Thomas & Betts (TNB) 10-Q 2001 Q3 Quarterly report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2001
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 of Incorporation)	(I.R.S. Employer Identification No.)
8155 T&B Boulevard Memphis, Tennessee (Address of principal executive offices)	38125 (Zip Code)

(901) 252-8000
(Registrant's telephone number, including area code)

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock—$0.10 Par Value	Outstanding Shares at November 5, 2001
(Title of each Class)	58,147,974

THOMAS & BETTS CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS

		Page
Cautionary Statement Regarding Forward-Looking Statements		2
	PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000	4
	Condensed Consolidated Statements of Operations for the Quarters and Nine Months Ended September 30, 2001 and October 1, 2000	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and October 1, 2000	6
	Notes to Condensed Consolidated Financial Statements	7
ITEM 2.	Management's Discussion and Analysis of Results of Operations and Financial Condition	19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	27
	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	27
ITEM 5.	Other Information	27
ITEM 6.	Exhibits and Reports on Form 8-K	27

NOTE:    Restated Consolidated Financial Statements

    Thomas & Betts Corporation (the "Corporation," the "Registrant" or "Thomas & Betts") recorded substantial charges in 2000. These charges were based upon the best information available to management and involved extensive use of estimates and assumptions. Management and the Corporation's independent auditors agreed that certain of these charges should be attributed to prior reporting periods. After consultation with the Corporation's independent auditors and the Audit Committee of the Board of Directors, management restated the Corporation's financial statements for the first and second quarters of 2000, the interim periods of 1999, and fiscal years 1996, 1997, 1998 and 1999. These restatements also include certain adjustments previously reflected in the Corporation's financial results for the third quarter of 1999, which were deemed immaterial to the previously reported fiscal periods. The reasons for, and financial impact of, the adjustments are described in the Corporation's Annual Report on Form 10-K for the fiscal period ended December 31, 2000.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    This Report includes various forward-looking statements regarding the Corporation which are subject to risks and uncertainties. Forward-looking statements include information concerning future results of operations and financial condition. Statements that contain words such as "believes," "expects," "anticipates," "intends," "estimates," "continue," "should," "could," "may," "plan," "project," "predict," "will" or similar expressions are forward-looking statements. These forward-looking statements are subject to risks and uncertainties, and many factors could affect the future financial results of the Corporation. Accordingly, actual results may differ materially from those

Page 2 of 28

expressed or implied by the forward-looking statements contained in this Report. For those statements, the Corporation claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

    There are many important factors that could cause actual results to differ materially from those in forward-looking statements, some of which are beyond the control of the Corporation. These factors include, but are not limited to:

•

Economic slowdown in the U.S. or in the Corporation's other main markets, including Canada and Western Europe;



•

Unforeseen difficulties in the implementation, enhancement and maintenance of operating and accounting systems and internal controls;



•

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, Euro and British pound;



•

Significant changes in any number of governmental policies domestically and abroad which could create trade restrictions, patent enforcement issues, adverse tax-rate changes and changes to tax treatment of items such as tax credits, withholding taxes, transfer pricing and other income and expense recognition for tax purposes, including changes in taxation of income generated in Puerto Rico;



•

Changes in environmental regulations and projected remediation technology advances that could impact expectations of remediation expenses;



•

Undiscovered liabilities arising from past acquisitions and dispositions of businesses, including the sale of the Corporation's Electronics OEM business in the second quarter of 2000;



•

Changes in the Corporation's relationships with its equity investment counterparties and changes in financial results from its equity investments;



•

Unexpected liabilities resulting from pending legal matters;



•

Changes in customer demand for various products of Thomas & Betts that could affect its overall product mix, margins, plant utilization levels and asset valuations;



•

Failure or disruption of computer programs and equipment within the Corporation or third parties with whom the Corporation does business which may disrupt business activities and operations;



•

Realization of deferred tax assets, which is dependent upon generating sufficient taxable income prior to their expiration;



•

The recoverability of long-lived assets, which will be impacted if the estimated future operating cash flows are not achieved; and



•

Other adjustments, if any, required after completion of management's continuing review of the Corporation's business practices, processes, controls and systems.

    The Corporation undertakes no obligation to revise the forward-looking statements included in this Report to reflect any future events or circumstances. The Corporation's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements.

    For additional information about business risks facing the Corporation, investors should review Part I, Item 1—"Business Risks" of the Corporation's Annual Report on Form 10-K for the fiscal period ended December 31, 2000.

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PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

			September 30, 2001			December 31, 2000
ASSETS
Current Assets:
	Cash and cash equivalents		$	155,545		$	199,285
	Marketable securities			11,655			19,390
	Receivables—net			257,801			325,671
	Receivable—Electronics OEM sale			35,000			35,000
	Inventories:
		Finished goods		145,672			174,930
		Work-in-process		31,483			48,226
		Raw materials		77,198			75,696
				254,353			298,852
	Income tax receivables			5,779			—
	Deferred income taxes			47,761			83,251
	Prepaid expenses			10,221			7,112
	Assets held for sale—net			25,202			—
Total Current Assets				803,317			968,561
Property, plant and equipment				826,573			865,973
	Less accumulated depreciation			435,992			440,496
Property, plant and equipment—net				390,581			425,477
Intangible assets—net				483,280			537,502
Investments in unconsolidated companies				122,182			121,645
Deferred income taxes				50,083			—
Other assets				30,120			34,578
TOTAL ASSETS			$	1,879,563		$	2,087,763
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
	Short-term debt		$	454		$	16,453
	Current maturities of long-term debt			6,237			6,025
	Accounts payable			130,595			156,840
	Accrued liabilities			171,719			209,634
	Income taxes payable			2,693			14,078
	Dividends payable			—			16,230
Total Current Liabilities				311,698			419,260
Long-term debt				664,344			669,983
Other long-term liabilities				75,183			80,090
Deferred income taxes				21,256			12,520
Shareholders' Equity:
	Common stock			5,815			5,800
	Additional paid-in capital			340,046			337,225
	Retained earnings			538,992			627,457
	Unearned compensation—restricted stock			(4,038	)		(2,667	)
	Accumulated other comprehensive loss			(73,733	)		(61,905	)
Total Shareholders' Equity				807,082			905,910
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	1,879,563		$	2,087,763

See accompanying notes to condensed consolidated financial statements.

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THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

		Quarter Ended						Nine Months Ended
		September 30, 2001			October 1, 2000			September 30, 2001			October 1, 2000
											(Restated)
Net sales		$	373,186		$	443,177		$	1,155,578		$	1,321,954
Costs and expenses:
	Cost of sales		283,528			346,560			870,035			1,124,810
	Selling, general and administrative		81,550			108,259			254,952			315,158
	Research and development		5,210			5,383			15,878			17,902
	Amortization of intangibles		4,050			4,647			12,255			13,543
	Impairment charges on long-lived assets		36,637			—			36,637			5,723
			410,975			464,849			1,189,757			1,477,136
Loss from operations			(37,789	)		(21,672	)		(34,179	)		(155,182	)
Income (loss) from unconsolidated companies			(1,542	)		2,684			2,137			11,692
Interest expense—net			(11,355	)		(11,736	)		(31,853	)		(40,486	)
Other (expense) income—net			(483	)		3,263			(2,246	)		(2,162	)
Loss from continuing operations before income
	taxes		(51,169	)		(27,461	)		(66,141	)		(186,138	)
Income tax benefit			(5,558	)		(8,238	)		(10,199	)		(62,797	)
Net loss from continuing operations			(45,611	)		(19,223	)		(55,942	)		(123,341	)
Earnings from discontinued operations			—			—			—			14,724
Gain on sale of discontinued operations			—			—			—			134,089
Net earnings (loss)		$	(45,611	)	$	(19,223	)	$	(55,942	)	$	25,472
Basic earnings (loss) per share:
	Loss from continuing operations	$	(0.78	)	$	(0.33	)	$	(0.96	)	$	(2.12	)
	Earnings from discontinued operations		—			—			—			0.25
	Gain on sale of discontinued operations		—			—			—			2.31
	Net earnings (loss)	$	(0.78	)	$	(0.33	)	$	(0.96	)	$	0.44
Diluted earnings (loss) per share:
	Loss from continuing operations	$	(0.78	)	$	(0.33	)	$	(0.96	)	$	(2.12	)
	Earnings from discontinued operations		—			—			—			0.25
	Gain on sale of discontinued operations		—			—			—			2.31
	Net earnings (loss)	$	(0.78	)	$	(0.33	)	$	(0.96	)	$	0.44
Average shares outstanding:
	Basic		58,150			57,974			58,105			57,935
	Diluted		58,150			57,974			58,105			57,935

See accompanying notes to condensed consolidated financial statements.

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THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

			Nine Months Ended
			September 30, 2001			October 1, 2000
						(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)			$	(55,942	)	$	25,472
Gain on sale of discontinued operations				—			(134,089	)
Earnings from discontinued operations				—			(14,724	)
Loss from continuing operations				(55,942	)		(123,341	)
Adjustments:
	Depreciation and amortization			60,095			63,199
	Impairment charges on long-lived assets			36,637			5,723
	Restructured operations recovery			—			(449	)
	Undistributed earnings from unconsolidated companies			(2,137	)		(11,692	)
	Mark-to-market adjustment for derivative instruments			1,532			—
	Deferred income taxes			(5,670	)		(9,447	)
	(Gain) loss on sales of businesses			98			(468	)
	Changes in operating assets and liabilities, net of acquisitions and divestitures:
		Receivables		63,543			16,202
		Purchase of receivables under asset securitization program		—			(177,100	)
		Inventories		24,010			43,076
		Accounts payable		(22,865	)		(9,727	)
		Accrued liabilities		(39,028	)		(13,049	)
		Income taxes payable		(22,248	)		(77,008	)
		Other		4,060			(6,593	)
Net cash provided (used) by operating activities				42,085			(300,674	)
Net cash provided by discontinued operations				—			53,226
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment				(26,928	)		(54,830	)
Proceeds from Electronics OEM sale				—			701,113
Proceeds from sales of businesses				6,000			10,047
Marketable securities acquired				(301	)		—
Proceeds from matured marketable securities				7,958			1,426
Net cash provided (used) by investing activities				(13,271	)		657,756
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in borrowings with original maturities less than 90 days				(15,830	)		(22,541	)
Decrease in long-term debt and other borrowings				(6,330	)		(247,665	)
Stock options exercised				—			3
Cash dividends paid				(48,753	)		(48,605	)
Net cash used by financing activities				(70,913	)		(318,808	)
EFFECT OF EXCHANGE-RATE CHANGES ON CASH				(1,641	)		(1,609	)
Net increase (decrease) in cash and cash equivalents				(43,740	)		89,891
Cash and cash equivalents at beginning of period				199,285			69,640
Cash and cash equivalents at end of period			$	155,545		$	159,531

See accompanying notes to condensed consolidated financial statements.

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THOMAS & BETTS CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.  BASIS OF PRESENTATION

    In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for the fair presentation of the financial position as of September 30, 2001 and December 31, 2000 and the results of operations and cash flows for the periods ended September 30, 2001 and October 1, 2000.

    Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation's Annual Report on Form 10-K for the fiscal period ended December 31, 2000. The results of operations for the quarters and nine months ended September 30, 2001 and October 1, 2000 are not necessarily indicative of the operating results for the full year.

    Our independent auditors have informed the Corporation that they did not have an adequate basis to complete the reviews of quarterly information in accordance with Statements on Auditing Standards No. 71 for the interim quarters of 2000 due to the matters related to the restatement and the corollary review of processes, controls and systems.

2.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

    In June 1998 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 2000 the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138 require that all derivative instruments be recorded on the balance sheet at their respective fair values (mark-to-market) unless certain conditions are met. SFAS No. 133 and SFAS No. 138 are effective for fiscal years beginning after June 15, 2000. The Corporation adopted SFAS No. 133 and SFAS No. 138 on January 1, 2001.

    At times, the Corporation utilizes forward foreign exchange contracts for the sale or purchase of principally Canadian, Australian and European currencies, all maturing within 60 days. In addition, the Corporation is exposed to risk from fluctuating prices for certain commodities used to manufacture its products, primarily: copper, zinc and aluminum. At times, some of that risk is hedged through the use of futures contracts that fix the price the Corporation will pay for the commodity. The Corporation's derivative instruments as of January 1, 2001 and September 30, 2001 do not qualify for hedge accounting treatment under the provisions of SFAS No. 133 and SFAS No. 138.

    In conjunction with the implementation of SFAS No. 133 and SFAS No. 138, the Corporation recorded an asset and a liability as of January 1, 2001 for $1.0 million and $0.6 million, respectively. The prepaid asset recorded as of January 1, 2001 was composed of $0.9 million and $0.1 million that related to forward foreign exchange contracts and commodities futures, respectively. Accrued liabilities as of January 1, 2001 included $0.1 million and $0.5 million that related to forward foreign exchange contracts and commodities futures, respectively. Accrued liabilities as of September 30, 2001 include $1.1 million related to commodities futures. The Corporation had no outstanding forward foreign exchange contracts as of September 30, 2001.

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    Mark-to-market gains and losses for commodities futures are recorded in cost of sales. Mark-to-market gains and losses for forward foreign exchange contracts are recorded in other (expense) income—net. The impact of these items in the statement of operations for the quarter and nine months ended September 30, 2001 was a gain of approximately $0.2 million and a loss of $1.5 million, respectively.

3.  PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment is composed of the following:

(In thousands)		September 30, 2001		December 31, 2000
Property, plant and equipment
	Land	$	15,450	$	17,593
	Buildings		170,826		176,132
	Machinery and equipment		616,830		623,968
	Construction-in-progress		23,467		48,280
			826,573		865,973
	Less accumulated depreciation		435,992		440,496
		$	390,581	$	425,477

4.  EARNINGS PER SHARE ("EPS")

    Basic EPS for each period is computed by dividing net earnings (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS for each period is computed by dividing net earnings by the sum of (1) the weighted-average number of shares outstanding during the period and (2) the dilutive effect, if any, of the assumed exercise of stock options using the treasury stock method.

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    The following is a reconciliation of the numerators and denominators of the per share computations:

			Quarter Ended						Nine Months Ended
(In thousands, except per share data)			September 30, 2001			October 1, 2000			September 30, 2001			October 1, 2000
												(Restated)
Loss from continuing operations			$	(45,611	)	$	(19,223	)	$	(55,942	)	$	(123,341	)
Earnings from discontinued operations				—			—			—			14,724
Gain on sale of discontinued operations				—			—			—			134,089
Net earnings (loss)			$	(45,611	)	$	(19,223	)	$	(55,942	)	$	25,472
Basic shares:
	Average shares outstanding			58,150			57,974			58,105			57,935
Basic earnings (loss) per share:
	Loss from continuing operations		$	(0.78	)	$	(0.33	)	$	(0.96	)	$	(2.12	)
	Earnings from discontinued operations			—			—			—			0.25
	Gain on sale of discontinued operations			—			—			—			2.31
		Net earnings (loss)	$	(0.78	)	$	(0.33	)	$	(0.96	)	$	0.44
Diluted shares:
	Average shares outstanding			58,150			57,974			58,105			57,935
	Exercise of stock options			—			—			—			—
				58,150			57,974			58,105			57,935
Diluted earnings (loss) per share:
	Loss from continuing operations		$	(0.78	)	$	(0.33	)	$	(0.96	)	$	(2.12	)
	Earnings from discontinued operations			—			—			—			0.25
	Gain on sale of discontinued operations			—			—			—			2.31
	Net earnings (loss)		$	(0.78	)	$	(0.33	)	$	(0.96	)	$	0.44

    Options for approximately 3,908,000 shares and 3,301,000 shares for the third quarter and nine months ended September 30, 2001, respectively, were excluded because their effect was anti-dilutive. Options for approximately 3,033,000 shares and 2,937,000 shares for the third quarter and nine months ended October 1, 2000, respectively, were excluded because their effect was anti-dilutive. Due to losses in certain periods, the assumed net exercise of stock options was excluded, as the effect would have been anti-dilutive. Options for approximately 2,296,000 shares were granted during the nine months ended September 30, 2001.

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5.  COMPREHENSIVE INCOME

    Total comprehensive income (loss) and its components are as follows:

	Quarter Ended						Nine Months Ended
(In thousands)	September 30, 2001			October 1, 2000			September 30, 2001			October 1, 2000
										(Restated)
Net earnings (loss)	$	(45,611	)	$	(19,223	)	$	(55,942	)	$	25,472
Foreign currency translation adjustments		(5,545	)		(16,674	)		(11,778	)		(26,708	)
Unrealized losses on securities		11			79			(50	)		(169	)
Total comprehensive income (loss)	$	(51,145	)	$	(35,818	)	$	(67,770	)	$	(1,405	)

6.  RESTATEMENTS AND RECLASSIFICATIONS

Restatement of Consolidated Financial Statements

    During 2000, management began a review of processes, controls and systems in order to assure their adequacy, and, when appropriate, began implementing improvements. Primarily in the second quarter of 2000, management recorded substantial charges in connection with the review. Management had identified certain adjustments which necessitated a restatement of the Corporation's consolidated financial statements for the first and second quarters of 2000, the interim periods of 1999, and for the years 1996, 1997, 1998 and 1999. The reasons for, and financial impact of, the adjustments on each of these fiscal periods are described in the Corporation's Annual Report on Form 10-K for the fiscal period ended December 31, 2000. See Management's Discussion and Analysis of Results of Operations and Financial Condition for an update on the "Review of Processes, Controls and Systems."

Reclassifications

    During the fourth quarter of 2000, the Corporation began reporting expenses for transportation of products to customers and between its facilities as a component of cost of sales as a result of the adoption of Emerging Issues Task Force ("EITF") Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs." These costs had previously been reported as a reduction of net sales. Transportation costs included in cost of sales for continuing operations totaled $23.8 and $82.2 million for the quarter and nine months ended October 1, 2000, respectively. The prior year financial statements were reclassified to conform to the current year presentation. These reclassifications had no effect on earnings or loss in any period.

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    The following table highlights the effects of the restatement and reclassifications on the previously reported condensed consolidated statements of operations for the nine months ended October 1, 2000.

		Nine Months Ended October 1, 2000 (unaudited)
(In thousands)		As Previously Reported(a)			Restatement Adjustments(b)			Reclassification Adjustments		As Restated and Reclassified
Net sales		$	1,167,833		$	71,938		$	82,183	$	1,321,954
Costs and expenses:
	Cost of sales		1,045,763			2,587			82,183		1,130,533
	Selling, general and administrative		310,204			4,954			—		315,158
	Research and development		17,903			(1	)		—		17,902
	Amortization of intangibles		13,542			1			—		13,543
			1,387,412			7,541			82,183		1,477,136
Loss from operations			(219,579	)		64,397			—		(155,182	)
Income from unconsolidated companies			10,489			1,203			—		11,692
Interest expense—net			(40,072	)		(414	)		—		(40,486	)
Other (expense) income—net			(2,195	)		33			—		(2,162	)
Loss from continuing operations before income taxes			(251,357	)		65,219			—		(186,138	)
Income tax benefit			(87,566	)		24,769			—		(62,797	)
Net loss from continuing operations			(163,791	)		40,450			—		(123,341	)
Earnings from discontinued operations			9,577			5,147			—		14,724
Gain on sale of discontinued operations			134,089			—			—		134,089
Net earnings		$	(20,125	)	$	45,597		$	—	$	25,472

(a)

This column represents information as reported in certain of the Corporation's prior year Quarterly Reports on Form 10-Q.

(b)

Reflects restatement adjustments in the first and second quarters of 2000.

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    The principal components of the restatement for the nine months ended October 1, 2000 are as follows:

(In thousands)			Nine Months Ended October 1, 2000
			(Unaudited)
Continuing Operations:
	Net sales:
		Revenue recognition	$	51,655
		Other revenue adjustments		20,283
			$	71,938
	Pretax earnings:
		Revenue recognition	$	26,168
		Other revenue adjustments		20,282
		Inventory		1,216
		Property, plant and equipment		10,685
		Other		6,868
				65,219
		Income tax effect and adjustments		24,769
		Net earnings from continuing operations	$	40,450
Earnings from discontinued operations			$	5,147
Total earnings from continuing and discontinued operations			$	45,597

    The principal adjustments to the Corporation's condensed consolidated financial statements are summarized as follows:

Revenue Recognition

    The restated condensed consolidated financial statements reflect the reversal of incorrectly recorded revenue from special promotional programs targeted at a select group of the Corporation's largest volume accounts, the terms of which caused the transaction to fail to qualify for immediate recognition.

Other Revenue Adjustments

    The restated condensed consolidated financial statements reflect adjustments to net sales and accounts receivable to properly accrue for returns, allowances, shipping and pricing errors, and volume and price rebates.

Inventory

    The restated condensed consolidated financial statements reflect adjustments to inventory and cost of sales to reduce the carrying value of inventory to agree with physical counts and the Corporation's perpetual records.

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Property, Plant and Equipment

    The restated condensed consolidated financial statements reflect adjustments to depreciate assets misclassified as construction-in-progress and to recognize depreciation expense in the appropriate periods. Adjustments were also made to correctly reflect certain items as period expenses that were previously capitalized.

Other

    Other items reflected in the restated condensed consolidated financial statements are primarily adjustments to properly attribute freight costs and restructuring charges.

Income Tax Adjustments

    Income tax adjustments primarily reflect the tax impact of the pretax adjustments described above.

7.  SEGMENT AND OTHER RELATED DISCLOSURES

    The Corporation has four reportable segments: Electrical, Steel Structures, Communications and HVAC. The Corporation's reportable segments are based on a combination of product lines and channels to market, and represent the primary mode used to assess allocation of resources and performance. Management evaluates each segment's profit or loss performance based on earnings before interest, taxes; gains and losses on sale of receivables; foreign exchange gains and losses; impairments; and restructure and certain other charges.

    During the first quarter of 2001, the Corporation began reporting its Steel Structures and HVAC businesses as segments. These businesses were previously included in Other results. The Steel Structures segment includes steel transmission poles and towers used for utility, cellular, lighting and municipal applications. The HVAC segment includes heating and ventilation products for commercial and industrial applications. Information for the prior period has been restated to conform to the current period presentation.

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Segment Information

			Quarter Ended						Nine Months Ended
(In thousands)			Sept. 30, 2001			October 1, 2000			Sept. 30, 2001			October 1, 2000
												(Restated)
Net Sales:
	Electrical		$	289,007		$	341,717		$	900,687		$	1,014,860
	Steel Structures			35,050			29,497			104,712			91,391
	Communications			25,690			46,514			81,609			137,363
	HVAC			23,439			25,449			68,570			78,340
		Total	$	373,186		$	443,177		$	1,155,578		$	1,321,954
Segment Earnings (Loss):
	Electrical		$	(7,659	)	$	(16,965	)	$	(2,764	)	$	(112,985	)
	Steel Structures			4,835			2,068			13,503			9,393
	Communications			(875	)		(6,087	)		(6,797	)		(25,365	)
	HVAC			1,005			805			653			4,440
		Total	$	(2,694	)	$	(20,179	)	$	4,595		$	(124,517	)

Reconciliation to Total Corporation

		Quarter Ended						Nine Months Ended
(In thousands)		Sept. 30, 2001			October 1, 2000			Sept. 30, 2001			October 1, 2000
											(Restated)
Earnings (Loss) Before Income Taxes:
	Total reportable segment earnings	$	(2,694	)	$	(20,179	)	$	4,595		$	(124,517	)
	Impairment, restructure and other special charges		(36,637	)		—			(36,637	)		(20,494	)
	Interest expense-net		(11,355	)		(11,736	)		(31,853	)		(40,486	)
	Loss on asset securitization program		(385	)		(541	)		(385	)		(3,191	)
	Other		(98	)		4,995			(1,861	)		2,550
	Loss from continuing operations before income taxes	$	(51,169	)	$	(27,461	)	$	(66,141	)	$	(186,138	)

8.  DIVESTITURES

    On July 2, 2000, the Corporation completed the sale of substantially all of its global Electronics OEM business to Tyco Group S.a.r.l. ("Tyco") for $750 million in cash, subject to adjustment, with a portion of the proceeds deferred. The cash purchase price was reduced by approximately $14 million for debt assumed by Tyco. At closing Tyco wire transferred funds of approximately $686 million and retained approximately $50 million of the purchase price. During the third quarter of 2000, $15 million of withheld proceeds were released to the Corporation. The remaining amount of proceeds is still being withheld by Tyco pending the resolution of the Tyco Dispute described in Note 9 "Contingencies."

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    The Electronics OEM sale has been accounted for as a discontinued operation in accordance with Accounting Principles Board Opinion No. 30. Accordingly, results from continuing operations for the prior period exclude the impact of the Electronics OEM business. The net results for the prior period of the Electronics OEM business are reflected in earnings from, or gain on the sale of, discontinued operations. The results of discontinued operations do not reflect any allocated corporate overhead expenses for centralized administration, finance and information technology departments.

    The sale resulted in a pretax gain of $231.1 million, which, reduced by $97.0 million of income taxes, produced a gain on sale of discontinued operations of $134.1 million. The gain includes $14.7 million of losses, net of $3.3 million of tax benefit, resulting from the operations of the Electronics OEM business from April 3, 2000 to the closing date.

    Net sales and earnings from discontinued operations in 2000 prior to April 3, 2000 are as follows:

(In thousands)
Net sales	$	205,103
Earnings before income taxes	$	23,546
Income tax expense		8,822
Earnings from discontinued operations	$	14,724

    Included in first quarter 2000 earnings from discontinued operations is interest expense of $4.3 million, which was allocated to discontinued operations based upon the ratio of invested capital of discontinued operations to consolidated invested capital.

    The Corporation sold its copper and zinc ground rods product line in February 2001 for an amount which approximated net book value. This product line had sales of $3 million in 2001 prior to its divestiture.

    The third quarter 2001 results include approximately $40 million in pre-tax charges related to the sale of the Corporation's American Electric and Dark-to-Light lighting product lines, which closed on October 19, 2001. These charges include approximately $37 million for impairment on long-lived assets, primarily goodwill. At closing, the Corporation received approximately $26 million in cash and retained approximately $14 million of accounts receivable related to these product lines. These Electrical segment product lines had sales of approximately $50 million in 2001 prior to its divestiture.

9.  CONTINGENCIES

Shareholder Litigation

    During 2000 certain shareholders of the Corporation filed five separate class-action suits in the United States District Court for the Western District of Tennessee against the Corporation, Clyde R. Moore and Fred R. Jones. The complaints allege fraud and violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder. The plaintiffs allege that purchasers of the Corporation's common stock between April 28, 1999 and August 21, 2000, were damaged when the market value of the stock dropped by nearly 29% on December 15, 1999, dropped by nearly 26% on June 20, 2000 and fell another 8% on August 22, 2000. An unspecified amount of damages is sought.

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    On December 12, 2000, the Court issued an order consolidating all five of the actions into a single action. The consolidated complaint essentially repeats the allegations in the earlier complaints.

    The Corporation intends to contest the litigation vigorously and has filed a motion to dismiss. At this stage, the Corporation is unable to predict the outcome of this litigation and its ultimate effect, if any, on the financial condition of the Corporation. However, management believes that there are meritorious defenses to the claims. Mr. Moore and Mr. Jones may be entitled indemnification by the Corporation in connection with this litigation.

    A parallel federal securities law class action has recently been filed by the same plaintiffs against KPMG LLP, the Corporation's independent auditors, mirroring the Rule 10b-5 allegations in the action discussed above against the Corporation. This suit was consolidated with the action against the Corporation on August 14, 2001.

Tyco Dispute

    On November 1, 2000, pursuant to the Purchase Agreement between Tyco and the Corporation, dated May 7, 2000, as amended, Tyco delivered to the Corporation its proposed calculation of the Statement of Closing Working Capital and Statement of Closing Long-term Tangible Assets for the Electronics OEM business (collectively, the "Tyco Statement Calculation"). Under the terms of the Purchase Agreement, the purchase price to the Corporation on the closing date could be adjusted if the Closing Working Capital or the Closing Long-term Tangible Assets, which will be amounts agreed to by Tyco and the Corporation, or as determined by an agreed upon third party, are less than the Base Working Capital or the Base Long-term Tangible Assets, as defined in the Purchase Agreement (Base Working Capital and Base Long-term Tangible Assets collectively referred to herein as "Agreed Amounts"). The Tyco Statement Calculation delivered to the Corporation is substantially below the Agreed Amounts. As of September 30, 2001, Tyco was in possession of proceeds held back totaling $35 million.

    Management has reviewed the Tyco Statement Calculation and by a submission to Tyco dated January 15, 2001 disputed substantially all of the differences between the Tyco Statement Calculation and the Corporation's records. The parties have not reached an agreement on the closing statements. Under the terms of the Purchase Agreement, the parties are to refer the dispute to binding arbitration before an accounting arbitrator of their mutual choosing. Tyco and the Corporation have discussed the procedural rules for the proceeding and agreed upon an arbitrator. At this time, the Corporation is unable to predict whether the purchase price on the closing date will be adjusted and, if so, its ultimate effect, if any, on the financial position or results of operations of the Corporation. However, management believes that the Tyco Statement Calculation is incorrect and intends to vigorously
dispute it.

SEC Investigation

    Soon after issuing the August 21, 2000 press release announcing substantial charges in the second fiscal quarter of 2000, the Corporation received an informal request for information regarding the basis of the charges from the staff of the Securities and Exchange Commission (the "Commission") Enforcement Division. In response, the Corporation collected and produced the bulk of the documents requested and various former and current employees were interviewed telephonically by the Commission's staff.

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    On January 4, 2001, the Commission issued a Formal Order of Investigation and subsequently has required the production of additional documents, conducted interviews and taken the testimony of current and former employees. Management is unable to express any opinion regarding the future course of this investigation; however, the Corporation intends to fully cooperate with the Commission during this process.

Other Legal Matters

    The Corporation is also involved in legal proceedings and litigation arising in the ordinary course of business. In those cases where the Corporation is the defendant, plaintiffs may seek to recover large and sometimes unspecified amounts, and some matters may remain unresolved for several years. The Corporation has provided for losses to the extent probable and estimable; however, additional losses, even though not anticipated, could be material with respect to financial position or results of operations in any given period.

10.  DEBT

    The Corporation's long-term debt at September 30, 2001 and December 31, 2000, was:

(In thousands)	September 30, 2001		December 31, 2000
Notes payable	$	605,851	$	605,734
Non-U.S. borrowings		51,561		52,319
Industrial revenue bonds		11,155		14,655
Other		2,014		3,300
		670,581		676,008
Less current portion		6,237		6,025
Long-term debt	$	664,344	$	669,983

    During the quarter, the Corporation terminated its revolving credit agreement with a group of domestic and foreign banks, under which $150 million was available for back-up liquidity purposes.

    In September 2001, the Corporation entered into an asset-securitization program. The program permits the Corporation to continually sell accounts receivable through September 21, 2002, to a maximum of $120 million. The amount of accounts receivable sold from time to time depends on the level of eligible accounts receivable and restrictions on concentrations of receivables. Sales under the program are accounted for as sales of assets under the provisions of Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." At September 30, 2001, no receivables have been sold under this program. Included in other income (expense) are charges totaling approximately $0.4 million associated with establishing the asset-securitization program.

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11.  OTHER

    Leviton Manufacturing Co.:  In August 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. manufacturer of wiring devices, for approximately $51 million consisting of cash and common stock. If the Corporation were to liquidate its interest in Leviton, it could be required to make an additional payment to the seller in an amount up to $20 million. 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 federal income tax consolidation). 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; however, 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. Since inception, senior management responsible for Leviton's day-to-day operations and operating and financial policies have engaged in an ongoing dialogue 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 earnings of Leviton was less than 10% of the fiscal 2000 consolidated pretax earnings (loss). 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.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS

Comparison of Periods in 2001 with Periods in 2000
Selected Information from Condensed Consolidated Statements of Operations

	Quarter Ended September 30, 2001					Quarter Ended October 1, 2000
	In Thousands			% of Net Sales		In Thousands			% of Net Sales
Net sales	$	373,186		100.0		$	443,177		100.0
Gross margin		89,658		24.0			96,617		21.8
Selling, general and administrative		81,550		21.9			108,259		24.4
Loss from operations		(37,789	)	(10.1	)		(21,672	)	(4.9	)
Income (loss) from unconsolidated companies		(1,542	)	(0.4	)		2,684		0.6
Interest expense—net		(11,355	)	(3.0	)		(11,736	)	(2.6	)
Net loss from continuing operations		(45,611	)	(12.2	)		(19,223	)	(4.3	)
Net loss		(45,611	)	(12.2	)		(19,223	)	(4.3	)

	Nine Months Ended September 30, 2001					Nine Months Ended October 1, 2000
	In Thousands			% of Net Sales		In Thousands			% of Net Sales
						(Restated)
Net sales	$	1,155,578		100.0		$	1,321,954		100.0
Gross margin		285,543		24.7			197,144		14.9
Selling, general and administrative		254,952		22.1			315,158		23.8
Loss from operations		(34,179	)	(3.0	)		(155,182	)	(11.7	)
Income from unconsolidated companies		2,137		0.2			11,692		0.9
Interest expense—net		(31,853	)	(2.8	)		(40,486	)	(3.1	)
Net loss from continuing operations		(55,942	)	(4.8	)		(123,341	)	(9.3	)
Net earnings (loss)		(55,942	)	(4.8	)		25,472		1.9

Consolidated Results

    For the third fiscal quarter of 2001, the Corporation reported a net loss from continuing operations of $45.6 million, or a loss per basic and diluted share of $0.78 on sales of $373.2 million. The current quarter results include approximately $40 million in pre-tax charges related to the sale of the Corporation's American Electric and Dark-to-Light lighting product lines, which closed on October 19, 2001. These charges include approximately $37 million for impairment on long-lived assets, primarily goodwill. These results compare to a net loss from continuing operations of $19.2 million, or a loss per basic and diluted share of $0.33 on sales of $443.2 million, for the same quarter in 2000.

    For the nine months of 2001, the Corporation reported a net loss from continuing operations of $55.9 million, or a loss per basic and diluted share of $0.96 on sales of $1,155.6 million. These results compare to a net loss from continuing operations of $123.3 million, or a loss per basic and diluted share of $2.12 on sales of $1,322.0 million, for the same period in 2000.

    For the quarter and nine months ended September 30, 2001, the consolidated net loss for the Corporation is the same as the net loss from continuing operations. Consolidated net loss for the quarter ended October 1, 2000 is also the same as the net loss from continuing operations. However,

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for the nine months of 2000, the Corporation reported net earnings of $25.5 million, or $0.44 per diluted share, which included an after-tax gain of $2.56 per diluted share related primarily to the gain on sale of the Corporation's Electronics OEM business.

    Continued softness in industrial, construction, cable TV and telecommunications markets adversely affected sales and results for both the current year quarter and nine months. The 2000 quarter and nine months results from continuing operations included significant charges. These charges are discussed in detail in Note 6 as well as in the Corporation's Annual Report on Form 10-K for fiscal year 2000.

    The third quarter of 2001 gross margin was $89.7 million (or 24.0% of net sales) as compared to a gross margin of $96.6 million (or 21.8% of net sales) for the third quarter of 2000. The 2001 third quarter gross margin includes $3.3 million in severance costs related to the third quarter 2001 rationalization and $3.2 million of inventory and accounts receivable write-downs associated with the sale of lighting product lines. The nine months 2001 gross margin was $285.5 million (or 24.7% of net sales) versus $197.1 million (or 14.9% of net sales) for the same period in 2000. Overall, the Corporation's plants are currently operating significantly below capacity. On an annualized basis, the Corporation expects to incur approximately $60 million of negative manufacturing variances. The Corporation will continue to take action to reduce its cost base and improve its gross margin with a long-term goal of achieving a gross margin in excess of 30%.

    Selling, general and administrative ("SG&A") expenses for the third quarter were $81.6 million, or 21.9% of sales, compared to $108.3 million, or 24.4% of sales in the third quarter 2000. For the nine-month periods, SG&A was $255.0 million and $315.2 million for 2001 and 2000, respectively. SG&A as a percentage of net sales was 22.1% as compared to 23.8% for the nine-month periods 2001 and 2000, respectively. The significant reduction year over year is due to the Corporation's continuing focus on reducing all components of SG&A and the inclusion of severance costs incurred in the prior-year period. The Corporation intends to continue reducing SG&A expense until it achieves a level below 20% of sales.

    Income from unconsolidated companies in the third quarter 2001 was a loss of $1.5 million versus income of $2.7 million in the third quarter 2000. For the nine-month periods, income from unconsolidated companies decreased from $11.7 million in 2000 to $2.1 million for the same 2001 period. The reductions for the quarter and nine month periods were due primarily to lower domestic operating results related to these entities.

    Net interest expense in the third quarter and nine months of 2001 was down from the same periods in the prior year as a result of lower debt levels during the current year as compared to the respective periods of the prior year.

    Other expense was $0.5 million in the current quarter period compared to other income of $3.3 million for the prior year period. Third quarter 2001 results reflected charges for fees associated with the Corporation's new asset securitization program while third quarter 2000 results reflected other income primarily due to the impact of favorable foreign currency exchange. Other expense for the nine-month periods remained relatively flat.

    The Corporation's 2001 effective income tax rate for continuing operations is a benefit of 10.9% and 15.4% for the third quarter and nine-month periods, respectively. These lower rates in 2001 reflect the previously mentioned impairment charges on long-lived assets, which were largely related to non-deductible goodwill. The effective income tax rate for 2000 continuing operations is a benefit of 30.0% and 33.7% for the quarter and nine months, respectively.

    Realization of the deferred tax assets is dependent upon the Corporation's ability to generate sufficient future taxable income. Management believes that it is more likely than not that future taxable income will be sufficient to realize the recorded deferred tax assets, net of the existing valuation

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allowance at September 30, 2001. Future taxable income is based on management's forecast of the operating results of the Corporation, and there can be no assurance that such results will be achieved. Management periodically reviews such forecasts in comparison with actual results and expected trends. In the event management determines that sufficient future taxable income may not be generated to fully realize the net deferred tax assets, the Corporation will increase the valuation allowance by a charge to income tax expense in the period of such determination.

Segment Results

    Beginning in the first quarter of 2001, the Corporation began reporting its Steel Structures and HVAC businesses as separate segments. These businesses were previously included in Other results. Information for the prior period has been restated to conform to the new basis of presentation.

    Sales in the Corporation's Electrical segment were $289.0 million for the third quarter of 2001, down from the $341.7 million reported in the third quarter of 2000. The quarter and year to date sales for the current period were adversely impacted by the continued slow down in industrial and construction markets. Segment loss for the quarter was $7.7 million versus a loss of $17.0 million in the year-earlier period. Year to date sales for the Electrical segment were down from $1,014.9 million for 2000 to $900.7 million for 2001 reflecting primarily lower sales volumes. Year to date segment loss for 2001 was $2.8 million versus a loss of $113.0 million for 2000. The 2000 earnings were significantly impacted by charges taken in the previous year while 2001 segment earnings were positively impacted as the result of actions taken by management to reduce manufacturing and SG&A expenses. Results in 2001 were negatively impacted by unabsorbed fixed costs resulting from lower volume levels previously mentioned plus deterioration in its unconsolidated subsidiaries' performance, severance costs and certain charges related to the sale of lighting product lines.

    Sales in the Steel Structures segment were $35.1 million for the third quarter compared to $29.5 million in the third quarter 2000. Earnings in the segment were $4.8 million versus $2.1 million in the third quarter 2000. The year to date segment sales increased to $104.7 million for 2001 from $91.4 million for 2000. Year to date segment earnings were $13.5 million for 2001 as compared to $9.4 million for 2000. The higher sales volumes are due to incremental capacity and strong demand for infrastructure to support power grids. A favorable product mix also boosted segment earnings.

    In the Corporation's Communications segment, sales were $25.7 million, down from the $46.5 million reported in the third quarter of 2000. On a year-over-year basis, sales were down significantly from the $137.4 million reported for the same nine-month period in 2000 to $81.6 million in 2001, largely as a result of currently depressed domestic market conditions in its cable TV (CATV) and telecom markets. Previously divested and discontinued product lines accounted for $13 million of this year to date sales decrease. Continued weak market demand for CATV products and the effort of telecom and CATV distributors to reduce their inventories are the primary drivers behind reduced sales volumes. The segment recorded a loss of $0.9 million for the 2001 quarter, significantly less than the $6.1 million loss in the third quarter 2000. The year to date segment results also reflected a much smaller loss of $6.8 million versus a loss of $25.4 million for the same period in the previous year. The 2000 earnings were significantly impacted by charges taken in that year while 2001 segment earnings were positively affected by efforts made to reduce manufacturing and SG&A expenses to better match current demand levels.

    The HVAC segment reported sales of $23.4 million for the quarter, down from $25.4 million in the third quarter of last year. Year to date segment sales decreased from $78.3 million for 2000 to $68.6 million for 2001. Sales continued to be adversely affected by changes made to a marketing program for distributors historically used by the Corporation, as well as reduced demand for made-to-order products due to soft construction markets. The segment reported earnings of $1.0 million in the current quarter compared to earnings of $0.8 million in the same period of 2000. The 2001 year to date earnings were $0.7 million versus 2000 year to date segment earnings of $4.4 million. The reduction in earnings was primarily due to lower sales volume.

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SUPPLEMENTAL SEQUENTIAL QUARTERLY COMPARISON

    While the information set forth below in this section is not required under Regulation S-K of the Securities Exchange Act of 1934, management believes the comparison of third quarter 2001 to second quarter 2001 is a meaningful analysis for understanding the current operations of the Corporation.

Comparison of Third Quarter 2001 with Second Quarter 2001
Selected Information from Condensed Consolidated Statements of Operations

	Quarter Ended
	September 30, 2001					July 1, 2001
	In Thousands			% of Net Sales		In Thousands			% of Net Sales
Net sales	$	373,186		100.0		$	385,444		100.0
Gross margin		89,658		24.0			98,315		25.5
Selling, general and administrative		81,550		21.9			84,377		21.9
Earnings (loss) from operations		(37,789	)	(10.1	)		4,755		1.2
Income (loss) from unconsolidated companies		(1,542	)	(0.4	)		245		0.1
Interest expense—net		(11,355	)	(3.0	)		(10,529	)	(2.7	)
Net loss		(45,611	)	(12.2	)		(5,365	)	(1.4	)

Consolidated Results

    Sales for the third quarter 2001 were $373.2 million compared to $385.4 million in the second quarter 2001. Continued softness in industrial, construction, cable TV and telecommunications markets adversely affected sales. The Corporation reported a net loss of $45.6 million, or loss per share of $0.78 in the current quarter as compared with the $5.4 million net loss, or $0.09 loss per share in the second quarter 2001. The current quarter results include approximately $40 million in pre-tax charges related to the sale of lighting product lines. Compared to the prior quarter, third quarter 2001 loss from operations was also negatively impacted by a $4.8 million pre-tax charge for rationalization. Lower earnings from unconsolidated companies also negatively affected third quarter results.

    The Corporation's gross margin was down $8.7 million compared to the second quarter 2001. As a percentage of sales, the gross margin decreased to 24.0% in the third quarter 2001 from 25.5% in the preceding quarter. Excluding $3.3 million in severance costs related to the third quarter 2001 rationalization and $3.2 million of inventory and accounts receivable write-downs associated with the sale of lighting product lines, the third quarter gross margin as a percentage of sales would have been flat with the second quarter of 2001. Continued inventory reductions coupled with the decline in sales volume prevented additional margin gains in the quarter.

    SG&A expenses for the third quarter were $81.6 million compared to $84.4 million. SG&A, as a percentage of sales, for the two quarters remained flat at 21.9%. However, excluding $1.5 million in severance costs associated with the third quarter 2001 rationalization, SG&A as a percentage of sales would have decreased to 21.5%.

    Results from unconsolidated companies in the third quarter was a loss of $1.5 million versus income of $0.2 million in the second quarter 2001 due primarily to lower domestic operating results related to these entities.

    Net interest expense in the third quarter 2001 was $11.4 million, compared with $10.5 million in the preceding quarter. The net quarter-over-quarter increase in 2001 is largely due to lower interest income and fees associated with the termination of a credit facility. The Corporation expects to finalize a new two-year $100 million revolving credit facility during the fourth quarter of 2001.

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    Other expense was $0.5 million in the reported period compared to other expense of $2.2 million in the second quarter 2001. Third quarter 2001 results reflected charges for fees associated with the Corporation's new asset securitization program. Second quarter 2001 results reflected the impact of unfavorable foreign currency exchange.

Segment Results

    Sales in the Corporation's Electrical segment were $289.0 million for the quarter, down from $302.0 million in the second quarter 2001. The segment incurred a loss of $7.7 million versus earnings of $4.0 million in the second quarter 2001. Segment sales in the third quarter 2001 were adversely impacted by the continued softness in industrial and construction markets. Third quarter 2001 segment earnings were adversely affected on a quarter-over-quarter basis by $8.9 million, which included: (1) $3.9 million of rationalization charges; (2) $3.2 million of inventory and accounts receivable write-downs associated with the sale of lighting product lines; and (3) $1.8 million of lower earnings from unconsolidated companies. Excluding these items, segment earnings would have been $1.2 million compared to the reported loss of $7.7 million.

    Sales in the Steel Structures segment were $35.1 million for the third quarter, compared to $36.3 million in the second quarter 2001. Earnings in the segment were $4.8 million versus $5.1 million in the preceding quarter. The quarter-over-quarter decline in sales and earnings is due largely to timing of certain large projects and does not reflect a softening in demand.

    In the Corporation's Communications segment, sales were $25.7 million, down slightly from the $27.6 million reported in the second quarter of 2001. Continued weak market demand for cable TV (CATV) products and telecom and CATV distributors' efforts to reduce their inventories are the primary drivers behind reduced sales volumes. The segment recorded a loss of $0.9 million for the third quarter of 2001, an improvement over the $2.8 million loss in the second quarter 2001. Third quarter 2001 segment results were positively affected by efforts made to reduce manufacturing and SG&A expenses to better match current demand levels.

    The HVAC segment reported sales of $23.4 million for the quarter, up from the $19.6 million from the preceding quarter. The segment reported earnings of $1.0 million in the current quarter compared to a loss of $1.3 million in the second quarter 2001. The quarter-over-quarter improvement is due to seasonality associated with the demand for industrial heating products

Review of Processes, Controls and Systems

    As discussed in prior reports, during 2000 the Corporation's new management team began a comprehensive review of processes, controls and systems in order to ensure their adequacy and, when appropriate, began implementing improvements.

    Early in this review, the accounts receivable function was identified as requiring significant improvement. Accordingly, the Corporation retained a nationally recognized firm to manage its claims and collections function. The Corporation also corrected technical systems issues that adversely impacted its pricing and invoicing systems during the fourth quarter of 1999 and the first half of 2000. These systems problems were responsible, in part, for the large number of payment deductions made by customers and associated problems that hampered the Corporation's accounts receivable collection efforts.

    The Corporation also began a program to analyze and correct deficiencies in its inventory management and control processes. Using a combination of internal resources and third-party consultants, the Corporation completed a thorough review of inventory controls and processes. The Corporation has refined and implemented new control procedures over inventory accounting and management.

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    The Corporation is reviewing its existing capital appropriations management processes to enhance controls associated with authorization and procurement. Management began implementing enhancements during the first quarter of 2001 and expects to be completed by year end 2001.

    The Corporation initiated a program in the first quarter of 2001 to enhance its revenue cycle processes, such as pricing quotations, order entry, ship-from-stock-and debit, returned goods, and claims processing. Management has begun revising the Corporation's business policies and procedures, enhancing the revenue auditing process and introducing more efficient cash management processes all in an effort to better maximize the Corporation's revenue cycle. Using a combination of internal resources and third-party experts, management plans to complete the program by late 2001.

    The Corporation is in the process of comprehensively revising and simplifying its pricing policies. The new pricing policies are expected to be in place for fiscal 2002 activity. The Corporation also revised the incentives offered in its Signature Service preferred customer program to ensure that the program supports profitable sales, and established tighter guidelines and accounting controls for volume-related discount programs and other price rebates effective in 2001.

    To address the Corporation's high freight costs, primarily as a result of inefficiencies and overly generous shipping policies, management revised the Corporation's freight policies to make them comparable to, and competitive with, the Corporation's electrical components industry peers. As part of this effort, the Corporation began in the third quarter of 2000 to consolidate shipments to customers in several key regional markets. Consolidating customer shipments reduces costs and simplifies the customer's receipt of materials.

    The Corporation is also exploring alternatives to make its distribution and warehouse operations more cost effective. Distribution costs are high due to inefficiencies and excess warehouse capacity. Management expects to see gradual improvements in its distribution costs mainly in 2002.

FINANCIAL CONDITION

Liquidity and Capital Resources

    Net cash provided by operating activities was $42.1 million for the first nine months of 2001 as compared to net cash used by operating activities of $300.7 million for the same 2000 period. Working capital as of September 30, 2001 was $491.6 million compared with $549.3 million as of December 31, 2000. Accounts receivable decreased by 20.8% from December 31, 2000 due primarily to lower sales volume and the Corporation's continued improvement in its collections. Inventory levels as of September 30, 2001 were approximately $44.5 million lower than December 31, 2000 due to the Corporation's efforts to tightly manage its inventory.

    Net cash used by investing activities for the first nine months of 2001 was $13.3 million as compared to net cash provided by investing activities of $657.8 million for the first nine months of 2000. Investing activities for 2000 included proceeds of $701.1 from the Electronics OEM sale. Year to date capital expenditures for 2001 totaled $26.9 million, down from $54.8 million in the same period of 2000. Capital expenditures for the year are expected to be approximately $40 million for 2001, as compared to $69 million for 2000. Depreciation and amortization are expected to be in the $80 million range in 2001, compared to $95 million in 2000.

    Net cash used by financing activities was $70.9 million for the 2001 nine-month period as compared to net cash used by financing activities of $318.8 million for the same 2000 period. Dividends paid during the first nine months of 2001 totaled $48.8 million for dividends declared in the fourth quarter of 2000 and the first and second quarters 2001. During July 2001, the Corporation paid dividends of $16.3 million declared in the second quarter 2001. On July 24, 2001, the Corporation's Board of Directors approved a change in the Corporation's current dividend paying practices and elected to retain its future earnings to fund the strengthening, development and growth of its business. The Corporation does not presently anticipate declaring any cash dividends on the Corporation's

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common stock in the foreseeable future. Future decisions concerning the payment of cash dividends on the Corporation's common stock will depend upon its results of operations, financial condition, capital expenditure plans and other factors that the Board of Directors may consider relevant.

    As of September 30, 2001, net debt (total debt net of all cash, cash equivalents and marketable securities) increased by $30.0 million compared with December 31, 2000. Significant factors contributing to this net increase were the payment of approximately $15 million in corporate severance that was accrued as of year-end 2000 and dividends paid during the year. During the quarter, the Corporation terminated its revolving credit agreement with a group of domestic and foreign banks, under which $150 million was available for back-up liquidity purposes. The Corporation expects to finalize a new two-year $100 million revolving credit facility during the fourth quarter of 2001.

    In September 2001, the Corporation's entered into an asset-securitization program. The program permits the Corporation to continually sell accounts receivable through September 21, 2002, to a maximum of $120 million. The amount of accounts receivable sold from time to time depends on the level of eligible accounts receivable and restrictions on concentrations of receivables. At September 30, 2001, no receivables have been sold under this program.

    As a result of the current operating results, the Corporation may not be able to access the public capital markets on acceptable terms or rates or in a timely manner. Management expects any future borrowings may be at higher rates or on more stringent terms. Management believes that existing cash balances, cash generated from operations and external financial resources will be sufficient to meet the Corporation's operating and capital needs for the foreseeable future.

Outlook

    Management believes that the improvement in collections, lower inventory levels and expense reductions demonstrates significant progress towards resolving the issues previously affecting the Corporation's performance. Subject to unforeseen change in the general economy, management expects to continue to reduce costs, as well as improve operating efficiencies and performance levels even in the face of a weak economic climate.

Impact of Recently Issued Accounting Standards

    In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 141,Business Combinations, and Statement No. 142,Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FAS Statement No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

    The Corporation is required to adopt the provisions of Statement 141 immediately and Statement 142 effective January 1, 2002. Furthermore, goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination completed after June 30, 2001, but before Statement 142 is adopted in full will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be

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amortized and tested for impairment in accordance with the appropriate pre-Statement 142 accounting requirements prior to the adoption of Statement 142.

    Statement 141 will require upon adoption of Statement 142, that the Corporation evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Corporation will be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Corporation will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

    In connection with the Statement 142 transitional goodwill impairment evaluation, the Corporation will perform an assessment of whether goodwill and equity-method goodwill is impaired as of the date of adoption. To accomplish this, the Corporation must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Corporation will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Corporation must perform the second step of the transitional impairment test. In the second step, the Corporation must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Corporation's statement of earnings.

    As of the date of adoption, the Corporation expects to have unamortized goodwill in the amount of approximately $470 million and unamortized identifiable intangible assets in the amount of approximately $10 million, all of which will be subject to the transition provisions of Statements 141 and 142. Amortization expense related to goodwill was approximately $15 million and $12 million for the year ended December 31, 2000 and the nine months ended September 30, 2001, respectively.

    Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Corporation's financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle.

    In July 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations, which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity will capitalize a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The standard is effective for fiscal years beginning after June 15, 2002, with earlier adoption permitted. The Corporation has not yet determined the impact, if any, of adopting this standard.

    In October 2001, the FASB issued Statement No. 144,Accounting for the Impairment of Disposal of Long-Lived Assets. Statement 144 supercedes Statement 121,Accounting for the Impairment of Long-

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Lived Assets and for Long-Lived Assets to Be Disposed Of. Statement 144 applies to all long-lived assets (including discontinued operations) and consequently amends APB Opinion No. 30,Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Statement 144 develops an accounting model for long-lived assets that are to be disposed of by sale. It requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. The Corporation will adopt Statement 144 effective January 1, 2002. The Corporation has not determined the impact, if any, of the adoption of Statement 144.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    For the period ended September 30, 2001, the Corporation did not experience any material changes in market risk that affect the quantitative and qualitative disclosures presented in its Annual Report on Form 10-K for the fiscal year ended December 31, 2000.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

    See Note 9, "Contingencies," to the condensed consolidated financial statements included herein.

Item 5.  Other Information

(a)

See "Cautionary Statement Regarding Forward-Looking Statements" included herein.

Item 6.  Exhibits and Reports on Form 8-K

(a)

The following exhibits are filed as part of this Report:

10.1

Pension Restoration Plan, as amended, effective December 31, 2001.

10.2

Form of executive officers employment agreement.

10.3

Termination letter to Five-Year Credit Agreement among the Corporation, Wachovia Bank, N.A., as agent, and certain lenders.

10.4

Receivables Purchase Agreement, dated September 21, 2001 among TBSPV, Inc., as seller, the Corporation, as master servicer, Blue Ridge Asset Funding Corporation, as Purchaser and Wachovia Bank, N.A., as administrative agent.

10.5

Receivables Contribution Agreement, dated September 21, 2001, between the Corporation and TBSPV, Inc.

10.6

Intercreditor Agreement dated September 21, 2001 among Wachovia Bank, N.A., as securitization agent and as agent, TBSPV, Inc. and the Corporation.

12

Statement re Computation of Ratio of Earnings to Fixed Charges

(b)

Reports on Form 8-K

On July 25, 2001, the Corporation filed a Current Report on Form 8-K, Items 5, 7 and 9, related to the Corporation's July 24, 2001 conference call with analysts in which the Corporation discussed its financial results for the fiscal quarter ended July 1, 2001.

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THOMAS & BETTS CORPORATION

SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THOMAS & BETTS CORPORATION (Registrant)
November 8, 2001	/s/ JOHN P. MURPHY   John P. Murphy Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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QuickLinks

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SUPPLEMENTAL SEQUENTIAL QUARTERLY COMPARISON
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K