-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WLKQIO7F5kvH7LS6j3gbv8DuMgEhjQfBmCRLhbtqNg/TmYtjVQeriHdqWPTC+HfG /b7heP3AOPVU0Tb/PTLA2g== 0001047469-99-010911.txt : 19990325 0001047469-99-010911.hdr.sgml : 19990325 ACCESSION NUMBER: 0001047469-99-010911 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19990103 FILED AS OF DATE: 19990323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THOMAS & BETTS CORP CENTRAL INDEX KEY: 0000097854 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 221326940 STATE OF INCORPORATION: TN FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-04682 FILM NUMBER: 99570973 BUSINESS ADDRESS: STREET 1: 8155 T&B BOULEVARD CITY: MEMPHIS STATE: TN ZIP: 38125 BUSINESS PHONE: 9012527766 MAIL ADDRESS: STREET 1: 1555 LYNNFIELD ROAD CITY: MEMPHIS STATE: TN ZIP: 38119 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 3, 1999. OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ TO _________________. COMMISSION FILE NUMBER 1-4682 THOMAS & BETTS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TENNESSEE 22-1326940 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 8155 T&B BOULEVARD, MEMPHIS, TENNESSEE 38125 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 252-8000 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 whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) 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. / / As of March 8, 1999, 56,854,414 shares of the Registrant's Common Stock were outstanding and the aggregate market value of the voting stock held by non-affiliates of the Registrant (based on the average bid and asked prices of such stock on the New York Stock Exchange composite tape) was $2,347,035,492. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the fiscal year ended January 3, 1999, are incorporated by reference into Parts I, II and IV. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 5, 1999, are incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE PART I ITEM 1. Business.................................................................... 3 ITEM 2. Properties.................................................................. 12 ITEM 3. Legal Proceedings........................................................... 14 ITEM 4. Submission of Matters to a Vote of Security Holders..................................................................... 16 Executive Officers of the Registrant........................................ 17 PART II ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters......................................................... 19 ITEM 6. Selected Financial Data..................................................... 19 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.......................................... 19 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk ................................................................ 19 ITEM 8. Financial Statements and Supplementary Data................................. 19 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 21 PART III ITEM 10. Directors and Executive Officers of the Registrant.......................... 22 ITEM 11. Executive Compensation...................................................... 22 ITEM 12. Security Ownership of Certain Beneficial Owners and Management....................................................... 22 ITEM 13. Certain Relationships and Related Transactions.............................. 22 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 23 EXHIBIT INDEX.......................................................................... E-1
Page 2 of 25 PART I ITEM 1. BUSINESS Thomas & Betts Corporation (the "Corporation" or "Thomas & Betts") is a leading manufacturer of connectors and components for worldwide electrical and electronics markets. Thomas & Betts operates 163 manufacturing and distribution facilities around the globe in over 24 countries. Thomas & Betts was first established in 1898 as a sales agency for electrical wires and raceways, and was incorporated and began manufacturing products in New Jersey in 1917. The Corporation was reincorporated in Tennessee in May 1996. Corporate offices are maintained at 8155 T&B Boulevard, Memphis, Tennessee 38125, and the telephone number at that address is 901-252-8000. The Corporation designs, manufactures and sells components used in assembling, maintaining and repairing electrical, electronic and communications systems. The Corporation's products include: 1) electrical components and accessories for industrial, commercial, utility and residential construction, renovation and maintenance applications and for applications in other companies' products primarily in North America, but also in Europe and other areas of the world; 2) electromechanical components, connectors and subsystems for use in high-speed applications involving miniaturization, surface-mounts, electromagnetic interference and multiplexing that are sold to the information processing and automotive industries in North America, Europe and Asia for use in other manufacturers' products; 3) electromechanical components, subsystems and accessories used to maintain, construct and repair cable television, telecommunications and data communications networks worldwide; 4) transmission poles and towers primarily for North American customers; and 5) heating units and accessories for North American and European markets. The Corporation classifies its products into business segments that are organized around the market channels through which it sells those products: Electrical, Electronic Original Equipment Manufacturers (OEMs) and Communications. Some products and sales cannot be classified into those segments and are included in "All Other." About one-half of Thomas & Betts' products meet global specifications and are sold worldwide. Other products, primarily those sold in the Electrical channel, have region-specific standards and are sold mostly in North America or in other regions sharing North American electrical codes. Page 3 of 25 The Corporation sells its products through electrical, electronic, telephone, cable and heating, ventilation and air-conditioning (HVAC) distributors, direct to OEMs, and through mass merchandisers, catalog merchandisers and home centers. No single customer of the Corporation accounted for more than 5.5% of 1998 net sales. Thomas & Betts pursues growth through market penetration, global expansion, new product development, joint venture arrangements and acquisitions. In 1998, the Corporation completed nine acquisitions for total consideration of $168 million cash and 1,461,000 shares of common stock. In November 1998, Thomas & Betts completed the cash acquisition of Kaufel Group Ltd., more than doubling the lighting product line that Thomas & Betts can offer. Canadian-based Kaufel manufactures emergency lighting products and sells in Canada, the U.S., Europe and Asia-Pacific. The July 1998 acquisition of Telecommunication Devices, Inc., a manufacturer of battery packs for mobile communications equipment, dramatically broadened the Corporation's exposure to the fast-growing area of mobile communications equipment where Thomas & Betts intends to sell other electronics products. Other 1998 acquisitions added to the scope of products offered through Electrical and Communications market channels. In 1997, Thomas & Betts completed six acquisitions, the largest of which was the July 1997 acquisition of Diamond Communications Products, Inc. Diamond's products enhanced the Corporation's offering in the "drop-end" portion of the cable television industry that connects cable service to homes and other service destinations. Other 1997 acquisitions increased the breadth of products offered within the Electrical segment. ELECTRICAL SEGMENT The Electrical segment's markets include industrial construction, renovation, maintenance and repair; commercial and residential construction and renovation; project construction; and industrial OEM, primarily in North America. Total sales of the segment were $1,079.8 million, $983.6 million and $827.7 million, or 48.4%, 43.5% and 38.7% of total sales for 1998, 1997 and 1996, respectively. Thomas & Betts designs, manufactures and markets thousands of different electrical connectors, components and other products for electrical applications. The Corporation has a leading position in the market for many of those products. Products Page 4 of 25 include fittings and accessories for electrical raceways; 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 trays, electrical enclosures and lighting raceways; ground rods and clamps; emergency, outdoor security, roadway and hazardous location lighting; circuit breakers, safety switches and meter centers; and other products, including insulation products, wire markers, cable tray and application tooling products. Products are sold under a variety of the Corporation's well-known brand names. Electrical products are sold through electrical and utility distributors as well as retail outlets such as home centers and mass merchants. The Corporation has relationships with over 8,000 national, regional and independent distributors, retailers and buying groups with locations across North America. Thomas & Betts has strong relationships with its distributors as a result of the breadth and quality of its product line, innovative service programs, product innovation, competitive pricing and brand-name recognition among end users. Thomas & Betts' products are sold through a network of factory and independent sales representatives who work with distributors, end users and retail outlets to increase demand for its products. The Corporation has thousands of customers, and no single end user, distributor, retailer or group of affiliated distributors accounted for more than 13% of the Electrical segment's 1998 net sales. Because electrical standards vary by region, and historically the Corporation has emphasized North American standards, the majority of Electrical segment sales is currently realized in the U.S. and Canada. Thomas & Betts has the potential to increase its participation in markets outside of North America by developing or acquiring product lines that conform to other regional standards. ELECTRONIC OEM SEGMENT Thomas & Betts sells electronic components primarily to OEMs in the automotive, information services, office equipment, mobile communications, industrial electronics, test equipment, computer- aided-engineering and manufacturing systems, instrumentation, medical electronics markets, and additional applications in aerospace. The Corporation also sells products through electronics distributors. Electronic OEM segment sales were Page 5 of 25 $640.1 million, $756.4 million and $799.5 million, or 28.7%, 33.5% and 37.5% of Thomas & Betts' total sales for 1998, 1997 and 1996, respectively. The Corporation's Electronic OEM components include: battery packs; printed circuit connectors; IDC connectors for mass termination of flat cables; custom-engineered connectors for automotive and professional electronics applications; flexible interconnects, flat cables and assemblies for automotive and other applications; cable ties; terminals; D-subminiature connectors, a broad group of industry standard connectors; custom and standard switches; printed circuit board sockets and terminal blocks. These components are sold under a variety of Thomas & Betts' brand names. Thomas & Betts manufactures and sells both custom-designed and standard components through electronic distributors and directly to end users. To enable it to compete in the global electronics marketplace, the Corporation has design, manufacturing and distribution capabilities in North America, Europe and the Far East. Thomas & Betts has a broad customer base, and no single customer accounted for more than 7% of Electronic OEM segment sales in 1998. OEM customers are reducing the number of their preferred suppliers, focusing on companies that can meet quality and delivery standards and that have a global presence, a broad product package, strong design capability and competitive prices. The Corporation has been designated as a preferred supplier by many of its most important OEM customers for electronic components, and continues to seek preferred status from other accounts. COMMUNICATIONS SEGMENT Thomas & Betts' Communications segment designs, manufactures and markets electromechanical components, subsystems and accessories used to maintain, construct and repair cable television (CATV), telecommunications and data communications networks. Although the majority of the segment's sales are recorded in North America, the products are of an international standard and are also sold outside of North America. Total Communications segment sales were $261.1 million, $262.1 million and $253.7 million, or 11.7%, 11.6% and 11.9% of the Corporation's total sales for 1998, 1997 and 1996, respectively. Page 6 of 25 The Corporation's communications product offering includes: CATV drop hardware; RF connectors; CATV amplifiers; fiber management systems; fiber optic connectors and splitters; modular voice and data connectors and related components; aerial, pole, pedestal and buried splice enclosures; connectors; encapsulation and sheath repair systems; and cable ties. Products are sold directly to CATV system operators and also through telecommunications and CATV distributors. Components, with the exception of modular voice and data connectors, are sold under a variety of the Corporation's brand names. Modular voice and data connectors and a package of related products are sold through an exclusive arrangement with IBM's Advanced Connectivity Systems, and are not offered directly to other end users. No single end user or distributor accounted for more than 5.3% of the Corporation's Communications segment 1998 net sales. OTHER SALES The Corporation sells its other products and components, comprised of heating products and steel poles and towers, through distributors and directly to end users. No single end user or distributor accounted for more than 10% of the Corporation's other sales in 1998. Other sales were $249.3 million, $257.4 million and $253.4 million, or 11.2%, 11.4% and 11.9% of the Corporation's total sales for 1998, 1997 and 1996, respectively. HEATING PRODUCTS The Corporation designs, manufactures and markets heating and ventilation products for commercial and industrial buildings. Products include gas, oil and electric unit heaters, gas-fired duct furnaces, indirect and direct gas-fired make-up air heaters, infrared heaters, and evaporative cooling and heat recovery products for the heating, ventilation and air conditioning ("HVAC") marketplace. Those products are sold under the Reznor(R) and E.K. Campbell(R) brand names through HVAC, mechanical and refrigeration distributors in over 1,800 locations throughout North America and Europe. TRANSMISSION POLES AND TOWERS The Corporation designs, manufactures and markets transmission and distribution poles and towers for North American power and telecommunications companies and for export. Those Page 7 of 25 products are primarily sold to five types of end users: investor-owned utilities; cooperatives, which purchase power from utilities and manage its distribution to end users; municipal utilities; cable television operating companies; and telephone companies. The Corporation's products include tubular steel transmission and distribution poles and lattice steel transmission towers. The Corporation manufactures and sells its transmission towers and its transmission and distribution poles under the Lehigh(R), Meyer(R) and Thomas & Betts brand names. MANUFACTURING AND DISTRIBUTION Thomas & Betts employs advanced processes in order to manufacture quality products. The Corporation's manufacturing processes include high-speed stamping, precision molding, machining, plating and automated assembly. The Corporation makes extensive use of computer-aided design and computer-aided manufacturing (CAD/CAM) software and equipment to link product engineering with its factories. The Corporation also utilizes 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. Thomas & Betts' products enjoy a reputation for quality in the markets in which they are sold. To ensure quality, all of Thomas & Betts' facilities embrace quality programs and 80% of all facilities owned as of October 31, 1998, meet ISO 9000, 9001, 9002 or QS 9000 standards. By year-end 2000, all facilities owned by Thomas & Betts as of January 3, 1999, are expected to have received either ISO or QS certification. The Corporation has implemented quality control processes in its design, manufacturing, delivery and other operations in order to further improve product quality and the service level to customers. These techniques include just-in-time manufacturing programs for more efficient use of machine tools in manufacturing different products, statistical process control, statistical problem solving, and other processes related to the Corporation's Distributor Manufacturer Integration (DMI) program. From its origin as a delivery guarantee for electrical distributors, the DMI program has evolved into a partnership for profitability that encompasses purchasing incentives, extensive marketing support, training and service discounts primarily for electrical and CATV distributors. The DMI process is now the Page 8 of 25 benchmark in the electrical components industry for how business through electronic commerce should be conducted. In 1998, participation in the DMI program increased 19% over the previous year. Management believes that the DMI advanced partnership includes customer cost- reduction processes such as automatic stock replenishment, advanced distributor inventory modeling, automatic receiving, price synchronization, invoice balancing and summary billing. The program also gives customers the right to return merchandise, which is prevalent in the electrical components industry. Combining those business process redefinitions with a leading effort in electronic commerce, such as extensive use of industry-standard electronic data interchange (EDI), has made the DMI partnership a success for the Corporation as well as its participating distributors. RAW MATERIALS Thomas & Betts purchases a wide variety of raw materials for the manufacture of its products, including metals such as brass, copper, aluminum, steel plate, steel strip and malleable iron castings, resins and rubber compounds. The Corporation's sources of raw materials and component parts are well established and are sufficiently numerous to avoid serious interruption of production in the event that certain suppliers are unable to provide raw materials and component parts. RESEARCH AND DEVELOPMENT Thomas & Betts has centralized research, development and engineering capabilities for those products that are globally accepted and maintains regional facilities to respond to the specific needs of local markets. The Corporation has a reputation for innovation and value based upon its ability to rapidly develop products that meet the needs of the marketplace. The Corporation invests significant resources in its research and development activities. Research, development and engineering expenditures invested into new and improved products and processes were $48.7 million, $53 million and $47.5 million, or 2.2%, 2.3% and 2.2% of total sales for 1998, 1997 and 1996, respectively. The Corporation has made major investments and future commitments toward next-generation engineering tools in the areas of solid modeling software and rapid prototyping. The foundation has also been set to integrate these tools across the design, Page 9 of 25 manufacturing and production areas. These research and development activities continue to be focused on high-growth markets and complementary products. Most research and development activity in 1998 took place in the Electronic OEM and Communications segments with efforts focused in part on expanding applications for the Metallized Particle Interconnect (MPI(TM)), microprocessor socket, commercializing polymer lithium ion battery technology for mobile communications applications and developing additional fiber optic products. PATENTS AND TRADEMARKS Thomas & Betts owns approximately 2,550 active patent registrations and applications worldwide. The Corporation has over 1,300 active trademark registrations and applications worldwide, including THOMAS & BETTS, T&B, AGASTAT, ALCOSWITCH, AMERICAN ELECTRIC LIGHTING, ANCHOR, ANSLEY, ARMIGER, ASTER, AUGAT, BLACKBURN, BOWERS, BUCHANAN, CANSTRUT, CATAMOUNT, CENTER-LOK, COLOR-KEYED, COMMANDER, DIAMOND, ELASTOMERIC TECHNOLOGIES, EK CAMPBELL, ELASTIMOLD, ELECTROLINE, EMERGI-LITE, EPITOME, ELECTROLAY, EVER-LOK, E-Z-CODE, FLEXSTRIP, HAZLUX, HOLMBERG, KINDORF, KOLD-N-CLOSE, LIQUID TITE, LRC, MARR, MARRETTE, MAX-GARD, MEYER, MICROLECTRIC, MPI, NEVADA WESTERN, PHOTON, RDI, REZNOR, RUSSELLSTOLL, SACHS, SIGNATURE SERVICE, SNAP-N-SEAL, STA- KON, STEEL CITY, SUPERSTRUT, TDI BATTERIES, TAYLOR, TELZON, TY-FAST, TY-RAP, UNION, VALON and ZINSCO. While the Corporation considers its patents and trademarks (including trade dress) to be valuable assets, it does not believe that its competitive position is dependent solely on patent or trademark protection or that its operations are dependent on any individual patent or trademark. The Corporation does not consider any of its licenses, franchises or concessions to be material to its business. COMPETITION Thomas & Betts encounters competition in all areas of its business, and the methods of competition vary depending on the market into which the Corporation is selling. The Corporation competes primarily on the basis of product quality, technology or innovation, price, performance and customer service. No single company competes directly with Thomas & Betts in all of its product lines, but various companies compete with Thomas & Betts in one or more product lines. Page 10 of 25 In total, Thomas & Betts has many competitors varying in size. Some have substantially greater sales and assets than Thomas & Betts while other companies are smaller than Thomas & Betts. EMPLOYEES As of January 3, 1999, the Corporation and its subsidiaries had approximately 19,330 full-time employees worldwide. Employees of the Corporation's international subsidiaries in the aggregate comprise approximately 56% of all employees. Of the total number of employees, 32% are represented by trade unions. The Corporation believes its relationships with its employees are excellent. REGULATION The Corporation is subject to federal, state and local environmental laws and regulations which govern the discharge of pollutants into the air, soil and water, as well as the handling and disposal of solid and hazardous wastes. Thomas & Betts believes that it is currently in substantial compliance with all applicable environmental laws and regulations and that the costs of maintaining or coming into compliance with such environmental laws and regulations will not be material to the Corporation's financial position or results of operations. FINANCIAL INFORMATION ABOUT FOREIGN AND U.S. DOMESTIC OPERATIONS For information concerning financial results for industry segments and foreign and U.S. domestic operations for the three years ended January 3, 1999, refer to Notes 12 and 13, respectively, of Notes to Consolidated Financial Statements contained in the Corporation's 1998 Annual Report to Shareholders, which Notes are incorporated herein by reference. Export sales originating in the U.S. were $37.3 million, $40.2 million and $49.7 million for 1998, 1997 and 1996, respectively. Page 11 of 25 ITEM 2. PROPERTIES The Corporation has total plant, office and distribution space of approximately 11,117,000 sq. ft. in 189 locations in 29 states, the Commonwealth of Puerto Rico and 23 other countries. This space is composed of 7,180,000 sq. ft. of manufacturing space, 2,854,000 sq. ft. of office and distribution space and 1,083,000 sq. ft. of idle space. The following table lists the Corporation's manufacturing locations by segment as of January 3, 1999:
APPROXIMATE AREA IN SQ. FT. NO. OF ------------------------ SEGMENT LOCATION FACILITIES LEASED OWNED - ------- -------- ---------- -------- -------- Electrical Arkansas 1 246,000 California 2 249,480 Georgia 3 220,600 157,818 Massachusetts 2 16,200 116,000 Mississippi 1 236,648 New Jersey 1 168,000 New Mexico 2 25,025 100,000 Puerto Rico 2 56,351 South Carolina 1 85,400 Tennessee 2 457,000 Texas 1 35,805 Australia 1 19,350 Barbados 1 22,000 Canada 11 64,200 651,787 Germany 1 25,178 Mexico 2 459,317 Netherlands 1 53,800 Spain 1 9,146 UK 5 11,500 119,890
Page 12 of 25
APPROXIMATE AREA IN SQ. FT. NO. OF ------------------------ SEGMENT LOCATION FACILITIES LEASED OWNED - ------- -------- ---------- -------- -------- Electronic OEM California 1 119,500 Florida 1 65,000 Illinois 2 113,300 Maine 1 99,280 Michigan 3 231,015 Pennsylvania 2 37,000 South Carolina 3 94,966 Hungary 1 77,472 Japan 1 74,777 Luxembourg 1 43,246 Malaysia 1 24,000 Mexico 3 846,933 Switzerland 1 188,000 UK 1 55,000 Communications Massachusetts 1 97,000 New Jersey 1 69,000 New York 1 174,500 Washington 1 69,667 Canada 2 65,340 Singapore 1 61,200 Other Pennsylvania 1 227,050 South Carolina 1 105,000 Texas 1 147,728 Wisconsin 1 171,206 Belgium 1 139,880 France 2 37,359 7,973 Mexico 1 131,393
The Corporation leases approximately 214,000 sq. ft. of space in Memphis, Tennessee for its corporate and group headquarters. Principal sales offices and distribution facilities are located in 2,640,000 sq. ft. of property, approximately 40% of which is leased. The Corporation has 1,083,000 sq. ft. of idle manufacturing and office space in Alabama, Connecticut, Kansas, Michigan, Pennsylvania, New Jersey, New York, Massachusetts, Oklahoma, Canada, and U.K., not included in the above table. Page 13 of 25 ITEM 3. LEGAL PROCEEDINGS Owners and operators of sites containing hazardous substances, as well as generators of hazardous substances, are subject to broad liability under various federal and state environmental laws and regulations, including liability for cleanup costs and damages arising out of past disposal activity. Such liability in many cases may be imposed regardless of fault or the legality of the original disposal activity. The Corporation is the owner or operator or former owner of various manufacturing facilities currently being evaluated by the Corporation for the presence of contamination that may require remediation, including closed facilities in Anniston, Alabama; Elizabeth, New Jersey; Pittsburgh, Pennsylvania; and currently operated facilities in Hager City, Wisconsin, and Lancaster, South Carolina. In addition, the Corporation is evaluating or remediating, or may have liability associated with, contamination at two manufacturing plants, which were sold by American Electric prior to its acquisition by the Corporation, located in Bainbridge, Georgia, and Medora, Indiana, that may require site remediation. All but two of the above facilities (Elizabeth and Lancaster) were purchased by American Electric from other parties between the years 1985 and 1988. With respect to all but one of those former American Electric facilities (Pittsburgh), at the time of those purchases by American Electric, the sellers committed to indemnify American Electric for environmental liabilities that occurred prior to the purchase of the facilities by American Electric. The Corporation believes that the indemnities are reliable; however, there can be no assurances that such indemnities will be honored. Subsequent to the Corporation's acquisition of American Electric, the Corporation entered into agreements with the sellers to cooperate with each other in resolving obligations in connection with the above-mentioned environmental issues. The Corporation has received notifications from the United States Environmental Protection Agency ("EPA") or similar state environmental regulatory agencies or private parties that the Corporation, 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 (the "Superfund" Act) or similar state environmental statutes. Pursuant to the Asset Purchase Agreement dated June 28, 1985, between American Electric and ITT Corporation ("ITT"), ITT has to date assumed responsibility for costs associated with contamination prior to June 1985 at four of those Page 14 of 25 sites. The Corporation has assumed responsibility for its share of costs at the remaining eight sites covered by that Agreement. In January 1996, the Corporation acquired Amerace Corporation. Pursuant to the various environmental laws and regulations described above, Amerace is evaluating or remediating, or may have liability associated with, contamination at three facilities formerly owned or operated by Amerace, located in Butler, New Jersey; New Milford, New Hampshire; and Tenafly, New Jersey; and at two facilities currently owned and operated by Amerace located in Albuquerque, New Mexico; and Hackettstown, New Jersey. In addition, Amerace has received notifications from the EPA or from similar state environmental regulatory agencies or private parties that Amerace, along with others, may currently be potentially responsible for its share of the costs relating to the remediation of ten sites pursuant to the Superfund Act or similar state environmental statutes. In December 1996, the Corporation acquired Augat Inc. Pursuant to the various environmental laws and regulations described above, Augat is evaluating or remediating, or may have liability associated with contamination at five facilities formerly owned or operated by Augat, located in Canton, Massachusetts; Horseheads, New York; Mashpee, Massachusetts; and at two facilities in Montgomery, Alabama. In addition, Augat has received notifications from the EPA or from similar state environmental regulatory agencies or private parties that Augat, along with others, may currently be potentially responsible for its share of the costs relating to the remediation of five sites pursuant to the Superfund Act or similar state environmental statutes. In July 1997, the Corporation acquired Diamond Communications, Inc. Pursuant to the various environmental laws and regulations described above, Diamond is evaluating, and may have liability associated with contamination at its Garwood, New Jersey facility. In November 1998, the Corporation acquired Kaufel Group, Ltd. Pursuant to the various environmental laws and regulations described above, Kaufel is evaluating, and may have liability associated with contamination at two facilities owned and operated by Kaufel, both located in Dorval, Quebec; and one facility formerly owned and operated by Kaufel, located in Baldwin, New York. Page 15 of 25 In January 1999, the Company acquired Ocal, Inc. Pursuant to the various environmental laws and regulations described above, Ocal is evaluating, and may have liability associated with contamination at one facility currently operated by Ocal in Mobile, Alabama. The Corporation is not able to predict with certainty the extent of its ultimate liability with respect to any pending or future environmental matters. However, the Corporation does not believe that any such liability with respect to the aforementioned environmental matters will be material to its financial position or results of operations. The Corporation is subject to other legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect to those other actions will not materially adversely affect the financial position or results of operations of the Corporation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended January 3, 1999. Page 16 of 25 EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding executive officers of the Corporation is as follows (included herein pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K):
DATE ASSUMED NAME POSITION AGE PRESENT POSITION ---- -------- --- ---------------- Clyde R. Moore President and 45 May 1997 Chief Executive Officer T. Roy Burton President-Electronics OEM 51 March 1994 Group John R. Janulis Vice President-Controller 54 February 1994 Fred R. Jones Vice President- 51 August 1995 Chief Financial Officer Jerry Kronenberg Vice President-General Counsel 64 May 1998 and Secretary Gregory M. Langston President-International 43 February 1998 Group David D. Myler Vice President-Administration 54 December 1993 W. Neil Parker President-Electrical 56 May 1996 Components Group Gary R. Stevenson President-Operations/ 46 January 1994 Administration Group
Mr. Moore was President and Chief Operating Officer of FL Industries, Inc. (1990 to 1992) and President of its American Electric Division (1985 to 1992). He was President-Electrical Division (1992 to 1994) and President and Chief Operating Officer (1994 to 1997) of the Corporation. Mr. Burton was Vice President-Information Technology Operations (1992 to 1993), and Vice President-Aerospace Operations (1993 to 1994) of Amphenol Corporation. Mr. Janulis was Vice President-Finance of the American Electric Division of FL Industries, Inc. (1990 to 1992) and Vice President-Finance of Thomas & Betts Holdings, Inc. (name changed from FL Industries, Inc. in 1992) (1992 to 1994). Page 17 of 25 Mr. Jones was Senior Vice President and Chief Financial Officer (1992 to 1995) of Joy Technologies, Inc. (manufacturer of industrial, mining and pollution control equipment) and Vice President-Finance and Treasurer of the Corporation (1995 to 1998). Mr. Kronenberg was Chairman of the Labor and Employee Relations Committee of the law firm of McBride, Baker & Coles (1990 to 1994) and Vice President-General Counsel of the Corporation (1994 to 1998). Mr. Langston was President of Groupe Schneider Mexico (1992 to 1995) and President-Utility Group of the Corporation (1995 to February 1998). Mr. Myler was Vice President-Administration (1991 to 1993) of Thomas & Betts Holdings, Inc. (name changed from FL Industries, Inc. in 1992). Mr. Parker was President of Thomas & Betts Limited (1992 to 1996), President-Thomas & Betts Canada (1995 to 1996), and Chief Executive Officer of Thomas & Betts Limited (1996 to 1998). Mr. Stevenson was Vice President-Operations of the American Electric Division of FL Industries, Inc. (1989 to 1992), Vice President-Operations (1992 to 1994) of Thomas & Betts Holdings, Inc. (name changed from FL Industries, Inc. in 1992) and Vice President-Operations of the Corporation (1994 to 1998). Executive officers are elected by, and serve at the discretion of, the Board of Directors for a term of one year. The current term expires May 5, 1999. There is no arrangement or understanding between any officer and any person, other than a director or executive officer of the Corporation acting in his official capacity, pursuant to which any officer was selected. There is no family relationship between any executive officer and any other officer or director of the Corporation. There has been no event involving any executive officer of the Corporation under any bankruptcy act, criminal proceeding, judgment or injunction during the past five years. Page 18 of 25 PART II Information for Items 5 through 8 of this Report appears in the Corporation's Annual Report to Shareholders for the fiscal year ended January 3, 1999, as indicated in the following table and is incorporated herein by reference. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Information regarding market information, shareholders and dividends is contained in the Financial Highlights, Quarterly Review and Corporate Information sections of the Corporation's Annual Report to Shareholders for the fiscal year ended January 3, 1999, on the inside cover and on pages 43 and 44 and is incorporated herein by reference.
PAGE IN ANNUAL REPORT TO SHAREHOLDERS ---------------- ITEM 6. SELECTED FINANCIAL DATA Selected Consolidated Financial Data...................... 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION................................................. 19-25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................................... 24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Earnings....................... 26 Consolidated Balance Sheets............................... 27 Consolidated Statements of Cash Flows..................... 28 Consolidated Statements of Shareholders' Equity............................................ 29 Notes to Consolidated Financial Statements................ 30
Page 19 of 25 FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE This document and the documents that are incorporated by reference include various forward-looking statements about Thomas & Betts that are subject to risks and uncertainties. Forward-looking statements include information concerning future results of operations, cost savings and synergies. Also, statements that contain words such as "believes," "expects," "anticipates," "intends," "estimates," or similar expressions are forward-looking statements. Shareholders should note that these forward- looking statements are subject to risks and uncertainties and that many factors, some of which are discussed elsewhere in this document and in the documents that are incorporated by reference, could affect the future financial results of Thomas & Betts. Accordingly, actual results may differ materially from those expressed or implied by such forward-looking statements contained or incorporated by reference in this document. There are numerous important factors that could cause actual results to differ materially from those in forward-looking statements, certain of which are beyond the control of Thomas & Betts, including: - changes in customer demand for various products of Thomas & Betts that could affect its overall product mix, margins, plant utilization levels and asset valuations; - economic slowdown in the U.S. or economic slowdowns in Thomas & Betts' major offshore markets, including Canada, Western Europe, particularly Germany and the U.K., Japan and Taiwan; - effects of significant changes in monetary or fiscal policies in the U.S. and abroad which could result in currency fluctuations, including fluctuations in the Canadian dollar, German mark, Japanese yen, Swiss franc and U.K. pound; - inflationary pressures which could raise interest rates and consequently Thomas & Betts' cost of funds; - unforeseen difficulties in completing identified cost-reduction actions initiated in the third quarter of 1998, including disposal of idle facilities, geographic shifts of production locations and closure of redundant administrative facilities; Page 20 of 25 - unforeseen problems in Thomas & Betts' computer systems and from third parties with whom Thomas & Betts deals in business transactions, specifically those related to "Year 2000" date-recognition ability in time-sensitive software; - availability and pricing of commodities and materials needed for production of Thomas & Betts' products, including steel, copper, zinc, aluminum, gold and plastic resins; - increased downward pressure on selling prices for Thomas & Betts' products; - unforeseen difficulties arising from past and future acquisitions of businesses; - changes in financial results of, or possibly the relationships with, Thomas & Betts' joint ventures and other equity income investments in Taiwan, Japan, Belgium and the U.S.; - changes in environmental regulations and policies that could impact projections of remediation expenses; and - significant changes in governmental policies domestically and abroad that could create trade restrictions, patent enforcement issues, adverse tax rate changes and changes to tax treatment of such items as tax credits, withholding taxes, transfer pricing and other income and expense recognition for tax purposes, including changes in taxation on income generated in Puerto Rico. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None Page 21 of 25 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding members of the Corporation's Board of Directors is presented in sections "Security Ownership," "Board and Committee Membership," "Compensation" and "Proposal No. 1, Election of Directors" and on pages 3 through 14 and pages 16 through 18 of the Definitive Proxy Statement for the Corporation's Annual Meeting of Shareholders which will be held May 5, 1999 and is incorporated herein by reference. Information regarding executive officers of the Corporation is included above 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. Information required by Item 405 of Regulation S-K is presented in "Section 16(a) Beneficial Ownership Reporting Compliance" on page 2 of the Definitive Proxy Statement and is incorporated herein by reference. Information for Items 11 through 13 of this Report appears in the Definitive Proxy Statement for the Corporation's Annual Meeting of Shareholders to be held on May 5, 1999, as indicated in the following table and is incorporated herein by reference.
PAGE IN PROXY STATEMENT ------------- ITEM 11. EXECUTIVE COMPENSATION Compensation............................................ 7 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership...................................... 3 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Nonemployee Directors................. 8 Employment Contracts, Termination of Employment and Change-of-Control Arrangements for Executives.................... 12
Page 22 of 25 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The consolidated financial statements of the Corporation, together with the report thereon of KPMG LLP, dated February 5, 1999, are presented on pages 26 through 42 of the Corporation's 1998 Annual Report to Shareholders and are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated by reference in Items 5, 6, 7 and 8 hereof, the Corporation's 1998 Annual Report to Shareholders is not to be deemed as filed as part of this Report. 2. FINANCIAL STATEMENT SCHEDULES All financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements, or the notes thereto, contained in the Corporation's 1998 Annual Report to Shareholders and incorporated herein by reference. 3. EXHIBITS Exhibits 3.1, 3.2, 4.1 through 4.13, 10.1 through 10.15, 12, 13, 21, 23, 24 are being filed in connection with this Report and incorporated herein by reference. The Exhibit Index on pages E-1 through E-4 is incorporated herein by reference. (b) REPORTS ON FORM 8-K During the last quarter of the period covered by this Report, the Corporation filed no Current Reports on Form 8-K. Page 23 of 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Corporation has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized. THOMAS & BETTS CORPORATION (Registrant) BY: /s/ FRED R. JONES ----------------------------------------- Fred R. Jones Vice President-Chief Financial Officer (PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Corporation in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE - --------- -------- ---- /s/ CLYDE R. MOORE* President, Chief Executive - ---------------------------- Officer (PRINCIPAL EXECUTIVE Clyde R. Moore OFFICER) and Director /s/ FRED R. JONES Vice President-Chief March 23, 1999 - ---------------------------- Financial Officer (PRINCIPAL Fred R. Jones FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER) /s/ JERRY KRONENBERG* Vice President-General - ---------------------------- Counsel and Secretary Jerry Kronenberg /s/ ERNEST H. DREW* Director - ---------------------------- Ernest H. Drew /s/ T. KEVIN DUNNIGAN* Chairman of the Board - ---------------------------- (T. Kevin Dunnigan) /s/ JEANANNE K. HAUSWALD* Director - ---------------------------- Jeananne K. Hauswald /s/ THOMAS W. JONES* Director - ---------------------------- Thomas W. Jones
Page 24 of 25
SIGNATURE CAPACITY DATE - --------- -------- ---- /s/ RONALD B. KALICH, SR.* Director - ---------------------------- Ronald B. Kalich, Sr. /s/ ROBERT A. KENKEL* Director - ---------------------------- Robert A. Kenkel /s/ KENNETH R. MASTERSON* Director - ---------------------------- Kenneth R. Masterson /s/ THOMAS C. MCDERMOTT* Director - ---------------------------- Thomas C. McDermott /s/ JEAN-PAUL RICHARD* Director - ---------------------------- Jean-Paul Richard /s/ JERRE L. STEAD* Director - ---------------------------- Jerre L. Stead /s/ WILLIAM H. WALTRIP* Director - ---------------------------- William H. Waltrip *By: /s/ FRED R. JONES March 23, 1999 ---------------------------- Fred R. Jones As attorney-in-fact for the above- named officers and directors pursuant to powers of attorney duly executed by such persons.
Page 25 of 25 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 3.1 Charter of the Corporation, as amended. (Filed as Exhibit 3.1 to the Corporation's 1997 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) 3.2 By-laws of the Corporation, as amended. 4.1 Indenture dated as of January 15, 1992 between the Corporation and First Trust of New York, as Trustee, relating to the Corporation's debt securities. (Filed as Exhibit 4(a) to the Corporation's 1991 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) 4.2 Supplemental Indenture dated as of May 2, 1996 between the Corporation and First Trust of New York, as Trustee, relating to the Corporation's 8 1/4% Senior Notes due January 15, 2004. (Filed as Exhibit 4.3 to the Corporation's Registration Statement on Form 8-B filed May 2, 1996, and incorporated herein by reference.) 4.3 Second Supplemental Indenture dated as of February 10, 1998 between the Corporation and The Chase Manhattan Bank, as Trustee, relating to the Corporation's Medium-Term Notes the last of which is due February 13, 2003. (Filed as Exhibit 4.1 to the Corporation's Current Report on Form 8-K dated February 10, 1998, Commission File No. 1-4682, and incorporated herein by reference.) 4.4 Third Supplemental Indenture dated May 7, 1998 between the Corporation and The Chase Manhattan Bank, as Trustee, relating to the Corporation's Medium-Term Notes the last of which is due May 7, 2008. (Filed as Exhibit 4.1 to the Corporation's Current Report on Form 8-K dated May 4, 1998, Commission File No. 1-4682, and incorporated herein by reference.) 4.5 Indenture dated as of August 1, 1998 between the Corporation and The Bank of New York, as Trustee, relating to the Corporation's debt securities. (Filed as Exhibit 4.1 to the Corporation's Current Report on Form 8-K dated February 3, 1999, Commission File No. 1-4682, and incorporated herein by reference.) E-1 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 4.6 Supplemental Indenture No. 1 dated February 10, 1999 between the Corporation and The Bank of New York, a Trustee, relating to the Corporation's Medium-Term Notes, Series B. (Filed as Exhibit 4.2 to the Corporation's Current Report on Form 8-K dated February 3, 1999, Commission File No. 1-4682, and incorporated herein by reference.) 4.7 Form of 6 1/2% Senior Note due January 15, 2006. (Filed as Exhibit 4.4 to the Corporation's Registration Statement No. 33-00893 on Form S-4 filed February 13, 1996, and incorporated herein by reference.) 4.8 Form of 8 1/4% Senior Note due January 15, 2004. (Filed as Exhibit 4(b) to the Corporation's 1991 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) 4.9 Form of 6.29% Medium-Term Note due nine months or more from date of issue. (Filed as Exhibit 4.2 to the Corporation's Current Report on Form 8-K dated February 10, 1998, Commission File No. 1-4682, and incorporated herein by reference.) 4.10 Form of 6.25% Medium-Term Note due nine months or more from date of issue. (Filed as Exhibit 4.2 to the Corporation's Current Report on Form 8-K dated May 4, 1998, Commission File No. 1-4682, and incorporated herein by reference.) 4.11 Form of 6.39% Medium-Term Note, Series B, due nine months or more from date of issue. (Filed as Exhibit 4.3 to the Corporation's Current Report on Form 8-K dated February 3, 1999, Commission File No. 1-4682, and incorporated herein by reference.) 4.12 Rights Agreement dated as of December 3, 1997 between the Corporation and First Chicago Trust Company of New York, as Rights Agent and Form of Right Certificate. (Filed as Exhibits 1 and 2 to the Corporation's Registration Statement on Form 8-A filed December 15, 1997 and incorporated herein by reference.) 4.13 Indenture dated as of July 22, 1998 between Kaufel Group Ltd., a subsidiary of the Corporation, and Montreal Trust Company of Canada, as Trustee, relating to 7.15% Senior Debentures due 2008. This agreement is not being filed as an exhibit pursuant to Regulation S-K, Item 601(b)(4)(iii); however, the Corporation will provide a copy of such agreement to the Commission upon request. E-2 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.1 Five-Year Credit Agreement dated July 1, 1998 among the Corporation, Morgan Guaranty Trust Company of New York, as Agent, and certain lenders. (Filed as Exhibit 10.1 to the Corporation's third quarter 1998 Quarterly Report on Form 10-Q, Commission File No. 1-4682, and incorporated herein by reference.) 10.2 Amendment No. 1 to the Five-Year Credit Agreement dated as of January 4, 1999 among the Corporation, Morgan Guaranty Trust Company of New York, as Agent, and certain lenders. 10.3 364-Day Credit Agreement dated as of July 1, 1998 among the Corporation, Morgan Guaranty Trust Company of New York, as Agent, and certain lenders. (Filed as Exhibit 10.2 to the Corporation's third quarter 1998 Quarterly Report on Form 10-Q, Commission File No. 1-4682, and incorporated herein by reference.) 10.4 Amendment No. 1 to 364-Day Credit Agreement dated as of January 4, 1999 among the Corporation, Morgan Guaranty Trust Company of New York, as Agent, and certain lenders. 10.5 1985 Stock Option Plan. (Filed as Exhibit 10 to the Corporation's 1992 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) 10.6 1990 Stock Option Plan and Form of Stock Option Agreement. (Filed as Exhibit 10 to the Corporation's 1990 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) 10.7 1993 Management Stock Ownership Plan, as amended (filed as Exhibit 10.6 to the Corporation's 1997 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference), and Forms of Stock Option Agreement. 10.8 Executive Incentive Plan. (A description of the executive incentive plan is contained in the Definitive Proxy Statement for the Corporation's 1999 Annual Meeting of Shareholders, as Proposal No. 2, and is incorporated herein by reference.) 10.9 Pension Restoration Plan effective January 1, 1995. (Filed as Exhibit 10.8 to the Corporation's 1997 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) E-3 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 10.10 Retirement Plan for Nonemployee Directors dated September 6, 1989, as amended December 3, 1997. (Filed as Exhibit 10.9 to the Corporation's 1997 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) 10.11 Deferred Fee Plan for Nonemployee Directors as amended and restated effective May 6, 1998. 10.12 Form of executive officer employment agreement, as amended. (Filed as Exhibit 10.11 to the Corporation's 1997 Annual Report on Form 10-K, Commission File No. 1-4682, and incorporated herein by reference.) 10.13 Executive Retirement Plan as amended June 4, 1997. 10.14 Restricted Stock Plan for Nonemployee Directors effective May 6, 1992. 10.15 Agreement with T. Kevin Dunnigan dated February 5, 1997. (Filed as Exhibit 10 to the Corporation's 1996 Annual Report on Form 10- K, Commission File No. 1-4682, and incorporated herein by reference.) 12 Statement re Computation of Ratio of Earnings to Fixed Charges. 13 Annual Report to Shareholders for the fiscal year ended January 3, 1999. 21 Subsidiaries of the Corporation. 23 Consent of Independent Public Accountants. 24 Powers of Attorney. E-4 EX-3.2 2 EXHIBIT 3.2 BYLAWS OF THOMAS & BETTS CORPORATION As Adopted by the Board of Directors on March 11, 1996 and Amended and Restated on September 3, 1997 and Amended and Restated February 3, 1999 TABLE OF CONTENTS PAGE ARTICLE 1 MEETINGS OF SHAREHOLDERS............................................1 Section 1. ANNUAL MEETING..............................................1 Section 2. SPECIAL MEETINGS............................................1 Section 3. PLACE OF MEETINGS...........................................1 Section 4. NOTICE OF MEETINGS..........................................1 Section 5. QUORUM; ADJOURNMENT.........................................1 Section 6. ORGANIZATION................................................2 Section 7. VOTING......................................................2 Section 8. SHAREHOLDER LISTS...........................................2 Section 9. NOTICE OF BUSINESS AND NOMINATIONS..........................2 A. ANNUAL MEETINGS OF SHAREHOLDERS.....................................2 B. SPECIAL MEETINGS OF SHAREHOLDERS....................................4 C. GENERAL.............................................................4 Section 10. INSPECTORS OF ELECTIONS.....................................5 ARTICLE 2 BOARD OF DIRECTORS..................................................5 Section 1. GENERAL POWERS..............................................5 Section 2. NUMBER, ELECTION AND TERM OF OFFICE.........................5 Section 3. MEETINGS....................................................5 Section 4. PLACE OF MEETING............................................6 Section 5. NOTICE OF MEETINGS..........................................6 Section 6. QUORUM AND MANNER OF ACTING.................................6 Section 7. ORGANIZATION................................................6 Section 8. RESIGNATIONS................................................6 Section 9. REMOVAL OF DIRECTORS........................................6 Section 10. VACANCIES...................................................7 Section 11. COMPENSATION................................................7 Section 12. INCREASING NUMBER OF DIRECTORS..............................7 ARTICLE 3 EXECUTIVE AND OTHER COMMITTEES......................................7 Section 1. EXECUTIVE COMMITTEE, GENERAL POWERS AND MEMBERSHIP..........7 Section 2. PROCEDURE...................................................8 Section 3. OTHER COMMITTEES............................................8 ARTICLE 4 OFFICERS............................................................8 Section 1. ELECTION, TERM OF OFFICE AND QUALIFICATIONS.................8 Section 2. REMOVAL.....................................................8 Section 3. RESIGNATIONS................................................8 Section 4. VACANCIES...................................................9 Section 5. CHAIRMAN OF THE BOARD OF DIRECTORS..........................9 Section 6. PRESIDENT...................................................9 Section 7. CHIEF EXECUTIVE OFFICER.....................................9 Section 8. SECRETARY AND ASSISTANT SECRETARY...........................9 i Section 9. TREASURER.....................................................10 ARTICLE 5 INDEMNIFICATION OF OFFICERS AND DIRECTORS..........................10 Section 1. RIGHT TO INDEMNIFICATION...................................10 Section 2. RIGHT OF CLAIMANT TO BRING SUIT............................11 Section 3. NON-EXCLUSIVITY OF RIGHTS; CONTINUATION OF RIGHTS..........11 Section 4. INSURANCE..................................................11 ARTICLE 6 EXECUTION OF INSTRUMENTS, ETC......................................12 Section 1. CONTRACTS, ETC., HOW EXECUTED..............................12 Section 2. DEPOSITS...................................................12 Section 3. CHECKS, DRAFTS, ETC........................................12 ARTICLE 7 SHARES AND THEIR TRANSFER; SHAREHOLDER RECORDS.....................12 Section 1. CERTIFICATES OF STOCK......................................12 Section 2. TRANSFER OF SHARES.........................................13 Section 3. CLOSING OF TRANSFER BOOKS; RECORD DATE.....................13 Section 4. LOST AND DESTROYED CERTIFICATES............................13 Section 5. REGULATIONS................................................13 ARTICLE 8 NOTICE.............................................................14 Section 1. WAIVER OF NOTICE...........................................14 ARTICLE 9 MISCELLANEOUS......................................................14 Section 1. FISCAL YEAR................................................14 Section 2. SEAL.......................................................14 ARTICLE 10 AMENDMENTS........................................................14 Section 1. 14 ii BYLAWS ARTICLE 1 MEETINGS OF SHAREHOLDERS Section 1. ANNUAL MEETING. The annual meeting of shareholders for the election of directors and for the transaction of such other business as may properly come before said meeting shall be held on a day during the period from April 15 to May 15, or on any other day, and at a time determined by the Board of Directors. Section 2. SPECIAL MEETINGS. Except as otherwise required by law, a special meeting of shareholders may be called at any time by the Chairman of the Board of Directors if he or she is an officer of the Corporation or by the President or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have at the time of the adoption of such resolution if there were no vacancies (the "Whole Board") and by no other person or persons. Section 3. PLACE OF MEETINGS. All meetings of shareholders shall be held at the principal office of the Corporation in the State of Tennessee, or at other places in or outside of such State as may be designated by the Board of Directors and specified in the notice of meeting. Section 4. NOTICE OF MEETINGS. Notice of each meeting stating the purpose or purposes for which the meeting is called and the time when and the place where it is to be held, shall be served upon each shareholder of record entitled to vote at such meeting, either personally or by mailing such notice to him or her or by such other manner as may be permitted by the Tennessee Business Corporations Act, not less than 10 days nor more than two months before the time fixed for such meeting. If mailed, it shall be directed to a shareholder at his or her address as it appears on the shareholder list. Any previously scheduled meeting of the shareholders may be postponed by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of shareholders. Section 5. QUORUM; ADJOURNMENT. Except as otherwise provided by law or by the Charter, at each meeting of shareholders, the holders of record of a majority of the total number of the shares of capital stock entitled to vote must be present in person or by proxy to constitute a quorum for the transaction of business. Whether or not there is a quorum at any meeting, the shareholders present and entitled to cast a majority of the votes thereat or the Chairman of the meeting may adjourn and readjourn the meeting from time to time. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. 1 Section 6. ORGANIZATION. At every meeting of the shareholders, the Chairman of the Board of Directors, or, in his or her absence, the President, or, in his or her absence, a Vice President designated by the President or, in the absence of such designation, a chairman designated by the Board of Directors, shall act as Chairman. The Secretary or the Assistant Secretary or such officer of the Corporation designated by the chairman shall act as secretary of each meeting of the shareholders. Section 7. VOTING. Each shareholder of record present shall be entitled at each meeting of shareholders to such number of votes as shall be prescribed by the Charter for the shares of capital stock recorded in his or her name in the shareholder records of the Corporation: (a) at the record date fixed as provided in Section 3 of Article 7, or (b) if no such record date shall have been fixed, then at the close of business on the eleventh day before the day of such meeting. The voting at any meeting of shareholders need not be by ballot, unless specifically required by law or requested by a qualified voter present in person or by proxy. Except to the extent permitted under the Tennessee Business Corporation Act, shares of the Corporation's capital stock shall not be entitled to vote if such shares are owned, directly or indirectly, by another corporation of which the Corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of such corporation. Notwithstanding, the foregoing shall not limit the power of the Corporation to vote any shares, including its own shares, held by it in a fiduciary capacity. Section 8. SHAREHOLDER LISTS. The Transfer Agent or the Secretary, or such other officer as may be designated by the Board of Directors, shall make a full, true and complete list, in alphabetical order, of all shareholders entitled to vote at each annual or special meeting of shareholders, and the address and the number of shares of capital stock held by each. The Board of Directors shall produce such list at the time and place of the meeting, to remain there during the meeting. Such list shall be the only evidence as to who are the shareholders entitled to vote at the meeting. Section 9. NOTICE OF BUSINESS AND NOMINATIONS. A. ANNUAL MEETINGS OF SHAREHOLDERS. [1] Nominations of persons for election to the Board of Directors of the Corporation and any proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders only (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of 2 Directors or (c) by any shareholder of the Corporation who was a shareholder of record at the time of giving of notice provided for in this Section, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section. [2] For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (c) of paragraph (A) (1) of this Section, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not later than the close of business on the later of the 120th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as such name and address appear in the Corporation's shareholder records, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner. [3] Notwithstanding anything in the second sentence of paragraph (A) (2) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 120 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered 3 to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. B. SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the notice of meeting (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by paragraph (A) (2) of this Section shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. C. GENERAL. [1] Only such persons who are nominated in accordance with the procedures set forth in this Section shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section and, if any proposed nomination or business is not in compliance with this Section, to declare that such defective proposal or nomination shall be disregarded. [2] For purposes of this Section, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15 (d) of the Exchange Act. [3] Notwithstanding the foregoing provisions of this Section, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section. Nothing in this Section shall be deemed to affect any rights of shareholders 4 to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 10. INSPECTORS OF ELECTIONS. The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at the meeting and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of shareholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath or affirmation faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. ARTICLE 2 BOARD OF DIRECTORS Section 1. GENERAL POWERS. The business of the Corporation, except as otherwise expressly provided by law or by the Charter, shall be managed by the Board of Directors. Section 2. NUMBER, ELECTION AND TERM OF OFFICE. A Board of Directors of not less than seven nor more than fifteen members as may be determined by the Board of Directors at a meeting held prior to the annual meeting shall be elected at the annual meeting of shareholders. The number of directors to be elected shall be stated in the notice of the meeting. Subject to such limitation, the persons receiving the greatest number of votes shall be the directors and they shall hold office until the next annual meeting and until their successors shall have been elected and qualified, or until death, resignation, disqualification or removal. Each director shall within one month's time of his or her election and so long as he or she shall continue to be a director, be a bona fide holder of at least one share of the Common Stock of the Corporation. Section 3. MEETINGS. The Board of Directors shall hold regular meetings on such days and at such hours as may be fixed by the Board of Directors from time to time, except that a regular meeting shall be held as soon as practicable after the adjournment of the annual meeting of the shareholders at which such Board of Directors shall have been elected, for the purpose of organization, the election of officers and the transaction of such other business as may properly come before the meeting. Special meetings shall be held whenever called by the Chairman of the Board of Directors or by the President or any two directors. 5 Section 4. PLACE OF MEETING. Meetings of the Board of Directors shall be held at the principal office of the Corporation or at such other place as the Board of Directors may from time to time determine. Section 5. NOTICE OF MEETINGS. Notice need not be given for regular Board of Directors meetings, the dates, times, and places of which have been fixed by the Board of Directors in advance for the calendar year. Notice of a special meeting or of a change in the date, time, or place of holding a regular Board of Directors meeting shall be communicated (i) in writing to each director at the director's residence or usual place of business, or at such other address as the director may have designated in a written request filed with the Secretary, at least two days before the day on which the meeting is to be held, or (ii) orally, in person or by telephone, at least 24 hours before the time at which the meeting is to be held. Notice of any meeting of the Board of Directors may be waived in writing by any director either before or after the time of such meeting; and at any meeting at which every director shall be present, even though without any notice, any business may be transacted. Section 6. QUORUM AND MANNER OF ACTING. A majority of the total number of directors shall be present in person or by telephone at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business thereat. Whether or not there is a quorum at any meeting, a majority of the directors who are present may adjourn and readjourn any meeting from time to time to a day and hour certain. Section 7. ORGANIZATION. At every meeting of the Board of Directors, the Chairman of the Board of Directors, or, in his or her absence, the President, or, in his or her absence, a chairman chosen by a majority of the directors present, shall preside. The Secretary of the Corporation shall act as secretary of the meetings of the Board of Directors. At any meeting of the Board of Directors, in the absence of the Secretary, the chairman of such meeting shall appoint a person to act as secretary of the meeting. Section 8. RESIGNATIONS. Any director may resign at any time by giving written notice to the Chairman of the Board of Directors or to the President or to the Secretary of the Corporation or to the Board of Directors. Such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 9. REMOVAL OF DIRECTORS. Any director may be removed, either with or without cause, at any time, by the affirmative vote of at least 50% of the total number of votes entitled to be cast at a special meeting of shareholders called for that purpose. Any director may be removed for cause, at any time, by a majority vote of the entire Board of Directors at a meeting called for that purpose, the notice of meeting for which states that a purpose of the meeting is the removal of a director. 6 Section 10. VACANCIES. Any vacancy in the Board of Directors arising at any time and for any cause, may be filled by the vote of a majority of the directors remaining in office. Any vacancy not filled by the Board of Directors may be filled by the shareholders at an annual meeting or at a special meeting of shareholders called for that purpose. Section 11. COMPENSATION. The Board of Directors, by the affirmative vote of a majority of directors in office and irrespective of any personal interest of any of them, shall have the authority to establish reasonable compensation, including reimbursement of expenses, of directors for services to the Corporation as directors, officers or otherwise. Nothing herein contained shall be construed to preclude any director from serving in any other capacity or receiving compensation for such service. Section 12. INCREASING NUMBER OF DIRECTORS. The Board of Directors shall have power at any time when the shareholders as such are not assembled in a meeting, regular or special, to increase the number of directors elected by the shareholders and forthwith to fill such position or positions by the election of one or more directors, to hold office until the next annual meeting of shareholders, and until his, her or their successor or successors are elected and qualified. ARTICLE 3 EXECUTIVE AND OTHER COMMITTEES Section 1. EXECUTIVE COMMITTEE, GENERAL POWERS AND MEMBERSHIP. From time to time, the Board of Directors may, by a majority of the Whole Board, appoint from its members an Executive Committee consisting of at least three members of the Board of Directors, a majority of whom shall not be employees of the Corporation, and the Committee shall meet at the call of the Chairman, or, in the absence of the Chairman, at the call of any member of such committee, to act for the Board of Directors, to the extent permitted by law, in any situation in which action of the Board of Directors is required and it is not practicable to have a meeting of the Board of Directors. The Executive Committee shall have and may exercise all the powers of the Board of Directors except the power to authorize or approve distributions or reacquisition of shares, except according to a formula or method prescribed by the Board of Directors, the power to appoint or remove a member of the Executive Committee or other committee, the power to fill vacancies in the Board of Directors, the power to remove an officer appointed by the Board of Directors, the power to amend or repeal these Bylaws and the power to authorize or approve the issuance or sale or contract for sale of shares, or to determine the designation and relative rights, preferences, and limitations of a class or series of shares, except as authorized by the Board of Directors within limits specifically prescribed by the Board of Directors. All actions of the Executive Committee shall be reported to the Board of Directors at its meeting next succeeding such action and, insofar as the rights of third parties shall not be affected thereby, shall be subject to revision and alteration by the Board of Directors. 7 All members of the Board of Directors not appointed to the Executive Committee may be authorized by appropriate action of the Board of Directors to attend the meetings of the Executive Committee as observers but without any right to vote at such meetings and shall be entitled to receive such fees as shall be fixed by the Board of Directors. Section 2. PROCEDURE. The Executive Committee shall fix its own rules of procedure and shall meet where and as provided by such rules or by resolution of the Board of Directors. The presence in person or by telephone of a majority shall be necessary to constitute a quorum and in every case the affirmative vote of a majority of all members of the committee shall be necessary. Section 3. OTHER COMMITTEES. From time to time, the Board of Directors, by resolution adopted by a majority vote of the Whole Board, may appoint any other committee or committees for any purpose or purposes with such powers as shall be specified in the resolution of appointment and permitted by law. ARTICLE 4 OFFICERS Section 1. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Board of Directors shall elect a President, a Secretary and a Treasurer and it may elect a Chairman of the Board of Directors, who may or may not be designated an officer of the Corporation, one or more Vice Presidents and such other officers as it may deem necessary from time to time, with such authority and such duties as may be prescribed by the Board of Directors from time to time. Subject to the provisions of Section 2 and Section 3 of this Article each elected officer shall hold office until the next annual election and until his or her successor is chosen and qualified. Divisional officers, who shall not be officers of the Corporation, may be appointed by the Chief Executive Officer to perform such duties as may be assigned from time to time by the Chief Executive Officer. The same person, whether an officer of the Corporation or a divisional officer, may hold more than one office, so far as permitted by law, except the offices of president and secretary, and exercise and perform the powers and duties thereof. Section 2. REMOVAL. Any officer may be removed, either with or without cause, at any time, by resolution adopted by a majority of the Whole Board, at any meeting of the Board of Directors, or by any committee or officer upon whom such power of removal shall have been conferred by resolution adopted by a majority of the Whole Board. Section 3. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Chairman of the Board of Directors if he or she is an officer of the Corporation or to the President or to the Secretary or to the Board of Directors. Any such resignation 8 shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4. VACANCIES. A vacancy in any office arising from any cause may be filled for the unexpired portion of the term in the manner prescribed in these Bylaws for election to such elective office. Section 5. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors shall preside at all shareholders' meetings and meetings of the Board of Directors. He or she shall perform such additional duties and possess such additional powers as from time to time shall be prescribed for him or her by the Board of Directors. Section 6. PRESIDENT. The President shall perform such duties and possess such powers as from time to time shall be prescribed for him or her by the Board of Directors. In the absence of the Chairman of the Board of Directors he or she shall perform the duties and possess the powers of the Chairman of the Board of Directors. Section 7. CHIEF EXECUTIVE OFFICER. The Board of Directors may from time to time designate either the Chairman of the Board of Directors or the President as the Chief Executive Officer of the Corporation to be in general charge of the business of the Corporation in all its departments. This shall require the affirmative vote of a majority of the Whole Board given at any meeting. Section 8. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall: A. keep the minutes of all meetings of the shareholders and of the Board of Directors, and of any committee of the Board of Directors to which a secretary shall not have been appointed, in books to be kept for the purpose; B. see that all notices are duly given in accordance with these Bylaws or as required by law; C. be custodian of the records (other than financial) and have charge of the seal of the Corporation and see that it is used upon all papers or documents whose execution on behalf of the Corporation under its seal is required by law or duly authorized in accordance with these Bylaws; and D. in general, perform all duties incident to the office of the Secretary, and such other duties as from time to time may be assigned by the Board of Directors or by the Chairman of the Board of Directors if he or she is an officer of the Corporation or by the President or by any committee thereunto authorized. 9 The Assistant Secretary shall, in the absence of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as from time to time may be assigned by the Board of Directors or by the Chairman of the Board of Directors if he or she is an officer of the Corporation or by the President or by any committee thereunto authorized. Section 9. TREASURER. The Treasurer shall: A. have charge and custody of, and be responsible for, all funds and securities of the Corporation; and B. in general, perform all the duties incident to the office of Treasurer, and such other duties as from time to time may be assigned by the Board of Directors or by the Chairman of the Board of Directors if he or she is an officer of the Corporation or by the President or by any committee thereunto authorized. ARTICLE 5 INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by the Tennessee Business Corporation Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Section shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the 10 Tennessee Business Corporation Act requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. Section 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1 of this Article is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Tennessee Business Corporation Act for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Tennessee Business Corporation Act, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. NON-EXCLUSIVITY OF RIGHTS; CONTINUATION OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Charter, Bylaw, agreement, vote of shareholders or disinterested directors or otherwise. All rights to indemnification under this Article shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Tennessee Business Corporation Act or any other applicable laws shall not in any way diminish any rights to indemnification of such director or officer or the obligations of the Corporation arising hereunder. Section 4. INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director or officer of the Corporation or another corporation, 11 partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Tennessee Business Corporation Act. ARTICLE 6 EXECUTION OF INSTRUMENTS, ETC. Section 1. CONTRACTS, ETC., HOW EXECUTED. All contracts and other corporate instruments shall be executed in the name of and in behalf of the Corporation and delivered by the Chairman of the Board of Directors if he or she is an officer of the Corporation, the President, the President of a division of the Corporation, any Vice President or the Treasurer and may be attested by the Secretary, Assistant Secretary or the Vice President-General Counsel unless the Board of Directors shall specifically direct otherwise. Section 2. DEPOSITS. Funds of the Corporation may be deposited from time to time to the credit of the Corporation with such depositaries as may be selected by the Board of Directors or by any committee or officer or officers, agent or agents of the Corporation to whom such power may be delegated from time to time by the Board of Directors. Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes, acceptances, or other evidences of indebtedness issued in the name of the Corporation shall be signed by the Vice President-Chief Financial Officer or the Treasurer or such agent or agents of the Corporation as shall be designated from time to time by the Vice President-Chief Financial Officer or the Treasurer. Unless otherwise provided by resolution of the Board of Directors, endorsements for deposit to the credit of the Corporation in any of its duly authorized depositaries may be made without counter signature, by the President or any Vice President, or the Treasurer, or by any other officer or agent of the Corporation to whom such power shall have been delegated by the Vice President-Chief Financial Officer or Treasurer and may be made by hand-stamped impression in the name of the Corporation. ARTICLE 7 SHARES AND THEIR TRANSFER; SHAREHOLDER RECORDS Section 1. CERTIFICATES OF STOCK. The stock of the Corporation shall be represented by certificates signed by the Chairman of the Board of Directors if he or she is an officer of the Corporation or by the President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Corporation. Such seal may be a facsimile, engraved or printed. Where any such 12 certificate is signed by a Transfer Agent or Assistant Transfer Agent or by a Transfer Clerk and by a Registrar, the signatures of the Chairman of the Board of Directors, President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer and of the Transfer Agent, Assistant Transfer Agent, Transfer Clerk and Registrar upon such certificate may be facsimiles, engraved or printed. Section 2. TRANSFER OF SHARES. Transfers of shares of the capital stock of the Corporation shall be recorded in the shareholder records of the Corporation when duly assigned by the holder of record of such shares or by his or her attorney thereunto duly authorized, and on surrender of the certificate or certificates, for such shares or pursuant to the abandoned property laws of any state of the United States if the shareholder's share interest shall be properly within the jurisdiction of the state and has been deemed abandoned and subject to custodial retention under the laws of such state. Section 3. CLOSING OF TRANSFER BOOKS; RECORD DATE. The Board of Directors may close the stock transfer books for a period not exceeding 60 days preceding the date of any meeting of shareholders or the date for payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect; provided, however, in lieu of closing the stock transfer books, as aforesaid the Board of Directors may at its discretion fix in advance a date, not exceeding 60 days preceding the date of any meeting of shareholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of capital stock, and all persons who are holders of record at such time of the class of stock involved, and no others, shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or allotment of rights or exercise of such rights, as the case may be. Section 4. LOST AND DESTROYED CERTIFICATES. The holder of record of any certificate of stock who shall claim that such certificate is lost or destroyed may make an affidavit or affirmation of that fact and advertise the same in such manner as the Board of Directors, the Transfer Agent or the Registrar may require and give a bond, if required to do so, in the form and in such sum as the Board of Directors, the Transfer Agent or the Registrar may direct, sufficient to indemnify the Corporation, the Transfer Agent and the Registrar against any claim that may be made on account of such certificate, whereupon one or more new certificates may be issued of the same tenor and for the same aggregate number of shares as the one alleged to be lost or destroyed. Section 5. REGULATIONS. The Board of Directors may make such rules and regulations as it may deem expedient concerning the issuance, transfer and registration 13 of certificates of stock; it may appoint one or more transfer agents or registrars of transfers or both, and may require all certificates of stock to bear the signature of either or both. ARTICLE 8 NOTICE Section 1. WAIVER OF NOTICE. No notice of the time, place or purpose of any meeting of shareholders or directors, or of any committee, or any publication thereof, whether prescribed by law, by the Charter or by these Bylaws, need be given to any person who attends such meeting, or who, in writing, executed either before or after the holding thereof, waives such notice, and such attendance or waiver shall be deemed equivalent to notice. ARTICLE 9 MISCELLANEOUS Section 1. FISCAL YEAR. The fiscal year of the Corporation shall end on the Sunday closest to the end of the calendar year. Section 2. SEAL. The seal of the Corporation shall be a device, circular in form, containing the name of the Corporation, the figures "1996" and the words, "Corporate Seal" and "Tennessee." The corporate seal may be used in printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression facsimile, or other reproduction of the corporate seal. The Secretary, Assistant Secretary, Vice President-General Counsel or any other person specifically authorized by the Board of Directors, may use the seal of the Corporation in connection with corporate contracts or instruments. ARTICLE 10 AMENDMENTS Section 1. These Bylaws may be amended or repealed by the shareholders at any annual meeting, or at any special meeting if notice of the proposed amendment or new Bylaws is included in the notice of such meeting. These Bylaws may be amended or repealed by the affirmative vote of a majority of the Whole Board given at any meeting, the notice or waiver of notice whereof mentions such amendment or repeal as one of the purposes of such meeting. 14 EX-10.2 3 EXHIBIT 10.2 EXECUTION COPY AMENDMENT NO. 1 TO FIVE-YEAR CREDIT AGREEMENT AMENDMENT dated as of January 4, 1999 to the Five-Year Credit Agreement dated as of July 1, 1998 (the "CREDIT AGREEMENT") among THOMAS & BETTS CORPORATION, the BANKS party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. The parties hereto agree as follows: SECTION 1. DEFINED TERMS; REFERENCES. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall, after this Amendment becomes effective, refer to the Credit Agreement as amended hereby. SECTION 2. AMENDMENT OF SECTION 5.07. Calculations of Consolidated Operating Cash Flow for the respective periods of four consecutive fiscal quarters ending April 4, 1999 and July 4, 1999 shall exclude the restructuring and special charges totaling $108.5 million incurred by the Borrower in, and reflected in the Borrower's consolidated statement of income for, the fiscal quarter ended October 4, 1998. SECTION 3. REPRESENTATIONS OF BORROWER. The Borrower represents and warrants that (i) the representations and warranties of the Borrower set forth in Article 4 of the Credit Agreement are true on and as of the date hereof and (ii) no Default has occurred and is continuing on the date hereof. SECTION 4. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. SECTION 5. COUNTERPARTS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 6. EFFECTIVENESS. This Amendment shall become effective as of January 4, 1999 when the Agent shall have received from each of the Borrower and the Required Banks a counterpart hereof signed by such party or facsimile or other written confirmation (in form satisfactory to the Agent) that such party has signed a counterpart hereof. 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. THOMAS & BETTS CORPORATION By: /s/Fred R. Jones ------------------------------ Title: Vice President - Chief Financial Officer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert Bottamedi ------------------------------ Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/Nancy S. Goldman ------------------------------ Title: Vice President WACHOVIA BANK, N.A. By: /s/ Karin E. Reel ------------------------------ Title: Vice President ABN AMRO BANK N.V. By: /s/ Patrick Thom ------------------------------ Title: Vice President By: /s/Robert A. Budnek ------------------------------ Title: Vice President THE BANK OF NOVA SCOTIA By: /s/M.D. Smith ---------------------------- Title: Agent CIBC INC. By: /s/Cyd Petre ------------------------------ Title: Executive Director DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCH By: /s/Alexander Karow ------------------------------ Title: Associate By: /s/Stephan Wiedemann ------------------------------ Title: Director FIRST UNION NATIONAL BANK By: /s/Robert T. Page ------------------------------ Title: Vice President SUNTRUST BANK, NASHVILLE, N.A. By: /s/Bryan W. Ford ------------------------------ Title: Vice President THE NORTHERN TRUST COMPANY By: /s/Nicole R. Kidder ------------------------------ Title: Second Vice President BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH By: ______________________________ Title: By: ______________________________ Title: THE BANK OF NEW YORK By: /s/Ann Marie Hughes ------------------------------ Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., ATLANTA AGENCY By: /s/William Otott ------------------------------ Title: Vice President FIRST AMERICAN NATIONAL BANK By: /s/William R. Stutts ------------------------------ Title: Senior Vice President KBC BANK N.V. By: /s/Robert Snauffer ------------------------------ Title: First Vice President By: /s/Marcel Claes ------------------------------ Title: Deputy General Manager THE SUMITOMO BANK, LTD. By: /s/Gary Franke ------------------------------ Title: Vice President & Manager UNION PLANTERS NATIONAL BANK By: /s/Elizabeth Rouse ------------------------------ Title: Vice President EX-10.4 4 EXHIBIT 10.4 EXECUTION COPY AMENDMENT NO. 1 TO 364-DAY CREDIT AGREEMENT AMENDMENT dated as of January 4, 1999 to the 364-Day Credit Agreement dated as of July 1, 1998 (the "CREDIT AGREEMENT") among THOMAS & BETTS CORPORATION, the BANKS party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. The parties hereto agree as follows: SECTION 1. DEFINED TERMS; REFERENCES. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall, after this Amendment becomes effective, refer to the Credit Agreement as amended hereby. SECTION 2. AMENDMENT OF SECTION 5.07. Calculations of Consolidated Operating Cash Flow for the respective periods of four consecutive fiscal quarters ending April 4, 1999 and July 4, 1999 shall exclude the restructuring and special charges totaling $108.5 million incurred by the Borrower in, and reflected in the Borrower's consolidated statement of income for, the fiscal quarter ended October 4, 1998. SECTION 3. REPRESENTATIONS OF BORROWER. The Borrower represents and warrants that (i) the representations and warranties of the Borrower set forth in Article 4 of the Credit Agreement are true on and as of the date hereof and (ii) no Default has occurred and is continuing on the date hereof. SECTION 4. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. SECTION 5. COUNTERPARTS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 6. EFFECTIVENESS. This Amendment shall become effective as of January 4, 1999 when the Agent shall have received from each of the Borrower and the Required Banks a counterpart hereof signed by such party or facsimile or other written confirmation (in form satisfactory to the Agent) that such party has signed a counterpart hereof. 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. THOMAS & BETTS CORPORATION By: /s/Fred R. Jones ------------------------------ Title: Vice President - Chief Financial Officer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert Bottamedi ------------------------------ Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/Nancy S. Goldman ------------------------------ Title: Vice President WACHOVIA BANK, N.A. By: /s/ Karin E. Reel ------------------------------ Title: Vice President ABN AMRO BANK N.V. By: /s/ Patrick Thom ------------------------------ Title: Vice President By: /s/Robert A. Budnek ------------------------------ Title: Vice President THE BANK OF NOVA SCOTIA By: /s/M.D. Smith ---------------------------- Title: Agent CIBC INC. By: /s/Cyd Petre ------------------------------ Title: Executive Director DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCH By: /s/Alexander Karow ------------------------------ Title: Associate By: /s/Stephan Wiedemann ------------------------------ Title: Director FIRST UNION NATIONAL BANK By: /s/Robert T. Page ------------------------------ Title: Vice President SUNTRUST BANK, NASHVILLE, N.A. By: /s/Bryan W. Ford ------------------------------ Title: Vice President THE NORTHERN TRUST COMPANY By: /s/Nicole R. Kidder ------------------------------ Title: Second Vice President BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH By: ______________________________ Title: By: ______________________________ Title: THE BANK OF NEW YORK By: /s/Ann Marie Hughes ------------------------------ Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., ATLANTA AGENCY By: /s/William Otott ------------------------------ Title: Vice President FIRST AMERICAN NATIONAL BANK By: /s/William R. Stutts ------------------------------ Title: Senior Vice President KBC BANK N.V. By: /s/Robert Snauffer ------------------------------ Title: First Vice President By: /s/Marcel Claes ------------------------------ Title: Deputy General Manager THE SUMITOMO BANK, LTD. By: /s/Gary Franke ------------------------------ Title: Vice President & Manager UNION PLANTERS NATIONAL BANK By: /s/Elizabeth Rouse ------------------------------ Title: Vice President EX-10.7 5 EX-10.7 Exhibit 10.7 GRANT AGREEMENT NONQUALIFIED STOCK OPTION Thomas & Betts Corporation (the "Corporation"), for and in consideration of the provisions and conditions as stated herein and in the Corporation's 1993 Management Stock Ownership Plan (the "Plan") and other good and valuable consideration, does hereby grant to the employee (one of the key employees of the Corporation) identified in the attached Notice of Grant of Stock Option (the "Optionee") this option to purchase from the Corporation the number of shares of Common Stock of the Corporation at the price per share set forth in the Notice of Grant of Stock Option, which option is not intended to qualify as an incentive stock option ("ISO") as that term is defined in Section 422A(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The option granted pursuant to this Grant Agreement (the "Option") shall be subject to the following conditions: (1) Subject to the provisions of Paragraph 4, the Option shall become exercisable in three installments in accordance with the following schedule and after the expiration of the following periods of time:
Portion of Period from which Installment Option Granted Option Granted ----------- -------------- ----------------- First One-third 12 months Second One-third 24 months Third One-third 36 months
If the Optionee does not purchase the full number of shares which he has at any time become entitled to purchase, he may purchase all of any part of those shares at any subsequent time during the term of this Option. (2) The Option herein granted to the extent that it is exercisable may be exercised by giving written notice to the Corporate Human Resources Department or other designated person of the Corporation at its principal office no later than the Expiration Date (as defined in Paragraph 3). Such notice shall include a statement of the number of shares with respect to which this Option is being exercised and the exercise date, and shall be accompanied by full tender of the purchase price payable which may be made in whole or in part either in cash or by the exchange of such number of whole shares of Thomas & Betts Corporation Common Stock owned by the Optionee whose fair market value as of the close of the business day immediately preceding the specified Exercise Date does not exceed the purchase price payable; provided, however, that if the shares to be exchanged were acquired under an ISO, such ISO shall have been granted at least two years prior thereto and the Common Stock shall have been owned by the Optionee for at least one year prior to such payment, and further provided that the Committee shall have the right, upon prior notice to the holders of options, to modify, suspend or cancel the right to pay the purchase price in whole or in part by exchange of shares at any time in the event the Committee determines that there has been a change in tax or accounting consequences to the Corporation or to any Optionee. Nothing in this agreement shall confer upon the Optionee any rights as a stockholder 1 prior to the time of the delivery to the Optionee of a stock certificate for the shares purchased under this agreement. (3) Unless this Option expires earlier in accordance with any provision of Paragraph 4, this Option shall expire on the date which is ten (10) years from the Date of Grant (the "Expiration Date"). (4) If, prior to the Expiration Date, the Optionee (i) becomes totally and permanently disabled as determined by the Corporation in its sole discretion, (ii) retires, (iii) dies, or (iv) otherwise terminates or is terminated as an employee of the Corporation, this option shall be exercisable under the circumstances and for the time periods set forth below, but only to the extent such time periods do not extend beyond the Expiration Date: (a) If the Optionee's employment terminates or is terminated for any reason other than (i) retirement, (ii) the Optionee becoming totally and permanently disabled, (iii) death, or (iv) under the circumstances described in Paragraph 4(b), this Option may be exercised within thirty (30) days of the date of such termination to the extent exercisable in accordance with the provisions of Paragraph 1; (b) In the event that (i) the Optionee has an employment agreement with the Corporation which provides for his continued employment following a change in control ("Employment Agreement") and (ii) a "Change in Control," as defined in Section 2 of such Employment Agreement, occurs, this Option shall become fully exercisable upon the "Effective Date," as defined in Section 1(a) of such Employment Agreement, notwithstanding any provision in Paragraph 1 to the contrary; in addition, if such Optionee's employment with the Corporation is thereafter terminated under the circumstances described in Section 7(d) of such Employment Agreement, this Option shall remain exercisable at any time prior to the Expiration Date; (c) If the Optionee retires at his normal or later retirement date or, with the consent of the Corporation, takes early retirement, this Option may be exercised in full, notwithstanding the provisions of Paragraph 1, at any time within six (6) years of the date of retirement; (d) If the Optionee becomes totally and permanently disabled, this Option may be exercised in full, notwithstanding the provisions of Paragraph 1, at any time within six (6) years of the date the Optionee's service as an employee is terminated within the meaning of the Code by reason of being totally and permanently disabled; (e) If the Optionee dies while he is employed or within three (3) years of his retirement in accordance with subparagraph (b) above, this Option may be exercised in full, notwithstanding the provisions of Paragraph 1, at any time within three (3) years of the Optionee's date of death by the legal representative of the Optionee or any person who acquires this Option by bequest or inheritance; and 2 (f) For purpose of this Paragraph 4, a sick leave or other bona fide leave of absence granted in accordance with the Corporation's usual procedure which does not operate to interrupt continuous employment for other benefits granted by the Corporation shall not be considered a termination of employment or interruption of continuous employment hereunder and an employee who is granted such a leave of absence shall be considered to be continuously employed during such period of leave; provided, that if the Code or the regulations promulgated thereunder establish a more restrictive rule defining termination of employment applicable to the option granted herein, such rule shall be substituted here for. (5) The Optionee agrees, by the acceptance of this Option, for himself and his executors and administrators, that if a registration statement under the Securities Act of 1933 is not in effect at the time of the exercise of any portion of this Option, with respect to the sale by the Corporation and the resale by the Optionee of the shares issuable upon such exercise, it shall be a condition precedent to the right to purchase such shares that the notice of exercise shall be accompanied by a written representation that the Optionee or his executor or administrator is acquiring such shares for his own or such executor's or administrator's account for investment and not with a view to the distribution thereof. (6) The Corporation shall be not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of this Option until the admission of such shares to listing on any stock exchange on which the Corporation's stock may then be listed and until the Corporation takes such steps as may be required by law and applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange as above mentioned, or until, in the opinion of counsel for the Corporation, any such listing or registration or other steps are not required. (7) The shares issued may be authorized but unissued stock, or treasury stock, and the number of shares with respect to which this Option may be exercised, and the price payable with respect thereto, shall be properly adjusted if the Corporation shall at any time declare a stock split, issue any stock dividend, or make a reclassification of such stock, so that the Optionee or his executors, administrators, legatees or distributees entitled hereunder shall not be in any way in a better or worse position as to the number of shares acquired and the aggregate amount paid therefore, solely from having exercised this option with respect to any of said shares after, rather than before, such stock split, stock dividend, or reclassification. (8) The granting of this Option shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Optionee for any specified period. The Company continues to retain the absolute right to terminate the employment relationship with the Optionee at any time, with or without good cause. (9) This Option shall be binding upon the Corporation and its successors and assigns, and upon the Optionee and his administrators and executors. 3 (10) Whenever the Corporation is required to issue or transfer shares of its Common Stock to Optionee pursuant hereto, the Corporation shall have the right to require the Optionee to remit to the Corporation an amount sufficient to satisfy all federal, state and local withholding tax requirements, if any. (11) The Optionee agrees, by the acceptance of this Option, to the amendment of this Grant Agreement, the Notice of Grant of Stock Option and the form of exercise of option provided by the Corporation, in any manner requested by the Corporation pursuant to advice from the Securities and Exchange Commission at any time during the term of this Option, and to execute any and all instruments relative thereto when so requested by the Corporation. (12) Throughout this agreement, the masculine gender shall be deemed to include the feminine. (13) This Option is not transferable by the Optionee otherwise than by will or by the laws of descent and distribution and during the lifetime of the Optionee it is exercisable only by the Optionee. 4 GRANT AGREEMENT INCENTIVE STOCK OPTION Thomas & Betts Corporation (the "Corporation"), for and in consideration of the provisions and conditions as stated herein and in the Corporation's 1993 Management Stock Ownership Plan (the "Plan") and other good and valuable consideration, does hereby grant to the employee (one of the key employees of the Corporation) identified in the attached Notice of Grant of Stock Option (the "Optionee") this option to purchase from the Corporation the number of shares of Common Stock of the Corporation at the price per share set forth in the Notice of Grant of Stock Option, which option except as provided in Paragraph 4, is intended to quality as an incentive stock option ("ISO") as that term is defined in Section 422A(b) of the Internal Revenue Code of 1986, as amended (the "Code"). The option granted pursuant to this Grant Agreement (the "Option") shall be subject to the following conditions: (1) Subject to the provisions of Paragraph 4, the Option shall become exercisable in three installments in accordance with the following schedule and after the expiration of the following periods of time:
Portion of Period from which Installment Option Granted Option Granted ----------- -------------- ----------------- First One-third 12 months Second One-third 24 months Third One-third 36 months
If the Optionee does not purchase the full number of shares which he has at any time become entitled to purchase, he may purchase all of any part of those shares at any subsequent time during the term of this Option. (2) The Option herein granted to the extent that it is exercisable may be exercised by giving written notice to the Corporate Human Resources Department or other designated person of the Corporation at its principal office no later than the Expiration Date (as defined in Paragraph 3). Such notice shall include a statement of the number of shares with respect to which this Option is being exercised and the exercise date, and shall be accompanied by full tender of the purchase price payable which may be made in whole or in part either in cash or by the exchange of such number of whole shares of Thomas & Betts Corporation Common Stock owned by the Optionee whose fair market value as of the close of the business day immediately preceding the specified Exercise Date does not exceed the purchase price payable; provided, however, that if the shares to be exchanged were acquired under an ISO, such ISO shall have been granted at least two years prior thereto and the Common Stock shall have been owned by the Optionee for at least one year prior to such payment, and further provided that the Committee shall have the right, upon prior notice to the holders of options, to modify, suspend or cancel the right to pay the purchase price in whole or in part by exchange of shares at any time in the event the Committee determines that there has been a change in tax or accounting consequences to the Corporation or to any 1 Optionee. Nothing in this agreement shall confer upon the Optionee any rights as a stockholder prior to the time of the delivery to the Optionee of a stock certificate for the shares purchased under this agreement. (3) Unless this Option expires earlier in accordance with any provision of Paragraph 4, this Option shall expire on the date which is ten (10) years from the Date of Grant (the "Expiration Date"). (4) If, prior to the Expiration Date, the Optionee (i) becomes totally and permanently disabled as determined by the Corporation in its sole discretion, (ii) retires, (iii) dies, or (iv) otherwise terminates or is terminated as an employee of the Corporation, this option shall be exercisable under the circumstances and for the time periods set forth below, but only to the extent such time periods do not extend beyond the Expiration Date: (a) If the Optionee's employment terminates or is terminated for any reason other than (i) retirement, (ii) the Optionee becoming totally and permanently disabled, (iii) death, or (iv) under the circumstances described in Paragraph 4(b), this Option may be exercised within thirty (30) days of the date of such termination to the extent exercisable in accordance with the provisions of Paragraph 1; (b) In the event that (i) the Optionee has an employment agreement with the Corporation which provides for his continued employment following a change in control ("Employment Agreement") and (ii) a "Change in Control," as defined in Section 2 of such Employment Agreement, occurs, this Option shall become fully exercisable upon the "Effective Date," as defined in Section 1(a) of such Employment Agreement, notwithstanding any provision in Paragraph 1 to the contrary, provided, however, that to the extent (if any) that the limitation set forth in Code Section 422(d) is exceeded, the Option shall be treated as a Nonqualified Stock Option; in addition, if such Optionee's employment with the Corporation is thereafter terminated under the circumstances described in Section 7(d) of such Employment Agreement, this Option shall remain exercisable at any time prior to the Expiration Date, provided, however, that if such exercise occurs more than three (3) months after the date of such Optionee's termination of employment, the Option shall be treated as a Nonqualified Stock Option; (c) If the Optionee retires at his normal or later retirement date or, with the consent of the Corporation, takes early retirement, this Option may be exercised in full, notwithstanding the provisions of Paragraph 1, at any time within six (6) years of the date of retirement; provided, however, that if such exercise occurs more than three (3) months after the date of such retirement, the Option shall be treated as a Nonqualified Stock Option; (d) If the Optionee becomes totally and permanently disabled, this Option may be exercised in full, notwithstanding the provisions of Paragraph 1, at any time within six (6) years of the date the Optionee's service as an employee is terminated within the meaning of the Code by reason of being totally and permanently disabled; provided, however, that if such Exercise occurs more than one (1) year after the date the Optionee's employment is 2 terminated due to such disability, this Option shall be treated as a Nonqualified Stock Option; (e) If the Optionee dies while he is employed or within three (3) years of his retirement in accordance with subparagraph (b) above, this Option may be exercised in full, notwithstanding the provisions of Paragraph 1, at any time within three (3) years of the Optionee's date of death by the legal representative of the Optionee or any person who acquires this Option by bequest or inheritance; provided, however, if the Optionee's date of death is more than three (3) months from the date of such retirement, this Option shall be treated as a Nonqualified Stock Option, and (f) For purpose of this Paragraph 4, a sick leave or other bona fide leave of absence granted in accordance with the Corporation's usual procedure which does not operate to interrupt continuous employment for other benefits granted by the Corporation shall not be considered a termination of employment or interruption of continuous employment hereunder and an employee who is granted such a leave of absence shall be considered to be continuously employed during such period of leave; provided, that if the Code or the regulations promulgated thereunder establish a more restrictive rule defining termination of employment applicable to the option granted herein, such rule shall be substituted here for. (5) The Optionee agrees, by the acceptance of this Option, for himself and his executors and administrators, that if a registration statement under the Securities Act of 1933 is not in effect at the time of the exercise of any portion of this Option, with respect to the sale by the Corporation and the resale by the Optionee of the shares issuable upon such exercise, it shall be a condition precedent to the right to purchase such shares that the notice of exercise shall be accompanied by a written representation that the Optionee or his executor or administrator is acquiring such shares for his own or such executor's or administrator's account for investment and not with a view to the distribution thereof. (6) The Corporation shall be not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of this Option until the admission of such shares to listing on any stock exchange on which the Corporation's stock may then be listed and until the Corporation takes such steps as may be required by law and applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange as above mentioned, or until, in the opinion of counsel for the Corporation, any such listing or registration or other steps are not required. (7) The shares issued may be authorized but unissued stock, or treasury stock, and the number of shares with respect to which this Option may be exercised, and the price payable with respect thereto, shall be properly adjusted if the Corporation shall at any time declare a stock split, issue any stock dividend, or make a reclassification of such stock, so that the Optionee or his executors, administrators, legatees or distributees entitled hereunder shall not be in any way in a better or worse position as to the number of shares acquired and the aggregate amount paid therefore, solely from having exercised this option with respect to any of said shares after, rather than before, such stock split, stock dividend, or reclassification. 3 (8) The granting of this Option shall not constitute or be evidence of any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Optionee for any specified period. The Company continues to retain the absolute right to terminate the employment relationship with the Optionee at any time, with or without good cause. (9) This Option shall be binding upon the Corporation and its successors and assigns, and upon the Optionee and his administrators and executors. (10) Whenever the Corporation is required to issue or transfer shares of its Common Stock to Optionee pursuant hereto, the Corporation shall have the right to require the Optionee to remit to the Corporation an amount sufficient to satisfy all federal, state and local withholding tax requirements, if any. (11) The Optionee agrees, by the acceptance of this Option, to the amendment of this Grant Agreement, the Notice of Grant of Stock Option and the form of exercise of option provided by the Corporation, in any manner requested by the Corporation pursuant to advice from the Securities and Exchange Commission at any time during the term of this Option, and to execute any and all instruments relative thereto when so requested by the Corporation. (12) Throughout this agreement, the masculine gender shall be deemed to include the feminine. (13) This Option is not transferable by the Optionee otherwise than by will or by the laws of descent and distribution and during the lifetime of the Optionee it is exercisable only by the Optionee. 4 EX-10.11 6 EXHIBIT 10.11 Exhibit 10.11 THOMAS & BETTS CORPORATION DEFERRED FEE PLAN FOR NONEMPLOYEE DIRECTORS (AS AMENDED AND RESTATED EFFECTIVE MAY 6, 1998) ARTICLE 1 INTRODUCTION 1.1 RECITALS. (a) Effective January 1, 1986, the Board of Directors (the "Board") of Thomas & Betts Corporation (the "Corporation") approved and adopted the Thomas & Betts Deferred Fee Plan for Nonemployee Directors for the purpose of providing nonemployee directors with the opportunity to defer receipt of compensation earned as a director to a date following termination of such service and to aid the Corporation in attracting and retaining as members of its Board of Directors persons whose abilities, experience and judgment can contribute to the well being of the Corporation. (b) The Thomas & Betts Deferred Fee Plan for Nonemployee Directors was amended and restated effective November 3, 1993, as the Deferred Fee Plan for Nonemployee Directors of Thomas & Betts Corporation (the "Plan") and was further amended and restated effective January 1, 1998. (c) The Board, desiring to amend the Plan (i) to provide that distribution of a Participant's Stock Accounts to be made after 1998 will be made only in Common Stock, (ii) to delete Section 4.5, "Conversions," (iii) to provide that, under certain circumstances, a Participant may change his or her election as to the time and method of payment of a distribution of a Stock Account or Mutual Fund Account, and (iv) to make certain other changes, hereby amends and restates the Deferred Fee Plan for Nonemployee Directors of Thomas & Betts Corporation in its entirety to read as set forth herein, effective May 6, 1998. 1.2 NAME AND PURPOSE. The name of this Plan is the "Deferred Fee Plan for Nonemployee Directors of Thomas & Betts Corporation." The purpose of the Plan is as stated in Section 1.1 above. 1.3 DEFINITIONS. Whenever used in the Plan, the following terms shall have the meaning set forth or referenced below: (a) "Account" means a Stock Account, a Mutual Fund Account, or a pre-1998 Cash Account. (b) "Board" has the meaning set forth in Section 1.1(a) above. (c) "Board Year" means a year beginning with the day on which the annual meeting of the shareholders of the Corporation (the "Shareholders' Meeting") is held, and ending on the day prior to the annual Shareholders' Meeting in the next calendar year. (d) "Business Day" means a day except for a Saturday, Sunday or a legal holiday. (e) "Cash Account" means a bookkeeping account which reflects the Compensation deferred by a Participant for a Plan Year prior to 1998 pursuant to the provisions of the Plan then in effect. (f) "Cash Credit" means a credit to a pre-1998 Cash Account, expressed in whole dollars and fractions thereof. (g) "Committee" means a committee appointed by the Board to administer the Plan, or specific provisions of the Plan. With respect to Section 4.1(d) (regarding changes in elections) and Section 4.4 (regarding Severe Financial Hardship), the Committee shall be composed solely of two or more nonemployee directors (within the meaning of rules and interpretations under Section 16(b)), unless counsel to the Corporation determines that compliance with such requirement is not necessary. Except as provided in the preceding sentence, the Committee shall be the Corporate Governance Committee of the Board, unless otherwise determined by the Board. If the Board does not appoint a committee with respect to administration of a specific provision of the Plan, then references to Committee in the Plan shall be deemed to be references to the Board. (h) "Common Stock" means (i) the common stock of the Corporation, adjusted as provided in Section 4.7, or (ii) if there is a merger or consolidation and the Corporation is not the surviving corporation thereof, the capital stock of the surviving corporation given in exchange for such common stock of the Corporation. (i) "Compensation" means retainer fees for service on, and fees for attendance at meetings of, the Board and any committees thereof, which are payable to a Nonemployee Director during a Plan Year. (j) "Corporation" has the meaning set forth in Section 1.1(a) above. (k) "Deferred Compensation Account" means a bookkeeping account established for a Participant under the Thomas & Betts Deferred Fee Plan for Nonemployee Directors before November 3, 1993, which was converted to a Cash Account or a Stock Account on or prior to December 31, 1993. (l) "Elective Stock Account" means a bookkeeping account which reflects the Compensation deferred by a Participant pursuant to Section 2.4. "Elective Stock Account" also means any Stock Account established prior to May 6, 1998. (m) "Fair Market Value" means the average of the high and the low sales prices of the Common Stock as reported in the New York Stock Exchange Composite Tape. (n) "Mutual Fund Account" means a bookkeeping account which reflects the Compensation deferred by a Participant pursuant to Section 2.5. (o) "Mutual Fund Credit" means a credit to the Mutual Fund Account, expressed in units or shares. (p) "Nonelective Stock Account" means a bookkeeping account which reflects the deferred fees credited pursuant to Article 3 on and after May 6, 1998. (q) "Nonemployee Director" means any individual serving on the Board who is not an employee of the Corporation or any of its subsidiaries or affiliates. (r) "Participant" means: (i) A Nonemployee Director who has filed an election to participate in the Plan under Section 2.2 of the Plan with regard to any Plan Year, or who has deferred Compensation to an Account; and (ii) Any Nonemployee Director who is eligible to receive Stock Credits under Article 3. (s) "Plan" has the meaning set forth in Section 1.2 above. (t) "Plan Year" means the calendar year. (u) "Section 16(b)" means Section 16(b) of the Securities Exchange Act of 1934, as amended. (v) "Stock Account" means an Elective Stock Account or a Nonelective Stock Account. (w) "Stock Credit" means a credit to a Stock Account, calculated pursuant to Section 2.4 or Article 3. ARTICLE 2 ELECTIVE FEE DEFERRALS 2.1 ELIGIBILITY. Any Nonemployee Director may participate in the Plan by making an election to defer Compensation pursuant to Section 2.2. 2.2 ELECTION TO PARTICIPATE. (a) Each Nonemployee Director, and each first-time nominee for director who is not an employee of the Corporation or any of its subsidiaries or affiliates, may elect to defer payment of all or any portion of his or her Compensation that is payable during any Plan Year. Such election must be made prior to the date that services are rendered in the Plan Year in which such Compensation otherwise would be paid. (b) An election to defer any Compensation under Section 2.2(a) above shall be: (i) in writing; (ii) delivered to the Committee or to the Secretary of the Corporation; and (iii) irrevocable with respect to the amount of Compensation to be deferred in a current Plan Year. If a director does not elect to defer Compensation payable to him or her during a Plan Year, all such Compensation shall be paid directly to such Nonemployee Director in accordance with resolutions adopted by the Board from time to time. 2.3 MODE OF DEFERRAL. (a) For Plan Years commencing on or after January 1, 1998, a Participant may elect to defer all or a portion of his or her Compensation for a Plan Year to an Elective Stock Account, a Mutual Fund Account or a combination of such Accounts. Any such election shall be specified in the writing referred to in Section 2.2(b) above that is delivered by the Nonemployee Director to the Committee or to the Secretary of the Corporation. Separate Elective Stock Accounts and separate Mutual Fund Accounts, as appropriate, shall be established for a Participant for each such Plan Year only to the extent necessary to reflect the Participant's distribution elections under Section 4.1 or beneficiary designations under Section 4.5. (b) For Plan Years commencing on or after January 1, 1994 and before January 1, 1998, a Participant could elect to defer all or a portion of his or her Compensation for a Plan Year to a Cash Account, an Elective Stock Account or a combination of such Accounts. A separate Cash Account and Elective Stock Account, as appropriate, was established for a Participant for each such Plan Year only to the extent necessary to reflect the Participant's distribution elections or beneficiary designations. Separate Cash Accounts and Elective Stock Accounts were also established for the conversion of Participants' Deferred Compensation Accounts on or prior to December 31, 1993. (c) The Committee shall maintain such Accounts in the name of the Participant. Compensation deferred to an Elective Stock Account, a Mutual Fund Account, or a pre-1998 Cash Account shall result in Stock Credits, or Mutual Fund Credits, or Cash Credits, respectively. 2.4 ELECTIVE STOCK ACCOUNT. The Elective Stock Account of a Participant shall be credited, as of the day of the Plan Year on which the deferred Compensation otherwise would have been payable to such Participant, with Stock Credits equal to the number of shares of Common Stock (including fractions of a share) that are equal in value to the amount of such deferred Compensation, using the Fair Market Value of shares of Common Stock on such day. As of the date any dividend is paid to holders of shares of Common Stock, such Elective Stock Account shall be credited with additional Stock Credits equal to the number of shares of Common Stock (including fractions of a share) that are equal in value, using the Fair Market Value of shares of Common Stock on the dividend payment date, to the amount which would have been paid as dividends on that number of shares (including fractions of a share) of Common Stock which is equal to the number of Stock Credits attributed to such Elective Stock Account as of the record date for the dividend payment. In the case of dividends paid in property other than cash, the amount of the dividend shall be deemed to be the fair market value of the property at the time of the payment of the dividend, as determined in good faith by the Committee. 2.5 MUTUAL FUND ACCOUNT. For Plan Years commencing on or after January 1, 1998, the Mutual Fund Account of a Participant shall be credited, as of a date which is no later than ten Business Days after the day of the Plan Year on which the deferred Compensation otherwise would have been payable to such Participant, with Mutual Fund Credits determined in accordance with the following. A Participant's Mutual Fund Account may consist of any one or more of the investment funds or vehicles made available by the Corporation from time to time under the Thomas & Betts Corporation Supplemental Executive Investment Plan (hereinafter referred to as "Reference Funds"). A Participant who has elected to defer all or a portion of his or her Compensation for a Plan Year to a Mutual Fund Account shall further elect which one or more of the Reference Funds shall be used for purposes of crediting hypothetical investment gains (or losses) to such Mutual Fund Account. The number of Mutual Fund Credits credited to a Participant's Mutual Fund Account, if any, shall be based on the Participant's investment election, the amount of Compensation deferred, and standard recordkeeping practices of the Reference Funds selected by the Participant. The Mutual Fund Credits shall be deemed, for bookkeeping purposes only, to increase or decrease to reflect the hypothetical earnings and the hypothetical realized and unrealized gains and losses of the Reference Funds selected by the Participant. Quarterly Participant investment elections with respect to Reference Funds shall apply to past or current contributions to the Participant's Mutual Fund Account(s), as elected by the Participant. 2.6 CASH ACCOUNT. The Cash Account(s) of a Participant established prior to January 1, 1998 shall continue to be credited as of the last day of each month, or as of the date the Cash Account is distributed, if earlier, with Cash Credits in an amount equal to the product of (a) the daily average balance in such Cash Account during such month and (b) the ratio of the number of days in the month to 365 days, multiplied by the rate of interest that the Corporation, on the first business day of each January, could obtain for an investment in a one-year Certificate of Deposit, as determined by the Committee. ARTICLE 3 NONELECTIVE FEE DEFERRALS 3.1 ELIGIBILITY. Effective May 6, 1998, each Nonemployee Director shall be eligible to participate in the Plan pursuant to this Article 3, unless he or she is in one of the following excluded categories: (a) A Nonemployee Director who is a participant in the Thomas & Betts Corporation Retirement Plan for Nonemployee Directors (the "Retirement Plan"), and who elects to continue to participate in the Retirement Plan, as described in Section 3.2; or (b) A Nonemployee Director who has an individual compensation agreement with the Corporation, unless such agreement expressly provides for participation under this Article 3. 3.2 ELECTION RE RETIREMENT PLAN. On or before May 6, 1998, each Nonemployee Director who is a participant in the Retirement Plan shall elect, in writing, one of the following alternatives: (a) To continue to participate in the Retirement Plan, in which event he or she shall not be eligible to receive any Stock Credits under this Article 3; or (b) To cease to participate in the Retirement Plan, to participate in the Plan pursuant to this Article 3, and to have his or her accrued benefit under the Retirement Plan converted to initial Stock Credits to his or her Nonelective Stock Account established pursuant to this Section 3.2. A Nonemployee Director who makes this election shall thereby waive all rights and benefits under the Retirement Plan. If a Nonemployee Director makes the election described in paragraph (b) above, his or her Nonelective Stock Account shall be credited with initial Stock Credits under this Article 3 equal to the number of shares of Common Stock (including fractions of a share) that are equal in value to the lump sum present value of his or her accrued benefit under the Retirement Plan, using the Fair Market Value of shares of Common Stock on May 5, 1998. The lump sum present value of the Nonemployee Director's accrued benefit under the Retirement Plan shall be determined as of May 5, 1998, assuming solely for purposes of such determination (i) full vesting, (ii) retirement at age 70, or current age, if later, and (iii) an interest rate equal to the interest assumption used by the Corporation for 1998 for financial reporting purposes for qualified retirement plans. 3.3 ANNUAL GRANT OF STOCK CREDITS. Effective for Board Years beginning on and after May 6, 1998, each Participant under this Article 3 who serves as a director for a Board Year shall be entitled to have his or her Nonelective Stock Account credited with Stock Credits as herein described. If the Participant serves as a director for the full Board Year, his or her Nonelective Stock Account shall be credited as of the close of such Board Year with Stock Credits equal to the number of shares of Common Stock (including fractions of a share) that are equal in value to $7,500, using the Fair Market Value of shares of Common Stock on the last Business Day of such Board Year. The applicable Nonelective Stock Account of a Participant under this Article 3 who serves for less than a full Board Year shall be credited as of the close of the Board Year with pro-rata Stock Credits. 3.4 NONELECTIVE STOCK ACCOUNTS. Separate Nonelective Stock Accounts shall be established for a Participant for each Plan Year for which he or she is entitled to Stock Credits under this Article 3 only to the extent necessary to reflect the Participant's distribution elections under Section 4.1 or beneficiary designations under Section 4.5. Additional Stock Credits attributable to dividends on Common Stock shall be credited to the Nonelective Stock Accounts of Participants in the manner described in Section 2.4. ARTICLE 4 DISTRIBUTION OF ACCOUNTS. 4.1 ELECTION OF TIME AND METHOD OF PAYMENT. (a) Distribution of each Nonelective Stock Account of a Participant shall commence, in accordance with the Participant's election with respect to such Account, as of (i) one month following such Participant's termination of service as a director or (ii) January 15 of the Plan Year following the Plan Year in which the Participant's service as a director ceases; PROVIDED, HOWEVER, that distribution of a Nonelective Stock Account resulting from conversion of an accrued benefit under the Retirement Plan pursuant to Section 3.2(b) may not commence within six months of the date the conversion election was made. If the date elected by a Participant for commencement of such distribution is not a Business Day, such distribution shall commence as of the next succeeding Business Day. (b) Distribution of each Elective Stock Account, Mutual Fund Account or pre-1998 Cash Account of a Participant shall commence, in accordance with such Participant's election with respect to such Account, as of (i) one month following such Participant's termination of service as a director, (ii) January 15 of the Plan Year following the Plan Year in which such Participant's service as a director ceases, or (iii) January 15 of a Plan Year prior to the Plan Year in which the Participant is scheduled to retire as a director; PROVIDED, HOWEVER, that distribution of an Elective Stock Account may not commence within six months of the date a deferral election was made under Article 2 to defer Compensation to such Account, and FURTHER PROVIDED that the distribution of any Elective Stock Account or Cash Account created by conversion of the balance of a Deferred Compensation Account on or prior to December 31, 1993 shall be made pursuant to the election or elections in effect prior to November 3, 1993, with respect to such Deferred Compensation Account. If the date elected by a Participant for commencement of such distribution is not a Business Day, such distribution shall commence as of the next succeeding Business Day. (c) Distribution of each Stock Account, Mutual Fund Account and pre-1998 Cash Account shall be made, in accordance with the Participant's election with respect to such Account, in a lump sum or in a number of annual installments (not to exceed 10). If no such election is made, distribution shall be made in a lump sum. Such payment or payments shall be in amounts determined pursuant to Section 4.3 below, and shall be made as of the date specified pursuant to Section 4.1(a) or (b) above, and such date of each succeeding Plan Year as applicable. (d) A Participant's elections pursuant to Section 4.1(a), (b) and (c) above must be in writing and be delivered to the Committee, or the Secretary of the Corporation, with such Participant's election to participate in the Plan for the applicable Plan Year. A Participant may change such election with respect to the time and method of payment if (i) the distribution of a Stock Account pursuant to such changed election is approved in advance by the Committee (composed in accordance with Section 1.3(g), taking into account Section 16(b)), unless counsel to the Corporation determines that such approval is not necessary for purposes of Section 16(b), and (ii) such election change is in writing and is received by the Committee, or the Secretary of the Corporation, at least 15 months before the earlier of (A) the date on which the Participant's service as a director ceases, or (B) if applicable, any earlier distribution date specified by the Participant in his or her original election under Section 4.1(b). 4.2 DISTRIBUTION IN COMMON STOCK OR CASH. (a) Distribution of a Participant's Stock Accounts prior to January 1, 1999 shall be made only in cash, in accordance with the terms of the Plan as in effect on January 1, 1998. Distribution of a Participant's Stock Accounts on or after January 1, 1999 shall be made only in Common Stock, except that the value of any fractional share shall be paid in cash based on the Fair Market Value of the Common Stock on the date of distribution. (b) Distribution of a Participant's Mutual Fund Accounts or pre-1998 Cash Accounts shall be made only in cash. 4.3 INSTALLMENT AMOUNT. (a) STOCK ACCOUNT. The amount of each installment with respect to a Stock Account of a Participant shall be the number of whole and fractional shares of Common Stock that is equal to the product of the current number of Stock Credits attributed to such Stock Account and a fraction, the numerator of which is one and the denominator of which is the number of installments yet to be paid. Distribution shall be made in the manner provided in Section 4.2(a). (b) MUTUAL FUND ACCOUNT. The amount of each installment with respect to a Mutual Fund Account of a Participant shall be equal to the product of the total current value of the Participant's Mutual Fund Account and a fraction, the numerator of which is one and the denominator of which is the number of installments yet to be paid. Such installment payments shall be deemed to be made pro-rata from the Reference Funds in which such Mutual Fund Account is hypothetically invested. (c) CASH ACCOUNT. The amount of each installment with respect to a pre-1998 Cash Account of a Participant shall be equal to the product of the current balance in such Cash Account and a fraction, the numerator of which is one and the denominator of which is the number of installments yet to be paid. 4.4 SEVERE FINANCIAL HARDSHIP. Notwithstanding any other Section of this Article 4, at the written request of a Participant or a Participant's legal representative, the Committee (composed in accordance with Section 1.3(g), taking into account Section 16(b)), in its sole discretion upon a finding that continued deferral will result in severe financial hardship to the Participant, may authorize (i) the payment of all or a part of a Participant's Stock Account(s), Mutual Fund Account(s), and pre-1998 Cash Account(s) in a single installment prior to the distribution commencement date(s) for such Account(s) elected by the Participant pursuant to Section 4.1, or (ii) the acceleration of payment of any multiple installments thereof. 4.5 DISTRIBUTION UPON DEATH. Notwithstanding any other provision of this Plan, upon the death of a Participant, the Committee shall distribute all of such Participant's Accounts in a single installment to such person or persons or the survivors thereof, including corporations, unincorporated associations or trusts, as the Participant may have designated. All such designations shall be made in writing and delivered to the Committee. A Participant may from time to time revoke or change any such designation by written notice to the Committee. If there is no designation on file with the Committee at the time of the Participant's death, or if the person or persons designated therein shall have all predeceased the Participant or otherwise ceased to exist, or if there is a dispute among designees of a Participant, such distributions shall be made to the executor or administrator of the Participant's estate. Any distribution under this Section 4.5 shall be made as soon as practicable after the Committee is notified of the Participant's death or is satisfied as to the identity of the appropriate payee, whichever is later. A Participant's Stock Account(s) shall be distributed as provided in Section 4.2(a). 4.6 WITHHOLDING TAXES. The Corporation shall deduct from all distributions under the Plan any taxes required to be withheld by federal, state, or local governments. 4.7 ADJUSTMENT OF STOCK ACCOUNTS. If at any time the number of outstanding shares of Common Stock shall be increased as the result of any stock dividend, stock split, subdivision or reclassification of shares, the number of Stock Credits with which each Stock Account of a Participant is credited shall be increased in the same proportion as the outstanding number of shares of Common Stock is increased. If the number of outstanding shares of Common Stock shall at any time be decreased as the result of any combination, reverse stock split or reclassification of shares, the number of Stock Credits with which each Stock Account of a Participant is credited shall be decreased in the same proportion as the outstanding number of shares of Common Stock is decreased. In the event the Corporation shall at any time be consolidated with or merged into any other corporation and holders of shares of Common Stock receive shares of the capital stock of the resulting or surviving corporation (or any consideration other than shares of capital stock), there shall be credited to each Stock Account of a Participant, in place of the Stock Credits then credited thereto, new Stock Credits in an amount equal to the product of the number of shares of capital stock (or consideration other than shares of capital stock) exchanged for one share of Common Stock upon such consolidation or merger and the number of Stock Credits with which such Account then is credited. ARTICLE 5 THE COMMITTEE 5.1 AUTHORITY. The Board may appoint separate Committees to administer specific provisions of the Plan. Each Committee shall, with respect to provisions for which it has administrative authority, have full power and authority to administer the Plan, including the power to (a) promulgate forms to be used with respect to the Plan, (b) promulgate rules of Plan administration, (c) settle any disputes as to rights or benefits arising from the Plan, (d) interpret and construe the terms of the Plan, including, but not limited to, determining entitlement to benefits and the amount of such benefits, and (e) make such decisions or take such action as the Committee, in its sole discretion, deems necessary or advisable to aid in the proper administration of the Plan. Any decision made by the Committee shall be final and binding on the Corporation, Participants and their heirs or successors. The Committee may delegate its power and authority to administer the Plan to officers and employees of the Corporation; PROVIDED, HOWEVER, that the Committee's power and authority under Section 4.1(d) (regarding changes in elections) and Section 4.4 (regarding Severe Financial Hardship) shall not be delegated unless counsel to the Corporation determines that such delegation would not cause the loss of an exemption under Section 16(b). 5.2 OPERATION. The Committee may act (a) by majority vote of its members meeting in person or by telephone, or (b) by consent in writing signed by all of the members of the Committee. Two members of the Committee shall constitute a quorum for the transaction of business at a meeting. 5.3 ELECTIONS, NOTICES. All elections and notices required to be provided to the Committee under the Plan must be in such form or forms prescribed by, and contain such information as is required by, the Committee. ARTICLE 6 MISCELLANEOUS 6.1 FUNDING. All amounts payable under the Plan shall constitute a general unsecured obligation of the Corporation. The Board may, however, in the event of a change of control of the Corporation or for administrative reasons, fully fund the Plan by means of a contribution to the Thomas & Betts Corporation Agreement and Plans Trust dated May 20, 1988, as amended (the "Rabbi Trust"), or other "rabbi" trust selected by the Committee. 6.2 NON-ALIENATION OF BENEFITS. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void. No such benefit, prior to receipt thereof pursuant to the provisions of the Plan, shall be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant. 6.3 GOVERNING LAW. This Plan shall be governed by the laws of the State of Tennessee. 6.4 AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board at any time may terminate and in any respect amend or modify the Plan; PROVIDED, HOWEVER, that no such termination, amendment or modification shall adversely affect the rights of any Participant or beneficiary, including his or her rights with respect to Stock Credits, Mutual Fund Credits, and Cash Credits credited prior to such termination, amendment or modification, without his or her consent. 6.5 SUCCESSORS AND HEIRS. The Plan and any properly executed elections hereunder shall be binding upon the Corporation and Participants, and upon any assignee or successor in interest to the Corporation and upon the heirs, legal representatives and beneficiaries of any Participant. 6.6 STATUS OF PARTICIPANTS. Stock Credits are not, and do not constitute, shares of Common Stock; and Mutual Fund Credits are not, and do not constitute, shares of a mutual fund. No right as a holder of shares of Common Stock or a mutual fund shall devolve upon a Participant by reason of his or her participation in the Plan. 6.7 STATEMENT OF ACCOUNTS. In February of each Plan Year, each Participant in the Plan during the immediately preceding Plan Year shall receive a statement of his or her Accounts under the Plan as of December 31 of such preceding Plan Year. Such statement shall be in a form and contain such information as is deemed appropriate by the Committee. 6.8 LIMITATION ON BENEFIT. No single Participant may acquire under the Plan more than one percent of the shares of Common Stock outstanding as of May 6, 1998. EX-10.13 7 EXHIBIT 10.13 THOMAS & BETTS CORPORATION EXECUTIVE RETIREMENT PLAN (AS AMENDED JUNE 4, 1997) THOMAS & BETTS CORPORATION EXECUTIVE RETIREMENT PLAN INTRODUCTION Thomas & Bett Corporation (the "Company") has adopted this Executive Retirement Plan effective as of September 2, 1992, and as amended on December 16, 1993, February 5, 1997 and June 4, 1997, to provide additional retirement income and death benefit protection to certain officers of the Company in recognition of their contribution to the Company in carrying out senior management responsibilities. The terms and conditions of participation and benefits under this Executive Retirement Plan are set out in this document. All benefits payable under this Plan, which is intended to constitute a non-qualified, unfunded deferred compensation plan for a select group of management employees under Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), shall be paid out of the general assets of the Company. 2 THOMAS & BETTS CORPORATION EXECUTIVE RETIREMENT PLAN AS AMENDED 06/04/97 ARTICLE 1. DEFINITIONS 1.01 "ACTUARIAL EQUIVALENT" shall mean the equivalent value when computed based on the UP-84 Mortality Table and an interest rate equal to 100 percent of the interest rate which would be used by the Pension Benefit Guaranty Corporation (under the pre-11/1/93 methodology) for valuing immediate annuities for single employer plans that terminate on the first day of the month in which the Eligible Employee's Benefit payments commence (the "PBGC Interest Rate"). 1.02 "AFFILIATED COMPANY" shall mean any company not participating in the Plan which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which also includes as a member of the Company; any trade or business under common control (as defined in Section 414(c) of the Code) with the Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Company; and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Code. 1.03 "AVERAGE MONTHLY COMPENSATION" shall mean the average monthly compensation of an Eligible Employee during any sixty (60) consecutive months during his employment with the Company or an Affiliated Company affording the highest such average. 3 1.04 "BENEFICIARY" shall mean the person or persons designated by an Eligible Employee as beneficiary in a time and manner determined by the Committee. If the Eligible Employee fails to designate a Beneficiary or if the Beneficiary predeceases the Eligible Employee, the Eligible Employee's spouse shall be the Beneficiary or if no spouse survives the Eligible Employee, the Eligible Employee's estate shall be the Beneficiary. An Eligible Employee may change his designated Beneficiary in a time and manner determined by the Committee. 1.05 "BENEFIT" shall mean the payments payable under Article 2 of this Plan. 1.06 "BOARD OF DIRECTORS" shall mean the Board of Directors of Thomas & Betts Corporation. 1.07 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. 1.08 "COMMITTEE" shall mean the Company's Human Resources Committee of the Board of Directors, any successor or substitute committee thereto, or, during any period of time when no such committee is in existence, the Company's entire Board of Directors. 1.09 "COMPANY" shall mean the Thomas & Betts Corporation or any successor by merger, purchase or otherwise, with respect to its employees and such affiliated companies authorized by the Board of Directors, on such terms and conditions as the Board may determine, to participate in the Plan. 4 1.10 "COMPENSATION" shall mean the base cash compensation paid to an Eligible Employee in respect of each month for services rendered to the Company by such Eligible Employee (in respect of each month for services rendered to the Company by such Eligible Employee), plus the amount paid pursuant to the provisions of the Officer Profit Sharing Plan and the Management Incentive Plan or such substitute or similar plans, determined prior to any pre-tax contributions under a "qualified cash or deferred arrangement" (as defined under Section 401(k) of the Code and its applicable regulations) or under a "cafeteria plan" (as defined under Section 125 of the Code and its applicable regulations). 1.11 "CREDITED SERVICE" shall mean, with respect to an Eligible Employee, service determined pursuant to the provisions of Section 2.9 of the Retirement Plan. Notwithstanding the foregoing, an Eligible Employee may, subject to the approval by the Board of Directors, be granted additional months or years of age or of Credited Service for purposes of determining the amount of Benefits under the Plan or for purposes of satisfying the service eligibility requirements necessary for Benefits under the Plan, or both. The number of additional months or years of age or of Credited Service so granted, if any, shall be set forth in Appendix A. 1.12 "EFFECTIVE DATE" shall mean September 2, 1992. 1.13 "ELIGIBLE EMPLOYEE" mean an employee who occupies a position of senior management with the Company who has been approved by the Committee and who is listed on Appendix A, as amended from time to time. No employee who is a party to a Supplemental Executive Retirement Contract (the "SERC") shall be so approved by the 5 Committee unless such employee has executed, in form satisfactory to the Committee, a written agreement terminating all of the obligations of the Company under the SERC and canceling any entitlements thereunder in respect of such employee. 1.14 "INVESTMENT PLAN" shall mean the Thomas & Betts Corporation Employees' Investment Plan. 1.15 "NORMAL RETIREMENT DATE" shall mean the first day of the calendar month following an Eligible Employee's 65th birthday. 1.16 "PLAN" shall mean the Thomas & Betts Corporation Executive Retirement Plan, as amended from time to time. 1.17 "RETIREE" shall mean an Eligible Employee (i) who has attained age 55 and completed 20 or more years of Credited Service or (ii) whose combined years of age and Credited Service (each completed to the nearest full month with any fractional part of a month of less than 15 days disregarded) equals 70 or more as of the Effective Date, and in each case, who either voluntarily or upon the Company's request or demand terminates employment with the Company and all Affiliated Companies after the Effective Date. 1.18 "RETIREMENT PLAN" shall mean The Thomas & Betts Pension Plan, as amended from time to time. 1.19 "SOCIAL SECURITY BENEFIT" shall mean the annual old-age Insurance benefit which the 6 Eligible Employee is entitled to receive under Title II of the Social Security Act as in effect on his Normal Retirement Date or which he would be entitled to receive on his Normal Retirement Date if he did not disqualify himself from receiving Social Security Benefits by entering into covered employment or for any other reason. 1.20 "10 YEAR CERTAIN AND LIFE ANNUITY" shall mean an annuity which provides a benefit payable during the Retiree's life and, if such Retiree dies during the 10 year period after the date such benefit began, a lump-sum payment shall be made to the Retiree's Beneficiary in respect of the balance of the payments for such 10 year period. ARTICLE 2. AMOUNT OF PAYMENT OF BENEFITS 2.01 Payment of Benefit Except as otherwise provided in Section 2.07 hereof, Benefits shall be payable by the Company only with respect to an Eligible Employee who becomes a Retiree, subject to the provisions of Section 3.07. Such benefits shall be payable from the general assets of the Company. 2.02 Amount of Benefit The monthly amount of the Benefit payable in the form of 10 Year Certain and Life Annuity shall be equal to: (a) the greater of (i) or (ii) where 7 (i) equals 2.5 percent of the Eligible Employee's Average Monthly Compensation (as defined in Sections 1.03 and 1.10) multiplied by the first 20 years of his Credited Service plus 1.5 percent of the Eligible Employee's Average Monthly Compensation (as defined in Sections 1.03 and 1.10) multiplied by the next 15 years of his Credited Service, and (ii) equals 50 percent of the Eligible Employee's Average Monthly Compensation (as defined in Sections 1.03 and 1.10) MINUS (b) The sum of(i), (ii), (iii) and (iv) where (i) equals the monthly amount of benefit which is or would be payable to the Eligible Employee, assuming such benefit commenced on his date of termination of employment pursuant to the provisions of the Retirement Plan in the form of a 100% Joint and Survivor Annuity (an Eligible Employee who is unmarried at the time the Benefit is determined shall be deemed, for purposes of the Plan, to have a survivor annuitant born on the same date as the Eligible Employee), (ii) equals the monthly amount of benefit to which the Eligible Employee would be entitled if his Company Contribution Account under the Investment Plan determined as of his date of termination of employment plus the amount of each withdrawal made from such Company Contribution Account on and after July 1, 1992 accumulated with interest at a rate of 8 percent, compounded annually from the date of each 8 withdrawal to the Eligible Employee's termination of employment, was used to purchase a 100% Joint and Survivor Annuity based on the interest and mortality assumptions used to determine Actuarial Equivalent as defined in Section 1.01 (an Eligible Employee who is unmarried at the time the Benefit is determined shall be deemed, for the purposes of the Plan, to have a survivor annuitant born on the same date as the Eligible Employee), (iii) equals 50 percent of the Eligible Employee's monthly Social Security Benefit, and (iv) equals the monthly amount of benefit payable under a prior employer's retirement program as set forth in Appendix A. Notwithstanding the foregoing, the offset of the Eligible Employee's monthly Social Security Benefit as described in Section 2.02(b)(iii) shall not, in the case of any Benefit payable in the forms described in Sections 2.03(a) and (b) be made until the Eligible Employee reaches his Normal Retirement Date. In the case of a Benefit paid in the form described in Section 2.03(c), the Committee shall, in good faith, determine the appropriate amount of offset under Section 2.02(b)(iii) to be used in calculating such Benefit, consistent with the preceding sentence and information available to the Committee at such time. In addition, the Committee shall determine, in good faith, the appropriate amount of offset under Section 2.02(b)(iv) to be used in calculating any Benefit under this Plan (including. without limitation, converting such monthly benefit under Section 2.02(b)(iv) an appropriate benefit form) and each Eligible Employee shall cooperate with the Committee by providing any information (certifiable or otherwise) necessary to make such determination. 9 2.03 Form of Payment (a) Unless a Retiree has elected an optional form of benefit, as provided herein, the automatic form of payment under this Plan deemed to have been elected by such Retiree upon becoming an Eligible Employee shall be a 10 Year Certain and Life Annuity, providing for monthly payments to the Retiree for his lifetime with a guaranteed minimum of one hundred twenty (120) monthly payments and if the Retiree dies prior to receiving the full one hundred twenty (120) monthly payments, the remainder of guaranteed payments shall be commuted and paid in one lump sum to the named Beneficiary in full discharge of the obligation of the Plan. In the absence of a named Beneficiary the commuted value of the remaining guaranteed payments will be paid to the Retiree's estate. (b) Any Eligible Employee may, upon becoming an Eligible Employee, elect in writing that his Benefit be paid in the form of a 100% Joint and Survivor Annuity of Actuarial Equivalent value to the Benefit otherwise payable under Section 2.03(a) above, providing for a reduced monthly benefit during his lifetime with 100% of such reduced monthly benefit continuing to his surviving spouse to whom he was married on the date his Benefit payments commenced for the remainder of such spouse's lifetime. If the Retiree and the spouse to whom he was married on the date his Benefit payments commenced dies before receiving one hundred twenty (120) monthly payments, the remainder of the one hundred twenty (120) guaranteed payments will be commuted and paid in one lump sum to the named beneficiary of the last surviving annuitant in full discharge of the obligation of the Plan. This optional form of benefit shall become effective on the first day of the month for which the Retiree's Benefit is first payable. If the Retiree's spouse dies before the first day 10 of the month for which the Retiree's Benefit is first payable, this optional form of payment shall be revoked and payments shall be made pursuant to the provisions of Section 2.03(a) above. (c) Any Eligible Employee may, upon becoming an Eligible Employee, elect in writing that his Benefit be paid to him (or his Beneficiary if he dies prior to payment under paragraph (d) below) in one single payment of Actuarial Equivalent value to the Benefit otherwise payable under Section 2.03(a) above. (d) Payments shall commence as of the first day of the month following the Eligible Employee's termination of employment or as soon as administratively practicable thereafter. (e) Any Eligible Employee may change his payment form election by making a new payment form election at any time; provided, however, that no such election shall be effective unless it shall have been made and submitted to the Committee prior to the last day of the calendar year prior to the calendar year in which the Eligible Employee terminates employment with the Company and each Affiliated Company. 2.04 Commencement of Benefit on or after Normal Retirement Date A Retiree who terminates employment on or after his Normal Retirement Date shall receive his Benefit commencing on the first day of the month following his termination of employment, subject to the provisions of Section 3.07. In that case, his Benefit shall be equal to the Benefit determined pursuant to the provisions of Section 2.02 on the basis of 11 his Average Monthly Compensation and Credited Service on the date of his termination of employment. 2.05 Commencement of Benefit Before Normal Retirement Date (a) Unless the provisions of Section 2.05(b) below are applicable a Retiree whose employment terminates for any reason prior to his Normal Retirement Date shall receive a Benefit commencing on the first day of the month following his termination of employment, subject to the provisions of Section 3.07. In such case, his Benefit shall be equal to the Benefit determined under the provisions of Section 2.02 on the basis of his Average Monthly Compensation and Credited Service on the date of his termination of employment; provided, however, the portion of his Benefit determined under the provisions of Section 2.02(a) shall be reduced by 3.6% for each year and l/12 of 3.6% for each month of a fractional year by which the date the Retiree's Benefit begins prior to the 60th anniversary of his birth. (b) A Retiree who terminates employment at the Company's request prior to his Normal Retirement Date shall, subject to the approval of the Committee and the provisions of Section 3.07, receive a special early Benefit commencing on the first day of the month following his termination of employment. The special early Benefit shall be equal to: (i) his Benefit determined pursuant to the provisions of Section 2.02 on the basis of his Average Monthly Compensation and Credited Service on his date of termination of employment; provided, however, the portion of his Benefit determined under the provisions of Section 2.02(a)(i) shall be calculated on the basis of the Credited Service he 12 accrued to his date of termination of employment plus any additional service he would have accrued pursuant to the provisions of Section 1.11 after his termination of employment if he had remained in the employ of the Company until his 60th birthday; increased by (ii) (A) in the case of any Benefit payable in the form described in Sections 2.03(a) or (b), the Social Security cost of living percentage increase granted on Social Security benefits paid in the year of such Retiree's termination of employment and on each anniversary of such Retiree's termination of employment occurring prior to his Normal Retirement Date, the Benefit determined under the provisions of Section 2.02(a) and paragraph (b) of this Section 2.05 shall be increased by the Social Security cost of living percentage increase granted on Social Security benefits paid in such calendar year; provided, however, the total number of such cost of living increases applied to a Retiree's Benefit under this subparagraph (ii) shall not exceed five, and the cost of living increase percentage applied to a Retiree's Benefit under this subparagraph (ii) each year shall not exceed 5%: or (B) in the case of any Benefit payable in the form described in Section 2.03(c), a projected and compounded deemed Social Security cost of living percentage increase equal to 5% of such Benefit for the year of such Retiree's termination and 5% of such Benefit as cumulatively increased, for each anniversary of such Retiree's termination occurring prior to his Normal Retirement Date; provided, however, the total number of such deemed cost of living increases 13 applied to a Retiree's Benefit under this subparagraph (ii) (B) shall not exceed five. 2.06 Disability Benefit An Eligible Employee who has not reached his Normal Retirement Date and who ceases to be employed by the Company and each Affiliate Company on account of disability shall continue to be credited with Credited Service if (i) as of the Effective Date, such Eligible Employee's combined years of age and Credited Service (computed in the same manner described in Section 1.17) equals 70 or more, (ii) such Eligible Employee has reached his 55th birthday and completed 20 years of Credited Service (computed in the same manner described in Section 1.17), or (iii) such employment cessation occurs after the date specified in Appendix A with respect to such Eligible Employee; PROVIDED, HOWEVER, such Credited Service shall only continue if such Eligible Employee is eligible for and is continuously receiving disability benefits under the Company's long-term disability program. There shall also be included in his Credited Service any applicable waiting period for disability benefits under the Company's long-term disability plan; provided that after expiration of such period the Eligible Employee becomes entitled to such disability benefits. Upon reaching age 65, such disabled Eligible Employee shall be entitled to a disability Benefit in an amount determined under Section 2.02, based on his Average Monthly Compensation at the time he ceased employment on account of disability and his Credited Service based on Section 1.11 and the preceding provisions of this Section 2.06. 2.07 Pre-Retirement Death Benefit 14 (a) If (i) an Eligible Employee whose combined years of age and Credited Service (computed in the same manner described in Section 1.17) equals 70 or more as of the Effective Date dies prior to his termination of employment, (ii) prior to his employment termination, an Eligible Employee dies after he has reached his 55th birthday and completed 20 or more years of Credited Service, (iii) an Eligible Employee dies prior to his termination of employment, but after the date specified in Appendix A with respect to such Eligible Employee, or (iv) an Eligible Employee dies while accruing Credit Service under Section 2.06, a spouse's Benefit shall be payable to his surviving spouse. Such spouse's Benefit shall be a lump sum payment which is Actuarial Equivalent to the amount of monthly benefit the spouse would have received if the Benefit which the Eligible Employee would have received under Section 2.02 of this Plan, reduced pursuant to the provision of Section 2.05(a) of this Plan, had commenced on the Eligible Employee's date of death in the form of a 100% joint and survivor annuity and the Eligible Employee had died immediately thereafter. Such spouse's benefit shall be paid as soon as practicable following such Eligible Employee's date of death. 2.08 Restoration of Service If an Eligible Employee who retired or otherwise terminated employment is restored to employment with the Company or an Affiliated Company, the monthly payments under the Plan shall he discontinued and, upon subsequent retirement or termination of employment with the Company or any Affiliated Company, the Eligible Employee's Benefit shall be computed in accordance with the provisions of this Article 2, as applicable, and shall be 15 reduced by the actuarial equivalent value of the Benefit payments he received prior to his subsequent retirement. 2.09 Designation of Beneficiary For purposes of Sections 2.03 and 2.07, each Eligible Employee shall file a written designation of Beneficiary with the Committee upon qualifying for participation hereunder. Such designation shall remain in force until revoked by the Eligible Employee by filing a new beneficiary form with the Committee. 2.10 Receipt of Single-Sum Payment If any Retiree has received a single sum payment under Section 2.03(c) above, such Retiree's Beneficiary shall have no further interest in the Plan or any benefits payable thereunder. ARTICLE 3. GENERAL PROVISIONS 3.01 Administration The administration of the Plan, the exclusive power to interpret it, and the responsibility for carrying out its provisions are vested in the Committee. The Committee shall have full discretionary authority to interpret the Plan and resolve all matters arising in connection with the Plan. The Committee may adopt procedural rules and may employ and rely on such legal counsel, actuaries, accountants and agents as it may deem advisable to assist in the administration of the Plan. Decisions of the Committee shall be conclusive and binding 16 on all persons. The expenses of the Committee attributable to the administration of this Plan shall be paid directly by the Company. 3.02 Funding (a) All amounts payable in accordance with this Plan shall constitute a general unsecured obligation of the Company. Such amounts, as well as any administrative costs relating to the Plan, shall be paid out of the general assets of the Company, unless the provisions of paragraph (b) below are applicable. (b) The Board of Directors may, for administrative reasons, establish a grantor trust for the benefit of Eligible Employees in the Plan. The assets of said trust will be held separate and apart from other Company funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions: (i) the creation of said trust shall not cause the Plan to be other than "unfunded" for purposes of Title I of ERISA; (ii) the Company shall be treated as the "grantor" of said trust for purposes of Sections 671 and 677 of the Internal Revenue Code; and (iii) said trust agreement shall provide that its assets may be used to satisfy claims of the Company's general creditors, provided that the rights of such general creditors are enforceable under federal and state law. 17 3.03 No Contract of Employment The establishment of the Plan shall not be construed as conferring any legal right upon any person for a continuation of employment, nor shall it interfere with the right of the Company to discharge any employee. 3.04 Competency If the Committee shall find that any person to whom any amount is or was payable hereunder is unable to care for his affairs because of illness or accident, or has died, then the Company, if it so elects, may direct that any payment due him or his estate (unless a prior claim therefore has been made by a duly appointed legal representative) or any part thereof be paid or applied for the benefit of such person or for the benefit of his spouse, children or other dependents, an institution maintaining or having custody of such person, any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper. Any such payment shall be in complete discharge of the liability of the Company therefor. 3.05 Withholding Taxes The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes. 18 3.06 Nonalienation Except insofar as may otherwise be required by law, no amount payable at any time under the Plan shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any person and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, shall be void. If any person shall attempt to, or shall, alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any amount payable under the Plan, or any part thereof, or if by reason of his bankruptcy or other event happening at any such time such amount would be made subject to his debts or liabilities or would otherwise not be enjoyed by him, then the Committee, if it so elects, may direct that such amount be withheld and that the same or any part thereof be paid or applied to or for the benefit of such person, his spouse, children or other dependents, or any of them, in such manner and proportion as the Committee may deem proper. 3.07 Forfeiture for Cause In the event that an Eligible Employee or Retiree shall at any time be convicted for a crime involving dishonesty or fraud on the part of such Eligible Employee or Retiree in his relationship with the Company or an Affiliated Company, all benefits that would otherwise be payable to him under the Plan shall be forfeited. If a Retiree shall at any time be under indictment for any such crime any Benefit amounts payable to such Retiree shall be suspended pending conviction, dismissal or acquittal in respect thereof. If the Retiree is 19 not convicted, the suspended amounts shall be paid to him (with simple interest accruing at the PBGC Interest Rate) within thirty days after the date of the dismissal or acquittal. For this purpose. any so-called ALFORD plea or plea of NOLO CONTENDERE shall be deemed to constitute an acquittal. 3.08 Mergers/Transfers This Plan shall be binding upon and inure to the benefit of the Company and its successors and assignees and the Eligible Employee, his designees and his estate. Nothing in this Plan shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Plan and all obligations of the Company hereunder. Upon such a consolidation. merger or transfer of assets and assumption, the term "Company" shall refer to such other corporation and this Plan shall continue in full force and effect. 3.085 Change of Control Notwithstanding any other provision of the Plan, in the case of an Eligible Employee who has an employment agreement with the Company which provides for his or her continued employment following a change of control ("Employment Agreement"), the following provisions shall apply in the event that such Eligible Employee's employment with the Company is terminated under the circumstances described in Section 7(d) of his or her Employment Agreement: (a) Such Eligible Employee, if not a Retiree as defined in Section 1.17, shall be deemed to be a 20 Retiree and shall be entitled to a Benefit determined in accordance with Section 2.02, provided, however, that Section 2.02 (a) (ii) shall not apply; (b) For purposes of Section 2.02 (a)(i), such Eligible Employee's years of Credited Service shall be increased by a period of time equal to the Remainder of the Employment Period (as defined in Section 7(d)(i)(D) of the Employment Agreement); and (c) The Actuarial Equivalent value of such Eligible Employee's Benefit (determined in accordance with the foregoing provisions of this Section 3.085) shall be paid to him or her in a lump sum within 30 days after the date of termination of his or her employment. 3.09 Calculations Whenever, under this Plan, it is necessary to determine whether one benefit is less than, equal to, or larger than another, whether or not such benefits are provided under this Plan, such determination shall be made by the Company's independent consulting actuary, using mortality and interest (unless otherwise specified in this Plan) and any other assumptions normally used at the time by such actuary in determining actuarial equivalents under the Retirement Plan. 3.10 Elections All elections, designations, requests, notices, instructions, and other communications from an Eligible Employee, Retiree, or other person to the Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Committee, shall be mailed by Certified or Registered mail, Return Receipt Requested, or 21 personally delivered to the principal offices of the Corporation, and shall be deemed to have been given and delivered only upon actual receipt thereof at such location. 3.11 Acceleration of Payment Notwithstanding any other provision of the Plan to the contrary, the Company shall make payments hereunder to a Retiree or Beneficiary before such payments are otherwise due if the Committee determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, a decision by a court of competent jurisdiction involving an Eligible Employee, Retiree or Beneficiary, or a closing agreement made under Code Section 7121 that is approved by the Internal Revenue Service and involves an Eligible Employee, Retiree or Beneficiary, that an Eligible Employee, Retiree or Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plans before they are paid to him. In such cases, any such Retiree or Beneficiary so affected shall receive the remaining Benefit payments payable to him and, where appropriate his Beneficiary in one single payment of Actuarial Equivalent value to such remaining payments. Upon receipt of such accelerated payment the provisions of Section 2.10 shall apply to any Beneficiary of such Retiree. 3.12 Construction (a) The Plan is intended to constitute an unfunded deferred compensation arrangement for a 22 select group of management or highly compensated employees and therefore exempt from the requirements or Sections 201, 301 and 401 of ERISA. All rights hereunder shall be governed by and construed in accordance with the laws of the State of Tennessee and, except to the extent otherwise herein provided, in accordance with the provisions of the Retirement Plan. (b) The masculine pronoun shall mean the feminine wherever appropriate. (c) The captions preceding the sections and articles hereof have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions of the Plan. 3.13 Insurance Products The Company may require each Eligible Employee to assist it in obtaining life insurance policies on the lives of each Eligible Employee, which policies would be owned by, and be payable to, the Company. The Eligible Employee may be required to complete an application for life insurance, furnish underwriting information including medical examinations by a life insurance company-approved examiner, and authorize release of medical history to the life insurance company's underwriter, as designated by the Company. An Eligible Employee shall have no right or interest in such policies or the proceeds thereof. 23 3.14 Nature of Obligation No Eligible Employee, Retiree or Beneficiary shall have any interest in any specific asset of the Company or any Affiliated Company as a result of the Plan. Nothing contained herein shall be deemed to create a trust of any kind or any fiduciary relationship between the Company (or any Affiliated Company) and any Eligible Employee, Retiree or Beneficiary. Any right to receive any Benefit under the Plan shall only be the right of a general unsecured creditor. 3.15 Legal Fees In the event that any claim by an Eligible Employee for payment of any benefit under the Plan is disputed by the Company or the trustee of any "rabbi" trust created in connection therewith, or any other dispute in respect of the Plan or any such trust arises between any Eligible Employee, the Company and/or such trustee, any such Eligible Employee shall be promptly reimbursed for all reasonable attorney fees and expenses, after satisfaction by the Eligible Employee of a lifetime deductible equal to $25,000, incurred by any such Eligible Employee (i) in pursuing any such claim, or (ii) in connection with any such other dispute. ARTICLE 4. AMENDMENT, TERMINATION, OR PARTICIPANT REMOVAL The Board of Directors reserves the right to modify or to amend, in whole or in part, or to terminate this Plan at any time. However, no modification, amendment or termination of the Plan shall reduce the Benefit being paid to a Retiree as of the date of any such amendment or termination. In respect of any Eligible Employee, no modification or amendment shall adversely 24 affect such Eligible Employee, unless such Eligible Employee consents to such modification or amendment in writing, and, if the Plan is terminated by the Company, each Eligible Employee shall be entitled to a Benefit calculated under Article 2 above, based on such Eligible Employee's service and compensation to the date of such plan termination. Also, with respect to an Eligible Employee who is not a Retiree pursuant to Section 1.17 of the Plan, if such Eligible Employee is removed as a participant from the Plan by the Committee, then such former Eligible Employee shall have no rights to any Benefits under the Plan, but rather such former Eligible Employee shall only have those rights that are available to such former Eligible Employee under the Company's other benefit plans. 25 EX-10.14 8 EXHIBIT 10.14 THOMAS & BETTS CORPORATION RESTRICTED STOCK PLAN FOR NONEMPLOYEE DIRECTORS 1. PURPOSE AND EFFECTIVE DATE. The purpose of the Thomas & Betts Corporation Restricted Stock Plan for Nonemployee Directors (the "Plan") is to promote the Corporation's long-term interests by attracting and retaining persons of outstanding competence to serve as directors. The Plan is designed to supplement the cash retainer and meeting fees paid to Nonemployee Directors for service as such and to encourage and enable them to increase their proprietary interest in the Corporation's long-term progress and success. The Plan shall become effective upon its approval by the shareholders of the Corporation. 2. STOCK AVAILABLE FOR THE PLAN. THE stock that may be granted under the Plan is the Common Stock of the Corporation, par value $.50 per share (the "Common Stock"), not exceeding a total of 20,000 shares except as adjusted in accordance with paragraph 3 below, which may be either authorized and unissued shares or issued shares acquired by the Corporation or a combination thereof. Any restricted share awarded under this Plan which become forfeited for any reason shall not again be available for other awards under the Plan. 3. ADJUSTMENT IN THE EVENT OF CHANGE IN STOCK. In the event of any change in the number or kind of outstanding shares of Common Stock by reason of a recapitalization, merger, consolidation, dividend, combination of shares, or any other change in the corporate structure or shares of stock of the Corporation, the committee of the Board of Directors administering the Plan will make appropriate adjustments in the number of shares available for delivery pursuant to the provisions of this Plan and the number of shares to be awarded to each participant under this Plan. 4. ELIGIBILITY FOR PARTICIPATION IN THE PLAN. Any person who is elected a director of the Corporation and is not an employee of the Corporation or any subsidiary or affiliate of the Corporation ("Nonemployee Director" or "Participant") shall be a Participant in the Plan. 5. AWARDS OF RESTRICTED STOCK. Upon the effective date of this Plan, each Participant in the Plan shall receive an award of 100 restricted shares of Common Stock. Thereafter, awards consisting of 100 restricted shares of Common Stock will be made to each Participant who is elected or who continues as a director each year, effective as of the date of the Annual Meeting of Shareholders. A Nonemployee Director who is elected to fill a vacancy or a newly created directorship in the interim between Annual Meetings will receive, effective as of the date of such election, a prorated award based upon the number of full or partial months such director will serve between his or her election and the next Annual Meeting. Each award of restricted shares under this Plan shall be registered in the name of the Participant as soon as practicable, but shall be expressly subject to the restrictions, the service provisions, and the other terms and conditions set forth in Section 6 of this Plan. 6. RESTRICTIONS, REMOVAL OF RESTRICTIONS, AND TERMS AND CONDITIONS OF AWARDS OF RESTRICTED SHARES. (a) Each Participant shall have the right to receive all dividends and other distributions made with respect to restricted shares registered in his or her name and shall have the right to vote or execute proxies with respect to such registered restricted shares, unless and until such shares are forfeited pursuant to the provisions of this Plan. Possession of the certificates of restricted shares shall be retained by the Corporate Secretary or such other person designated by the committee administering the Plan, for the benefit of Participants, but subject to the restrictions of this Plan, until the provisions of the Plan relating to removal of the restrictions have been satisfied. (b) Shares of restricted stock may not be sold, assigned, pledged or otherwise transferred by the Participant unless and until all of the restrictions imposed by this Plan have been removed pursuant to the provisions of this Plan. Certificates for restricted shares shall bear an appropriate legend evidencing such limitation on disposal, and the Participant in whose name the shares are registered shall execute a stock power or other instrument of assignment endorsed in blank which will permit transfer to the Corporation of all or any portion of the shares that shall be forfeited. (c) None of the shares of restricted stock awarded under this Plan shall become free of restrictions and nonforfeitable until the termination of the Participant's service as a director of the Corporation at the earliest of the Participant's: (i) death or disability; (ii) retirement from the Board in accordance with the retirement policy adopted by the Board; (iii) failure to be re-elected after being duly nominated; or (iv) resignation with the consent of the Board. Subject to paragraph (d) below, any involuntary termination for cause effected by Board or shareholder action shall result in forfeiture of the restricted shares. (d) In the event of a "change of control" of the Corporation (as defined below) and the involuntary termination of the Participant's service as a director, except for cause, the forfeiture provisions relating to all of the affected director's restricted shares shall immediately lapse and the shares shall be released to the terminated director. For purposes of this Plan, a "change of control" of the Corporation shall mean a change of control of a nature that would be required to be reported in response to Item 1 (a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, such a "change of control" shall be deemed to have occurred if: (i) a third person, including a "group" as such term is used in Section 13(d)(3) of the Exchange Act, becomes the beneficial owner, directly or indirectly, of 25% or more of the combined voting power of the Corporation's outstanding voting securities ordinarily having the right to vote for the election of directors of the Corporation; or (ii) individuals who, as of the date hereof, constitute the Board of Directors of the Corporation (the "Board" generally and as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board. (e) Any shares of Common Stock received by a Participant as a stock dividend, or as a result of stock splits, recapitalizations, combinations, exchanges of shares, reorganizations, mergers, consolidations or otherwise which a re derived directly or indirectly from shares of restricted stock issued under this Plan shall have the same status, be subject to the same restrictions, and shall bear the same legend as the shares received pursuant to this Plan. (f) Notwithstanding any other provision of this Plan, the issuance or delivery of any shares may be postponed for such period as may be required to comply with any applicable requirements of any national securities exchange or any requirements under any other law or regulation applicable to the issuance or deliver of such shares, and the Corporation shall not be obligated to issue or deliver any such shares if the issuance or delivery thereof shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange. 7. NO RIGHT TO NOMINATION. Nothing contained in this Plan shall confer upon any director the right to be nominated for re-election to the Board. 8. ADMINISTRATION OF PLAN. The Plan will be administered by the Committee on Directors or by such other committee as may be designated by the Board of Directors (the "Committee"); provided, however, that the Committee's functions shall be essentially ministerial and limited to interpreting the provisions of the Plan. The Committee shall have no power to determine eligibility for awards, the number of shares to be awarded to each Participant, the timing of the awards, or to authorize release of restrictions on shares awarded under the Plan otherwise than as specifically set forth in this Plan. 9. AMENDMENT OR TERMINATION OF PLAN. THE Corporation reserves the right to amend, modify, suspend, or terminate this Plan at any time by action of its Board of Directors, provided that such action shall not adversely affect any Participant's fights under the provisions of this Plan with respect to awards of restricted stock which were made prior to such action, and further provided that any change in eligibility under the Plan or in the number of shares available for grant under the Plan, other than as set forth in Section 3, will be subject to the approval of the shareholders of the Corporation. Notwithstanding anything to the contrary in the immediately preceding sentence or otherwise in the Plan, Sections 3, 4, 5 and/or 6 shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. EX-12 9 EXHIBIT 12 EXHIBIT 12 THOMAS & BETTS CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS)
For The Years Ended ----------------------------------------------------------------------- January 3, December 28, December 29, December 31, January 1, 1999 1997 1996 1995 1995 ----------- ------------ ------------ ------------ ----------- Earnings from continuing operations before income taxes $ 124,908 $ 233,507 $ 106,395 $ 148,365 $ 54,576 Add: Interest on indebtedness 50,958 51,431 50,131 32,625 31,252 Amortization of debt expense 177 610 1,335 1,496 1,373 Portion of rents representative of the interest factor 10,835 11,796 11,585 10,935 9,906 Deduct: Interest capitalized and undistributed earnings from less than 50 percent owned persons (12,701) (10,380) (5,259) (2,848) (1,863) --------- --------- --------- --------- --------- Earnings as adjusted $ 174,177 $ 286,964 $ 164,187 $ 190,573 $ 95,244 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Fixed charges: Interest on indebtedness 50,958 51,431 $ 50,131 $ 32,625 $ 31,252 Amortization of debt expense 177 610 1,335 1,496 1,373 Portion of rents representative of the interest factor 10,835 11,796 11,585 10,935 9,906 --------- --------- --------- --------- --------- Total fixed charges $ 61,970 $ 63,837 $ 63,051 $ 45,056 $ 42,531 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of earnings to fixed charges 2.8x 4.5x 2.6x 4.2x 2.2x --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
EX12-1 EX-13 10 EXHIBIT 13 FINANCIAL HIGHLIGHTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES
In thousands (except per share data) 1998 1997 - ---------------------------------------------------------------------------- Net sales $2,230,351 $2,259,508 Special charges(1) $ 108,487 $ -- Net earnings (after special charges) $ 87,501 $ 162,278 Net earnings per common share: Basic $ 1.54 $ 2.89 Diluted $ 1.54 $ 2.87 Average shares outstanding: Basic 56,677 56,178 Diluted 56,990 56,551 Cash dividends declared per common share $ 1.12 $ 1.12 Shareholders' equity $1,015,105 $ 999,304 Capital expenditures $ 126,733 $ 118,926 Employees 19,330 17,829 Shareholders of record 4,374 5,051 - ----------------------------------------------------------------------------
1998 1997 ----------------------- -------- BEFORE AFTER SPECIAL SPECIAL CHARGES CHARGES - ------------------------------------------------------------------------------- Net sales (in millions) $2,230 $2,230 $2,260 Net earnings (in millions) $164.5 $ 87.5 $162.3 Earnings per share: Basic $ 2.90 $ 1.54 $ 2.89 Diluted $ 2.89 $ 1.54 $ 2.87 Return on average shareholders' equity 15.7% 8.7% 17.2% - ---------------------------------------------------------------------------------
(1) Special charges of $108.5 million pretax in 1998 consisted of restructuring costs and other charges. Excluding those charges, earnings per share would have been $2.90 basic and $2.89 diluted in 1998. Amounts have been restated to include the July 2, 1998, acquisition of Telecommunication Devices, Inc., accounted for as a pooling of interests, except cash dividends per share, which reflect the Corporation's historical per share amount. [GRAPH 1] NET SALES NET SALES DECREASED ONLY SLIGHTLY BUT WOULD ACTUALLY HAVE SHOWN AN INCREASE HAD WE NOT CONTRIBUTED CERTAIN BUSINESS LINES TO A JOINT VENTURE AT YEAR-END 1997. [GRAPH 2] NET EARNINGS NET EARNINGS BEFORE THE SPECIAL CHARGE FOR PLANT CLOSINGS AND CONSOLIDATIONS REACHED A RECORD LEVEL OF $164.5 MILLION. [GRAPH 3] DILUTED EARNINGS PER SHARE DILUTED EARNINGS PER SHARE BEFORE THE SPECIAL CHARGE MOVED TO A RECORD $2.89, SLIGHTLY HIGHER THAN THE $2.87 IN 1997. SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Dollars and shares in thousands (except per share data) 1998(a) 1997 1996(b) 1995(c) 1994(d) 1993(d) - -------------------------------------------------------------------------------------------------------------------------------- OPERATIONAL DATA Net sales $2,230,351 $2,259,508 $2,134,387 $1,876,403 $1,677,249 $1,400,516 Costs and expenses Cost of sales 1,581,215 1,567,286 1,525,121 1,339,305 1,202,930 986,153 Marketing, general and administrative 366,463 353,029 344,941 289,474 259,627 244,297 Research and development 48,690 52,977 47,482 44,083 40,543 37,176 Amortization of intangibles 17,364 17,355 15,323 11,314 12,345 13,072 Merger expense -- -- 30,558 -- -- -- Provision for restructured operations 62,096 -- 24,501 18,700 79,011 -- - -------------------------------------------------------------------------------------------------------------------------------- 2,075,828 1,990,647 1,987,926 1,702,876 1,594,456 1,280,698 - -------------------------------------------------------------------------------------------------------------------------------- Earnings from operations 154,523 268,861 146,461 173,527 82,793 119,818 Other expense net 29,615 35,354 40,066 25,162 28,218 31,393 - -------------------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before income taxes 124,908 233,507 106,395 148,365 54,575 88,425 Income taxes 37,407 71,229 32,940 41,917 12,484 24,353 - -------------------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before cumulative effect of change in accounting for income taxes 87,501 162,278 73,455 106,448 42,091 64,072 - -------------------------------------------------------------------------------------------------------------------------------- Net earnings $ 87,501 $ 162,278 $ 73,455 $ 106,448 $ 108,024 $ 77,022 - -------------------------------------------------------------------------------------------------------------------------------- Net return on sales 3.9% 7.2% 3.4% 5.7% 6.4% 5.5% Return on average shareholders equity 8.7% 17.2% 8.4% 12.7% 14.4% 11.5% FINANCIAL POSITION (AT YEAR END) Current assets $1,058,402 $ 846,472 $ 997,863 $ 786,828 $ 759,452 $ 679,215 Current liabilities $ 587,549 $ 473,234 $ 515,740 $ 422,170 $ 364,711 $ 268,201 Working capital $ 470,853 $ 373,238 $ 482,123 $ 364,658 $ 394,741 $ 411,014 Current ratio 1.80 to 1 1.79 to 1 1.93 to 1 1.86 to 1 2.08 to 1 2.53 to 1 Property, plant and equipment net $ 631,022 $ 574,052 $ 543,237 $ 475,536 $ 398,507 $ 397,507 Long-term debt $ 790,963 $ 503,077 $ 645,096 $ 353,666 $ 354,552 $ 439,299 Shareholders equity $1,015,105 $ 999,304 $ 888,647 $ 870,096 $ 808,982 $ 692,407 Total assets $2,499,587 $2,094,288 $2,175,342 $1,706,003 $1,595,312 $1,466,162 COMMON STOCK DATA Average shares outstanding Basic 56,677 56,178 54,520 53,955 52,323 51,077 Diluted 56,990 56,551 54,973 54,183 52,621 51,488 Cash dividends declared $ 66,307 $ 66,752 $ 62,112 $ 63,880 $ 50,508 $ 42,928 Percent of net earnings 76% 41% 85% 60% 47% 56% Per share Earnings from continuing operations Basic $ 1.54 $ 2.89 $ 1.35 $ 1.97 $ 0.80 $ 1.25 Diluted $ 1.54 $ 2.87 $ 1.34 $ 1.96 $ 0.80 $ 1.24 Net earnings Basic $ 1.54 $ 2.89 $ 1.35 $ 1.97 $ 2.06 $ 1.51 Diluted $ 1.54 $ 2.87 $ 1.34 $ 1.96 $ 2.05 $ 1.50 Cash dividends declared $ 1.12 $ 1.12 $ 1.12 $ 1.12 $ 1.12 $ 1.12 Shareholders equity $ 17.88 $ 17.71 $ 16.23 $ 16.08 $ 15.25 $ 13.50 Market price range $64-33 11/16 $58 11/16-41 $45 7/8-34 3/4 $37 5/8-31 3/4 $35 5/8-29 1/8 $36-28 1/2 OTHER DATA Capital expenditures $ 126,733 $ 118,926 $ 109,108 $ 132,838 $ 99,515 $ 59,860 Depreciation $ 77,969 $ 79,183 $ 77,098 $ 65,970 $ 64,192 $ 60,923 Employees at year end 19,330 17,829 15,523 13,406 12,308 12,608 - --------------------------------------------------------------------------------------------------------------------------------
Restated to include the results of Telecommunication Devices, Inc., acquired July 2, 1998, and Augat Inc., acquired December 11, 1996, and accounted for as poolings of interests, except cash dividends per share, which reflect the Corporation's historical per share amount. (a) Includes special charges of $108.5 million pretax ($1.36 basic and $1.35 diluted per share). Net sales excludes sales of businesses contributed to the Exemplar/Thomas & Betts joint venture at the end of 1997. (b) Includes special charges of $97.1 million pretax ($1.23 basic and $1.22 diluted per share). (c) Includes special charges of $23.0 million pretax ($0.29 basic and diluted per share). (d) Net earnings for 1994 and 1993 included after-tax earnings from discontinued operations (Vitramon, Inc.) of $7.4 million and $11.3 million, respectively. Net earnings in 1994 also included a pretax gain from the sale of Vitramon of $99.1 million, a pretax restructuring charge of $79.0 million and a pretax operating write-down of $10.6 million for previously vacated facilities.Those items offset each other on an after-tax basis. Net earnings in 1993 also included a positive impact from a cumulative effect of change in accounting for income taxes of $1.6 million ($0.03 basic and diluted per share). 18 MANAGEMENT'S DISCUSSION AND ANALYSIS THOMAS & BETTS CORPORATION AND SUBSIDIARIES RESULTS OF OPERATIONS Thomas & Betts Corporation (Thomas & Betts or the Corporation) recorded net sales in 1998 of $2,230.4 million. That compares with $2,259.5 million in 1997 and $2,134.4 million in 1996. Results for all three years were restated for the 1998 acquisition of Telecommunication Devices, Inc. accounted for as a pooling of interests. Four factors affect significantly the comparability of 1998 net sales with those of 1997 and 1996. First, net sales for 1998 do not include sales from businesses contributed at year-end 1997 to the Exemplar/Thomas & Betts (ET&B) joint venture. Second, in 1998, the Corporation did not have sales realized in 1996 and 1997 for a particular automotive wiring harness program due to a previously announced and anticipated discontinuation in the fall of 1997 of that auto platform by the manufacturer. Third, in both 1998 and 1997, negative foreign currency translations effectively reduced reported sales by 1.0% from the prior year. Offsetting those three factors, the Corporation completed eight acquisitions during 1998 that accounted for incremental sales year over year. Sales in 1998 would have been 1.5% above sales in 1997 in the absence of those comparability issues. Results for 1998 include the contributions of nine acquisitions, eight of which were accounted for using the purchase-accounting method. The results of those eight acquisitions are included from the date that Thomas & Betts acquired each company. Those eight acquisitions accounted for $58.8 million of 1998 sales and $0.03 of 1998's diluted EPS, and additional details follow in the discussion of Liquidity and Capital Resources. Thomas & Betts also acquired Telecommunication Devices, Inc. on July 2, 1998. That acquisition was accounted for as a pooling of interests, and its results are combined with those of Thomas & Betts for all periods presented herein. Acquisitions completed during 1998 raised the percentage of sales that Thomas & Betts realized outside the U.S. to 28.7%, compared with 1997's 24.7% and 1996's 24.4%. The Corporation has a goal of increasing its presence outside of the U.S. over the next several years in an effort to achieve a 50%-domestic, 50%-non-domestic sales mix. Net sales of $2,259.5 million for 1997 increased 5.9%, or $125.1 million from 1996. Sales growth from expanding the Corporation's existing businesses, coupled with acquisitions, accounted for the majority of the growth. The acquisition of Augat Inc. in December 1996, the largest acquisition in the Corporation's history, was accounted for as a pooling of interests and resulted in Augat's financial results being combined with those of the Corporation for all periods presented herein. The Corporation views its business in three segments that are divided along the lines of the end-user markets to which Thomas & Betts sells. The Electrical segment includes sales of a broad package of electrical connectors, components and accessories primarily fasteners, fittings, connectors, boxes and covers, metal framing, grounding and lighting to worldwide customers for use in industrial, commercial, residential and utility installations, repairs and maintenance. Those sales grew 9.8% to $1,079.8 million in 1998, following an increase of 18.8% in 1997 compared with 1996. The rate of sales growth for the Electrical segment moderated in 1998 due to softening demand from the North American industry. Also, weakening of the Canadian dollar and a summer-long construction-worker strike in Canada, where Thomas & Betts typically records about 15% of Electrical sales, dampened the growth rate. In both 1998 and 1997, volume gains accounted for over one-half of the segments growth with several product-line acquisitions and favorable pricing also contributing to the year-over-year improvements. The Electronic Original Equipment Manufacturer (OEM) segment produces and markets electronic connectors and components for use in high-speed professional electronics, mobile communications and automotive applications, all involving miniaturization, surface-mounts, electromagnetic interference and multiplexing. Reported sales of the Electronic OEM segment were $640.1 million in 1998, or 15.4% lower than 1997, following a 5.4% decrease in 1997 from 1996. At year-end 1997, Thomas & Betts contributed certain businesses to the ET&B joint venture. Sales of businesses contributed to that joint venture, included in 1997 and 1996 segment sales, were excluded from segment sales in 1998. Also, the Electronic OEM segment was credited with automotive wiring harness sales to the aforementioned discontinued auto platform in 1996 and 1997. Weaker foreign currencies negatively affected Electronic OEM sales, lowering sales by approximately 1%. In the absence of the impact of the joint-venture deconsolidation, the discontinued product lines and 19 MANAGEMENT'S DISCUSSION AND ANALYSIS THOMAS & BETTS CORPORATION AND SUBSIDIARIES negative foreign currency translations, the underlying rate of change in 1998 over 1997 was a 1.9% decrease. Volume increases in a number of product lines in 1998 were offset by anticipated declines in certain automotive-related product lines. Pricing for certain products sold to electronic OEMs declined moderately during 1998, as a result of industry overcapacity as manufacturers of computing equipment lowered inventory levels. In total, price declines lowered Electronic OEM sales by 3.0% in 1998 from 1997. During 1998, Thomas & Betts ramped up sales of products based on its innovative Metallized Particle Interconnect-TM- (MPI-TM-) technology. The MPI product line contributed $20.3 million to 1998's sales, up from $1.6 million in its introductory year of 1997. As previously discussed, at year-end 1997 Thomas & Betts contributed assets, which generated 1997 sales of approximately $86 million, to the ET&B joint venture. Under terms of the joint-venture agreement, Thomas & Betts has a 49% ownership interest in ET&B, and retains 100% interest in the income generated by the assets it contributed plus a 49% interest in income generated by jointly developed future business. The Corporation accounts for its investment in ET&B under the equity method. The establishment of the joint venture did not change segment earnings or consolidated net earnings from what they would have been if the business was fully consolidated, but did reduce net sales, costs and expenses by the amounts attributable to the contributed assets. The Communications segment manufactures and sells a package of drop-line hardware, connectors, fasteners, fiber optics, grounding and accessories, for use in cable television (CATV), telecommunications and data communications network applications. Communications sales of $261.1 million were slightly lower, by 0.4%, than in 1997. In 1997, Communications sales were $262.1 million, an increase of 3.3% over 1996. A new contract with a major CATV provider boosted sales of amplifiers to offset slacking industry demand for CATV hardware and connectors in 1998. That contract is expected to continue through 2000 and to generate $70.0 million in sales over its three-year life. Also during 1998, Thomas & Betts entered into an agreement with IBMs Advanced Connectivity Systems (ACS) Division to design and supply data communications connectors and hardware to ACS. That agreement resulted in higher sales of those products in late 1998 and is expected to contribute to segment sales growth in 1999 and beyond. Sales that cannot be classified in the aforementioned segments totaled $249.3 million in 1998, 3.1% lower than 1997, after having risen 1.5% in 1997 over 1996. The Corporation de-emphasized reliance on diminishing sales of steel structures for use as cellular telephone towers, and that move significantly contributed to the 1998 decrease. Sales of steel structures strengthened considerably during the course of 1998 as Thomas & Betts built poles and towers for traditional utility-transmission-line use and for wind-power generation projects. Unusually mild winter weather in both early and late 1998 lowered sales of heating products for the year. Expenses for 1998 include the cost of the Corporation's accelerated cost-reduction program. Pretax special charges of $108.5 million were recorded in the third quarter primarily for consolidating facilities and product-line operations, terminating employees at affected locations, downsizing administrative functions and writing down idle facilities. Those charges had a negative after-tax impact of $77.0 million, or $1.35 per share, on 1998 net earnings, and are discussed in detail in Note 4 to the financial statements. The charges were recorded as $30.3 million of cost of sales, $16.1 million of marketing, general and administrative expense and a $62.1 million provision for restructured operations. In many cases individual facilities involved in the cost-reduction effort manufacture product lines for more than one of the Corporation's reportable segments, making it impracticable to attribute special charges and associated project costs by segment. Those restructuring costs are therefore managed by facility and excluded from the measurement of segment results. The cost-reduction program is comprised primarily of: (1) projects to realign and relocate certain product-line manufacturing processes to enhance cost efficiencies; and (2) the streamlining of administrative functions. Efforts include plant closings and relocations of manufacturing lines among plants, and involve approximately 35 locations, both in the U.S. and internationally. Thomas & Betts expects that cost-reduction actions will ultimately result in a net reduction of 400 jobs. The projects comprising the entire restructuring program will be staged generally over periods that began in the third and fourth quarters of 1998, and are expected to be fully completed by the end of 1999. In 1998, Thomas & Betts incurred $6.2 million of project expenses, which were not accruable as part of the 1998 special 20 MANAGEMENT'S DISCUSSION AND ANALYSIS THOMAS & BETTS CORPORATION AND SUBSIDIARIES charges, as it began implementing those cost-reduction plans. Those project expenses included primarily equipment and personnel relocation costs. The Corporation expects that project expenses over the life of the program will total $33.8 million. In addition to project expenses, the Corporation anticipates related capital spending of $29.1 million over the life of the cost-reduction program, $5.4 million of which was expended in 1998. Actions implemented in 1998 saved Thomas & Betts $7.2 million in the year. The Corporation anticipates a net pretax benefit from the cost-reduction program in 1999 of $26.0 million, and that figure is expected to grow to $67.0 million in 2000. The Corporation expects the cumulative cash outflows of the cost-reduction plans, less cash savings captured by the plans, to reach approximately $21 million by the end of the second quarter of 1999. After that time, the cost-reduction plans are expected to generate positive cash flow. In 1996, the Corporation recorded $97.1 million in special charges, related primarily to the acquisition and assimilation of Augat. (See Note 4 to the financial statements.) Included in those charges were merger expenses, resulting from legal and financial-advisory fees and change-of-control payments, and provisions for restructured operations related to the integration of Augat and initiatives to optimize operations and improve future profitability. The consolidated gross margin, excluding the $30.3 million portion of the special charges, was 30.5% in 1998. That compares with 30.6% and 29.3% in 1997 and 1996, respectively, if special charges of $16.2 million are excluded from the 1996 calculation. Including special charges in the respective years, the 1998 gross margin was 29.1% and the 1996 gross margin was 28.5%. The 1998 gross margin reflected lower commodity costs and savings from previous restructuring and cost-reduction efforts. Marketing, general and administrative (MG&A) expense before special charges of $16.1 million represented 15.7% of sales in 1998. That compares with 15.6% and 15.1% of sales in 1997 and 1996, respectively, if special charges of $22.1 million are excluded from 1996. The slight increase in MG&A expense as a percent of sales in 1998 was due to somewhat higher shipping and warehousing expense. The Corporation spent 2.2% of sales on research and development (R&D) during 1998 versus 2.3% in 1997 and 2.2% in 1996. Most R&D activity took place in the Electronic OEM and Communications segments with efforts in 1998 focused on MPI; a new battery pack technology, lithium-polymer ion; and fiber-optic components. Amortization expense rose in both years due to additional amortization of goodwill related to acquisitions. Earnings from operations excluding special charges were $263.0 million in 1998, 2.2% lower than 1997's $268.9 million. Some businesses that were consolidated in 1996 and 1997 were contributed to the ET&B joint venture at year-end 1997, and earnings associated with those businesses were classified as earnings from unconsolidated companies in 1998. Income from unconsolidated companies includes equity income from the Corporation's joint ventures and other equity investments. Those include the ET&B joint venture, the investment in Leviton Manufacturing Co. and the Elastimold offshore joint ventures. Income from unconsolidated companies for 1998 rose $12.3 million from 1997's level, to $26.2 million, due primarily to the new ET&B joint venture. Other expense-net includes interest expense, loss on sales of accounts receivable, foreign-currency losses and index-put options partially offset by investment income and foreign-exchange contract gains. Other expense-net increased in 1998 from 1997's level due primarily to a full year's losses on sales of accounts receivable under the Corporation's asset-securitization program, which was initiated in December 1997. Other expense-net in 1997 was higher than in 1996 due to the absence of the cost of index-put options related to the Augat merger offset by greater interest expense resulting from higher average debt levels. The effective income tax rate for 1998 of 29.9% was 0.6 percentage points below the rate for 1997 and 1.1 percentage points lower than the 1996 rate. The higher 1996 rate was due to non-deductible merger-related special charges associated with the Augat acquisition. Thomas & Betts has been able to maintain a tax rate below the statutory rate because of tax benefits derived from operations in Puerto Rico and other proactive tax-saving initiatives. In the absence of special charges, Thomas & Betts had record net earnings of $164.5 million, or $2.89 per share on a diluted basis, versus its 1997 performance of $162.3 million, or $2.87 per share, and 1996's earnings of $139.1 million, or $2.53 per share, before the effect of 1996's special charges. Including special charges, the Corporation had net earnings of $87.5 million, or $1.54 per share 21 MANAGEMENT'S DISCUSSION AND ANALYSIS THOMAS & BETTS CORPORATION AND SUBSIDIARIES on a diluted basis, in 1998, and net earnings of $73.5 million, or $1.34 per share on a diluted basis, in 1996. Comparing year-to-year results, excluding the impact of special charges in all years, 1998 net earnings were 1.4% higher than 1997's earnings, which were 16.7% above those in 1996. The Corporation evaluates its business segments on the basis of segment earnings, with segment earnings defined as earnings before interest, taxes, restructure and special charges and certain other expenses. Earnings of the Electrical segment rose 8.0% in 1998 over 1997 and 30.4% in 1997 over 1996, due to higher sales volumes overall and higher growth in sales to commercial customers than to the more profitable industrial markets. Earnings from the Electronic OEM segment were 5.6% lower in 1998 than in 1997 and declined 0.5% in 1997 from 1996, reflecting lower sales but improved margins within the segment. Communications earnings decreased 26.5% from 1997 and were 0.2% lower in 1997 compared with 1996, as the mix of product sold in 1998 favored lower-margin product. Earnings related to all other sales rose 14.9% in 1998 versus 1997, compared with a 3.6% increase in 1997 versus 1996, as a result of enhancements made in the manufacturing processes for steel structures and unit heaters. LIQUIDITY AND FINANCIAL RESOURCES Cash provided by operating activities decreased in 1998 due to increased investment in working capital. The year-over-year increase in accounts receivable was primarily due to the acquisition of Kaufel Group Ltd. in late 1998 and to information and financial systems conversions. In December 1997, the Corporation initiated a program to sell accounts receivable under an asset-securitization program. The commencement of that program provided an increase in cash of $145.2 million in 1997. Purchases of property, plant and equipment of $126.7 million in 1998 increased 6.6% from 1997's level. Spending in 1997 of $118.9 million was up 9.0% from 1996. Projects in 1998, as well as 1997, included restructuring-related spending to consolidate the operations of recent acquisitions, expansion of production capabilities,efficiency-related improvements and new systems software. Projects in 1996 included completion of the Corporation's central distribution center, continued expansion of Mexican operations and restructuring-related spending at Augat. Thomas & Betts makes selective acquisitions to broaden its business worldwide. The Corporation currently is evaluating several acquisition possibilities and expects to do so from time to time in the future. The Corporation may finance any such acquisitions that it consummates through the issuance of private or public debt or equity, internally generated funds or a combination of those sources. In January 1999, Thomas & Betts announced a proposed stock-for-stock merger with AFC Cable Systems, Inc. (AFC). AFC is a leading manufacturer and innovative marketer of cost-saving and labor-saving electrical and communications products and systems for commercial and industrial buildings, including armored cable, modular wiring systems and other electrical products and devices used for transmitting power, voice and data. That transaction is subject to approval by shareholders of both companies and is expected to be completed within the first half of 1999. Thomas & Betts completed nine acquisitions during 1998 for approximately $168 million of cash, 1,461,000 shares of the Corporation's common stock and $99 million of assumed debt. Those acquisitions and the product lines acquired were: (1) in March, Pride Product Services, Inc., fiber protection sleeves and other fiber-optic consumables for telecommunications applications; (2) in May, U.K.-based W.J. Furse & Co., Limited, grounding and lightning protection systems, spring steel fasteners and electronic surge protection devices; (3) also in May, HitLock connectors product line for non-metallic sheathed cable; (4) also in May, 700 and 709 IDC connector product lines from Lucent Technologies; (5) in June, Dark to Light, Inc., electronic photo controls used in lighting products; (6) in July, Telecommunication Devices, Inc. (TDI), mobile communications battery packs; (7) also in July, Emery Fixtures, Inc., decorative light fixtures and poles; (8) in September, CATV trap and filter manufacturing assets of Pico Products, Inc.; and (9) in November, Kaufel Group Ltd., emergency lighting products. All acquisitions, with the exception of TDI, were accounted for using the purchase method, and in aggregate, gave rise to $64.5 million of goodwill. Thomas & Betts completed six acquisitions during 1997 for approximately $19 million of cash, 793,560 shares of the Corporation's common stock and $16 million of assumed debt. The largest of those was the July acquisition of Diamond Communications Products, Inc., a manufacturer of drop hardware for the worldwide communications industry. The six acquisitions completed in 1997 represented $57.6 million of that year's sales. 22 MANAGEMENT'S DISCUSSION AND ANALYSIS THOMAS & BETTS CORPORATION AND SUBSIDIARIES Thomas & Betts closed eight acquisitions in 1996, the two largest of which were Augat and Amerace Corporation. In December 1996, the Corporation exchanged approximately 12.8 million shares of common stock for all of the outstanding common stock of Augat in a transaction valued at approximately $570 million. In January 1996, the Corporation acquired all the outstanding stock of Amerace for $213.0 million in cash. Total debt increased $342.9 million in 1998 from 1997's level, reflecting debt issued and assumed for the November acquisition of Kaufel and for other acquisitions, and to fund increases in working capital. Debt declined $168.5 million in 1997 from 1996's level, reflecting the application of cash generated from operations and proceeds from the sale of accounts receivable. Thomas & Betts maintains a commercial paper program, which is backed by $500.0 million of revolving-credit agreements. At year-end 1998, $135.0 million of commercial paper was outstanding. Management believes that its external financial resources and internally generated funds are sufficient to meet the Corporation's capital needs for the foreseeable future. Cash and marketable securities increased $8.9 million in 1998. Thomas & Betts maintains a portfolio of marketable securities and cash equivalents in Puerto Rico, which at year-end 1998 was valued at $49.3 million. Although those investments represent currently available funds, they remain invested until the Corporation can repatriate the investments free of tollgate tax. YEAR-2000 READINESS PROGRAM Thomas & Betts is actively engaged in a corporate-wide program to ensure its systems and products are Year-2000 compliant. The Year-2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. As a result, computer programs that have time-sensitive software are at risk to recognize a date using 00 as the year 1900 rather than the year 2000. Thomas & Betts is taking steps that it believes will ensure no disruption to its operations. In 1997, the Corporation began a worldwide-technology upgrade of its order-entry and financial-reporting computer systems. As part of that project, Thomas & Betts has completed an assessment of its Year-2000 issue and is modifying or replacing portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. Thomas & Betts plan to resolve the Year-2000 issue involves four phases: assessment, remediation, testing and implementation. As of year-end 1998, Thomas & Betts had completed its assessment of all significant computer systems that could be affected by the Year-2000 issue. The assessment indicated that many of the Corporation's important information technology systems could be affected, and that software used in certain manufacturing equipment was at risk. Thomas & Betts is currently in the process of correcting those systems and manufacturing equipment that present a risk. At year end, Thomas & Betts had completed 78% of the remediation phase for all corporate replacement systems, and expects to complete software programming and replacement no later than July 1, 1999. After completing the reprogramming and replacement of software, the Corporation's plans call for testing and implementing its information technology systems. Thomas & Betts had completed 72% of testing of its project to replace corporate systems and to remediate plant systems and had implemented 65% of its remediated plant systems by year-end 1998. The Corporation expects to complete the testing phase by July 1, 1999, with all remediated systems fully implemented by September 1, 1999. With respect to operating equipment, Thomas & Betts had completed an assessment of equipment that could be affected by the Year-2000 issue, had completed 80% of the remediation phase and had completed 60% of the testing of that equipment at year-end 1998. Once testing is completed, the operating equipment will be ready for immediate use. Thomas & Betts expects to complete its equipment remediation efforts by July 1, 1999, and testing and implementing of all affected equipment by September 1, 1999. Thomas & Betts has surveyed its important suppliers, vendors and customers, either by mail or telephone, to assess their Year-2000 readiness. To date, the Corporation is not aware of any problems within those groups that would materially affect results of Thomas & Betts operations. The Corporation is utilizing both internal and external resources to reprogram or replace, test and implement the software and operating equipment for Year-2000 modifications. As part of the previously mentioned worldwide-technology upgrade that began in 1997, the Corporation has been and is installing new systems with greatly enhanced functionality that will also solve potential Year-2000 problems in those areas. Management anticipates that 23 MANAGEMENT'S DISCUSSION AND ANALYSIS THOMAS & BETTS CORPORATION AND SUBSIDIARIES its costs to modify existing software for Year-2000 compliance will approximate $2 million, and to date, Thomas & Betts has spent approximately 50% of that amount on Year-2000 issues. Thomas & Bett's plans to complete Year-2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. Estimates of the status of completion and the expected completion dates are based on hours expended to date compared to total expected hours. However, there can be no guarantee that those estimates will be achieved, and actual results could differ materially from those anticipated. Specific factors that might cause material differences include, but are not limited to, the availability and cost of personnel training in this area, and the ability to locate and correct all relevant computer codes and similar uncertainties. The Corporation has contingency plans to address situations that may result if the Corporation is unable to achieve Year-2000 readiness of its critical operating systems. Those contingency plans cover the critical order processing and distribution systems, as well as plant operating systems. A majority of those plans involve redundant systems. For example, the Corporation is remediating existing systems in parallel with development of Year-2000 compliant replacement systems for order processing and distribution. In the event that the Corporation's actions to correct potential Year-2000 issues are incomplete and its contingency plans fail, the incorrect recognition of the year 2000 by time-sensitive software could result in a system failure or miscalculations causing disruptions of operations including, among other things, a temporary inability to process orders, prepare invoices or engage in normal business activities. The Corporation expects that any such disruption would be temporary and likely not material, as any previously undetected root cause for such disruption could likely be identified and fixed in a relatively short period of time. However, if both the Corporation's Year-2000 solution and contingency plans fail for a critical system for a prolonged period, the impact on the Corporation would be material. Despite assurances from outside parties of their timely readiness, the Corporation cannot ensure that its suppliers, vendors and customers will resolve all Year-2000 issues. Given the responses to date from its suppliers, vendors and customers, Thomas & Betts believes it is unlikely that a large number of them will experience significant problems due to unresolved Year-2000 issues. Should such an event occur, the Corporation can adjust its order processing cycle to accommodate manual orders from its customers while those third parties resolve outstanding issues. Consequently, the failure by some parties to complete their Year-2000 readiness process would not likely have a material impact on the Corporation. In the event that a large number of customers suffer Year-2000 compliance issues over a prolonged period, the impact on the Corporation would be material. MARKET RISK AND FINANCIAL INSTRUMENTS Thomas & Betts is exposed to market risk from changes in foreign-exchange rates, raw material commodity prices and interest rates. The Corporation may enter into various hedging transactions to reduce those risks and allow management to focus on core business issues and challenges. The Corporation does not enter into foreign-currency or interest-rate transactions or commodity-price contracts for speculative purposes. Thomas & Betts primarily enters into forward-exchange contracts to reduce the impact on earnings and cash flow from non-functional currency-denominated assets, liabilities and transactions, predominantly inter-company and third-party receivables and payables. Gains and losses resulting from hedging instruments offset the losses and gains on the underlying assets, liabilities and transactions being hedged. The Corporation's forward-exchange contracts generally have maturity dates of less than 90 days, and a high correlation is maintained between the hedges and the underlying assets, liabilities or transactions to minimize currency risk. In most cases, both the exposed transactions and the hedging contracts are marked to market monthly with gains and losses included in earnings as other income or expense. Assuming a hypothetical 10% adverse change in all foreign currencies, with the resulting functional currency gains and losses translated into U.S. dollars at the spot rate, the loss in fair value of exchange contracts held on January 3, 1999, would be $6.0 million. Those losses would be offset by gains on the underlying assets, liabilities and transactions being hedged. 24 MANAGEMENT'S DISCUSSION AND ANALYSIS THOMAS & BETTS CORPORATION AND SUBSIDIARIES Thomas & Betts will occasionally enter into interest-rate swaps to reduce the impact of changes in interest rates on portions of its floating-rate debt. During 1998, there were no interest-rate swaps outstanding. As of January 3, 1999, the fair value of the Corporation's long-term debt, estimated using quoted market prices or discounted future cash flows based on the Corporation's current incremental borrowing rates for similar types of borrowing arrangements, was $832.6 million. That fair value exceeded the carrying value of debt at January 3, 1999, by $19.0 million. Market risk is estimated as the potential change in fair value resulting from a hypothetical one-percentage-point decrease in interest rates, and amounted to $28.2 million at January 3, 1999. Thomas & Betts is exposed to risk from fluctuation in prices for commodities used to manufacture its products, primarily copper, zinc, aluminum, gold and silver. Some of that risk is hedged through the use of futures and swap contracts that fix the price the Corporation will pay for the commodity. The use of such commodity contracts effectively protects Thomas & Betts against changes in the price of the commodity to the extent of the notional amount under the contract. Since the maturities of those contracts are highly correlated with the actual purchases of the commodities, the reported cost of sales amounts reflect the commodities costs, including the effects of commodity hedges. As of January 3, 1999, the net unrealized loss on all commodity contracts held was $3.2 million. A hypothetical 10% decrease in all commodity market prices would result in an additional unrealized loss of $2.5 million. The Corporation would normally record only those losses at the time Thomas & Betts actually purchased the commodity, and the loss would be reported as part of cost of sales. NEW ACCOUNTING STATEMENTS In 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 133 will require the recognition at fair value of all derivatives as either assets or liabilities in the Consolidated Balance Sheet. Under certain conditions, a derivative can be designated as a hedge allowing the deferral of fair value gains or losses until the offsetting gains or losses on the hedged item are recognized. At times Thomas & Betts enters into derivative instruments to hedge risks associated with foreign-currency and commodity fluctuations. Statement No. 133 is effective for the first quarter of 2000. Although the Corporation has not completed its final evaluation of the effects of the new statement, it does not currently believe that adoption will have a material effect on its future results of operations or financial position. ENVIRONMENTAL MATTERS Thomas & Betts is committed to complying with all applicable laws and to pursuing actions and practices that promote a safer, healthier environment. The Corporation expended approximately $2 million, $3 million and $2 million for environmental remediation and corrective matters for the years 1998, 1997 and 1996, respectively, with payments for Superfund-related matters being less than $0.7 million in any year. EURO CONVERSION On January 1, 1999, 11 of the 15 member countries of the European Union established fixed-conversion rates between their existing sovereign currencies and the euro, and began a three and one-half year effort to fully adopt the euro as their common legal currency. Thomas & Betts is assessing the potential impact to the Company that may result from the euro conversion. In addition to tax and accounting considerations, the Corporation is assessing the potential impact from the euro conversion in a number of areas, including: (1) the technical challenges to adapt information technology and other systems to accommodate euro-denominated transactions; (2) the competitive impact of cross-border price transparency, which may make it more difficult for businesses to charge different prices for the same products on a country-by-country basis; (3) the impact on currency exchange costs and currency exchange-rate risks; and (4) the impact on existing contracts. Thomas & Betts cannot yet predict the anticipated impact of the euro conversion on its operations. 25 CONSOLIDATED STATEMENTS OF EARNINGS THOMAS & BETTS CORPORATION AND SUBSIDIARIES
In thousands (except per share data) 1998 1997 1996 - ----------------------------------------------------------------------------------- Net Sales $2,230,351 $2,259,508 $2,134,387 Costs and Expenses Cost of sales 1,581,215 1,567,286 1,525,121 Marketing, general and administrative 366,463 353,029 344,941 Research and development 48,690 52,977 47,482 Amortization of intangibles 17,364 17,355 15,323 Merger expense -- -- 30,558 Provision for restructured operations 62,096 -- 24,501 - ---------------------------------------------------------------------------------- 2,075,828 1,990,647 1,987,926 - ---------------------------------------------------------------------------------- Earnings from operations 154,523 268,861 146,461 Income from unconsolidated companies 26,172 13,909 7,920 Other expense -- net 55,787 49,263 47,986 - ---------------------------------------------------------------------------------- Earnings before income taxes 124,908 233,507 106,395 Income taxes 37,407 71,229 32,940 - ---------------------------------------------------------------------------------- Net Earnings $ 87,501 $ 162,278 $ 73,455 - ---------------------------------------------------------------------------------- Net Earnings Per Common Share: Basic $ 1.54 $ 2.89 $ 1.35 Diluted $ 1.54 $ 2.87 $ 1.34 Average shares outstanding: Basic 56,677 56,178 54,520 Diluted 56,990 56,551 54,973 Cash dividends declared per share $ 1.12 $ 1.12 $ 1.12
Amounts have been restated to include the July 2, 1998, acquisition of Telecommunication Devices, Inc., accounted for as a pooling of interests, except for cash dividends per share, which reflect the Corporation's historical per share amount. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 26 CONSOLIDATED BALANCE SHEETS THOMAS & BETTS CORPORATION AND SUBSIDIARIES
JANUARY 3, December 28, In thousands 1999 1997 - -------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 64,028 $ 45,225 Marketable securities 42,478 52,382 Receivables -- net 404,784 293,722 Inventories 469,641 402,601 Deferred income taxes 61,829 43,452 Prepaid expenses 15,642 9,090 - -------------------------------------------------------------------------- Total Current Assets 1,058,402 846,472 Property, Plant and Equipment Land 22,309 21,670 Buildings 232,380 219,832 Machinery and equipment 908,253 840,807 - -------------------------------------------------------------------------- 1,162,942 1,082,309 Less accumulated depreciation 531,920 508,257 - -------------------------------------------------------------------------- 631,022 574,052 Intangible assets -- net 621,487 506,225 Investments in unconsolidated companies 142,251 127,706 Other assets 46,425 39,833 - -------------------------------------------------------------------------- Total Assets $2,499,587 $2,094,288 - -------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable $ 75,068 $ 37,383 Current maturities of long-term debt 22,589 5,256 Accounts payable 262,483 226,542 Accrued liabilities 155,815 142,974 Income taxes 55,674 45,678 Dividends payable 15,920 15,401 - -------------------------------------------------------------------------- Total Current Liabilities 587,549 473,234 Long-Term Liabilities Long-term debt 790,963 503,077 Other long-term liabilities 93,788 92,206 Deferred income taxes 12,182 26,467 Shareholders' Equity Common stock 5,678 317,143 Additional paid-in capital 322,018 -- Retained earnings 710,474 689,280 Unearned compensation -- restricted stock (4,534) (4,921) Accumulated other comprehensive income (18,531) (2,198) - -------------------------------------------------------------------------- Total Shareholders' Equity 1,015,105 999,304 - -------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $2,499,587 $2,094,288 - --------------------------------------------------------------------------
Amounts have been restated to include the July 2, 1998, acquisition of Telecommunication Devices, Inc., accounted for as a pooling of interests. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 27 CONSOLIDATED STATEMENTS OF CASH FLOWS THOMAS & BETTS CORPORATION AND SUBSIDIARIES
In thousands 1998 1997 1996 - ------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net earnings $ 87,501 $ 162,278 $ 73,455 Adjustments: Depreciation and amortization 95,333 96,538 92,421 Provision for restructured operations 62,096 - 24,501 Accrued merger and other special charges 46,393 - 51,145 Undistributed earnings from unconsolidated companies (13,204) (11,278) (4,217) Deferred income taxes (26,139) 19,771 (26,728) Changes in operating assets and liabilities, net: Receivables (60,145) 77,817 (65,781) Inventories (50,477) (25,687) (29,844) Accounts payable (11,677) 23,260 26,151 Accrued liabilities (38,487) (60,198) (30,556) Income taxes payable 6,694 9,144 20,278 Other (9,459) 77 4,559 - ------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 88,429 291,722 135,384 - ------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Purchases of and investments in businesses (169,349) (19,326) (256,390) Purchases of property, plant and equipment (126,733) (118,926) (109,108) Proceeds from sale of property, plant and equipment 5,337 6,098 37,535 Marketable securities acquired (36,781) (81,365) (26,636) Proceeds from matured marketable securities 48,816 64,807 51,387 Other - (1,000) - - ------------------------------------------------------------------------------------------------------- Net cash used in investing activities (280,710) (149,712) (303,212) - ------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Increase (decrease) in borrowings with original maturities less than 90 days 22,602 432 (16,637) Proceeds from long-term debt and other borrowings 256,560 170,730 386,437 Repayment of long-term debt and other borrowings (11,148) (354,394) (95,137) Stock options exercised 10,553 25,945 12,812 Cash dividends paid (65,788) (62,648) (62,005) - ------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 212,779 (219,935) 225,470 Effect of exchange-rate changes on cash (1,695) (4,030) (6,805) - ------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 18,803 (81,955) 50,837 Cash and cash equivalents - beginning of year 45,225 127,180 76,343 - ------------------------------------------------------------------------------------------------------- Cash and cash equivalents - end of year $ 64,028 $ 45,225 $ 127,180 - ------------------------------------------------------------------------------------------------------- Cash payments for interest $ 46,600 $ 55,088 $ 38,078 Cash payments for income taxes $ 46,050 $ 42,552 $ 31,408
Except for cash dividends, amounts have been restated to include the July 2, 1998, acquisition of Telecommunication Devices, Inc., accounted for as a pooling of interests. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 28 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Accumulated Common Stock Other ------------------ Paid-In Retained Restricted Comprehensive Comprehensive In thousands Shares Amount Capital Earnings Stock Income Income Total - -------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 54,119 $266,648 $ - $579,535 $ (478) $ 24,440 $ - $ 870,145 - -------------------------------------------------------------------------------------------------------------------------------- Net earnings - - - 73,455 - - 73,455 73,455 Other comprehensive income: Unrealized gain on securities net of taxes of $7 - - - - - - 15 15 Cumulative translation adjustment - - - - - - (8,626) (8,626) Minimum pension liability adjustment - - - - - - 646 646 - -------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income - - - - - (7,965) (7,965) - - -------------------------------------------------------------------------------------------------------------------------------- Comprehensive income - - - - - - 65,490 - - -------------------------------------------------------------------------------------------------------------------------------- Dividends declared - - - (62,112) - - - (62,112) Business acquisitions and investments 58 1,949 - (39) - - - 1,910 Change in subsidiaries year end - - - (1,516) - - - (1,516) Stock options and incentive awards 587 16,263 - - - - - 16,263 Unearned compensation - - - - (1,533) - - (1,533) - -------------------------------------------------------------------------------------------------------------------------------- Balance at December 29, 1996 54,764 284,860 - 589,323 (2,011) 16,475 - 888,647 - -------------------------------------------------------------------------------------------------------------------------------- Net earnings - - - 162,278 - - 162,278 162,278 Other comprehensive income: Unrealized gain on securities net of taxes of $30 - - - - - - (87) (87) Cumulative translation adjustment - - - - - - (18,586) (18,586) - -------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income - - - - - (18,673) (18,673) - - -------------------------------------------------------------------------------------------------------------------------------- Comprehensive income - - - - - - 143,605 - - -------------------------------------------------------------------------------------------------------------------------------- Dividend declared - - - (66,752) - - - (66,752) Business acquisitions and investments 62 3,610 - - - - - 3,610 Stock options and incentive awards 910 25,945 - - - - - 25,945 Unearned compensation - - - - (2,910) - - (2,910) Immaterial poolings of interest 731 2,728 - 4,431 - - - 7,159 - -------------------------------------------------------------------------------------------------------------------------------- Balance at December 28, 1997 56,467 317,143 - 689,280 (4,921) (2,198) - 999,304 - -------------------------------------------------------------------------------------------------------------------------------- NET EARNINGS - - - 87,501 - - 87,501 87,501 OTHER COMPREHENSIVE INCOME: UNREALIZED GAIN ON SECURITIES NET OF TAXES OF $67 - - - - - - 198 198 CUMULATIVE TRANSLATION ADJUSTMENT - - - - - - (16,531) (16,531) - -------------------------------------------------------------------------------------------------------------------------------- OTHER COMPREHENSIVE INCOME - - - - - (16,333) (16,333) - - -------------------------------------------------------------------------------------------------------------------------------- COMPREHENSIVE INCOME - - - - - - 71,168 - - -------------------------------------------------------------------------------------------------------------------------------- STOCK CONVERTED TO $0.10 PAR VALUE - (311,497) 311,497 - - - - - DIVIDENDS DECLARED - - - (66,307) - - - (66,307) STOCK OPTIONS AND INCENTIVE AWARDS 307 31 10,522 - - - - 10,553 UNEARNED COMPENSATION - - - - 387 - - 387 - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 3, 1999 56,774 $ 5,677 $322,019 $710,474 $(4,534) $(18,531) $ - $1,015,105 - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
Amounts have been restated to include the July 2, 1998, acquisition of Telecommunication Devices, inc., accounted for as a pooling interests. Preferred Stock: Authorized 1,000,000 shares, par value $0.10 per share. None issued to date, but 300,000 shares are reserved for the Corporation's Shareholders' Rights Plan. Common Stock: Authorized 250,000,000 shares, par value $0.10 per share. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES 1. NATURE OF OPERATIONS Thomas & Betts Corporation (Thomas & Betts or the Corporation) is a leading manufacturer of connectors and components for worldwide electrical and electronics markets. With international headquarters in Memphis, Tennessee, Thomas & Betts operates 163 manufacturing and distribution facilities around the globe in 24 countries. Thomas & Betts designs, manufactures and sells components used in assembling, maintaining or repairing electrical, electronic and communications systems. The Corporation's products include: (1) electrical components and accessories for industrial, commercial, utility and residential construction, renovation and maintenance applications and for applications within other companies products, primarily in North America, but also in Europe and other areas of the world; (2) electromechanical components, connectors and subsystems for use in high-speed applications involving miniaturization, surface-mounts, electromagnetic interference and multiplexing that are sold to the information processing, mobile communications and automotive industries in North America, Europe and Asia for use within other manufacturers products; (3) electromechanical components, subsystems and accessories used to maintain, construct and repair cable television, telecommunications and data communications networks worldwide; (4) transmission poles and towers primarily for North American customers; and (5) heating units and accessories for North American and European markets. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Corporation and its domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Corporation uses the equity method of accounting for its investments in 20-to-50-percent-owned companies. Under generally accepted accounting principles (GAAP), there is a presumption that the equity method should be used to account for those investments. If the Corporation were to determine that it no longer had the ability to exercise significant influence over the operating and financial policies of those companies, GAAP would require the Corporation to use the cost method rather than the equity method to account for those investments. The Corporation regularly monitors its relationships with those companies. Use of Estimates The preparation of financial statements in conformity with 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 reporting period. Actual results could differ from those estimates. Fiscal Year The Corporation's fiscal year ends on the Sunday closest to the end of the calendar year. Results for 1998 are for the 53 weeks ended January 3, 1999, and results for 1997 and 1996 are for the 52 weeks ended December 28, 1997, and December 29, 1996, respectively. In 1996, the Corporation's Augat subsidiary changed the fiscal year of its European and Far Eastern subsidiaries from November 30 to the Corporation's fiscal year end, thus eliminating a one-month reporting lag. That change resulted in a charge against retained earnings of $1.5 million in 1996. Financial Instruments and Concentrations of Credit Risk When deemed appropriate, the Corporation enters into forward-foreign- exchange contracts to hedge foreign-currency-transaction exposures for periods consistent with those committed exposures. Those financial instruments are with major financial institutions and expose the Corporation to market and credit risks and may at times be concentrated with certain counterparties. The creditworthiness of counterparties is subject to continuing review and full performance by those counterparties is anticipated. Foreign-exchange contracts generally have maturities which do not exceed one year. The Corporation maintains a high correlation between the transactions and the hedges to minimize currency risk. In most cases, both the exposed transactions and the hedging contracts are marked to market monthly with gains and losses included in earnings as other income or expense. Gains and losses on certain contracts that hedge specific foreign-currency-denominated commitments are deferred and recognized in the period in which the transaction is completed. Unrealized gains are reported as prepaid expenses and unrealized losses are reported as accrued liabilities. As of January 3, 1999, and December 28, 1997, the Corporation had outstanding forward contracts of $60.5 million and $22.5 million, respectively, for the sale or purchase of principally Canadian, Japanese and European currencies, all maturing within 160 days. Deferred contract gains and losses at January 3, 1999, and December 28, 1997, were not significant. 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES The Corporation is exposed to risk from fluctuating prices for commodities used to manufacture its products: primarily copper, zinc, aluminum, gold and silver. Some of that risk is hedged through the use of futures and swap contracts that fix the price the Corporation will pay for the commodity. Cost of sales reflects the commodity cost including the effects of the commodity hedge. As of January 3, 1999, the Corporation had $27.6 million of those contracts outstanding, maturing through June 2000. The maturity of the contracts highly correlates with the actual purchases of the commodity. The amounts paid or received are calculated based on the notional amounts under the contracts. The use of such commodity contracts effectively protects the Corporation against changes in the price of the commodity to the extent of the notional amount under the contract. The fair value of commodity contracts as of January 3, 1999, was a $3.2 million loss. That value will change as commodity prices change and will be recorded only at the time the underlying commodity is actually purchased. Credit risk with respect to trade receivables is limited due to the large number of customers comprising the Corporation's customer base and their dispersion across many different industries and geographic areas. The Corporation will, on occasion, enter into interest-rate swaps to reduce the impact of changes in interest rates on portions of its floating-rate debt. The rate differential paid or received under those agreements is accrued monthly, consistent with the terms of the agreements and market interest rates. Those agreements are with financial institutions having at least a single-A credit rating, which minimizes non-performance risk. As of January 3, 1999, the Corporation had no outstanding interest-rate swaps. Receivables Receivables are stated net of allowance for doubtful accounts and returns and allowances of $23.6 million at January 3, 1999, and $20.5 million at December 28, 1997. The Corporation has an asset securitization program which permits the Corporation to continually sell accounts receivable to a maximum purchasers' investment of $175.0 million. The investment varies, based on the level of eligible accounts receivable and restrictions on concentrations of receivables. Sales under that program are accounted for as sales of assets under the provisions of Statement of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The sold accounts receivable are reflected as reductions of the receivable balance in the accompanying consolidated balance sheets. At January 3, 1999, and December 28, 1997, net receivables amounting to $172.5 million and $145.2 million, respectively, had been sold under that program. The discount rate on the receivables sold in December 1998 was approximately 5.6%. Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for approximately 79% of the Corporation's inventories and the first-in, first-out (FIFO) method for the remainder of inventories. The LIFO value of inventories held at January 3, 1999, approximated their current cost. Property, Plant and Equipment Property, plant and equipment are stated at cost. Expenditures for maintenance and repair are charged to expense as incurred. Significant renewals and betterments that 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 10 to 25 years for land improvements, five to 45 years for buildings, and three to 15 years for machinery and equipment. Intangible Assets Intangible assets consist principally of the excess of cost over the fair value of net assets (goodwill) acquired in business combinations accounted for as purchases. Those assets are being amortized on a straight-line basis over various periods not exceeding 40 years. Goodwill is reevaluated when business events and circumstances indicate that the carrying amount may not be recoverable. Reevaluation is based on projections of related undiscounted future cash flows. As of January 3, 1999, and December 28, 1997, accumulated amortization of intangible assets was $115.8 and $106.9 million, respectively. Income Taxes The Corporation uses the asset and liability method of accounting for income taxes. That method recognizes the expected future tax consequences of temporary differences between the book and tax bases of assets and liabilities, and provides a valuation allowance based on a more-likely-than-not standard. Undistributed earnings of foreign subsidiaries amounted to $145.9 million at January 3, 1999. Those earnings are considered to be indefinitely reinvested, and, accordingly, no provision for U.S. federal or state income taxes has been provided thereon. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES Shareholders' Equity In May 1998, the Corporation's number of authorized shares of common stock was increased from 80,000,000 to 250,000,000; authorized preferred stock shares were increased from 500,000 to 1,000,000; and both common stock and preferred stock par value were changed from no par value to $0.10 par value. The accumulated other comprehensive income component of shareholders' equity is primarily cumulative translation adjustment. Basic earnings per share are computed by dividing net earnings by the weighted-average number of shares of common stock outstanding during the year. 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 dilutive effect of the assumed exercise of stock options using the treasury stock method. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:
In thousands (except per share data) 1998 1997 1996 - ---------------------------------------------------------------------------- Net earnings $87,501 $162,278 $73,455 - ---------------------------------------------------------------------------- Basic Average shares outstanding 56,677 56,178 54,520 Basic earnings per share $ 1.54 $ 2.89 $ 1.35 Diluted Average shares outstanding 56,677 56,178 54,520 Plus additional shares from the assumed exercise of stock options 313 373 453 - ---------------------------------------------------------------------------- 56,990 56,551 54,973 - ---------------------------------------------------------------------------- Diluted earnings per share $ 1.54 $ 2.87 $ 1.34 - ----------------------------------------------------------------------------
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, on an undiscounted basis, 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. Cash Flow Information Cash equivalents consist of investments with maturities at date of purchase of less than 90 days that have a low risk of change in value due to interest-rate changes. Foreign-currency cash flows have been converted to U.S. dollars at appropriately weighted-average exchange rates or the exchange rates in effect at the time of the cash flows, where determinable. 3. MERGERS, ACQUISITIONS AND DIVESTITURES 1998 - Kaufel Group Ltd. On November 5, 1998, the Corporation purchased Kaufel Group Ltd., an international company headquartered in Montreal, Canada, specializing in the design, manufacture and distribution of emergency and other lighting products and systems for the industrial and commercial markets. The Corporation acquired all of the outstanding Class A shares and Class B Subordinate Voting shares of Kaufel for a cash price of approximately $100 million, and assumed approximately $60 million of outstanding debt. The acquisition was accounted for using the purchase method, with the aggregate purchase price allocated to the acquired assets based on their respective fair values and the excess of approximately $28 million allocated to goodwill. The purchase price has been allocated to the assets and liabilities based on estimated fair values at the acquisition date. Adjustments, which the Corporation does not expect to be material, may be made to such balances upon the final determination of fair values. The goodwill is being amortized on a straight-line basis over 40 years. For the 12 months ended August 31, 1998 (its latest fiscal year), Kaufel had sales of approximately $170 million. The Kaufel acquisition added $30.2 million to the Corporation's sales in 1998. 1998 - Other Acquisitions During 1998, the Corporation completed eight acquisitions in addition to Kaufel, for a total consideration of $107.0 million, consisting of $68.2 million of cash and $38.8 million of debt assumed, and 1,461,000 of shares of the Corporation's common stock. Seven of those acquisitions were accounted for using the purchase method of accounting, with the aggregate purchase price allocated to the acquired assets based on their respective fair values and the excess of approximately $36.5 million allocated to goodwill. The goodwill is being amortized on a straight-line basis over 40 years. Those seven acquisitions added $28.6 million to sales in 1998. The acquisition of Telecommunication Devices, Inc. (TDI) on July 2, 1998, was accounted for as a pooling of interests, and the Corporation's financial statements were restated to include the results of that acquisition for all periods presented, except for dividends per share which reflect the Corporation's historical per share amount. The Corporation acquired all of the outstanding stock of TDI and affiliated companies for 1,461,000 shares of the Corporation's common stock. 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES Combined and separate results of Thomas & Betts and TDI during the periods preceding the merger were:
In millions Thomas & Betts TDI Combined - ----------------------------------------------------------------------------- Six months ended July 5, 1998 (unaudited) Net sales $1,015 $ 83 $1,098 Net earnings $ 78 $ 1 $ 79 - ----------------------------------------------------------------------------- Fiscal year ended December 28, 1997 Net sales $2,115 $145 $2,260 Net earnings $ 155 $ 7 $ 162 - ----------------------------------------------------------------------------- Fiscal year ended December 29, 1996 Net sales $1,985 $149 $2,134 Net earnings $ 60 $ 13 $ 73 - -----------------------------------------------------------------------------
1997 - Acquisitions The Corporation completed six acquisitions during 1997 for a total consideration of $62.0 million, consisting of approximately $19 million of cash and 793,560 shares of the Corporation's common stock. Two of those acquisitions were accounted for as immaterial poolings of interests, and the results of those acquisitions have been included in the Corporation's results as of the beginning of 1997 without restating prior years results. The remaining four acquisitions were accounted for under the purchase method of accounting. The six acquisitions represented approximately $57.6 million of sales reported by the Corporation in 1997. The excess of the purchase price over the fair value of the acquired assets in the purchase acquisitions was approximately $14.6 million and was recorded as goodwill. 1997 - Exemplar/Thomas & Betts Joint Venture On December 28, 1997, the Corporation formed a joint venture with Exemplar Manufacturing Company, a privately-owned business based in Ypsilanti, Michigan, to manufacture and sell power distribution, battery cable and wiring systems to the U.S. automotive industry. In exchange for a 49% interest in the ownership of the joint venture, the Corporation contributed net assets with a carrying value of approximately $41 million; no gain or loss was recognized as a result of that transaction. The joint-venture agreement provides that each party retains a 100% income interest in earnings generated by its respective contributed business. Income from jointly developed business will be allocated in accordance with the ownership percentages. Sales generated in 1997 by the assets contributed by the Corporation to this joint venture were approximately $85.9 million. 1996 - Augat Inc. On December 11, 1996, the Corporation acquired all of the outstanding common stock of Augat Inc., in exchange for 12,821,337 shares of the Corporation's common stock. In addition, options to acquire Augat common stock were converted to options to acquire 791,400 shares of the Corporation's common stock. The acquisition was accounted for as a pooling of interests, and the Corporation's financial statements were restated to include the results of Augat for all periods presented, except for dividends per share which reflect the Corporation's historical per share amount. In the fourth quarter of 1996, the Corporation recorded special charges totaling $97.1 million. The charges provided for: (1) merger expenses, including legal and financial advisory fees and change-of-control payments; restructuring expenses related to both the Corporation's existing operations and the operations of Augat (see also Note 4); (2) adjustments to accounting estimates of Augat's liabilities, primarily environmental, litigation, warranty and employee benefit accruals, and provisions for inventory obsolescence; (3) the cost of index-put options purchased and held through the mergers stock pricing period; and (4) other one-time expenses, including certain termination benefits related to the Corporation's executive retirement plan and previously idled facility charges. The charges were recorded in the statement of earnings as follows: (1) net sales, $2.4 million; (2) cost of sales, $13.8 million; (3) marketing, general and administrative, $19.7 million; (4) merger expense, $30.6 million; (5) provision for restructured operations, $24.5 million; and (6) other expense, $6.1 million. 1996 - Amerace Corporation On January 2, 1996, the Corporation acquired all the outstanding stock of Amerace Corporation for $212.5 million in cash. That acquisition was accounted for using the purchase method. The aggregate purchase price was allocated to the acquired assets of Amerace based on their respective fair values with the excess of approximately $150 million allocated to goodwill. The goodwill is being amortized on a straight-line basis over 40 years. 1996 - Other Acquisitions The Corporation completed six acquisitions during 1996 in addition to Augat and Amerace for a total of approximately $46 million, consisting of cash and 57,714 shares of the Corporation's common stock. All were accounted for using the purchase method of accounting and represented approximately $37 million of sales reported by the Corporation in 1996. The excess of the purchase price over the fair value of the acquired assets for the six acquisitions was approximately $26 million, which was recorded as goodwill. Leviton Manufacturing Co. On August 10, 1994, the Corporation completed the purchase of a minority interest (29.1% of the outstanding common stock representing 23.55% of the voting common stock) in Leviton Manufacturing Co., Inc., a leading U.S. 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES manufacturer of wiring devices, for approximately $51 million consisting of cash and common stock. Leviton's chief executive officer opposed the Corporation's acquisition. The chief executive officer, with his wife, owns approximately 50.5% of Leviton's outstanding common stock (76.45% of Leviton's voting common stock) through a voting trust (a majority sufficient for the approval of all corporate actions that Leviton might undertake; however, the majority is not sufficient to permit either federal income tax consolidation or pooling of interests accounting treatment in a merger). The remainder of the outstanding common stock, all of which is non-voting, is owned by approximately 19 other Leviton family members. The opposition of the chief executive officer to the Corporation's investment has resulted in litigation between Leviton and the Corporation, consisting of the Corporation's proceeding in Delaware in February 1995 to compel Leviton to make additional financial and other information available to the Corporation, and of Leviton's subsequent action against the Corporation and other parties in New York seeking damages and other relief in connection with the transaction in which the Corporation acquired its Leviton investment. The Corporation does not have and has not sought representation on Leviton's board of directors, which would be opposed by Leviton's chief executive officer, and does not receive copies of Leviton's board minutes. Notwithstanding the existence of an adversarial relationship with the controlling shareholder of Leviton, the Corporation has developed relationships with certain key members of Leviton management and believes that those relationships and other factors support management's conclusion that the Corporation has the ability to exercise significant influence over Leviton's financial and operating policies. The Corporation owns more than 20% of Leviton's voting stock, and there are no restrictions to the Corporation's ability to exercise the attributes of ownership (situations have not arisen to date in which the Corporation has had an opportunity to vote its Leviton shares in a matter that would demonstrate significant influence over Leviton's financial and operating policies). In addition, because the Corporation is a non-family shareholder, the Corporation believes that it has a greater ability than other shareholders to challenge actions by Leviton management that the Corporation considers adverse to shareholders interests. Senior management responsible for Leviton's day-to-day operations and operating and financial policies has engaged in an ongoing dialogue over the past two and one-half years with the Corporation, and they have acknowledged that the Corporation's presence as a Leviton shareholder has influenced the manner in which Leviton conducts business. Further, Leviton has taken certain actions following discussions with the Corporation that have been consistent with the Corporation's requests and suggestions. The Corporation's equity in the earnings of Leviton has been typically less than 5% and of late never more than 7% of the Corporation's net income before special charges, and typically less than 7% and of late never more than 11% of the Corporation's net income after special charges. Should the Corporation determine that it no longer has the ability to influence the operating and financial policies of Leviton, the Corporation, in compliance with GAAP, will adopt the cost method on a prospective basis. 4. RESTRUCTURING AND SPECIAL CHARGES During the third quarter of 1998, the Corporation recorded pretax restructuring and special charges of $108.5 million primarily related to a program to reduce costs through manufacturing relocations. Those cost-reduction plans involved consolidating several facilities and product-line operations, terminating employees at affected locations, downsizing administrative functions and writing down idle facilities. The charges were comprised of a $62.1 million provision for restructuring operations and $46.4 million of other special charges, of which $30.3 million was charged to cost of sales and $16.1 million to marketing, general and administrative expense. The components of those charges were:
Charges to Original Reserves Remaining Provision During 1998 Balance - ----------------------------------------------------------------------------------------- Severance and employee-related costs $ 26.6 $ 5.1 $21.5 Property, plant and equipment write-offs 25.7 7.0 18.7 Other facility exit costs 9.8 2.3 7.5 - ----------------------------------------------------------------------------------------- Provision for Restructured Operations 62.1 14.4 47.7 - ----------------------------------------------------------------------------------------- Inventory write-offs related to restructuring 21.6 14.4 7.2 Costs related to previously idled facilities 15.1 2.2 12.9 Other 9.7 - 9.7 - ----------------------------------------------------------------------------------------- Special Charges 46.4 16.6 29.8 - ----------------------------------------------------------------------------------------- Total $108.5 $31.0 $77.5 - -----------------------------------------------------------------------------------------
Severance and other employee-related costs involve actions that will result in a net reduction of approximately 400 jobs, including administrative positions at plants and corporate headquarters. As of year end, the Corporation had realized a net reduction of approximately 125 jobs. The property, plant and equipment write-offs reduced to estimated realizable value the carrying amount of fixed assets that were not relocated in conjunction with their associated manufacturing process. Assets written down as part of the cost-reduction program remain classified as property, plant and equipment until idled; their carrying value was approximately $0.9 million at January 3, 1999. The effect of suspending depreciation on facilities idled in 1998 was $0.1 million of depreciation expense reduction. 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES Inventory write-offs primarily relate to items that became obsolete due to modifications of manufacturing processes for product lines being relocated; items not cost-effective to relocate; and, to a lesser degree, inventory associated with discontinued products. Costs related to previously idled and written-down facilities were based on management's current estimates of costs necessary to ultimately dispose of, and satisfy obligations related to, such facilities. The majority of those are lease-related costs, which will generally be incurred ratably over an eight-year period. The cost-reduction programs commenced in 1998 are expected to be completed by year-end 1999, with disposal of idle facilities anticipated by the end of 2000. Certain other costs, primarily relating to the relocation of inventory, equipment and personnel, are not accruable until incurred. Such costs, which were not included in the $108.5 million provision, amounted to $6.2 million in 1998. Future revenues are not expected to be significantly affected, since the cost-reduction programs are primarily intended to relocate operations rather than discontinue operations. During the fourth quarter of 1996, the Corporation recorded a restructuring charge of $24.5 million relating to the integration of Augat and initiatives affecting Augat's and other of the Corporation's operations. Restructuring initiatives included the closure of Augat's corporate headquarters facility in Mansfield, Massachusetts, and redundant non-U.S. administrative facilities, as well as the rationalization of the combined sales forces and manufacturing operations. These initiatives are now substantially complete and did not require material changes to the initial provision. 5. INCOME TAXES The components of earnings before income taxes were:
In thousands 1998 1997 1996 - ------------------------------------------------- Domestic $ 99,949 $184,252 $ 55,724 Foreign 24,959 49,255 50,671 - ------------------------------------------------- Total $124,908 $233,507 $106,395 - -------------------------------------------------
The components of income tax expense were:
In thousands 1998 1997 1996 - ------------------------------------------------- Current Federal $ 44,149 $32,892 $ 33,923 Foreign 19,942 17,695 18,835 State and local 1,786 622 5,157 - ------------------------------------------------- Total current 65,877 51,209 57,915 - ------------------------------------------------- Deferred Domestic (21,507) 19,408 (23,650) Foreign (6,963) 612 (1,325) - ------------------------------------------------- Total deferred (28,470) 20,020 (24,975) - ------------------------------------------------- Income taxes $ 37,407 $71,229 $ 32,940 - -------------------------------------------------
The reconciliation between the federal statutory tax rate and the Corporation's effective tax rate was:
1998 1997 1996 - ------------------------------------------------------------------------ Federal statutory tax rate 35.0% 35.0% 35.0% Increase (reduction) resulting from: State tax -- net of federal tax benefit 0.3 0.4 2.3 Partially tax-exempt income (9.2) (6.3) (9.4) Goodwill 3.4 2.0 4.5 Merger expenses - - 5.6 Non-taxable income of company acquired in pooling of interests (0.6) (0.5) (3.1) Change in valuation allowance - (1.9) (5.0) Other 1.0 1.8 1.1 - ------------------------------------------------------------------------ Effective tax rate 29.9% 30.5% 31.0% - ------------------------------------------------------------------------
The components of the Corporation's net deferred tax assets were:
JANUARY 3, December 28, In thousands 1999 1997 - ---------------------------------------------------------------------- Deferred tax assets Special-charge-related reserves $ 34,611 $ 16,596 Accrued employee benefits 7,244 10,146 Other accruals 20,457 19,504 Asset reserves 11,429 14,845 Foreign tax credit and loss carryforwards 18,628 7,644 Pension benefits 7,168 6,569 Other 20,557 4,611 Valuation allowance (2,769) (3,373) - ---------------------------------------------------------------------- Net deferred tax assets 117,325 76,542 - ---------------------------------------------------------------------- Deferred tax liabilities Property, plant and equipment (40,257) (36,885) Other (27,421) (22,672) - ---------------------------------------------------------------------- Total deferred tax liabilities (67,678) (59,557) - ---------------------------------------------------------------------- Net deferred tax assets $ 49,647 $ 16,985 - ----------------------------------------------------------------------
The valuation allowance for deferred tax assets was decreased by $0.6 million in 1998 due to both the utilization and expiration of foreign net operating loss carryforwards. The remaining valuation allowance at January 3, 1999, related to foreign net operating loss carryforwards and foreign tax credit carryforwards. 6. FAIR VALUE OF FINANCIAL INSTRUMENTS The Corporation's financial instruments include cash and cash equivalents, marketable securities, short-term borrowings, long-term debt, commodity swaps and foreign-currency contracts. The carrying amounts of those financial instruments generally approximated their fair values at January 3, 1999, and December 28, 1997, except that, based on the borrowing rates currently available to the Corporation, the fair value of long-term debt was approximately $832.6 million and $519.4 million at January 3, 1999, and December 28, 1997, respectively. 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES The cost bases and fair market values of marketable securities at January 3, 1999, and December 28, 1997, were:
Amortized Gross Gross Fair Cost Unrealized Unrealized Market In thousands Basis Gains Losses Value - ------------------------------------------------------------------------------------ January 3, 1999 Certificates of deposit $25,705 $ - $ - $25,705 Mortgage-backed 15,370 1,472 (69) 16,773 - ------------------------------------------------------------------------------------ Total $41,075 $1,472 $ (69) $42,478 - ------------------------------------------------------------------------------------ December 28, 1997 Certificates of deposit $27,447 $ - $ - $27,447 Mortgage-backed 22,588 1,281 (213) 23,656 Equity and other 1,074 234 (29) 1,279 - ------------------------------------------------------------------------------------ Total $51,109 $1,515 $(242) $52,382 - ------------------------------------------------------------------------------------
The mortgage-backed securities and certificates of deposit held at January 3, 1999, had expected maturities ranging from five to 21 years and 91 days to one year, respectively. 7. LONG-TERM DEBT The Corporation's long-term debt at January 3, 1999, and December 28, 1997, was:
JANUARY 3, December 28, In thousands 1999 1997 - ------------------------------------------------------------------------------------ Notes payable with a weighted-average interest rate at January 3, 1999, of 7.0%, due through 2008 $448,418 $273,478 Commercial paper with a weighted-average interest rate at January 3, 1999, of 6.11% 134,399 79,907 Other bank borrowings with a weighted-average interest rate at January 3, 1999, of 5.7% 131,900 104,573 Non-U.S. borrowings with a weighted-average interest rate at January 3, 1999, of 6.28%, due through 2008 71,858 20,352 Industrial revenue bonds with a weighted-average interest rate at January 3, 1999, of 4.2%, due through 2010 19,455 19,855 Other 7,522 10,168 - ------------------------------------------------------------------------------------ 813,552 508,333 Less current portion 22,589 5,256 - ------------------------------------------------------------------------------------ Long-term debt $790,963 $503,077 - ------------------------------------------------------------------------------------
Principal payments on long-term debt including capital leases in each of the five years subsequent to January 3, 1999, are $22.6, $3.2, $17.8, $5.8 and $327.5 million, respectively. The Corporation has committed borrowing facilities of approximately $571 million. Those facilities include $500.0 million of revolving-credit commitments with a group of banks that makes $300.0 million available through June 30, 2003, and the remaining $200.0 million available through June 30, 1999. Under the $200.0- million facility, any committed borrowings outstanding as of June 30, 1999, would mature on June 30, 2000. There were no borrowings outstanding under those facilities as of January 3, 1999, or December 28, 1997. The Corporation has the option, at the time of drawing funds under such facilities, of selecting an interest rate based on a number of benchmarks including LIBOR, the certificate of deposit rate or the prime rate of the agent bank. The credit facilities include covenants, among which are limitations on the amount of future indebtedness that are based on certain financial ratios. The Corporation's commercial paper program is backed by those credit facilities. The Corporation also has a number of uncommitted credit facilities to provide funding for both its domestic and international operations. In the normal course of its business activities, the Corporation is required under certain contracts to provide letters of credit that may be drawn in the event the Corporation fails to perform under the contracts. Outstanding letters of credit or similar financial instruments amounted to $52.9 million at January 3, 1999. In February and May 1998, the Corporation completed the sales of $60.0 million of five-year 6.29% medium-term notes and $115.0 million of 10-year 6.63% medium-term notes, respectively. The net proceeds from those sales were used to repay commercial paper issued by the Corporation within the past year and other short-term borrowings. On August 14, 1998, the Corporation filed a Registration Statement on Form S-3 to register $600.0 million of the Corporation's debt securities, common stock and preferred stock. Future proceeds from the sale of any securities registered in that filing will be added to the general funds of the Corporation and used for general corporate purposes. 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES 8. STOCK OPTION AND INCENTIVE PLANS The Corporation has stock option plans that provide for the purchase of the Corporation's common stock by its key employees. At January 3, 1999, a total of 3,506,862 shares was reserved for issuance under stock options or restricted stock awards already granted or available for future grants. A summary of the options outstanding at January 3, 1999, follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------- ------------------------------ Weighted-Average Range Of Number Remaining Weighted-Average Number Weighted-Average Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price - --------------------------------------------------------------------------------------------------------- $23.31-$33.03 699,527 4.5 years $31.03 698,781 $31.03 33.75- 45.75 871,413 7.1 years 41.86 457,487 39.96 49.66- 59.56 433,336 9.1 years 50.59 8,225 59.29 - --------------------------------------------------------------------------------------------------------- $23.31-$59.56 2,004,276 6.6 years $39.97 1,164,493 $34.74 - ---------------------------------------------------------------------------------------------------------
The following is a summary of the option transactions for the years 1998, 1997 and 1996:
Average Per Share Shares Option Price - ------------------------------------------------------------ Balance at December 31, 1995 2,410,124 $28.45 Granted 375,063 37.36 Exercised (502,420) 23.90 Terminated (116,535) 31.85 - ------------------------------------------------------------ Balance at December 29, 1996 2,166,232 $30.71 - ------------------------------------------------------------ Granted 545,237 45.70 Exercised (801,132) 27.11 Terminated (61,592) 35.87 - ------------------------------------------------------------ Balance at December 28, 1997 1,848,745 $36.53 - ------------------------------------------------------------ Granted 471,661 50.16 Exercised (233,377) 31.83 Terminated (82,753) 44.14 - ------------------------------------------------------------ Balance at January 3, 1999 2,004,276 $39.97 - ------------------------------------------------------------ Exercisable at December 29, 1996 1,536,214 $28.95 Exercisable at December 28, 1997 1,074,759 $32.02 Exercisable at January 3, 1999 1,164,493 $34.74 - ------------------------------------------------------------
The 1993 Management Stock Ownership Plan provides that, for each calendar year, up to 1.25% of the outstanding common stock of the Corporation will be available for issuance as grants or awards. That plan provides for granting stock options at a price not less than the fair market value on the date of grant with a term not to exceed 10 years. The plan also provides for the issuance of restricted stock awards as incentive compensation to key employees. The awards are subject to certain restrictions, including full vesting if the recipient remains in the employ of the Corporation three years after receiving the award. The value of the awards is recorded as compensation expense. Restricted shares plus cash payments for federal and state taxes awarded under that plan were 79,724 shares awarded in 1998; 127,641 shares awarded in 1997; and 63,844 shares plus $0.5 million awarded in 1996. The Corporation has a Restricted Stock Plan for Nonemployee Directors under which each director receives 200 restricted shares of common stock annually for a full year of service. Those shares remain restricted during the directors' term. Shares issued under that plan were 2,000 in 1998; 2,000 in 1997; and 2,162 in 1996. The Corporation continues to account for its stock-based employee compensation plans in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation cost has been recognized for fixed stock-option plans. In accordance with SFAS No. 123, Accounting for Stock-Based Compensation, a valuation using the fair-value-based accounting method has been made for stock options issued in 1998, 1997 and 1996. That valuation was performed using the Black-Scholes option-pricing model. The Corporation's 10-year term options were valued assuming risk-free interest rates of 5.5%, 6.25% and 5.25% on their respective issuance dates in 1998, 1997 and 1996, a dividend yield of 2.5%, an average expected-option life of five years and volatility of 20%. The valuation determined a per-share weighted-average fair value for 10-year options granted during 1998, 1997 and 1996 of $10.63, $10.36 and $8.03, respectively. Had those options been accounted for using the fair-value method, they would have resulted in additional compensation cost of $3.1 million, $2.4 million and $1.1 million net of taxes for 1998, 1997 and 1996, respectively. Had the Corporation adopted the fair-value-based accounting method for stock options, net earnings would have been $84.4 million ($1.49 basic earnings per share; $1.48 diluted earnings per share) in 1998; $159.7 million ($2.84 basic earnings per share; $2.82 diluted earnings per share) in 1997; and $69.2 million ($1.27 basic earnings per share; $1.26 diluted earnings per share) in 1996. 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES 9. POSTRETIREMENT BENEFITS Pension Plans The Corporation and its subsidiaries have several noncontributory pension plans covering substantially all employees. Those plans generally provide pension benefits that are based on compensation levels and years of service. Annual contributions to the plans are made according to the established laws and regulations of the applicable countries. Plan assets are primarily invested in equity securities, fixed income securities and cash equivalents. The Corporation maintains non-qualified supplemental pension plans covering certain key executives, which provide for benefit payments that exceed the limit for deductibility imposed by income tax regulations, and a retirement plan for nonemployee directors (closed effective December 1997), which provides benefits to those board members based on compensation and years of service. The benefit obligation related to those unfunded plans was $12.3 million at January 3, 1999, and $12.1 million at December 28, 1997. Net periodic pension cost for 1998, 1997 and 1996 for the Corporation's defined benefit pension plans included the following components:
In thousands 1998 1997 1996 - ------------------------------------------------------------------------------------- Service cost -- benefits earned during the period $ 10,542 $ 9,138 $ 8,654 Interest cost on projected benefit obligation 17,077 15,431 14,130 Expected return on plan assets (19,659) (17,001) (15,731) Net amortization of unrecognized: Prior service costs/(gains) 607 746 946 Transition amount (1,536) (1,539) (1,485) Plan net losses 392 57 500 - ------------------------------------------------------------------------------------- Net periodic pension cost $ 7,423 $ 6,832 $ 7,014 - -------------------------------------------------------------------------------------
Assumed weighted-average rates used in developing the net periodic pension cost were:
U.S. Plans Non-U.S. Plans -------------------- -------------------- 1998 1997 1996 1998 1997 1996 - ---------------------------------------------------------------------------- Discount rate 7.3% 7.8% 7.5% 6.1% 6.3% 7.2% Rate of increase in compensation level 4.5% 4.5% 4.5% 3.8% 4.2% 4.8% Expected long-term rate of return on plan assets 9.5% 9.0% 9.0% 7.7% 7.7% 8.6% - ----------------------------------------------------------------------------
The following is information regarding the Corporation's 1998 and 1997 pension benefit obligation:
In thousands 1998 1997 - ------------------------------------------------------------------------ Change in benefit obligation: Benefit obligation at beginning of year $233,150 $198,354 Service cost 10,542 9,138 Interest cost 17,077 15,431 Employee contributions 699 449 Plan amendments (465) (1,040) Actuarial (gains)/losses 17,806 32,512 Foreign-exchange impact 196 (757) Acquisitions 5,590 997 Curtailments (123) - Settlements (1,643) - Benefits paid (15,613) (21,934) - ------------------------------------------------------------------------ Benefit obligation at end of year 267,216 233,150 - ------------------------------------------------------------------------ Change in plan assets: Fair value of plan assets at beginning of year 210,875 196,718 Actual return on plan assets 19,143 24,188 Company contributions 8,908 11,334 Employee contributions 699 449 Foreign-exchange impact (72) (638) Acquisitions 7,381 758 Settlements (1,643) - Benefits paid (15,613) (21,934) - ------------------------------------------------------------------------ Fair value of plan assets at end of year 229,678 210,875 - ------------------------------------------------------------------------ Funded status: Plan assets in excess of (less than) benefit obligation (37,538) (22,275) Unrecognized: Net transition asset (3,287) (4,809) Plan net (gains)/losses 26,076 10,783 Prior service costs/(gains) 2,276 3,428 - ------------------------------------------------------------------------ Prepaid/(accrued) benefit costs $(12,473) $(12,873) - ------------------------------------------------------------------------
The present value of projected benefits for U.S. plans recorded at January 3, 1999, and December 28, 1997, was determined using discount rates of 7.0% and 7.25%, respectively, and an assumed rate of increase in compensation of 4.5%. The Corporation's recognized defined benefit pension cost for 1998 and 1997 included the following components:
In thousands 1998 1997 - --------------------------------------------------------------------------- Prepaid benefit costs $ 7,022 $ 2,418 Accrued benefit liability (19,669) (17,311) Intangible asset 174 2,020 Net amount recognized $(12,473) $(12,873) - ---------------------------------------------------------------------------
38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES Other Postretirement Benefit Plans The Corporation sponsors defined contribution 401(k) savings plans for its U.S. employees for which the Corporation's contributions are based on a percentage of employee contributions. The cost of those plans for continuing operations was $6.1, $5.0 and $4.5 million in 1998, 1997 and 1996, respectively. The Corporation provides certain health-care and life insurance benefits to certain retired employees and certain active employees who meet age and length of service requirements. The Corporation is recognizing the estimated liability for those benefits over the estimated lives of the individuals covered, and is not funding that liability. The plan is closed to new entrants. Plan net gains and losses are amortized over a five-year period. The net periodic cost for postretirement health-care and life insurance benefits in 1998, 1997 and 1996 included the following components:
In thousands 1998 1997 1996 - ------------------------------------------------------------------------------ Service cost - benefits earned during the period $ 22 $ 37 $ 89 Interest cost on projected benefit obligation 1,970 1,888 2,430 Net amortization of unrecognized: Prior service costs (gains) 41 41 41 Plan net (gains)/losses (1,051) (2,161) (221) Transition amount 1,009 1,009 $1,009 - ------------------------------------------------------------------------------ Net periodic pension cost $ 1,991 $ 814 $3,348 - ------------------------------------------------------------------------------
The following is information regarding the Corporation's 1998 and 1997 postretirement benefit obligation:
In thousands 1998 1997 - ------------------------------------------------------------------------------ Change in benefit obligation: Benefit obligation at beginning of year $26,333 $32,731 Service cost 22 37 Interest cost 1,970 1,888 Actuarial (gains)/losses 3,143 (4,996) Benefits paid (3,126) (3,327) - ------------------------------------------------------------------------------ Benefit obligation at end of year $28,342 $26,333 - ------------------------------------------------------------------------------
In thousands 1998 1997 - ------------------------------------------------------------------------------ Total postretirement benefit obligation $28,342 $26,333 Unrecognized: Net transition liability (13,909) (14,918) Plan net (gains)/losses 3,283 7,478 Prior service costs/(gains) (80) (121) - ------------------------------------------------------------------------------ Accrued benefits cost $17,636 $18,772 - ------------------------------------------------------------------------------
The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.0% in 1998 and 7.25% in 1997. An increase in the cost of covered health-care benefits of 8.3% was assumed for 1999, and graded down annually to 5.0% for 2005 and future years. A 1.0% increase or 1.0% decrease in the health-care cost trend rate would increase or decrease the accumulated postretirement benefit obligation by $1.4 million and $1.3 million, respectively, at January 3, 1999, and increase or decrease the net periodic cost by $0.1 million for the year then ended. 10. COMMITMENTS The Corporation and its subsidiaries are parties to various leases relating to plants, distribution facilities, office facilities, automobiles and other equipment. Related real estate taxes, insurance and maintenance expenses are normally obligations of the Corporation. It is expected that in the normal course of business the majority of the leases will be renewed or replaced by other leases. Capitalized leases are not significant. Future minimum payments under noncancellable operating leases consisted of the following at January 3, 1999:
Future Minimum In thousands Payments - ----------------------------------------------------------- 1999 $ 26,656 2000 20,773 2001 15,140 2002 12,450 2003 9,757 Thereafter 39,406 - ----------------------------------------------------------- Total minimum operating lease payments $124,182 - -----------------------------------------------------------
Rent expense for operating leases was $32.5, $35.4 and $34.7 million in 1998, 1997 and 1996, respectively. 11. OTHER FINANCIAL DATA Other expense -- net consisted of the following:
In thousands 1998 1997 1996 - -------------------------------------------------------------------------------- Investment income $ 5,379 $ 7,246 $ 8,716 Interest expense (51,135) (52,041) (49,254) Loss on sale of receivables (8,951) (1,754) - Index put options - - (5,452) Foreign-currency losses (707) (3,759) (2,065) Foreign-exchange contract gains 2,395 2,071 1,077 Other (2,768) (1,026) (1,008) - -------------------------------------------------------------------------------- Other expense -- net $(55,787) $(49,263) $(47,986) - ------------------------------------------------------------------------------
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES The Corporation expenses the cost of advertising as it is incurred. Total advertising expense was $22.4 million in 1998, $22.0 million in 1997 and $18.1 million in 1996. Accrued liabilities included salaries, fringe benefits and other compensation amounting to $36.7 and $50.0 million in 1998 and 1997, respectively. Inventories consisted of the following:
JANUARY 3, December 28, In thousands 1999 1997 - ---------------------------------------------------------------------------- Finished goods $202,368 $157,136 Work in process 95,436 67,726 Raw materials 171,837 177,739 - ---------------------------------------------------------------------------- Total inventories $469,641 $402,601 - ----------------------------------------------------------------------------
12. SEGMENT AND OTHER RELATED DISCLOSURES The Corporation has three reportable segments: Electrical, Electronic Original Equipment Manufacturer (Electronic OEM) and Communications. The Electrical segment manufactures and sells a broad package of electrical connectors, components and accessories primarily fasteners, connectors, fittings, boxes and covers, metal framing, grounding materials and lighting products for use in industrial, commercial and utility electrical construction and maintenance applications. The Electronic OEM segment manufactures and markets electronic cable assemblies, connectors and various electronic components for use in high-speed automotive, computer and mobile-communications applications involving miniaturization, surface-mounts, electromagnetic interference and multiplexing. The Communications segment produces and sells a package of drop-line hardware, connectors, fasteners, fiber optics, grounding materials, cross-connect materials and various electronic components for use in cable television, telecommunications and data communications applications. Some business activities cannot be classified in the aforementioned segments and are shown under Other. Those businesses consist mainly of the manufacture and sale of steel structures for electrical transmission and distribution, power-generation and telecommunications applications and mechanical products, primarily heating units, for heating and ventilation applications. The Corporation's reportable segments are based on channels to market, and represent the primary mode used to assess allocation of resources and performance. Management evaluates each segments profit or loss performance based on earnings before interest, taxes, loss on sale of accounts receivable, restructure and special charges and certain other expenses. The significant accounting policies applied to the segments to determine earnings are essentially those described in the summary of significant accounting policies. The Corporation has no material inter-segment sales. General corporate assets not allocated to segments are principally cash, marketable securities, deferred income taxes and other corporate assets.
SEGMENT INFORMATION In thousands 1998 1997(a) 1996(a) - --------------------------------------------------------------------------------- Net Sales Electrical $1,079,842 $ 983,594 $ 827,679 Electronic OEM 640,105 756,421(b) 799,528(b) Communications 261,060 262,121 253,731 All other 249,344 257,372 253,449 - --------------------------------------------------------------------------------- Total $2,230,351 $2,259,508 $ 2,134,387 - --------------------------------------------------------------------------------- Segment Earnings Electrical $ 181,806 $ 168,355 $ 129,155 Electronic OEM 66,071 70,006 70,332 Communications 17,224 23,440 23,477 Related to all other sales 23,659 20,590 19,865 - --------------------------------------------------------------------------------- Total $ 288,760 $ 282,391 $ 242,829 - --------------------------------------------------------------------------------- Total Assets Electrical $1,285,240 $ 966,611 $ 1,032,659 Electronic OEM 550,350 536,010 568,369 Communications 249,485 223,448 196,601 Related to all other sales 240,222 220,593 159,399 - --------------------------------------------------------------------------------- Total $2,325,297 $1,946,662 $1,957,028 - --------------------------------------------------------------------------------- Capital Expenditures Electrical $ 55,163 $ 50,752 $ 41,407 Electronic OEM 39,486 36,288 44,507 Communications 21,069 19,431 17,522 Related to all other sales 11,015 10,042 5,419 - --------------------------------------------------------------------------------- Total $ 126,733 $ 116,513 $ 108,855 - --------------------------------------------------------------------------------- Depreciation and Amortization Electrical $ 45,470 $ 41,760 $ 42,490 Electronic OEM 34,790 29,858 29,270 Communications 15,134 15,988 13,046 Related to all other sales 9,898 8,261 7,434 - --------------------------------------------------------------------------------- Total $ 95,292 $ 95,867 $ 92,240 - ---------------------------------------------------------------------------------
(a) Certain prior-year amounts have been reclassified to conform to the current-year presentation. (b) Includes sales of businesses contributed to the Exemplar/Thomas & Betts joint venture at the end of 1997, amounting to $85.9 million and $86.6 million in 1997 and 1996, respectively. In 1998, results of operations from that investment were accounted for using the equity method. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES The following are reconciliations of the total of reportable segments to the consolidated company:
RECONCILIATION TO TOTAL COMPANY In thousands 1998 1997(a) 1996(a) - ----------------------------------------------------------------------------------------- Net Sales Total reportable segment net sales $ 1,981,007 $2,002,136(b) $1,880,938(b) Other sales 249,344 257,372 253,449 - ----------------------------------------------------------------------------------------- Total $ 2,230,351 $2,259,508 $2,134,387 - ----------------------------------------------------------------------------------------- Earnings Before Income Taxes Total reportable segment earnings $ 265,101 $ 261,801 $ 222,964 Earnings on other sales 23,659 20,590 19,865 Restructure and special charges (108,487) - (97,068) Interest expense (51,135) (52,041) (49,254) Loss on sale of receivables (8,951) (1,754) - Interest income 5,379 7,246 8,716 Other (658) (2,335) 1,172 - ----------------------------------------------------------------------------------------- Total $ 124,908 $ 233,507 $ 106,395 - ----------------------------------------------------------------------------------------- Total Assets Total from reportable segments 2,085,075 $1,726,069 $1,797,629 Related to all other sales 240,222 220,593 159,399 General corporate 174,290 147,626 218,314 - ----------------------------------------------------------------------------------------- Total $ 2,499,587 $2,094,288 $2,175,342 - ----------------------------------------------------------------------------------------- Capital Expenditures Total from reportable segments 115,718 $ 106,471 $ 103,436 Related to all other sales 11,015 10,042 5,419 General corporate - 2,413 253 - ----------------------------------------------------------------------------------------- Total $ 126,733 $ 118,926 $ 109,108 - ----------------------------------------------------------------------------------------- Depreciation and Amortization Total from reportable segments $ 85,394 $ 87,606 $ 84,806 Related to all other sales 9,898 8,261 7,434 General corporate 41 671 181 - ----------------------------------------------------------------------------------------- Total $ 95,333 $ 96,538 $ 92,421 - -----------------------------------------------------------------------------------------
(a) Certain prior-year amounts have been reclassified to conform to the current-year presentation. (b) Includes sales of businesses contributed to the Exemplar/Thomas & Betts joint venture at the end of 1997. 13. FINANCIAL INFORMATION RELATING TO OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS The Corporation conducts business in five principal areas: U.S., Europe, Canada, Asia Pacific and Latin America.
In thousands 1998 1997 1996 - ---------------------------------------------------------------------------------------- Net Sales (by external customer locations) U.S. $1,590,259 $1,700,904(a) $1,612,531(a) Canada 202,436 161,401 124,377 Europe 306,459 253,882 242,774 Asia Pacific 80,361 95,764 101,054 Other countries 37,346 40,203 49,670 Latin America 13,490 7,354 3,981 - ----------------------------------------------------------------------------------------- Total $2,230,351 $2,259,508 $2,134,387 - ----------------------------------------------------------------------------------------- Long-lived Assets U.S. $1,063,864 $1,041,436 $ 997,108 Canada 176,257 81,599 77,802 Europe 129,659 58,918 53,132 Asia Pacific 39,042 35,110 42,937 Latin America 32,363 30,753 6,500 - ----------------------------------------------------------------------------------------- Total $1,441,185 $1,247,816 $1,177,479 - -----------------------------------------------------------------------------------------
(a) Includes sales of businesses contributed to the Exemplar/Thomas & Betts joint venture at the end of 1997. 14. SUBSEQUENT EVENTS In January 1999, the Company entered into an agreement to acquire the outstanding common stock of AFC Cable Systems, Inc. (AFC) in a stock-for-stock merger valued at approximately $490 million. AFC is a Rhode Island-based manufacturer of electrical and communications products and systems for commercial and industrial buildings. The transaction, which is subject to the approval of the shareholders of both companies, is expected to be completed in the first half of 1999, and to be accounted for as a pooling of interests. In February 1999, the Corporation completed the sale of $150.0 million of 10-year 6.39% medium-term notes. The net proceeds from that sale were added to the general funds of the Corporation and used for general corporate purposes. 41 COMPANY REPORT ON FINANCIAL STATEMENTS THOMAS & BETTS CORPORATION AND SUBSIDIARIES TO THE SHAREHOLDERS OF THOMAS & BETTS CORPORATION: The accompanying financial statements, as well as all financial data in this annual report, have been prepared by the Corporation in accordance with generally accepted accounting principles consistently applied. As such, they include certain amounts that are based on the Corporation's estimates and judgments. The Corporation has systems of internal control that are designed to provide reasonable assurance that the financial records are reliable for preparing financial statements and maintaining accountability for assets, and that assets are safeguarded against loss from unauthorized use or disposition. Those systems are augmented by the positive attitude of management in maintaining a sound control environment, communication of established written policies and procedures, the maintenance of a qualified internal auditing group, the selection and training of qualified personnel and an organizational structure that provides appropriate delegation of authority, segregation of duties and regular review of financial performance by management. In addition to the systems of internal control, additional safeguards are provided by the independent auditors and the Audit Committee of the Board of Directors. The independent auditors, whose report is set forth below, perform an objective, independent audit of the Corporation's financial statements taken as a whole. The Audit Committee, composed entirely of outside directors, meets periodically with the independent auditors, director of internal audit and members of management to review matters relating to the quality of financial reporting and internal accounting control and to the nature, extent and results of audit efforts. INDEPENDENT AUDITORS' REPORT THOMAS & BETTS CORPORATION AND SUBSIDIARIES To the Shareholders and Board of Directors of Thomas & Betts Corporation: We have audited the accompanying consolidated balance sheets of Thomas & Betts Corporation and subsidiaries as of January 3, 1999, and December 28, 1997, and the related consolidated statements of earnings, cash flows, and shareholders equity for each of the years in the three-year period ended January 3, 1999. 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 generally accepted auditing standards. 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 at January 3, 1999, and December 28, 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended January 3, 1999, in conformity with generally accepted accounting principles. KPMG LLP Memphis, Tennessee February 5, 1999 42 QUARTERLY REVIEW THOMAS & BETTS CORPORATION AND SUBSIDIARIES
In thousands (except per share data) 1998(a) 1997(b) 1996(b)(c) - ---------------------------------------------------------------------------------------------- First Quarter Net sales $ 544,656 $ 549,287 $ 516,682 Gross profit 163,342 161,932 147,725 Net earnings 37,303 31,696 28,870 Earnings per common share Basic .66 .57 .53 Diluted .65 .57 .53 Cash dividends declared per share .28 .28 .28 Market price range $ 64-44 5/8 $47 1/2-42 1/2 $39 1/2-35 15/16 - ----------------------------------------------------------------------------------------------- Second Quarter Net sales $ 553,318 $ 581,153 $ 539,135 Gross profit 170,636 177,020 157,321 Net earnings 41,543 40,199 34,556 Earnings per common share Basic .73 .72 .63 Diluted .73 .71 .63 Cash dividends declared per share .28 .28 .28 Market price range $61 3/4-45 7/8 $55 3/8-41 $ 40 1/4-37 - ----------------------------------------------------------------------------------------------- Third Quarter Net sales $ 539,945 $ 553,956 $ 529,972 Gross profit 132,343 169,113 155,995 Net earnings (loss) (37,468) 42,232 36,793 Earnings (loss) per common share Basic (.66) .75 .67 Diluted (.66) .74 .67 Cash dividends declared per share .28 .28 .28 Market price range $49 15/16-33 11/16 $58 11/16-5 19/16 $39 1/2-34 3/4 - ----------------------------------------------------------------------------------------------- Fourth Quarter Net sales $592,432 $ 575,112 $ 548,598 Gross profit 182,815 184,158 148,225 Net earnings (loss) 46,124 48,151 (26,764) Earnings (loss) per common share Basic .81 .85 (.49) Diluted .81 .85 (.49) Cash dividends declared per share .28 .28 .28 Market price range $459/16 - 367/8 $55 13/16-43 15/16 $45 7/8-37 7/8 - ------------------
Restated to include the results of Augat Inc., acquired December 11, 1996, and Telecommunication Devices, Inc., acquired July 2, 1998, and accounted for as poolings of interests, except for cash dividends per share, which reflect the Corporation's historical per share amount. Basic per share amounts are based on average shares outstanding in each quarter. Diluted per share amounts also reflect potential dilution from stock options. (a) 1998 includes special charges of $108.5 million pretax ($1.36 basic and $1.35 diluted per share). (b) Includes sales of businesses contributed to the Exemplar/Thomas & Betts joint venture at the end of 1997, amounting to $85.9 million and $86.6 million in 1997 and 1996, respectively. In 1998, such investment was accounted for using the equity method. (c) 1996 includes special charges of $97.1 million pretax ($1.23 basic and $1.22 diluted per share). 43 ANNUAL MEETING The annual meeting of shareholders will be held on Wednesday, May 5, 1999, at 10:00 a.m. at the Winegardner Auditorium, The Dixon Gallery and Gardens, 4339 Park Avenue, Memphis Tennessee. ANNUAL REPORT ON FORM 10-K A copy of the Corporation's Annual Report on Form 10-K (excluding exhibits), filed with the Securities and Exchange Commission, is available free of charge by writing to Renee W. Johansen, Director, Investor Relations, at Corporate Headquarters. The Form 10-K, and other documents filed electronically with the SEC, may be accessed via the Internet at www.sec.gov TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING AGENT First Chicago Trust Company, a division of Equiserve P.O. Box 2534, Suite 4692 Jersey City, New Jersey 07303-2534 Fax (201) 222-4679 Telephone Response Center (800) 446-2617 (24 hours a day, 7 days a week) Fax (201) 222-4892. TDD Service (201) 222-4955 Correspondence concerning change of address, dividends, lost stock certificates and stock transfer requirements should be directed to the address above. Inquiries regarding the Dividend Reinvestment Plan should be directed to Corporate Headquarters at the address shown here. DIVIDEND REINVESTMENT PLAN First Chicago Trust Company, a division of Equiserve Dividend Reinvestment Plan P.O. Box 2598 Jersey City, New Jersey 07303-2598 Internet address: www.fctc.com LISTED NEW YORK STOCK EXCHANGE Trading symbol: TNB CORPORATE HEADQUARTERS Thomas & Betts Corporation 8155 T&B Boulevard Memphis, Tennessee 38125 (901) 252-8000 INVESTOR INQUIRIES Inquiries should be directed to the Investor Relations Department at Corporate Headquarters. Investor information is also available on our website. Visit us on the World Wide Web at www.tnb.com for investor information, technical product background or a general overview of Thomas & Betts. SAFE HARBOR NOTICE Forward-looking statements made throughout this annual report are subject to many uncertainties in the Corporation's operations and business environment. Such uncertainties, which are discussed in the Corporation's Annual Report on Form 10-K filed with the Securities and Exchange Commission, may cause actual results of the Corporation to be materially different from any future results expressed or implied by such forward-looking statements. EX-21 11 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF REGISTRANT
STATE OR COUNTRY OF SUBSIDIARIES OF REGISTRANT INCORPORATION OR ORGANIZATION Amerace Corporation Delaware Augat Inc. Massachusetts Kaufel Group Ltd. Canada Leviton Manufacturing Co., Inc. Delaware Thomas & Betts Caribe, Inc. Delaware Thomas & Betts International, Inc. Delaware Thomas & Betts Limited Canada Thomas & Betts Netherlands B.V. The Netherlands
The Registrant has omitted 25 subsidiaries operating in the U.S. and 101 subsidiaries operating in foreign countries. The Registrant's subsidiaries are in the same businesses. EX-21 EX-23 12 EXHIBIT 23 EXHIBIT 23 ACCOUNTANTS' CONSENT The Shareholders and Board of Directors Thomas & Betts Corporation: We consent to incorporation by reference in the Registration Statements (No. 33-1403, No. 33-35297, No. 33-56789 and No. 33-68370) on Form S-8 and in the Registration Statements (No. 33-44153, No. 333-34567, No. 333-61465, and No. 333-60459) on Form S-3 and in the Registration Statement (No. 333-893) on Form S-4 of Thomas & Betts Corporation of our report dated February 5, 1999, relating to the consolidated balance sheets of Thomas & Betts Corporation and subsidiaries as of January 3, 1999 and December 28, 1997, and the related consolidated statements of earnings, cash flows and shareholders' equity for each of the years in the three-year period ended January 3, 1999, which report appears or is incorporated by reference in the January 3, 1999 Annual Report on Form 10-K of Thomas & Betts Corporation. KPMG LLP Memphis, Tennessee March 22, 1999 EX-23 EX-24 13 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Clyde R. Moore, Jerry Kronenberg and Fred R. Jones, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, to sign the Annual Report on Form 10-K of Thomas & Betts Corporation for its fiscal year 1998, and any and all amendments and exhibits thereto, and to file the same and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act necessary to be done as fully to all intents and purposes as he or she could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE DATE TITLE /s/ Clyde R. Moore - --------------------------- President and Chief February 3, 1999 Clyde R. Moore Executive Officer and --- Director - --------------------------- Director February , 1999 Ernest H. Drew --- /s/ T. Kevin Dunnigan - --------------------------- Chairman of the Board February 3, 1999 T. Kevin Dunnigan and Director --- - --------------------------- Director February , 1999 Jeananne K. Hauswald --- /s/ Fred R. Jones - --------------------------- Vice President-Chief February 3, 1999 Fred R. Jones Financial Officer --- - --------------------------- Director February , 1999 Thomas W. Jones ---
1 of 2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Clyde R. Moore, Jerry Kronenberg and Fred R. Jones, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, to sign the Annual Report on Form 10-K of Thomas & Betts Corporation for its fiscal year 1998, and any and all amendments and exhibits thereto, and to file the same and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act necessary to be done as fully to all intents and purposes as he or she could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE DATE TITLE - --------------------------- President and Chief February , 1999 Clyde R. Moore Executive Officer and --- Director /s/ Ernest H. Drew - --------------------------- Director February 3, 1999 Ernest H. Drew --- - --------------------------- Chairman of the Board February , 1999 T. Kevin Dunnigan and Director --- - --------------------------- Director February , 1999 Jeananne K. Hauswald --- - --------------------------- Vice President-Chief February , 1999 Fred R. Jones Financial Officer --- - --------------------------- Director February , 1999 Thomas W. Jones ---
1 of 2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Clyde R. Moore, Jerry Kronenberg and Fred R. Jones, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, to sign the Annual Report on Form 10-K of Thomas & Betts Corporation for its fiscal year 1998, and any and all amendments and exhibits thereto, and to file the same and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act necessary to be done as fully to all intents and purposes as he or she could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE DATE TITLE - --------------------------- President and Chief February , 1999 Clyde R. Moore Executive Officer and --- Director - --------------------------- Director February , 1999 Ernest H. Drew --- - --------------------------- Chairman of the Board February , 1999 T. Kevin Dunnigan and Director --- /s/ Jeananne K. Hauswald - --------------------------- Director February 3, 1999 Jeananne K. Hauswald --- - --------------------------- Vice President-Chief February , 1999 Fred R. Jones Financial Officer --- - --------------------------- Director February , 1999 Thomas W. Jones ---
1 of 2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Clyde R. Moore, Jerry Kronenberg and Fred R. Jones, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, to sign the Annual Report on Form 10-K of Thomas & Betts Corporation for its fiscal year 1998, and any and all amendments and exhibits thereto, and to file the same and any other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act necessary to be done as fully to all intents and purposes as he or she could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE DATE TITLE - --------------------------- President and Chief February , 1999 Clyde R. Moore Executive Officer and --- Director - --------------------------- Director February , 1999 Ernest H. Drew --- - --------------------------- Chairman of the Board February , 1999 T. Kevin Dunnigan and Director --- - --------------------------- Director February , 1999 Jeananne K. Hauswald --- - --------------------------- Vice President-Chief February , 1999 Fred R. Jones Financial Officer --- /s/ Thomas W. Jones - --------------------------- Director February 3, 1999 Thomas W. Jones ---
1 of 2
SIGNATURE DATE TITLE /s/ Ronald B. Kalich, Sr. - --------------------------- Director February 1, 1999 Ronald B. Kalich, Sr. --- - --------------------------- Director February , 1999 Robert A. Kenkel --- - --------------------------- Vice President-General February , 1999 Jerry Kronenberg Counsel and Secretary --- - --------------------------- Director February , 1999 Kenneth R. Masterson --- - --------------------------- Director February , 1999 Thomas C. McDermott --- - --------------------------- Director February , 1999 Jean-Paul Richard --- - --------------------------- Director February , 1999 Jerre L. Stead --- - --------------------------- Director February , 1999 William H. Waltrip ---
2 of 2
SIGNATURE DATE TITLE - --------------------------- Director February , 1999 Ronald B. Kalich, Sr. --- /s/ Robert A. Kenkel - --------------------------- Director February 3, 1999 Robert A. Kenkel --- - --------------------------- Vice President-General February , 1999 Jerry Kronenberg Counsel and Secretary --- - --------------------------- Director February , 1999 Kenneth R. Masterson --- - --------------------------- Director February , 1999 Thomas C. McDermott --- - --------------------------- Director February , 1999 Jean-Paul Richard --- - --------------------------- Director February , 1999 Jerre L. Stead --- - --------------------------- Director February , 1999 William H. Waltrip ---
2 of 2
SIGNATURE DATE TITLE - --------------------------- Director February , 1999 Ronald B. Kalich, Sr. --- - --------------------------- Director February , 1999 Robert A. Kenkel --- /s/ Jerry Kronenberg - --------------------------- Vice President-General February 3, 1999 Jerry Kronenberg Counsel and Secretary --- - --------------------------- Director February , 1999 Kenneth R. Masterson --- - --------------------------- Director February , 1999 Thomas C. McDermott --- - --------------------------- Director February , 1999 Jean-Paul Richard --- - --------------------------- Director February , 1999 Jerre L. Stead --- - --------------------------- Director February , 1999 William H. Waltrip ---
2 of 2
SIGNATURE DATE TITLE - --------------------------- Director February , 1999 Ronald B. Kalich, Sr. --- - --------------------------- Director February , 1999 Robert A. Kenkel --- - --------------------------- Vice President-General February , 1999 Jerry Kronenberg Counsel and Secretary --- /s/ Kenneth R. Masterson - --------------------------- Director February 2, 1999 Kenneth R. Masterson --- - --------------------------- Director February , 1999 Thomas C. McDermott --- - --------------------------- Director February , 1999 Jean-Paul Richard --- - --------------------------- Director February , 1999 Jerre L. Stead --- - --------------------------- Director February , 1999 William H. Waltrip ---
2 of 2
SIGNATURE DATE TITLE - --------------------------- Director February , 1999 Ronald B. Kalich, Sr. --- - --------------------------- Director February , 1999 Robert A. Kenkel --- - --------------------------- Vice President-General February , 1999 Jerry Kronenberg Counsel and Secretary --- - --------------------------- Director February , 1999 Kenneth R. Masterson --- /s/ Thomas C. McDermott - --------------------------- Director February 1, 1999 Thomas C. McDermott --- - --------------------------- Director February , 1999 Jean-Paul Richard --- - --------------------------- Director February , 1999 Jerre L. Stead --- - --------------------------- Director February , 1999 William H. Waltrip ---
2 of 2
SIGNATURE DATE TITLE - --------------------------- Director February , 1999 Ronald B. Kalich, Sr. --- - --------------------------- Director February , 1999 Robert A. Kenkel --- - --------------------------- Vice President-General February , 1999 Jerry Kronenberg Counsel and Secretary --- - --------------------------- Director February , 1999 Kenneth R. Masterson --- - --------------------------- Director February , 1999 Thomas C. McDermott --- /s/ Jean-Paul Richard - --------------------------- Director February 3, 1999 Jean-Paul Richard --- - --------------------------- Director February , 1999 Jerre L. Stead --- - --------------------------- Director February , 1999 William H. Waltrip ---
2 of 2
SIGNATURE DATE TITLE - --------------------------- Director February , 1999 Ronald B. Kalich, Sr. --- - --------------------------- Director February , 1999 Robert A. Kenkel --- - --------------------------- Vice President-General February , 1999 Jerry Kronenberg Counsel and Secretary --- - --------------------------- Director February , 1999 Kenneth R. Masterson --- - --------------------------- Director February , 1999 Thomas C. McDermott --- - --------------------------- Director February , 1999 Jean-Paul Richard --- /s/ Jerre L. Stead - --------------------------- Director February 3, 1999 Jerre L. Stead --- - --------------------------- Director February , 1999 William H. Waltrip ---
2 of 2
SIGNATURE DATE TITLE - --------------------------- Director February , 1999 Ronald B. Kalich, Sr. --- - --------------------------- Director February , 1999 Robert A. Kenkel --- - --------------------------- Vice President-General February , 1999 Jerry Kronenberg Counsel and Secretary --- - --------------------------- Director February , 1999 Kenneth R. Masterson --- - --------------------------- Director February , 1999 Thomas C. McDermott --- - --------------------------- Director February , 1999 Jean-Paul Richard --- - --------------------------- Director February , 1999 Jerre L. Stead --- /s/ William H. Waltrip - --------------------------- Director February 3, 1999 William H. Waltrip ---
2 of 2 EX-27.1 14 EXHIBIT 27.1
5 This schedule contains summary financial information extracted from SEC Form 10-K for the period ended January 3, 1999, and is qualified in its entirety by reference to such financial statements. Amounts have been restated to include the July 2, 1998 acquisition of Telecommunication Devices, Inc., accounted for as a pooling of interests. 1,000 12-MOS JAN-03-1999 JAN-03-1999 64,028 42,478 439,646 (34,862) 469,641 1,058,402 1,162,942 (531,920) 2,499,587 587,549 790,963 0 0 5,678 1,009,427 2,499,587 2,230,351 2,230,351 1,581,215 2,075,828 (21,520) 0 51,135 124,908 37,407 87,501 0 0 0 87,501 1.54 1.54
EX-27.2 15 EXHIBIT 27.2
5 This schedule contains summary financial information extracted from SEC Form 10-K for the periods ended December 28, 1997 and December 29, 1996, and is qualified in its entirety by reference to such financial statements. Amounts have been restated to include the July 2, 1998 acquisition of Telecommunication Devices, Inc., accounted for as a pooling of interests. 1,000 12-MOS 12-MOS DEC-28-1997 DEC-29-1996 DEC-28-1997 DEC-29-1996 45,225 127,180 52,382 35,940 324,754 389,112 (31,032) (8,694) 402,601 384,170 846,472 997,863 1,082,309 1,006,128 (508,257) (462,891) 2,094,288 2,175,342 473,234 515,740 503,077 645,096 0 0 0 0 317,143 284,860 682,161 603,787 2,094,288 2,175,342 2,259,508 2,134,387 2,259,508 2,134,387 1,567,286 1,525,121 1,990,647 1,987,926 (16,687) (9,188) 0 0 52,041 49,254 233,507 106,395 71,229 32,940 162,278 73,455 0 0 0 0 0 0 162,278 73,455 2.89 1.35 2.87 1.34
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