

Discount rate

     4.2     5.1     3.8     4.5

Rate of increase in compensation level

     2.9     3.1        

Reflected in the weighted-average rates above used in determining the pension benefit obligations are the U.S. discount rates of 4.2% for 2011 and 5.1% for 2010.

 

Page 73 of 96


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

The following information is for pension plans with plan assets in excess of accumulated benefit obligation:

 

 

(In thousands)

   December 31,
2011
     December 31,
2010
 

Projected benefit obligation

   $ 54,390       $ 72,432   

Accumulated benefit obligation

     53,393         67,264   

Fair value of plan assets

     68,625         72,105   

The following information is for pension plans with plan assets less than accumulated benefit obligation:

 

 

(In thousands)

   December 31,
2011
     December 31,
2010
 

Projected benefit obligation

   $ 592,088       $ 513,418   

Accumulated benefit obligation

     582,955         508,200   

Fair value of plan assets

     396,634         384,164   

The accumulated benefit obligation for all pension plans was $636.3 million at December 31, 2011 and $575.5 million at December 31, 2010.

The Corporation maintains non-qualified supplemental pension plans covering certain key employees which provide for benefit payments that exceed the limit for deductibility imposed by income tax regulations. The projected benefit obligation above related to these unfunded plans was $55.7 million at December 31, 2011 and $50.8 million at December 31, 2010.

Net periodic cost for the Corporation’s pension and other postretirement benefits for 2011, 2010 and 2009 included the following components:

 

 

    Pension Benefits     Other
Postretirement Benefits
 
(In thousands)   2011     2010     2009     2011     2010     2009  

Service cost

  $ 4,102      $ 10,800      $ 12,268      $ 6      $ 5      $ 6   

Interest cost

    29,044        29,044        30,096        791        917        1,238   

Expected return on plan assets

    (34,258     (32,975     (26,560                     

Plan net loss (gain) amortization

    5,885        12,336        15,172        107        (124     (138

Prior service cost (gain) amortization

    912        1,129        1,096        (252     (252     (252

Transition obligation (asset) amortization

    (21     (16     (10     767        766        766   

Curtailment and settlement loss/(gain)(a)

    1,417        642        1,958        (12              
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

  $ 7,081      $ 20,960      $ 34,020      $ 1,407      $ 1,312      $ 1,620   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

(a) Amounts in 2011 reflect a plan to freeze future benefits at one of the locations covered by the Thomas & Betts Pension Plan for Bargaining Unit Employees. Amounts in 2009 reflect a plan to freeze future benefits of The Thomas & Betts Pension Plan.

 

Page 74 of 96


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

The following table summarizes components included in accumulated other comprehensive income.

 

 

    Defined Benefit Pension and Other Postretirement Plans        

(In thousands)

  Net Actuarial
Gains  (Losses)
    Prior Service
Credit (Cost)
    Net Transition
Asset  (Obligation)
    Pension Related
Tax Valuation
Adjustment
    Included in
Accumulated
Other
Comprehensive
Income
 

Pre-Tax:

         

Balance at December 31, 2008

  $ (205,748   $ (7,415   $ (3,014   $      $ (216,177

Comprehensive Income (Loss)

    26,519        1,056        759               28,334   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2009

    (179,229     (6,359     (2,255            (187,843

Comprehensive Income (Loss)

    (2,458     737        751               (970
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2010

    (181,687     (5,622     (1,504            (188,813

Comprehensive Income (Loss)

    (92,510     1,668        746               (90,096
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

  $ (274,197   $ (3,954   $ (758   $      $ (278,909
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tax Impacts:

         

Balance at December 31, 2008

  $ 77,153      $ 2,699      $ 1,150      $ (10,977   $ 70,025   

Comprehensive Income (Loss)

    (10,969     (402     (289            (11,660
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2009

    66,184        2,297        861        (10,977     58,365   

Comprehensive Income (Loss)

    1,246        (278     (287            681   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2010

    67,430        2,019        574        (10,977     59,046   

Comprehensive Income (Loss)

    34,803        (615     (285            33,903   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

  $ 102,233      $ 1,404      $ 289      $ (10,977   $ 92,949   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net of Tax:

         

Balance at December 31, 2008

  $ (128,595   $ (4,716   $ (1,864   $ (10,977   $ (146,152

Comprehensive Income (Loss)

    15,550        654        470               16,674   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2009

    (113,045     (4,062     (1,394     (10,977     (129,478

Comprehensive Income (Loss)

    (1,212     459        464               (289
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2010

    (114,257     (3,603     (930     (10,977     (129,767

Comprehensive Income (Loss)

    (57,707     1,053        461               (56,193
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

  $ (171,964   $ (2,550   $ (469   $ (10,977   $ (185,960
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The remaining balance for pension related tax valuation adjustment relates to a prior income tax valuation allowance recognized in accumulated other comprehensive income. The December 31, 2011 balance of net actuarial losses, prior service costs, and net transition obligation expected to be amortized in 2012 is $10.8 million, $0.8 million and $0.8 million, respectively.

 

Page 75 of 96


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

The Corporation’s contributions to all qualified pension plans were $43 million in 2011, $2 million in 2010, and $52 million in 2009. The Corporation expects 2012 required contributions to its qualified pension plans to be minimal.

The following pension and other postretirement benefit payments, which reflect expected future service, as appropriate, are as follows:

 

 

(In millions)    Pension
Benefits
     Other  Post-
retirement
Benefits
 

2012

   $ 34.1       $ 2.1   

2013

     32.3         2.0   

2014

     52.4         1.9   

2015

     33.2         1.7   

2016

     34.6         1.6   

2017 – 2021

     176.0         6.5   
  

 

 

    

 

 

 

Expected benefit payments over next ten years

   $ 362.6       $ 15.8   
  

 

 

    

 

 

 

Assumed weighted-average rates used in determining the net periodic pension cost were:

 

     Pension Benefits     Other
Postretirement  Benefits
 
     2011     2010     2009     2011     2010     2009  

Discount rate

     5.1     5.6     6.3     4.5     5.0     6.3

Rate of increase in compensation level

     3.7     3.2     4.0            

Expected long-term rate of return on plan assets

     7.7     8.0     8.6            

Reflected in the weighted-average rates above used in determining the net periodic pension benefit cost are the U.S. discount rate of 5.1% for 2011, 5.6% for 2010 and 6.3% for 2009, and the U.S. expected long-term rate of return on plan assets of 8.0% for 2011, 8.3% for 2010 and 8.8% for 2009.

Certain actuarial assumptions, such as the assumed discount rate, the long-term rate of return on plan assets and the assumed health care cost trend rates have an effect on the amounts reported for net periodic pension and postretirement medical benefit expense as well as the respective benefit obligation amounts. The Corporation reviews external data and its own historical trends for health care costs to determine the health care cost trend rates for the postretirement medical benefit plans. The assumed discount rates represent long-term high quality corporate bond rates commensurate with liability durations of its plans. The long-term rates of return on plan assets used by the Corporation take into account expected forward-looking rates for the plans’ asset classes and the plans’ historical investment experience over a multi-year period, as well as, mix of plan asset investment types, current market conditions, investment practices of its Retirement Plans Committee, and advice from its actuaries.

 

Page 76 of 96


Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

The assumed annual increases in health care cost at December 31, 2011 and 2010 are:

 

 

     2011     2010  

Health care cost trend rate assumed for next year

     8.0     8.0

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)

     5.0     5.0

Year that the rate reaches the ultimate trend rate

     2019        2016   

Assumed health care cost trend rates have an effect on the amounts reported for the postretirement benefit plans. A one-percentage-point change in assumed annual increases in health care cost would have the following effects:

 

 

(In thousands)    1-Percentage-Point
Increase
     1-Percentage-Point
Decrease
 

Effect on total of service and interest cost

   $ 39       $ (35

Effect on postretirement benefit obligation

     986         (874

The financial objectives of the Corporation’s investment policy for pension plan assets are (1) to maximize returns in order to minimize contributions and long-term cost of funding pension liabilities, within reasonable and prudent levels of risk, (2) to match liability growth with the objective of fully funding benefits as they accrue and (3) to achieve annualized returns in excess of the applicable policy benchmark. The Corporation’s asset allocation targets are 43% U.S. domestic equity securities, 15% international equity securities, 26% fixed income and high yield debt securities and 16% other, including alternative investments.

The fair values of the Corporation’s pension plan assets at December 31, 2011 by asset class are as follows:

 

 

(In millions)    Total      Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
     Significant
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Asset Class:

           

Collective trust funds

   $ 309.4       $       $ 309.4       $   

Fixed income investments:

           

Fixed income mutual fund

     36.6         36.6                   

Other fixed income securities

     24.1         20.7         3.4           

Equity securities, primarily U.S.

     28.9         28.9                   

Hedge fund

     35.3                 35.3           

Other alternative investments

     19.6                         19.6   

Cash and equivalents

     11.4         11.4                   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at December 31, 2011

   $ 465.3       $ 97.6       $ 348.1       $ 19.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

The fair values of the Corporation’s pension plan assets at December 31, 2010 by asset class are as follows:

 

 

(In millions)    Total      Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
     Significant
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Asset Class:

           

Collective trust funds

   $ 309.5       $       $ 309.5       $   

Fixed income investments:

           

Fixed income mutual fund

     32.0         32.0                   

Other fixed income securities

     25.7         21.7         4.0           

Equity securities, primarily U.S.

     32.1         32.1                   

Hedge fund

     36.6                 36.6           

Other alternative investments

     18.8                         18.8   

Cash and equivalents

     1.6         1.6                   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at December 31, 2010

   $ 456.3       $ 87.4       $ 350.1       $ 18.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Collective trust funds:    Collective trust funds are comprised of units in commingled funds that are not publicly traded. The underlying assets in these funds (48% domestic equity securities, 30% foreign equity securities and 22% fixed income securities) are publicly traded on national securities exchanges and price quotes for the assets held by these funds are readily available. The investment strategies of these funds are to invest in specific sectors or securities consistent with the overall investment policy of the Corporation. A significant portion of the underlying assets in these funds are invested in domestic large-cap, mid-cap and small-cap equity securities. The collective trust funds are valued at the net asset value per unit as determined by the collective trusts as of the valuation date. The Corporation has elected as a practical expedient to reflect the collective trust fund balances on the basis of NAV. Collective trust funds have been classified as a Level 2 investment.

Fixed income investments:    Fixed income investments include an open-ended bond mutual fund comprised principally of U.S. government bonds. Fixed income investments also reflect directly held domestic and foreign government bonds and corporate bonds. Such investments are measured using quoted market prices which are readily available. These fixed income investments have been classified as a Level 1 investment. Fixed income investments also include asset and mortgage backed securities. The fair value of these investments is estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. These fixed income securities have been classified as a Level 2 investment.

Equity securities:    Equity securities represent directly held domestic and foreign common stocks. Such securities are publicly traded on national securities exchanges and price quotes for these assets are readily available. Equity securities have been classified as a Level 1 investment.

Hedge fund:    The Northern Trust Alpha Strategies Fund (“Fund”) operates as a “fund of funds” investing in a group of funds or other pooled investment vehicles (“sub-funds”) and the Fund’s

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

investment objective is to seek attractive risk-adjusted rates of return through investment in a diversified portfolio of assets. The Fund is valued based on NAV calculated by the sub-fund managers, as well as other considerations of the Fund manager. This information is generally not publicly available. Due to the Fund having a redemption period of 90 days or less, the Corporation has elected as a practical expedient to reflect the Fund fair value on the basis of NAV and has classified it as Level 2.

Other alternative investments:    Other alternative investments include a private equity partnership fund and a real estate partnership investment fund. The valuation of the private equity and private real estate partnership funds require significant judgment due to the absence of quoted market prices, the inherent lack of liquidity and the long-term nature of such assets. These assets are initially valued at cost, which approximates fair value, and are reviewed periodically utilizing available and relevant market data to determine if the carrying value of these assets should be adjusted. Other alternative investments also include insurance contracts whose values are based on net contributions made, plus earnings. The contract value approximates fair value. The insurance contract issuer is contractually obligated to repay the principal and a specified interest rate that is guaranteed to the participant. Other alternative investments are classified as a Level 3 investment. The valuation methodology is applied consistently from period to period.

The following is a reconciliation of the fair value activity of assets valued with fair value measurements using significant unobservable inputs:

 

 

     Fair Value
Measurements
Using Significant
Unobservable Inputs
(Level 3)
 
     Other Alternative Investments  
(In millions)    December 31, 2011     December 31, 2010  

Balance at beginning of period

   $ 18.8      $ 5.3   

Pension assets from acquisition

            11.4   

Actual return on plan assets

     1.5        1.7   

Purchases, sales and settlements

     (0.7     0.4   
  

 

 

   

 

 

 

Balance at end of period

   $ 19.6      $ 18.8   
  

 

 

   

 

 

 

Other Benefits

The Corporation sponsors defined contribution plans for its U.S. employees for which the Corporation makes matching contributions based on percentages of employee contributions and non-elective contributions. The cost of these plans was $15.7 million in 2011, $7.1 million in 2010 and $6.3 million in 2009.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

13.    Pension and Other Postretirement Benefits (Continued)

 

Multiemployer Defined Benefit Plans

The Corporation contributes to two multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

a. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

c. If the Corporation chooses to stop participating in either of its multiemployer plans, the Corporation may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Corporation’s participation in multiemployer plans for the annual periods ended December 31, 2011 and 2010, is outlined in the table below. For both plans, the Pension Protection Act (PPA) zone status for 2011 and 2010 is as of plan years ended December 31, 2010 and 2009, respectively. The zone status is based on information received from the plans and is certified by the respective plan actuaries. Among other factors, plans in the yellow zone are less than 80 percent funded and plans in the green zone are at least 80 percent funded. The last column lists the expiration dates of the collective-bargaining agreements to which the plans are subject. The plans utilized an amortization extension and the funding relief provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act in determining the zone status.

 

 

Pension Fund

 

Employee

Identification

Number/

Pension

Plan Number

  Pension
Protection Act
Zone Status
    Financial
Improvement
Plan
Status
Pending/
Implemented
  Contributions of
Thomas & Betts
(in thousands)
    Surcharge
Imposed
    Expiration Date
of Collective-
Bargaining
Agreement
 
    2011     2010       2011     2010     2009      

Boilermaker-Blacksmith National Pension Trust

  48-6168020 /001     Yellow        Green      Implemented   $ 1,377      $   967      $ 708        No        June 30, 2013   

IAM National Pension Fund

  51-6031295 /002     Green        Green      N/A     67        63        50        No        April 30, 2013   
         

 

 

   

 

 

   

 

 

     
  Total contributions:     $1,444        $1,030        $758       
         

 

 

   

 

 

   

 

 

     

 

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

14.    Leases

The Corporation and its subsidiaries are parties to various leases relating to plants, distribution facilities, office facilities, vehicles and other equipment. Related real estate taxes, insurance and maintenance expenses are normally obligations of the Corporation. Capitalized leases are not significant.

Future minimum payments under non-cancelable operating leases with initial or remaining terms greater than one year, consisted of the following at December 31, 2011:

 

 

(In thousands)    Operating
Leases
 

2012

   $ 16,721   

2013

     13,602   

2014

     9,208   

2015

     7,199   

2016

     4,687   

Thereafter

     6,792   
  

 

 

 

Total minimum operating lease payments

   $ 58,209   
  

 

 

 

Rent expense for operating leases was $30.3 million in 2011, $28.4 million in 2010 and $30.1 million in 2009.

15.    Other Financial Data

Repurchase of Common Shares

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. Through December 31, 2011, the Corporation repurchased, with available cash resources, 1,500,000 common shares through open-market transactions under this plan. During 2011, the Corporation repurchased, with available cash resources, 1,000,000 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.

In 2008, the Corporation’s Board of Directors approved a share repurchase plan that authorized the Corporation to buy up to 5,000,000 of our common shares. Under this authorization, the Corporation repurchased with available cash resources 4,500,000 (1,075,000 in 2010; 1,000,000 in 2009) common shares through open-market transactions. This share repurchase authorization expired in October 2010.

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

15.    Other Financial Data (Continued)

 

Accumulated Other Comprehensive Income

The following table summarizes the components of accumulated other comprehensive income (loss), net of taxes.

 

 

(In thousands)    December 31,
2011
    December 31,
2010
 

Cumulative translation adjustment

   $ 38,455      $ 49,315   

Net actuarial gains (losses)

     (171,964     (114,257

Prior service credit (cost)

     (2,550     (3,603

Net transition asset (obligation)

     (469     (930

Pension related tax valuation adjustment(a)

     (10,977     (10,977

Unrealized gain (loss) on interest rate swap

     (4,421     (13,090
  

 

 

   

 

 

 

Accumulated other comprehensive income (loss)

   $ (151,926   $ (93,542
  

 

 

   

 

 

 

 

 

(a) The remaining balance at December 31, 2011 for pension related tax valuation adjustment relates to a prior year income tax valuation allowance recognized in accumulated other comprehensive income.

Other Financial Disclosures

Depreciation expense was $49.5 million in 2011, $49.3 million in 2010 and $47.5 million in 2009.

Research, development and engineering expenditures were $37.4 million in 2011, $35.7 million in 2010 and $33.5 million in 2009. These expenditures are included in cost of sales.

The Corporation expenses the cost of advertising as it is incurred. Total advertising expense was $15.5 million in 2011, $16.9 million in 2010 and $15.9 million in 2009.

Interest expense, net in the accompanying consolidated statements of operations includes interest income of $2.9 million in 2011, $2.5 million in 2010 and $0.8 million in 2009.

Foreign exchange gain (loss) included in the accompanying consolidated statements of operations was $0.8 million in 2011, $(0.3) million in 2010 and $1.8 million in 2009.

Accrued liabilities included salaries, fringe benefits and other compensation of $61.0 million in 2011 and $57.2 million in 2010.

The following table reflects activity for accounts receivable allowances, sales discounts and allowances, quantity and price rebates, and bad debts during the three years ended December 31, 2011:

 

 

(In thousands)

  Balance at
Beginning
of Year
    Acquired
Balances
    Divested
Balances
    Provisions     Deductions     Balance at
End
of Year
 

2011

  $ 78,766      $ 419      $      $ 311,353      $ (304,969   $ 85,569   

2010

  $ 71,817      $ 759      $ (263   $ 264,435      $ (257,982   $ 78,766   

2009

  $ 91,419      $      $      $ 252,062      $ (271,664   $ 71,817   

 

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Table of Contents

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

16.    Segment and Other Related Disclosures

The Corporation has three reportable segments: Electrical, Steel Structures and HVAC. The Corporation’s reportable segments are based primarily on product lines and represent the primary mode used to assess allocation of resources and performance. The Corporation evaluates its business segments primarily on the basis of segment earnings, with segment earnings defined as earnings before corporate expense, depreciation and amortization expense, share-based compensation expense, interest, income taxes and certain other items. Corporate expense includes legal, finance and administrative costs. The Corporation has no material inter-segment sales.

The Electrical segment designs, manufactures and markets thousands of different electrical connectors, components and other products for industrial, construction and utility applications. The Steel Structures segment designs, manufactures and markets highly engineered steel transmission structures. The HVAC segment designs, manufactures and markets heating and ventilation products for commercial and industrial buildings. The Corporation’s U.S. Electrical and International Electrical operating segments have been aggregated in the Electrical reporting segment since they have similar economic characteristics as well as similar products and services, production processes, types of customers and methods used for distributing their products.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

16.    Segment and Other Related Disclosures (Continued)

 

Segment Information

 

 

(In thousands)    2011      2010      2009  

Net Sales

        

Electrical

   $ 1,905,221       $ 1,678,645       $ 1,488,334   

Steel Structures

     250,785         219,897         234,462   

HVAC

     141,525         105,824         109,912   
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,297,531       $ 2,004,366       $ 1,832,708   
  

 

 

    

 

 

    

 

 

 

Segment Earnings

        

Electrical

   $ 382,169       $ 316,201       $ 257,447   

Steel Structures

     30,657         34,935         47,433   

HVAC

     20,886         16,145         18,213   
  

 

 

    

 

 

    

 

 

 

Total

   $ 433,712       $ 367,281       $ 323,093   
  

 

 

    

 

 

    

 

 

 

Capital Expenditures

        

Electrical

   $ 37,307       $ 26,742       $ 29,279   

Steel Structures

     3,615         4,388         5,495   

HVAC

     1,494         614         628   
  

 

 

    

 

 

    

 

 

 

Total from reportable segments

     42,416         31,744         35,402   

Corporate

     3,037         1,653         5,704   
  

 

 

    

 

 

    

 

 

 

Total

   $ 45,453       $ 33,397       $ 41,106   
  

 

 

    

 

 

    

 

 

 

Depreciation and Amortization

        

Electrical

   $ 75,894       $ 73,003       $ 66,218   

Steel Structures

     3,919         3,815         3,777   

HVAC

     4,155         2,335         2,427   
  

 

 

    

 

 

    

 

 

 

Total from reportable segments

     83,968         79,153         72,422   

Corporate

     378         443         874   
  

 

 

    

 

 

    

 

 

 

Total

   $ 84,346       $ 79,596       $ 73,296   
  

 

 

    

 

 

    

 

 

 

Total Assets

        

Electrical

   $ 1,910,995       $ 1,891,705       $ 1,608,746   

Steel Structures

     157,633         141,755         144,201   

HVAC

     84,892         39,701         43,109   
  

 

 

    

 

 

    

 

 

 

Total from reportable segments

     2,153,520         2,073,161         1,796,056   

Corporate

     670,201         559,232         657,351   
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,823,721       $ 2,632,393       $ 2,453,407   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

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Notes to Consolidated Financial Statements

 

16.    Segment and Other Related Disclosures (Continued)

 

The following are reconciliations of the reportable segments to the consolidated Corporation earnings:

 

 

(In thousands)    2011     2010     2009  

Earnings from Continuing Operations Before Income Taxes

      

Total reportable segment earnings

   $ 433,712      $ 367,281      $ 323,093   

Corporate expense

     (43,147     (52,318     (47,423

Depreciation and amortization expense

     (84,346     (79,596     (73,296

Share-based compensation expense

     (16,425     (14,604     (16,162

Intangible asset impairment

                   (5,794

Interest expense, net

     (32,012     (35,124     (35,483

Loss on extinguishment of debt

                   (6,391

Other (expense) income, net

     742        (299     1,846   
  

 

 

   

 

 

   

 

 

 

Earnings from continuing operations before income taxes

   $ 258,524      $ 185,340      $ 140,390   
  

 

 

   

 

 

   

 

 

 

17.    Financial Information Relating to Operations in Different Geographic Areas

The Corporation conducts business in three principal areas: U.S., Canada and Europe. Net sales are attributed to geographic areas based on customer location.

 

 

(In thousands)    2011      2010      2009  

Net Sales

        

U.S.

   $ 1,342,913       $ 1,251,072       $ 1,191,100   

Canada

     441,615         377,488         320,727   

Europe

     318,320         235,531         207,477   

Other countries

     194,683         140,275         113,404   
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,297,531       $ 2,004,366       $ 1,832,708   
  

 

 

    

 

 

    

 

 

 

Long-lived Assets

        

U.S.

   $ 1,052,789       $ 1,083,307       $ 1,143,150   

Canada

     167,096         171,610         171,835   

Europe

     382,733         354,923         123,660   

Other countries

     22,259         21,912         22,329   
  

 

 

    

 

 

    

 

 

 

Total

   $ 1,624,877       $ 1,631,752       $ 1,460,974   
  

 

 

    

 

 

    

 

 

 

Export sales originating in the U.S. were approximately $76 million in 2011, $74 million in 2010 and $55 million in 2009.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

18.    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 and 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.

Environmental Matters

Under the requirements of the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, (the “Superfund Act”) and certain other laws, the Corporation is potentially liable for the cost of clean-up at various contaminated sites identified by the United States Environmental Protection Agency and other agencies. The Corporation has been notified that it is named a potentially responsible party (“PRP”) at various sites for study and clean-up costs. In some cases there are several named PRPs and in others there are hundreds. The Corporation generally participates in the investigation or clean-up of potentially contaminated sites through cost-sharing agreements with terms which vary from site to site. Costs are typically allocated based upon the volume and nature of the materials sent to the site. However, under the Superfund Act and certain other laws, as a PRP, the Corporation can be held jointly and severally liable for all environmental costs associated with the site.

In conjunction with certain acquisitions, the Corporation assumed responsibility for environmental matters for those entities.

When the Corporation becomes aware of a potential liability at a particular site, it conducts studies to estimate the amount of the liability. If determinable, the Corporation accrues what it considers to be the most accurate estimate of its liability at that site, taking into account the other participants involved in the site and their ability to pay. The Corporation has acquired facilities subject to environmental liability where, in one case, the seller has committed to indemnify the Corporation for those liabilities, and, in another, subject to an asset purchase agreement, the seller assumed responsibility for paying its proportionate share of the environmental clean-up costs.

The Corporation’s accrual for probable environmental costs was approximately $13 million and $12 million as of December 31, 2011 and 2010, respectively. The Corporation is not able to predict the extent of its ultimate liability with respect to all of its pending or future environmental matters, and liabilities arising from potential environmental obligations that have not been reserved at this time may be material to the operating results of any single quarter or year in the future. The operation of manufacturing plants involves a high level of susceptibility in these areas, and there is no assurance that the Corporation will not incur material environmental or occupational health and safety liabilities in the future. Moreover, expectations of remediation expenses could be affected by, and potentially

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

18.    Contingencies (Continued)

 

significant expenditures could be required to comply with, environmental regulations and health and safety laws that may be adopted or imposed in the future. Future remediation technology advances could adversely impact expectations of remediation expenses.

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:

 

 

(In thousands)    2011     2010     2009  

Balance at beginning of year

   $ 2,574      $ 3,064      $ 3,112   

Acquired liabilities for warranties

     726                 

Liabilities accrued for warranties issued during the year

     3,203        1,580        1,605   

Changes in liability for pre-existing warranties during the year, including expirations

     (77     (1     (137

Warranty claims paid during the year

     (3,213     (2,069     (1,516
  

 

 

   

 

 

   

 

 

 

Balance at end of year

   $ 3,213      $ 2,574      $ 3,064   
  

 

 

   

 

 

   

 

 

 

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.

19.    Recently Issued Accounting Standards

In June 2011, the Financial Accounting Standards Board (“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 Corporation’s consolidated financial position or results of operations.

 

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Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

 

20.    Subsequent Event

On January 29, 2012, Thomas & Betts Corporation, Swiss-based ABB Ltd (“ABB”) and a wholly owned subsidiary of ABB entered into a merger agreement. At the closing of the merger contemplated by the merger agreement, (i) the Corporation will become a wholly owned indirect subsidiary of ABB, and (ii) each common share of the Corporation will be converted into the right to receive $72.00 in cash (approximately $3.9 billion total purchase consideration), without interest. The closing of the merger is subject to customary conditions, including approval of the shareholders of the Corporation’s common stock and expiration or termination of the applicable waiting period under the Hart- Scott-Rodino Act and the antitrust laws of certain foreign jurisdictions. Among other things, the merger agreement contains certain termination rights for the Corporation and ABB, and further provides that, upon termination of the merger agreement under specified circumstances, the Corporation will be obligated to pay a termination fee to ABB of $116 million.

Shortly after the announcement of the merger, two putative class action lawsuits challenging the merger were filed in the Chancery Court for Shelby County, 20th Judicial District, for State of Tennessee, against Thomas & Betts Corporation, ABB, Edison Acquisition Corp. and the individual members of Thomas & Betts’ Board of Directors. The complaints generally allege, among other things, that, in connection with merger, the members of the Thomas & Betts Board of Directors breached their fiduciary duties owed to Thomas & Betts’ shareholders, and that Thomas & Betts, ABB and Edison Acquisition Corp. aided and abetted such breaches of fiduciary duties. The complaints generally seek, among other things, declaratory and injunctive relief, preliminary injunctive relief prohibiting or delaying the defendants from consummating the merger, and other forms of equitable relief. It is possible that additional lawsuits may be filed against us asserting similar or different claims. There is no assurance that we or any of the other defendants will be successful in the outcome of the pending or any potential future lawsuits.

 

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Thomas & Betts Corporation and Subsidiaries

SUPPLEMENTARY FINANCIAL DATA

 

(In thousands, except per share data)    2011      2010  
     (Unaudited)  

First Quarter

     

Net sales

   $ 523,135       $ 453,629   

Gross profit

     163,603         134,600   

Net earnings

     35,526         27,952   

Per share net earnings(a)

     

Basic

     0.69         0.54   

Diluted

     0.67         0.53   
  

 

 

    

 

 

 

Second Quarter

     

Net sales

   $ 566,342       $ 499,980   

Gross profit

     169,923         157,795   

Net earnings

     43,457         33,601   

Per share net earnings(a)

     

Basic

     0.84         0.65   

Diluted

     0.82         0.63   
  

 

 

    

 

 

 

Third Quarter

     

Net sales

   $ 604,426       $ 518,233   

Gross profit

     191,499         166,137   

Net earnings

     54,333         44,104   

Per share net earnings(a)

     

Basic

     1.05         0.85   

Diluted

     1.03         0.84   
  

 

 

    

 

 

 

Fourth Quarter

     

Net sales

   $ 603,628       $ 532,524   

Gross profit

     193,495         158,500   

Net earnings

     56,837         39,983   

Per share net earnings(a)

     

Basic

     1.11         0.78   

Diluted

     1.08         0.76   
  

 

 

    

 

 

 

 

 

(a) Basic per share amounts are based on average shares outstanding in each quarter. Diluted per share amounts reflect potential dilution from stock options and nonvested restricted stock, when applicable.

 

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Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.    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) Management’s Annual Report on Internal Control over Financial Reporting

Management’s report on internal control over financial reporting is on page 40 of this Form 10-K and is incorporated by reference into this Item.

(c) Changes in Internal Control over Financial Reporting

There have been no significant changes in internal control over financial reporting that occurred during the fourth quarter of 2011 that have materially affected or are reasonably likely to materially affect the Corporation’s internal control over financial reporting.

Item 9B.    OTHER INFORMATION

None.

 

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PART III

Item 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

EXECUTIVE OFFICERS   DIRECTORS     

Dominic J. Pileggi

Chairman of the Board, and

Chief Executive Officer

 

Charles L. Treadway

President and Chief Operating

Officer

 

William E. Weaver, Jr.

Senior Vice President and

Chief Financial Officer

 

Imad Hajj

Senior Vice President —

International and Operational

Development

 

Peggy P. Gann

Senior Vice President —

Human Resources and

Administration

 

J.N. Raines

Vice President — General

Counsel and Secretary

 

Stanley P. Locke

Vice President — Business

Development and Strategic

Planning

 

Dominic J. Pileggi

Chairman of the Board, and

Chief Executive Officer

Director since 2004

 

Michael L. Ducker

Chief Operating Officer

and President —

International Division

FedEx Express

Director since 2011(2)

 

Jeananne K. Hauswald

Managing Director

Solo Management Group, LLC

Director since 1993(2)(3)

 

Dean Jernigan

Chief Executive Officer

Cube SmartSM

Director since 1999(1)

 

Ronald B. Kalich, Sr.

Former President and Chief Executive Officer of FastenTech, Inc.

Director since 1998(3)(*)

 

Kenneth R. Masterson

Former Executive Vice President General Counsel and Secretary

FedEx Corporation

Director since 1993(2)(*)(3)(4)

  Jean-Paul Richard

Chairman of the Board and Chief

Executive Officer H-E Parts,

International

Director since 1996(3)

 

Rufus H. Rivers

Managing Director

RJL Equity Partners, LLC

Director since 2008(1)

 

Kevin L. Roberg

Former President and Chief

Executive Officer of ProStaff, Inc.

Director since 2007(1)

 

David D. Stevens

Former Chief Executive Officer

Accredo Health, Incorporated

Director since 2004(1)(*)(2)

 

 

(1) Audit Committee

 

(2) Nominating and Governance Committee

 

(3) Compensation Committee

 

(4) Lead Director

 

(*) Committee Chair

Information regarding members of the Board of Directors is incorporated by reference from the section Corporate Governance, Certain Relationships and Related Transactions of the definitive Proxy Statement for our Annual Meeting of Shareholders.

Information regarding executive officers of the Corporation is included in Part I of this Form 10-K under the caption “Executive Officers of the Registrant” pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K.

 

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Information required by Item 405 of Regulation S-K is presented in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for our Annual Meeting of Shareholders, and is incorporated herein by reference.

Information regarding Director Independence and Corporate Governance as required by Item 407(c)(3), (d)(4) and (d)(5) is incorporated by reference from the Corporate Governance sections of the definitive Proxy Statement for our Annual Meeting of Shareholders. Alternatively, we may file an amendment to this Form 10-K containing the applicable disclosure within 120 days after the end of the fiscal year covered by this report.

We have adopted a code of conduct that applies to all of our employees, officers, and directors. A copy of our code of conduct can be found on our internet site at www.tnb.com. Any amendment to or waiver from any provision in our code of conduct required to be disclosed as Item 5.05 on Form 8-K will be posted on our Internet site.

Item 11.    EXECUTIVE COMPENSATION

Information related to executive compensation appears in the section entitled “Executive Compensation” in the definitive Proxy Statement for our Annual Meeting of Shareholders and is incorporated by reference. Alternatively, we may file an amendment to this Form 10-K containing the applicable disclosure within 120 days after the end of the fiscal year covered by this report.

 

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

Information required by Item 403 of Regulation S-K appears in the section entitled “Security Ownership” in the definitive Proxy Statement for our Annual Meeting of Shareholders and is incorporated by reference. Alternatively, we may file an amendment to this Form 10-K containing the applicable disclosure within 120 days after the end of the fiscal year covered by this report.

 

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As of December 31, 2011, we had the following compensation plans under which common stock has been issued or may be issued.

 

Plan Category

   Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
     Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
     Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in
column(a))
(c)
 

Equity compensation plans
approved by security holders

        

2008 Stock Incentive Plan

     2,423,939         34.94         704,519

Equity Compensation Plan

     988,943         42.94           

Non-employee Directors Equity Compensation Plan

     44,870         35.40           

1993 Management Stock Ownership Plan

     140,604         19.97           

Equity compensation plans not approved by security holders

        

Deferred Fee Plan for Non-employee Directors

     25,055                   

Non-employee Directors Stock Option Plan

     40,000         19.17           

2001 Stock Incentive Plan

     29,470         17.27           
  

 

 

    

 

 

    

 

 

 

Total

     3,692,881         36.21         704,519   
  

 

 

    

 

 

    

 

 

 

 

 

* Of the 704,519 securities remaining available for future issuance under the 2008 Stock Incentive Plan, 622,369 may only be issued as stock options or stock appreciation rights and 82,150 may be issued as restricted stock, restricted stock units, stock grants, stock credits, performance stock, performance stock units, stock appreciation rights or stock options.

The 1993 Management Stock Ownership Plan, the Deferred Fee Plan for Non-Employee Directors, the Non-Employee Directors Stock Option Plan and the 2001 Stock Incentive Plan were terminated in May 2004. The Equity Compensation Plan and the Non-Employee Directors Equity Compensation Plan were terminated in May 2008. No new awards may be made under any of the aforementioned plans; however, awards issued under the plans prior to the May 2004 and May 2008, respectively, will continue under the terms of the plans.

 

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Description of equity compensation plans not approved by security holders:

Deferred Fee Plan for Non-employee Directors

The Deferred Fee Plan for Non-employee Directors permitted a non-employee director to defer all or a portion of compensation earned for services as a director, and permitted the granting of stock appreciation rights as compensation to our directors. Any amount deferred was valued, in accordance with the director’s election, in a hypothetical investment in our common stock as stock appreciation rights or in one or more mutual funds from the Vanguard Group. The stock appreciation rights fluctuate in value as the value of the common stock fluctuates. Each participant was credited with a dividend equivalent in stock appreciation rights for any dividends paid on our common stock. Stock appreciation rights are distributed in shares of our common stock and mutual fund accounts are distributed in cash upon a director’s termination of service.

Non-employee Directors Stock Option Plan

The Non-employee Directors Stock Option Plan provided that each non-employee director, upon election at either an annual meeting or by the Board to fill a vacancy or new position, received a nonqualified stock option grant for shares of common stock in an amount determined by the Board of Directors. The option exercise price was the fair market value of our common stock on the option grant date. Each option grant was fully vested and exercisable on the date it was granted and has a term of ten years, subject to earlier expiration upon a director’s termination of service prior to exercise.

2001 Stock Incentive Plan

The 2001 Stock Incentive Plan provided that key employees could receive nonqualified stock option grants for shares of common stock in an amount determined by the Board of Directors. The option exercise price was the fair market value of a share of common stock on the date the option is granted. Each option grant usually vests in increments of one-third over a three year period, and had a ten year life, subject to earlier expiration upon an employee’s termination of service.

Item 13.    CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item appears in the section entitled “Certain Relationships, Related Transactions and Director Independence” in the definitive Proxy Statement for our Annual Meeting of Shareholders and is incorporated herein by reference in response to this item.

Information regarding Director Independence and Corporate Governance as required by Item 407(c)(3), (d)(4) and (d)(5) is incorporated by reference from the Corporate Governance sections of the definitive Proxy Statement for our Annual Meeting of Shareholders. Alternatively, we may file an amendment to this Form 10-K containing the applicable disclosure within 120 days after the end of the fiscal year covered by this report.

Item 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The sections entitled “Independent Registered Public Accounting Firm’s Fees” and “Pre-Approval Policies and Procedures” in the definitive Proxy Statement for our Annual Meeting of Shareholders, are incorporated by reference. Alternatively, we may file an amendment to this Form 10-K containing the applicable disclosure within 120 days after the end of the fiscal year covered by this report.

 

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PART IV

Item 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as a part of this Report:

1. Financial Statements

The following financial statements, related notes and reports of the independent registered public accounting firm are filed with this Annual Report in Part II, Item 8:

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for 2011, 2010 and 2009

Consolidated Balance Sheets as of December 31, 2011 and 2010

Consolidated Statements of Cash Flows for 2011, 2010 and 2009

Consolidated Statements of Shareholders’ Equity and Comprehensive Income for 2011, 2010 and 2009

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable, not material, or the required information is included in the financial statements listed above or the notes.

3. Exhibits

The Exhibit Index on pages E-1 through E-5 is incorporated by reference.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

THOMAS & BETTS CORPORATION

(Registrant)

Date: February 17, 2012

 

 

By:

 

/S/    DOMINIC J. PILEGGI

 

Dominic J. Pileggi

 

Chairman and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

  

Title

  

Date

/S/    DOMINIC J. PILEGGI

Dominic J. Pileggi

  

Chairman of the Board, and Chief

Executive Officer

(Principal Executive Officer)

   February 17, 2012

/S/    MICHAEL L. DUCKER

Michael L. Ducker

  

Director

   February 17, 2012

/S/    JEANANNE K. HAUSWALD

Jeananne K. Hauswald

  

Director

   February 17, 2012

/S/    DEAN JERNIGAN

Dean Jernigan

  

Director

   February 17, 2012

/S/    RONALD B. KALICH, SR.

Ronald B. Kalich, Sr.

  

Director

   February 17, 2012

/S/    KENNETH R. MASTERSON

Kenneth R. Masterson

  

Director

   February 17, 2012

/S/    JEAN-PAUL RICHARD

Jean-Paul Richard

  

Director

   February 17, 2012

/S/    RUFUS H. RIVERS

Rufus H. Rivers

  

Director

   February 17, 2012

/S/    KEVIN L. ROBERG

Kevin L. Roberg

  

Director

   February 17, 2012

/S/    DAVID D. STEVENS

David D. Stevens

  

Director

   February 17, 2012

/S/    WILLIAM E. WEAVER, JR.

William E. Weaver, Jr.

  

Senior Vice President and Chief

Financial Officer

(Principal Financial Officer)

   February 17, 2012

/S/    DAVID L. ALYEA

David L. Alyea

  

Vice President — Controller

   February 17, 2012

 

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PART IV

EXHIBIT INDEX

 

Exhibit No.

  

Description of Exhibit

3.1    Amended and Restated Charter of Thomas & Betts Corporation (Filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and incorporated herein by reference).
3.2    Amended and Restated Bylaws of Thomas & Betts Corporation (Filed as Exhibit 3.1 to the Registrants’ Current Report on Form 8-K dated June 3, 2009 and incorporated herein by reference).
4.1    Second Supplemental Indenture dated as of February 10, 1998, between Thomas & Betts Corporation and The Chase Manhattan Bank, as Trustee (Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated February 2, 1998 and incorporated herein by reference).
4.2    Third Supplemental Indenture dated as of May 7, 1998 between Thomas & Betts Corporation and The Chase Manhattan Bank, as Trustee (Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated May 4, 1998 and incorporated herein by reference).
4.3    Trust Indenture dated as of August 1, 1998 between Thomas & Betts Corporation and The Bank of New York, as Trustee (Filed as Exhibit 4.3 to the Registrant’s Registration Statement on Form S-3 dated December 3, 2008 and incorporated herein by reference).
4.4    Supplemental Indenture No. 1 dated February 10, 1999, between Thomas and Betts Corporation and The Bank of New York, a Trustee (Filed as Exhibit 4.5 to the Registrant’s Registration Statement on Form S-3 dated December 3, 2008 and incorporated herein by reference).
4.5    Supplemental Indenture No. 2 dated May 27, 2003, between Thomas & Betts Corporation and The Bank of New York, as Trustee (Filed as Exhibit 4.6 to the Registrant’s Registration Statement on Form S-3 dated December 3, 2008 and incorporated herein by reference).
4.6    Form of Supplemental Indenture No. 3 between Thomas & Betts Corporation and The Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated November 16, 2009 and incorporated herein by reference).
10.1†    Thomas & Betts Corporation 1993 Management Stock Ownership Plan, as amended through June 5, 2001, and Forms of Grant Agreement (Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2001 and incorporated herein by reference).
10.2†    Deferred Fee Plan for Non-employee Directors as amended and restated effective May 6, 1998 (Filed as Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 3, 1999 and incorporated herein by reference).
10.3†    Restricted Stock Plan for Non-employee Directors as amended March 7, 2003 (Filed as Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference).

 

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Exhibit No.

  

Description of Exhibit

10.4†    Non-employee Directors Stock Option Plan and Form of Stock Option Agreement, as amended March 9, 2001 (Filed as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and incorporated herein by reference).
10.5†    Thomas & Betts Corporation 2001 Stock Incentive Plan (Filed as Exhibit 10.1 to Registrant’s Registration Statement on Form S-8 dated May 2, 2001 (File No. 333-60074), and incorporated herein by reference).
10.6†    Non-employee Directors Equity Compensation Plan (Filed as Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference).
10.7†    Form of Non-Qualified Stock Option Agreement pursuant to the Thomas & Betts Corporation Non-employee Directors Equity Compensation Plan (Filed as Exhibit 10 to the Registrant’s Current Report on Form 8-K dated August 31, 2004 and incorporated herein by reference).
10.8†    Equity Compensation Plan (Filed as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference).
10.9†    Form of Restricted Stock Agreement pursuant to the Thomas & Betts Corporation Equity Compensation Plan (Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 2, 2005 and incorporated herein by reference).
10.10†    Form of Incentive Stock Option Agreement pursuant to the Thomas & Betts Corporation Equity Compensation Plan (Filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated February 2, 2005 and incorporated herein by reference).
10.11†    Form of Nonqualified Stock Option Agreement pursuant to the Thomas & Betts Corporation Equity Compensation Plan (Filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated February 2, 2005 and incorporated herein by reference).
10.12†    Form of Restricted Stock Agreement Pursuant to Thomas & Betts Corporation Non-employee Directors Equity Compensation Plan. (Filed as Exhibit 10.28 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.13†    Amended and Restated Thomas & Betts Corporation Pension Restoration Plan (Filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated September 11, 2007 and incorporated herein by reference).
10.14    Amended and Restated Thomas & Betts Corporation Indemnification Agreement (Filed as Exhibit 10.13 to the Registrant’s Current Report on Form 8-K dated September 11, 2007 and incorporated herein by reference).
10.15    Second Amended and Restated Credit Agreement dated October 16, 2007, among Thomas & Betts Corporation, as Borrower, the Lenders party hereto, and Wachovia Bank, N.A., as Administrative Agent, and Wachovia Capital Markets, LLC and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Runners (Filed as Exhibit 10.15 to the Registrant’s Current Report on Form 8-K dated October 17, 2007 and incorporated herein by reference).

 

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Exhibit No.

  

Description of Exhibit

10.16†    Health Benefits Continuation Agreement dated September 5, 2007 between Thomas & Betts Corporation and Dominic J. Pileggi (Filed as Exhibit 10.14 to the Registrant’s Current Report on Form 8-K dated September 11, 2007 and incorporated herein by reference).
10.17†    The Thomas & Betts Corporation Management Incentive Plan, as Amended and Restated effective January 1, 2009 (Filed as Exhibit 10.41 to the Registrant’s Current Report on Form 8-K dated May 7, 2008 and incorporated herein by reference).
10.18†    The Thomas & Betts Corporation 2008 Stock Incentive Plan (Filed as Exhibit 10.42 to the Registrant’s Current Report on Form 8-K dated May 7, 2008 and incorporated herein by reference).
10.19†    Form of Restricted Stock Agreement pursuant to the Thomas & Betts Corporation 2008 Stock Incentive Plan (Filed as Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.20†    Form of Nonqualified Stock Option Agreement pursuant to the Thomas & Betts Corporation 2008 Stock Incentive Plan (Filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.21†    Form of Restricted Stock Agreement for Nonemployee Directors pursuant to the Thomas & Betts Corporation 2008 Stock Incentive Plan (Filed as Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.22†    Form of Nonqualified Stock Option Agreement for Nonemployee Directors pursuant to the Thomas & Betts Corporation 2008 Stock Incentive Plan. (Filed as Exhibit 10.42 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.23†    Executive Retirement Plan, as Amended and Restated Effective January 1, 2005, Including Amendments and Appendix A adopted through December 3, 2008. (Filed as Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.24†    Amended and Restated Termination Protection Agreement between Thomas & Betts Corporation and Dominic J. Pileggi dated December 16, 2008. (Filed as Exhibit 10.46 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.25†    Amended and Restated Termination Protection Agreement between Thomas & Betts Corporation and Imad Hajj dated December 16, 2008. (Filed as Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.26†    Amended and Restated Termination Protection Agreement between Thomas & Betts Corporation and J.N. Raines dated December 16, 2008. (Filed as Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).

 

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Exhibit No.

  

Description of Exhibit

10.27†    Amended and Restated Termination Protection Agreement between Thomas & Betts Corporation and William E. Weaver, Jr. dated December 30, 2008. (Filed as Exhibit 10.50 to the Registrant’s Annual Report on Form 10-K for year ended December 31, 2008 and incorporated herein by reference).
10.28†    Amended and Restated Termination Protection Agreement between Thomas & Betts Corporation and Stanley P. Locke dated January 15, 2009 (Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for quarter ended March 31, 2009 and incorporated herein by reference).
10.29†    Termination Protection Agreement, effective May 6, 2009, between Charles L. Treadway and Thomas & Betts Corporation (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 6, 2009 and incorporated herein by reference).
10.30†    Amendment to the Thomas & Betts Corporation Executive Retirement Plan, dated December 2, 2009 (Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated December 2, 2009 and incorporated herein by reference).
10.31    First Amendment to Second Amended and Restated Credit Agreement dated as of November 13, 2009 between Thomas & Betts Corporation, as Borrower, the Lenders named therein and Wachovia Bank, as Administrative Agent. (Filed as Exhibit 10.47 to Registrant’s Annual Report on Form 10-K for year ended December 31, 2009 and incorporated herein by reference).
10.32†    First Amendment to Termination Protection Agreement between Thomas & Betts Corporation and William E. Weaver, Jr. dated March 3, 2010. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 3, 2010 and incorporated herein by reference).
10.33†    First Amendment to Termination Protection Agreement between Thomas & Betts Corporation and Imad Hajj dated March 3, 2010. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 3, 2010 and incorporated herein by reference).
10.34†    Termination Protection Agreement between Thomas & Betts Corporation and Peggy P. Gann dated May 5, 2010. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 5, 2010 and incorporated herein by reference).
10.35†    The Thomas & Betts Supplemental Executive Investment Plan (As Amended and Restated Effective September 1, 2010). (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 1, 2010 and incorporated herein by reference).
10.36†   

Thomas & Betts Corporation 2008 Stock Incentive Plan Performance Stock Agreement. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 1, 2010 and incorporated herein by reference).

10.37†    First Amendment to Termination Protection Agreement between Thomas & Betts Corporation and Charles L. Treadway dated May 4, 2011. (Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 6, 2011 and incorporated herein by reference).

 

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Exhibit No.

  

Description of Exhibit

10.38†    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 the Registrant’s Current Report on Form 8-K dated August 16, 2011 and incorporated herein by reference).
10.39†    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 the Registrant’s Current Report on Form 8-K dated August 16, 2011 and incorporated herein by reference).
10.40†    Form of Nonqualified Stock Option Agreement Pursuant to Thomas & Betts Corporation 2008 Stock Incentive Plan.
10.41   

Agreement and Plan of Merger dated January 29, 2012, among Thomas & Betts Corporation, ABB Ltd, Edison Acquisition Corporation (Filed as Exhibit 2.1 to The Registrant’s Current Report on Form 8-K dated January 30, 2012 and incorporated herein by reference).

12    Statement re Computation of Ratio of Earnings to Fixed Charges.
21    Subsidiaries of the Registrant.
23    Consent of KPMG LLP.
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 Years Ended December 31, 2011, 2010 and 2009, (ii) the Consolidated Balance Sheets as of December 31, 2011 and 2010, (iii) the Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009, (iv) the Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the Years Ended December 31, 2011, 2010 and 2009 and (v) the Notes to Consolidated Financial Statements.

 

 

Management contract or compensatory plan or arrangement.

 

* Pursuant to Rule 406T of Regulation S-T, the interactive data included in Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections

 

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