Thomas & Betts Corporation Reports Third Quarter 2009 Earnings

Thomas & Betts Corporation (NYSE:TNB) today reported net sales of $485.1 million for the third quarter 2009, down 27.1 percent compared to the third quarter of 2008 when the company reported record sales of $665.7 million. Net earnings were $32.1 million or $0.61 per diluted share including a $4 million pre-tax charge ($0.05 per share) related to an estimate revision for an environmental remediation site. In the third quarter 2008, the company earned $63.2 million, or $1.11 per diluted share, from continuing operations.

“We are very pleased with our results, which came in as expected and again demonstrated our ability to manage successfully in very tough operating conditions,” said Dominic J. Pileggi, chairman and chief executive officer. “We delivered segment earnings of nearly 19 percent of sales – an exceptional performance given the significant sales decline. Prior actions taken to lower overall manufacturing costs – including headcount and expense cuts – and the impact of lower commodity costs coupled with our continued discipline in managing mix and price helped mitigate the negative impact of lower sales volumes on earnings. It is also worth noting that in the third quarter last year, we reported record sales and delivered segment earnings of 20 percent.”

The year-over-year sales decrease primarily reflects continuing weakness in global demand for electrical products used in construction, industrial maintenance and power distribution as well as commercial heating products. The stronger U.S. dollar negatively impacted sales by approximately $19 million, or three percent, in the quarter.

Gross profit was 30.4 percent of sales for the quarter compared to 31.3 percent last year. The decrease primarily reflects the net impact of lower production volumes.

Selling, general and administrative expense (SG&A) was $92.0 million including the previously noted $4 million environmental remediation charge. This charge is reflected in corporate expense and did not impact segment earnings. As a percent of sales, SG&A was 18.9 percent (18.1 percent excluding the charge) compared to 16.1 percent in third quarter 2008.

Net interest expense was $8.5 million compared to $9.4 million a year ago largely as a result of lower average debt outstanding. Other expense reflects $2.1 million of net foreign currency losses primarily from fluctuations in European currencies. The effective tax rate was 28.7 percent in the third quarter compared to 31 percent last year.

SEGMENT RESULTS

Total segment earnings were $91.6 million compared to $133.5 million in the third quarter of 2008. As a percent of net sales, segment earnings were 18.9 percent compared to 20.1 percent last year. Lower sales and production volumes and the impact of unfavorable foreign currency drove the decrease in segment earnings.

In the company’s Electrical segment, third quarter sales were $410.9 million, down 29.0 percent year over year. Foreign currency contributed approximately $19 million, or three percent, to the sales decline. Volumes were lower across all market segments and geographies.

Electrical segment earnings were $78.3 million or 19.0 percent of sales in the quarter just ended including approximately $2 million in charges related to an in-process facility consolidation which was offset by an adjustment of self-insurance reserves. In the third quarter 2008, electrical segment earnings were $119.1 million or 20.6 percent of sales. The year-over-year decline reflects the negative impact of lower sales and production volumes as well as a stronger U.S. dollar.

Third quarter 2009 Steel Structures segment sales were $50.9 million, down 8.6 percent compared to $55.7 million in sales last year. Sales for both the current and prior-year quarters were negatively impacted by delayed shipments of approximately $6 million. Segment earnings improved to $10.1 million compared to $9.0 million last year, largely due to favorable project mix. As a percent of sales, segment earnings were 19.8 percent compared to 16.2 percent last year.

HVAC segment sales declined to $23.3 million from $31.2 million in the prior year. HVAC earnings were $3.2 million down from $5.3 million in third quarter 2008. As a percent of sales, HVAC earnings were 13.8 percent, compared to 17.2 percent of sales last year. Weak demand in commercial construction markets contributed to the sales and earnings decline.

NINE MONTH RESULTS

For the nine months ended September 30, 2009, net sales declined by 26.1 percent to $1.4 billion compared to $1.9 billion in the same period last year. The year-over-year sales decrease reflects lower global demand and a stronger U.S. dollar. Segment earnings were $242.6 million or 17.3 percent of sales, compared to $372.9 million or 19.6 percent in the comparable period in 2008.

Year-to-date net earnings were $80.8 million or $1.53 per diluted share. This compares to earnings from continuing operations for the comparable period last year of $2.68 per diluted share ($4.31 in reported earnings from continuing operations per diluted share excluding the $1.63 net benefit from unusual items which includes a gain on the sale of the company’s minority interest in Leviton Manufacturing Company).

CASH FLOW AND DEBT HIGHLIGHTS

During the first nine months of 2009, Thomas & Betts generated $113 million in free cash flow (defined as net cash provided by operating activities less capital expenditures) and ended the third quarter with cash and cash equivalents totaling $357 million and total debt of $608 million. This compares to cash and cash equivalents totaling $292 million and $661 million in total debt at December 31, 2008. Continued strong working capital management contributed to the favorable year-to-date cash flow performance. At September 30, 2009, the company had approximately $295 million of availability under its existing credit agreements. The company repurchased 500,000 shares of common stock at a cost of $13.8 million during the third quarter. The share repurchase activity had a negligible effect on earnings per share in the quarter.

2009 DIRECTIONAL GUIDANCE

“Looking forward, we do not expect any meaningful improvement in our key markets in the fourth quarter despite recent signs that the global macro economy may be stabilizing,” said Pileggi. “We have done a good job responding to the economic downturn thus far, moving quickly to adjust production, aggressively managing costs and taking appropriate action to cut permanent costs from our structure without compromising our fast, flexible and customer-focused culture. In the fourth quarter, we expect an additional $0.05 per share charge for the in-process facility consolidation noted earlier.”

“While we are not yet prepared to provide guidance for 2010, we have narrowed the range of our full year 2009 E.P.S guidance to $2.10 to $2.25 per diluted share,” continued Pileggi. “Previously, our range was $2.10 to $2.40 per diluted share. The key risks to achieving these results continue to be credit availability in key end markets; fluctuations in foreign currency and commodity costs; and further deterioration in market conditions.”

CORPORATE OVERVIEW

Thomas & Betts Corporation (www.tnb.com) is a leading designer and manufacturer of electrical components used in industrial, commercial, communications and utility markets. The company is also a leading producer of commercial heating and ventilation units and highly engineered steel structures used, among other things, for utility transmission. Headquartered in Memphis, Tenn., the company has manufacturing, distribution and office facilities worldwide. In 2008, the company reported $2.5 billion in net sales.

The attached financial tables support the information in this news release:

Consolidated Statements of Operations
Segment Information
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Selected Ratios

CONFERENCE CALL AND WEBCAST INFORMATION

Thomas & Betts will hold a conference call and webcast to discuss the company’s third quarter 2009 results on Thursday, October 22, 2009 at 10:00 a.m. Eastern (9:00 a.m. Central). Investors and other interested parties can access the conference call on the company’s website at www.tnb.com or by calling (201) 689-8341. No confirmation code is required. The recorded web cast will be archived on the investor relations section of www.tnb.com. A telephonic replay of the conference call will be recorded and available for replay through 12:00 midnight Eastern on October 29, 2009. To access the replay, please call 201-612-7415, account number 9517, pass code 334963.

CAUTIONARY STATEMENT

This press release includes forward-looking statements that are identified by terms such as "optimistic," "trend," "will," and "believe." These statements discuss business strategies, economic outlook and future performance. These forward-looking statements make assumptions regarding the company's operations, business, economic and political environment, including, without limitation, customer demand, government regulation, terrorist acts and acts of war. Accordingly, these forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may be materially different from any future results expressed or implied by such forward-looking statements. Please see the "Risk Factors" section of the company's Form 10-K for the fiscal year ended December 31, 2008 for further information related to these uncertainties. The company undertakes no obligation to publicly release any revisions to any forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this release or to reflect the occurrence of unanticipated events.

THOMAS & BETTS CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
		Quarter Ended								Year to Date
		September 30,				September 30,				September 30,				September 30,
		2009				2008				2009				2008
Net sales		$	485,075			$	665,679			$	1,405,906			$	1,902,500
Cost of sales			337,485				457,406				988,965				1,307,991
Gross profit			147,590				208,273				416,941				594,509
Gross profit - % of net sales			30.4	%			31.3	%			29.7	%			31.2	%
Selling, general and administrative			91,957				106,918				277,605				323,692
Selling, general and administrative - % of net sales			18.9	%			16.1	%			19.8	%			17.0	%
Earnings from operations			55,633				101,355				139,336				270,817
Earnings from operations - % of net sales			11.5	%			15.2	%			9.9	%			14.2	%
Interest expense, net			(8,478	)			(9,355	)			(26,317	)			(33,455	)
Other (expense) income, net			(2,101	)			(469	)			1,649				(2,416	)
Gain on sale of equity interest			-				-				-				169,684
Earnings before income taxes			45,054				91,531				114,668				404,630
Income tax provision			12,943				28,375				33,827				155,273
Effective tax rate			28.7	%			31.0	%			29.5	%			38.4	%
Net earnings from continuing operations			32,111				63,156				80,841				249,357
Loss from discontinued operations, net			-				(997	)			-				(1,106	)
Net earnings		$	32,111			$	62,159			$	80,841			$	248,251
Basic earnings (loss) per share:
Continuing operations		$	0.62			$	1.11			$	1.54			$	4.35
Discontinued operations			-				(0.01	)			-				(0.02	)
Net earnings		$	0.62			$	1.10			$	1.54			$	4.33
Diluted earnings (loss) per share:
Continuing operations		$	0.61			$	1.11			$	1.53			$	4.31
Discontinued operations			-				(0.02	)			-				(0.02	)
Net earnings		$	0.61			$	1.09			$	1.53			$	4.29
Average shares outstanding:
Basic			52,178				56,678				52,356				57,339
Diluted			52,858				57,142				52,987				57,802

THOMAS & BETTS CORPORATION AND SUBSIDIARIES Segment Information (In thousands) (Unaudited)
		Quarter Ended								Year to Date
		September 30,				September 30,				September 30,				September 30,
		2009				2008				2009				2008
Net sales:
Electrical		$	410,872			$	578,817			$	1,163,062			$	1,638,382
Steel Structures			50,922				55,700				167,817				164,091
HVAC			23,281				31,162				75,027				100,027
Total net sales		$	485,075			$	665,679			$	1,405,906			$	1,902,500
Segment earnings:
Electrical		$	78,267			$	119,146			$	194,480			$	326,093
Steel Structures			10,082				9,032				36,630				29,619
HVAC			3,221				5,349				11,505				17,144
Total reportable segment earnings		$	91,570			$	133,527			$	242,615			$	372,856
Corporate expense			(14,908	)			(11,283	)			(37,916	)			(28,117	)
Depreciation and amortization expense			(18,424	)			(18,573	)			(56,417	)			(61,771	)
Share-based compensation expense			(2,605	)			(2,316	)			(8,946	)			(12,151	)
Interest expense, net and other (expense) income, net			(10,579	)			(9,824	)			(24,668	)			(35,871	)
Gain on sale of equity interest			-				-				-				169,684
Earnings before income taxes		$	45,054			$	91,531			$	114,668			$	404,630
Segment earnings - % of net sales:
Electrical			19.0	%			20.6	%			16.7	%			19.9	%
Steel Structures			19.8	%			16.2	%			21.8	%			18.1	%
HVAC			13.8	%			17.2	%			15.3	%			17.1	%
Total			18.9	%			20.1	%			17.3	%			19.6	%

THOMAS & BETTS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) (Unaudited)
		September 30,			December 31,
		2009			2008
ASSETS
Current assets:
Cash and cash equivalents		$	357,429		$	292,494
Restricted cash			2,917			7,971
Receivables, net			243,424			229,160
Inventories			231,134			278,098
Other current assets			53,672			59,070
Total current assets			888,576			866,793
Net property, plant and equipment			298,595			299,077
Goodwill			897,468			880,410
Other intangible assets			256,241			274,672
Investments in unconsolidated companies			5,166			5,050
Other assets			83,816			84,600
Total assets		$	2,429,862		$	2,410,602
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt		$	593		$	148,751
Accounts payable			138,882			180,750
Accrued liabilities			110,709			138,553
Income taxes payable			14,044			7,947
Total current liabilities			264,228			476,001
Long-term debt, net of current maturities			607,626			512,193
Other long-term liabilities			281,134			277,751
Shareholders' equity			1,276,874			1,144,657
Total liabilities and shareholders' equity		$	2,429,862		$	2,410,602

THOMAS & BETTS CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Year to Date
		September 30,				September 30,
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings		$	80,841			$	248,251
Adjustments:
Depreciation and amortization			56,417				61,771
Share-based compensation expense			8,946				12,151
Gain on sale of equity interest			-				(169,684	)
Changes in operating assets and liabilities, net (a):
Receivables			(7,863	)			(66,840	)
Inventories			51,878				(37,781	)
Accounts payable			(45,798	)			24,263
Accrued liabilities			(24,833	)			(16,216	)
Income taxes payable			7,065				40,987
Lamson & Sessions change in control payments			(5,275	)			(12,685	)
Other			24,049				2,223
Net cash provided by (used in) operating activities			145,427				86,440
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(32,250	)			(29,839	)
Purchases of businesses			-				(90,571	)
Proceeds from sale of businesses, net			-				51,619
Proceeds from sale of equity interest, net			-				280,000
Restricted cash used for change in control payments			5,054				8,134
Other			953				412
Net cash provided by (used in) investing activities			(26,243	)			219,755
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common shares			(24,907	)			(100,572	)
Revolving credit facility proceeds (repayments), net			95,000				(30,000	)
Repayment of debt and other borrowings			(148,288	)			(120,073	)
Stock options exercised			451				1,883
Other			19				609
Net cash provided by (used in) financing activities			(77,725	)			(248,153	)
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS			23,476				(5,058	)
Net increase (decrease) in cash and cash equivalents			64,935				52,984
Cash and cash equivalents at beginning of period			292,494				149,926
Cash and cash equivalents at end of period		$	357,429			$	202,910
Cash payments for interest		$	26,527			$	37,391
Cash payments for income taxes		$	26,251			$	114,389

(a) Net of foreign exchange and acquisition effects

THOMAS & BETTS CORPORATION AND SUBSIDIARIES Selected Ratios (In thousands, except ratios) (Unaudited) Reconciliation of Free Cash Flow
		Year to Date
		September 30,				September 30,
		2009				2008
Net cash provided by (used in) operating activities		$	145,427			$	86,440
Less: Purchases of property, plant and equipment			(32,250	)			(29,839	)
Free Cash Flow		$	113,177			$	56,601
Reconciliation of Working Capital as a Percentage of Sales
		September 30,				December 31,				September 30,
		2009				2008				2008
Receivables, net		$	243,424			$	229,160			$	345,606
Inventories			231,134				278,098				320,186
Accounts payable			(138,882	)			(180,750	)			(197,805	)
Working capital		$	335,676			$	326,508			$	467,987
Net sales - rolling 4 quarters		$	1,977,230			$	2,473,824			$	2,504,894
Working capital as a percentage of sales			17.0	%			13.2	%			18.7	%
Reconciliation of Total Debt-to-Total Capitalization
		September 30,				December 31,
		2009				2008
Current maturities of long-term debt		$	593			$	148,751
Long-term debt, net of current maturities			607,626				512,193
Total debt			608,219				660,944
Shareholders' equity			1,276,874				1,144,657
Total capitalization		$	1,885,093			$	1,805,601
Total debt-to-total capitalization			32.3	%			36.6	%

Note: The Selected Ratios above are not calculated in accordance with Generally Accepted Accounting Principles (GAAP) and should not be considered a substitute for or superior to financial measures in accordance with GAAP. Management believes these non-GAAP financial measures provide investors and our management with additional useful information to measure and forecast our liquidity and operating results and to compare our liquidity and operating results on a more consistent basis against that of other companies in the markets that we serve.