Thomas & Betts 10Q 2007 Q2 Quarterly report

Thomas & Betts (TNB) Inactive 10-Q2007 Q2 Quarterly report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


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


		For the quarterly period ended June 30, 2007


or


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


		For the transition period from to

Commission file number 1-4682

Thomas & Betts Corporation

(Exact name of registrant as specified in its charter)


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

8155 T&B Boulevard
Memphis, Tennessee		38125
(Address of principal executive offices)		(Zip Code)

(901) 252-8000

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No þ

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


		Outstanding Shares
Title of Each Class		at August 1, 2007

Common Stock, $.10 par value		57,823,947

Thomas & Betts Corporation and Subsidiaries

TABLE OF CONTENTS


		Page

PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements — Unaudited:		3
	Consolidated Statements of Operations for the Quarters and Six Months Ended June 30, 2007 and June 30, 2006		3
	Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006		4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and June 30, 2006		5
	Notes to Consolidated Financial Statements		6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		26

ITEM 4.	Controls and Procedures		27

PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings		27
ITEM 1A.	Risk Factors		27
ITEM 2.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		27
ITEM 4.	Submission of Matters to a Vote of Security Holders		28
ITEM 6.	Exhibits		28
SIGNATURE			29
EXHIBIT INDEX			30
Statement Re Computation of Ratio of Earnings to Fixed Charges
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a)
Certification of Principal Executive Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b)
Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b)

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

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


• “achieve”	• “anticipates”	• “intends”
• “should”	• “expects”	• “predict”
• “could”	• “might”	• “will”
• “may”	• “believes”	• other similar expressions

Many factors could affect our future financial condition or results of operations. Accordingly, actual results, performance or achievements may differ materially from those expressed or implied by the forward-looking statements contained in this Report. We undertake no obligation to revise any forward-looking statement included in the Report to reflect any future events or circumstances.


^(a)		These risks and uncertainties, which are further explained in Item 1A. Risk Factors in ourForm 10-K for the year ended December 31, 2006, include:


	•	negative economic conditions could have a material adverse effect on our operating results and financial condition;

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

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

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

PART I. FINANCIAL INFORMATION


Item 1.	*Financial Statements*

Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)


	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Net sales	$	507,238		$	467,879		$	981,790		$	909,681
Cost of sales		352,644			326,007			682,361			631,526

Gross profit		154,594			141,872			299,429			278,155
Selling, general and administrative		84,532			81,772			171,861			160,300

Earnings from operations		70,062			60,100			127,568			117,855
Income from unconsolidated companies		213			361			243			535
Interest expense, net		(3,446	)		(3,708	)		(6,997	)		(7,175	)
Other (expense) income, net		640			977			480			1,163

Earnings before income taxes		67,469			57,730			121,294			112,378
Income tax provision		20,916			16,742			37,601			32,590

Net earnings	$	46,553		$	40,988		$	83,693		$	79,788

Earnings per share:
Basic	$	0.81		$	0.67		$	1.44		$	1.30
Diluted	$	0.80		$	0.66		$	1.42		$	1.28
Average shares outstanding:
Basic		57,649			61,093			58,191			61,159
Diluted		58,459			62,133			58,980			62,262

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

Thomas & Betts Corporation and Subsidiaries

Consolidated Balance Sheets
(In thousands)
(Unaudited)


	June 30,			December 31,
	2007			2006
ASSETS
Current Assets:
Cash and cash equivalents	$	338,152		$	370,968
Marketable securities		239			371
Receivables, net		261,946			204,270
Inventories:
Finished goods		101,151			107,786
Work-in-process		30,958			27,408
Raw materials		94,138			83,342

Total inventories		226,247			218,536

Deferred income taxes		54,100			60,611
Prepaid expenses		12,271			13,614

Total Current Assets		892,955			868,370

Property, plant and equipment:
Land		17,809			17,042
Buildings		186,984			183,323
Machinery and equipment		630,569			621,272
Construction-in-progress		17,094			14,409

Gross property, plant and equipment		852,456			836,046
Less accumulated depreciation		(588,135	)		(568,846	)

Net property, plant and equipment		264,321			267,200

Goodwill		498,396			490,210
Investments in unconsolidated companies		115,178			115,726
Deferred income taxes		42,414			42,811
Prepaid pension plan costs		6,997			6,590
Other assets		40,697			39,316

Total Assets	$	1,860,958		$	1,830,223


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	115,537		$	719
Accounts payable		163,081			144,844
Accrued liabilities		106,545			96,611
Income taxes payable		4,876			6,355

Total Current Liabilities		390,039			248,529

Long-Term Liabilities:
Long-term debt		272,359			386,912
Accrued pension plan liability		45,795			46,028
Deferred income taxes		10,491			10,376
Other long-term liabilities		64,243			70,019
Contingencies (Note 10)
Shareholders’ Equity:
Common stock		5,747			5,924
Additional paid-in capital		195,042			294,502
Retained earnings		902,474			818,781
Accumulated other comprehensive income		(25,232	)		(50,848	)

Total Shareholders’ Equity		1,078,031			1,068,359

Total Liabilities and Shareholders’ Equity	$	1,860,958		$	1,830,223

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

Thomas & Betts Corporation and Subsidiaries

Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)


	Six Months Ended
	June 30,
	2007			2006

Cash Flows from Operating Activities:
Net earnings	$	83,693		$	79,788
Adjustments:
Depreciation and amortization		25,116			24,074
Deferred income taxes		13,235			10,008
Share-based compensation expense		8,272			4,195
Incremental tax benefits from share-based payments		(5,062	)		(8,705	)
Changes in operating assets and liabilities, net:
Receivables		(52,440	)		(54,324	)
Inventories		(4,351	)		(26,813	)
Accounts payable		15,047			5,209
Accrued liabilities		8,588			(8,628	)
Income taxes payable		(1,742	)		(6,364	)
Other		434			10,851

Net cash provided by (used in) operating activities		90,790			29,291

Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(17,628	)		(22,326	)
Proceeds from sale of property, plant and equipment		161			172
Marketable securities acquired		(2	)		(121,664	)
Proceeds from marketable securities		137			413,314

Net cash provided by (used in) investing activities		(17,332	)		269,496

Cash Flows from Financing Activities:
Repurchase of common shares		(132,958	)		(166,554	)
Stock options exercised		18,778			46,765
Repayment of long-term debt and other borrowings		(197	)		(150,255	)
Incremental tax benefits from share-based payments		5,062			8,705

Net cash provided by (used in) financing activities		(109,315	)		(261,339	)

Effect of exchange-rate changes on cash		3,041			1,248

Net increase (decrease) in cash and cash equivalents		(32,816	)		38,696
Cash and cash equivalents, beginning of period		370,968			216,742

Cash and cash equivalents, end of period	$	338,152		$	255,438

Cash payments for interest	$	13,760		$	18,797
Cash payments for income taxes	$	26,678		$	26,413

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

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)


1.	Basis of Presentation

In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary for the fair presentation of the Corporation’s financial position as of June 30, 2007 and December 31, 2006 and the results of operations and cash flows for the periods ended June 30, 2007 and 2006.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Corporation’s Annual Report onForm 10-K for the fiscal year ended December 31, 2006. The results of operations for the periods ended June 30, 2007 and 2006 are not necessarily indicative of the operating results for the full year.

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


2.	Basic and Diluted Earnings Per Share

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


	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006

(In thousands, except per share data)
Net earnings	$	46,553	$	40,988	$	83,693	$	79,788

Basic shares:
Average shares outstanding		57,649		61,093		58,191		61,159

Basic earnings per share	$	0.81	$	0.67	$	1.44	$	1.30

Diluted shares:
Average shares outstanding		57,649		61,093		58,191		61,159
Additional shares on the potential dilution from stock options and nonvested restricted stock		810		1,040		789		1,103

		58,459		62,133		58,980		62,262

Diluted earnings per share	$	0.80	$	0.66	$	1.42	$	1.28

The Corporation had stock options that were out-of-the-money which were excluded because of their anti-dilutive effect. Such out-of-the-money options were 0.3 million shares of common stock for the second quarter of 2007 and 0.7 million shares of common stock for the second quarter of 2006. Out-of-the-money options were 0.3 million shares of common stock for the first six months of 2007 and 0.5 million shares of common stock for the first six months of 2006.

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)


3.	Share-Based Payment Arrangements

Share-based compensation expense, net of tax, of $1.9 million ($0.03 per basic and diluted share) was charged against income during the second quarter of 2007 and $1.5 million ($0.03 per basic and diluted share) was charged against income during the second quarter of 2006. Share-based compensation expense, net of tax, of $5.1 million ($0.09 per basic and diluted share) was charged against income during the first six months of 2007 and $2.6 million ($0.04 per basic and diluted share) was charged against income during the first six months of 2006.

During the second quarter of 2007, the Corporation, under its Non-Employee Directors Equity Compensation Plan, granted non-employee members of the Board of Directors a total of 8,028 shares of common stock with a grant date fair value of $56.00 that vested upon issuance. The stock awards were in lieu of stock option awards. Compensation expense, net of tax, of $0.3 million associated with these stock awards was recognized as of the grant date and expensed to SG&A.

Share-based compensation expense, net of tax, for the full year 2006 was $7.4 million ($0.12 per basic and diluted share) for stock options and nonvested restricted stock. The Corporation does not anticipate a significant change in share-based compensation expense, net of tax, for the full year 2007.

During the first six months of 2007, the Corporation granted 404,282 stock options with a weighted average grant date fair value of $16.92 and had 677,845 stock options exercised at a weighted average exercise price of $27.71. Also, during the first six months of 2007, the Corporation granted 135,645 shares of nonvested restricted stock with a weighted average grant date fair value of $48.43.


4.	Income Taxes

The Corporation’s income tax provision for the quarter ended June 30, 2007 was $20.9 million, or an effective rate of 31% of pre-tax income, compared to a tax provision in the quarter ended June 30, 2006 of $16.7 million, or an effective rate of 29% of pre-tax income. The Corporation’s income tax provision for the first six months of 2007 was $37.6 million, or an effective rate of 31% of pre-tax income, compared to a tax provision in the first six months of 2006 of $32.6 million, or an effective rate of 29% of pre-tax income. The increase in the effective rate over the prior-year periods reflects the effect of a net increase in U.S. income taxes on the Corporation’s overall blended tax rate. The effective rate for both years reflects benefits from our Puerto Rican manufacturing operations which has a significantly lower effective tax rate than the Corporation’s overall blended tax rate.

The Corporation had net deferred tax assets totaling $86.0 million as of June 30, 2007 and $93.0 million as of December 31, 2006. Realization of the deferred tax assets is dependent upon the Corporation’s ability to generate sufficient future taxable income. Management believes that it is more-likely-than-not that future taxable income, based on tax laws in effect as of June 30, 2007, will be sufficient to realize the recorded deferred tax assets, net of any valuation allowance.

On January 1, 2007, the Corporation adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income tax positions recognized in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 requires that an enterprise must determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes,

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)

based on the technical merits of the position. A tax position that meets the more-likely-than-not threshold is then measured to determine the amount of benefit to recognize in the financial statements. The adoption of FIN 48 had no impact on the Corporation. The Corporation examined its tax positions for all open tax years and the full benefit of each tax position taken has been recognized in the financial statements in accordance with FIN 48. On any future tax positions, the Corporation intends to record interest and penalties, if any, as a component of income tax expense.

The Corporation’s tax years are open for all U.S. state and federal jurisdictions from 2003 through 2006. Certain state tax years remain open for 2001 and 2002 filings. International statutes vary widely and the open years range from 2001 through 2006. Taxing authorities have the ability to review prior tax years to the extent net operating loss and tax credit carryforwards relate to open tax years.


5.	Comprehensive Income

Total comprehensive income and its components are as follows:


	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

(In thousands)
Net income	$	46,553		$	40,988		$	83,693		$	79,788
Foreign currency translation adjustments		20,936			11,272			23,583			12,726
Unrealized gains (losses) on marketable securities, net of tax		(1	)		(3	)		(2	)		(7	)
Amortization of unrecognized pension and other postretirement costs, net of tax		1,035			—			2,035			—

Comprehensive income	$	68,523		$	52,257		$	109,309		$	92,507


6.	Derivative Instruments

The Corporation is exposed to market risk from changes in raw material prices, interest rates and foreign-exchange rates. At times, the Corporation may enter into various derivative instruments to manage certain of those risks. The Corporation does not enter into derivative instruments for speculative or trading purposes.

Commodities Futures Contracts

As of June 30, 2007 and December 31, 2006, the Corporation had no outstanding commodities futures contracts. The Corporation is exposed to risk from fluctuating prices for certain materials used to manufacture its products, such as: steel, aluminum, copper, zinc, resins and rubber compounds. At times, some of the risk associated with usage of aluminum, copper and zinc has been mitigated through the use of futures contracts that fix the price the Corporation paid for a commodity. Mark-to-market gains and losses for commodities futures, if any, were recorded in cost of sales. Cost of sales reflects a gain of $0.3 million for the second quarter of 2006 and a loss of $0.5 million for the first six months of 2006, related to mark-to-market adjustments for commodities futures contracts.

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)

Interest Rate Swap Agreements

As of June 30, 2007 and December 31, 2006, the Corporation had no outstanding interest rate swap agreements, which results in all of its outstanding unsecured notes having fixed interest rates. In certain past periods, the Corporation has entered into interest rate swap agreements that effectively converted fixed interest rates associated with certain of its debt securities to floating interest rates. The interest rate swaps qualified for the short-cut method of accounting for a fair valued hedge under SFAS No. 133. The amount to be paid or received under the interest rate swap agreements was recorded as a component of net interest expense. Interest expense, net includes expense of $0.3 million and $0.5 million associated with interest rate swap agreements for the quarter ended June 30, 2006 and first six months of 2006, respectively.

Forward Foreign Exchange Contracts

The Corporation had no outstanding forward sale or purchase contracts as of June 30, 2007 and December 31, 2006. From time to time, the Corporation utilizes forward foreign exchange contracts for the sale or purchase of foreign currencies.


7.	Debt

The Corporation’s long-term debt at June 30, 2007 and December 31, 2006 was:


	June 30,		December 31,
	2007		2006

(In thousands)
Unsecured notes
6.63% Notes due 2008	$	114,888	$	114,821
6.39% Notes due 2009		149,913		149,887
7.25% Notes due 2013		120,562		120,192
Other, including capital leases		2,533		2,731

Long-term debt (including current maturities)		387,896		387,631
Less current portion		115,537		719

Long-term debt	$	272,359	$	386,912

The indentures underlying the unsecured notes above contain standard covenants such as restrictions on mergers, liens on certain property, sale-leaseback of certain property and funded debt for certain subsidiaries. The indentures also include standard events of default such as covenant default and cross-acceleration.

The Corporation has a $300 million committed revolving credit facility that contains customary covenants which could potentially restrict the payment of dividends, investments, liens, issuing certain types of additional debt and the disposition of assets if the Corporation fails to maintain its financial covenants and certain minimum levels of total availability under the facility. The Corporation pays an annual commitment fee of 10 basis points to maintain this facility. Any borrowings outstanding as of December 2011 would mature on that date. No borrowings were outstanding under this facility as of June 30, 2007 and December 31, 2006.

Outstanding letters of credit which reduced availability under the credit facility amounted to $22.4 million at June 30, 2007. The letters of credit relate primarily to third-party insurance claims processing.

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)

The Corporation has a EUR10 million (approximately US $13 million) committed revolving credit facility with a European bank. The Corporation pays an annual unused commitment fee of 20 basis points on the undrawn balance to maintain this facility. This credit facility contains standard covenants similar to those contained in the $300 million credit agreement and standard events of default such as covenant default and cross-default. This facility has an indefinite maturity and no borrowings were outstanding as of June 30, 2007 and December 31, 2006.

Outstanding letters of credit which reduced availability under the European credit facility amounted to $0.4 million at June 30, 2007.

As of June 30, 2007, the Corporation’s aggregate availability of funds under its credit facilities is approximately $290.7 million, after deducting outstanding letters of credit. The Corporation has the option, at the time of drawing funds under any of the credit facilities, of selecting an interest rate based on a number of benchmarks including LIBOR, the federal funds rate, or the prime rate of the agent bank.


8.	Pension and Other Postretirement Benefits

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


	Quarter Ended
	Pension Benefits						Other Postretirement Benefits
	June 30,			June 30,			June 30,			June 30,
	2007			2006			2007			2006

(In thousands)
Service cost	$	2,506		$	2,578		$	(2	)	$	43
Interest cost		5,598			5,509			246			250
Expected return on plan assets		(7,765	)		(7,360	)		—			—
Plan net loss (gain)		968			1,611			181			150
Prior service cost (gain)		270			233			(56	)		(50	)
Transition obligation (asset)		(4	)		(5	)		189			194
				��
Net periodic pension cost	$	1,573		$	2,566		$	558		$	587

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)


	Six Months Ended
	Pension Benefits						Other Postretirement Benefits
	June 30,			June 30,			June 30,			June 30,
	2007			2006			2007			2006

(In thousands)
Service cost	$	5,476		$	5,171		$	59		$	87
Interest cost		10,914			10,741			490			500
Expected return on plan assets		(14,839	)		(14,291	)		—			—
Plan net loss (gain)		2,085			3,105			281			300
Prior service cost (gain)		529			471			(112	)		(100	)
Transition obligation (asset)		(8	)		(13	)		383			388

Net periodic pension cost	$	4,157		$	5,184		$	1,101		$	1,175

Contributions to our qualified pension plans during the quarters and six months ended June 30, 2007 and 2006 were not significant. We expect required contributions during the remainder of 2007 to our qualified pension plans to be minimal.


9.	Segment Disclosures

The Corporation has three reportable segments: Electrical, Steel Structures and HVAC. The Electrical segment designs, manufactures and markets thousands of different electrical connectors, components and other products for electrical, utility and communications applications. The Steel Structures segment designs, manufactures and markets highly engineered tubular steel transmission and distribution poles. We also market lattice steel transmission towers for North American power and telecommunications companies which we currently source from third parties. The HVAC segment designs, manufactures and markets heating and ventilation products for commercial and industrial buildings.

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)

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


	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

(In thousands)
Net Sales
Electrical	$	418,033		$	383,273		$	807,199		$	741,122
Steel Structures		57,082			51,457			110,112			104,185
HVAC		32,123			33,149			64,479			64,374

Total	$	507,238		$	467,879		$	981,790		$	909,681

Segment Earnings
Electrical	$	73,155		$	63,640		$	138,056		$	121,879
Steel Structures		8,880			7,013			17,782			15,345
HVAC		4,183			4,742			8,892			8,893

Segment earnings		86,218			75,395			164,730			146,117
Corporate expense		(15,943	)		(14,934	)		(36,919	)		(27,727	)
Interest expense, net		(3,446	)		(3,708	)		(6,997	)		(7,175	)
Other (expense) income, net		640			977			480			1,163

Earnings before income taxes	$	67,469		$	57,730		$	121,294		$	112,378


10.	Contingencies

Legal Proceedings

Kaiser Litigation

By July 2000, Kaiser Aluminum, its property insurers, 28 Kaiser injured workers, nearby businesses and a class of 18,000 residents near the Kaiser facility in Louisiana, filed product liability and business interruption cases against the Corporation and nine other defendants in Louisiana state court seeking damages in excess of $550 million. These cases alleged that a Thomas & Betts cable tie mounting base failed, thereby allowing bundled cables to come in contact with a 13.8 kV energized bus bar. This alleged electrical fault supposedly initiated a series of events culminating in an explosion, which leveled 600 acres of the Kaiser facility.

A trial in the fall 2001 resulted in a jury verdict in favor of the Corporation. However, 13 months later, the trial court overturned that verdict in granting plaintiffs’ motions for judgment notwithstanding the verdict. In December 2002, the trial court judge found the Thomas & Betts product, an adhesive backed mounting base, to be unreasonably dangerous and therefore assigned 25% fault to Thomas & Betts. The judge set the damages for an injured worker at $20 million and the damages for Kaiser at $335 million. The judgment did not address damages for nearby

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)

businesses or the class of 18,000 residents near the Kaiser facility. The Corporation’s 25% allocation was $88.8 million, plus legal interest. The Corporation appealed to the Louisiana Court of Appeals, an intermediate appellate court. The appeal required a bond in the amount of $104 million (the judgment plus legal interest). Plaintiffs successfully moved the trial court to increase the bond to $156 million. The Corporation’s liability insurers secured the $156 million bond. As a result of court decisions, such bonds have subsequently been released.

In 2004, the Corporation and the class of 18,000 residents reached a court-approved settlement. The settlement extinguished the claims of all class members and included indemnity of the Corporation against future potential claims asserted by class members or those class members who opted out of the settlement process. The $3.75 million class settlement amount was paid directly by an insurer of the Corporation.

In March 2006, the Louisiana Court of Appeals unanimously reversed the trial court’s decision and reinstated the jury verdict of no liability in favor of the Corporation. In April 2006, the Kaiser plaintiffs filed with the Louisiana Supreme Court an appeal of the Court of Appeals decision. In May 2006, the Louisiana Supreme Court refused to accept the plaintiffs appeal. The Louisiana Supreme Court let stand the appellate court decision to reinstate the jury verdict of no liability in favor of the Corporation. In August 2006, the plaintiffs initiated a new appeal of the original jury verdict. The Court of Appeals dismissed that appeal. In January 2007, the Kaiser plaintiffs filed an additional motion for a new trial at the trial court level. The Corporation contests this attempt to relitigate resolved issues.

The injured worker who was a separate plaintiff and whose earlier judgment against the Corporation was reversed sought relief from the trial court arguing that Thomas & Betts never appealed the $20 million award the injured worker received. The trial court agreed, but the Louisiana Court of Appeals immediately reversed that decision. The injured worker then appealed this ruling to the Louisiana Supreme Court, which refused to hear the appeal. In January 2007, the injured worker petitioned the United States Supreme Court for a hearing on his claim. The United States Supreme Court refused to accept this petition. This injured worker joined the Kaiser plaintiffs’ motion for a new trial. The Corporation continues to contest these further legal actions.

Other Legal Matters

The Corporation is also involved in legal proceedings and litigation arising in the ordinary course of business. In those cases where we are the defendant, plaintiffs may seek to recover large and sometimes unspecified amounts or other types of relief and some matters may remain unresolved for several years. Such matters may be subject to many uncertainties and outcomes which are not predictable with assurance. We consider the gross probable liability when determining whether to accrue for a loss contingency for a legal matter. We have provided for losses to the extent probable and estimable. The legal matters that have been recorded in our consolidated financial statements are based on gross assessments of expected settlement or expected outcome. Additional losses, even though not anticipated, could have a material adverse effect on our financial position, results of operations or liquidity in any given period.

Guarantee and Indemnification Arrangements

The Corporation follows the provisions of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The Interpretation requires the Corporation to recognize the fair value of guarantee and

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)

indemnification arrangements issued or modified by the Corporation, if these arrangements are within the scope of that Interpretation. In addition, under previously existing generally accepted accounting principles, the Corporation continues to monitor the conditions that are subject to the guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under the guarantees and indemnifications when those losses are estimable.

The Corporation generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time and usage of the product depending on the nature of the product, the geographic location of its sale and other factors. The accrued product warranty costs are based primarily on historical experience of actual warranty claims as well as current information on repair costs.

The following table provides the changes in the Corporation’s accruals for estimated product warranties:


	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

(In thousands)
Balance at beginning of period	$	1,341		$	1,578		$	1,737		$	1,478
Liabilities accrued for warranties issued during the period		339			301			622			563
Deductions for warranty claims paid during the period		(387	)		(236	)		(1,232	)		(540	)
Changes in liability for pre-existing warranties during the period, including expirations		119			127			285			269

Balance at end of period	$	1,412		$	1,770		$	1,412		$	1,770

In conjunction with the divestiture of the Corporation’s Electronics OEM business to Tyco Group S.A.R.L. in July 2000, the Corporation provided an indemnity to Tyco associated with environmental liabilities that were not known as of the sale date. Under this indemnity, the Corporation continues to be liable for certain subsequently identified environmental claims up to $2 million. To date, environmental claims by Tyco have been negligible.


11.	Share Repurchase Plans

In July 2006, the Corporation’s Board of Directors approved a share repurchase plan that authorized the Corporation to buy up to 3,000,000 of its common shares. During May 2007, the Corporation repurchased, through open-market transactions, 500,000 common shares with available cash resources that completed all common share repurchases authorized by the July 2006 plan.

In March 2007, the Corporation’s Board of Directors approved a share repurchase plan that authorizes the Corporation to buy an additional 3,000,000 of its common shares. During May and June 2007, the Corporation repurchased, through open-market transactions, 200,700 common shares with available cash resources leaving 2,799,300 shares that can be repurchased under this authorization. The timing of future repurchases, if any, will depend upon a variety of factors including market conditions. This authorization expires in March 2009.

Thomas & Betts Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited) — (Continued)


12.	Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Corporation has not yet evaluated the impact, if any, of this requirement.

Effective December 31, 2006, the Corporation adopted the recognition and disclosure provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” requiring recognition of the overfunded or underfunded status of benefit plans on its balance sheet. SFAS No. 158 also eliminates the use of “early measurement dates” to account for certain of the Corporation’s pension and other postretirement plans effective December 31, 2008. The Corporation has not yet evaluated the impact of eliminating the use of early measurement dates.

In February 2007, the Financial Accounting Standards Board issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities — Including an amendment of FASB Statement No. 115.” SFAS No. 159 gives companies the option to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for financial statements for fiscal years beginning after November 15, 2007. The Corporation has not yet evaluated the impact, if any, of this requirement.


13.	Subsequent Events

On July 25, 2007, the Corporation acquired the Joslyn Hi-Voltage and Power Solutions businesses from Danaher Corporation for $280 million in cash. Joslyn Hi-Voltage offers a broad range of high voltage electric switches, reclosers, vacuum interruptor attachments and related products used mainly by electric utilities. Power Solutions offers a broad range of products and services designed to ensure a high quality, reliable flow of power to commercial and industrial customers for mission critical applications such as datacenters.

On July 6, 2007, the Corporation acquired Drilling Technical Supply SA (DTS), a privately held French manufacturer of explosion-proof lighting and electrical protection equipment, for approximately $20 million.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

Executive Overview

Introduction

Thomas & Betts Corporation is a leading designer and manufacturer of electrical components used in industrial, commercial, communications and utility markets. We are also a leading producer of highly engineered steel structures, used primarily for utility transmission, and commercial heating units. We have operations in approximately 20 countries. Manufacturing, marketing and sales activities are concentrated primarily in North America and Europe.

Critical Accounting Policies

The preparation of financial statements contained in this report requires the use of estimates and assumptions to determine certain amounts reported as net sales, costs, expenses, assets or liabilities and certain amounts disclosed as contingent assets or liabilities. Actual results may differ from those estimates or assumptions. Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements in our Annual Report onForm 10-K for the fiscal year ended December 31, 2006. We believe our critical accounting policies include the following:


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

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

	•	Goodwill and Other Intangible Assets: We follow the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires a transitional and annual test of goodwill and indefinite lived assets associated with reporting units for indications of impairment. With the assistance of a third party valuation firm, the Corporation performs its annual impairment assessment in the fourth quarter of each year, unless circumstances dictate more


		frequent assessments. Indications of impairment require significant judgment by management. Under the provisions of SFAS No. 142, each test of goodwill requires that we determine the fair value of each reporting unit, and compare the fair value 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 a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date.


	•	Long-Lived Assets: We follow the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 establishes accounting standards for the impairment of long-lived assets such as property, plant and equipment and intangible assets subject to amortization. For purposes of recognizing and measuring impairment of long-lived assets, the Corporation evaluates assets at the lowest level of identifiable cash flows for associated product groups. The Corporation reviews long-lived assets to beheld-and-used for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Indications of impairment require significant judgment by management. If the sum of the undiscounted expected future cash flows over the remaining useful life of the primary asset in the associated product groups is less than the carrying amount of the assets, the assets are considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. When fair values are not available, we estimate fair values using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

	•	Pension and Postretirement Benefit Plan Actuarial Assumptions: We follow the provisions of SFAS No. 87, “Employers’ Accounting for Pensions,” SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other than Pensions,” SFAS No. 132 (Revised), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” and SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” For purposes of calculating pension and postretirement medical benefit obligations and related costs, the Corporation uses certain actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expenseand/or liability measurement. We evaluate these assumptions annually. Other assumptions include employee demographic factors (retirement patterns, mortality and turnover), rate of compensation increase and the healthcare cost trend rate. See additional information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations — Qualified Pension Plans in our Annual Report onForm 10-K for the fiscal year ended December 31, 2006.

	•	Income Taxes: We use the asset and liability method of accounting for income taxes. This method recognizes the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities and provides a valuation allowance based on a more-likely-than-not criteria. The Corporation has valuation allowances for deferred tax assets primarily associated with foreign net operating loss carryforwards and foreign income tax credit carryforwards. Realization of the deferred tax assets is dependent upon the Corporation’s ability to generate sufficient future taxable income. Management believes that it is


		more-likely-than-not that future taxable income, based on enacted tax law in effect as of June 30, 2007, will be sufficient to realize the recorded deferred tax assets net of existing valuation allowances.


	•	Environmental Costs: Environmental expenditures that relate to current operations are expensed or capitalized, as appropriate. Remediation costs that relate to an existing condition caused by past operations are accrued when it is probable that those costs will be incurred and can be reasonably estimated based on evaluations of current available facts related to each site. The operation of manufacturing plants involves a high level of susceptibility in these areas, and there is no assurance that we will not incur material environmental or occupational health and safety liabilities in the future. Moreover, expectations of remediation expenses could be affected by, and potentially significant expenditures could be required to comply with, environmental regulations and health and safety laws that may be adopted or imposed in the future. Future remediation technology advances could adversely impact expectations of remediation expenses.

2007 Outlook

We expect mid-to-high single-digit sales growth for the full year 2007 compared to 2006, driven primarily by volume gains and, to a lesser degree, price increases to offset higher material and energy costs. Given this sales expectation, we are increasing our earnings guidance to between $3.15 to $3.20 per diluted share for the full year 2007 from $3.05 to $3.15 per diluted share. This guidance includes an eight cent per share legal settlement charge taken in the first quarter and the effect of the Corporation’s share repurchase activity. This guidance does not include the impact of third quarter acquisitions on sales or earnings.

Our 2007 guidance assumes:


	•	continued solid demand in most of our key markets;

	•	a less significant impact of commodity-related price increases on year-over-year sales growth in the second half;

	•	continued strength in foreign currencies versus the U.S. dollar;

	•	Steel Structures segment sales of approximately $55 million per quarter;

	•	Corporate expense of approximately $14 million per quarter for the balance of the year;

	•	a 31% effective income tax rate; and,

	•	approximately 58 million fully diluted average shares outstanding for each of the remaining quarters this year.

In July 2007, the Corporation acquired the Joslyn Hi-Voltage and Power Solutions businesses from Danaher Corporation for $280 million and Drilling Technical Supply SA (DTS) for approximately $20 million. We expect these acquisitions to contribute approximately $70 million to full year 2007 sales and have negligible net impact to earnings per share due in part to the amortization of significant acquisition-related intangible assets.

We expect capital expenditures to be $45-$50 million for the full year 2007. Capital expenditures in 2007 include investment to expand tubular steel structures sales capacity by$15-$20 million annually beginning in 2008.

The key risks we may face for the remainder of 2007 include the potential negative impact of rising and volatile commodity and energy costs and higher interest rates on capital spending in the markets we serve.

Summary of Consolidated Results


	Quarter Ended June 30,
	2007						2006
				% of Net						% of Net
	In Thousands			Sales			In Thousands			Sales

Net sales	$	507,238			100.0		$	467,879			100.0
Cost of sales		352,644			69.5			326,007			69.7

Gross profit		154,594			30.5			141,872			30.3
Selling, general and administrative		84,532			16.7			81,772			17.5

Earnings from operations		70,062			13.8			60,100			12.8
Income from unconsolidated companies		213			0.1			361			0.1
Interest expense, net		(3,446	)		(0.7	)		(3,708	)		(0.8	)
Other (expense) income, net		640			0.1			977			0.2

Earnings before income taxes		67,469			13.3			57,730			12.3
Income tax provision		20,916			4.1			16,742			3.5

Net earnings	$	46,553			9.2		$	40,988			8.8

Earnings per share:
Basic	$	0.81					$	0.67

Diluted	$	0.80					$	0.66


	Six Months Ended June 30,
	2007						2006
				% of Net						% of Net
	In Thousands			Sales			In Thousands			Sales

Net sales	$	981,790			100.0		$	909,681			100.0
Cost of sales		682,361			69.5			631,526			69.4

Gross profit		299,429			30.5			278,155			30.6
Selling, general and administrative		171,861			17.5			160,300			17.6

Earnings from operations		127,568			13.0			117,855			13.0
Income from unconsolidated companies		243			—			535			0.1
Interest expense, net		(6,997	)		(0.7	)		(7,175	)		(0.8	)
Other (expense) income, net		480			0.1			1,163			0.1

Earnings before income taxes		121,294			12.4			112,378			12.4
Income tax provision		37,601			3.9			32,590			3.6

Net earnings	$	83,693			8.5		$	79,788			8.8

Earnings per share:
Basic	$	1.44					$	1.30

Diluted	$	1.42					$	1.28

2007 Compared with 2006

Overview

Net sales in the second quarter and in the first six months of 2007 increased from the respective prior-year periods for the Corporation. The increase in net sales for both periods was driven primarily by volume and price increases to offset higher material and energy costs. Foreign currency also contributed to the increase in net sales for both periods.

Operating earnings in the second quarter and in first six months of 2007 were up from the respective prior-year periods. These results reflect higher sales levels and the Corporation’s continuing ability to recover higher material and energy costs through price increases. Operating earnings in the first six months of 2007 included a $7 million first quarter charge related to a legal settlement involving a commercial dispute on a product line we no longer market.

Second quarter 2007 earnings were $0.80 per diluted share compared to $0.66 per diluted share in the second quarter of the prior year. Earnings in the first six months of 2007 were $1.42 per diluted share compared to $1.28 per diluted share in the first six months of 2006. Earnings in the first six months of 2007 include a charge of $0.08 per share related to the first quarter legal settlement.

Net Sales and Gross Profit

Net sales in the second quarter of 2007 were $507.2 million, up $39.4 million, or 8.4%, from the prior-year period. Favorable foreign currency exchange accounted for approximately $7.5 million of the increase. For the first six months of 2007, net sales were $981.8 million, up $72.1 million, or 7.9%, from the prior-year period. Favorable foreign currency exchange accounted for approximately $12.5 million of the increase. The net sales increase was driven primarily by higher sales volume and price increases to offset higher material and energy costs for both the quarter and year to date periods.

Gross profit in the second quarter and first six months of 2007 was 30.5% of net sales, which is comparable with the respective prior-year periods. The Corporation continues to offset higher material and energy costs with increased selling prices. Costs related to the consolidation of a manufacturing facility and relocation of production lines to another company facility negatively impacted the second quarter and first six months of 2007 by approximately $2 million.

Expenses

Selling, general and administrative (SG&A) expense in the second quarter of 2007 was 16.7% of net sales compared to 17.5% of net sales in the prior-year period. For the first six months of 2007, SG&A expense was 17.5% of net sales compared to 17.6% of net sales in the prior-year period. For the first six months of 2007, SG&A expense included the previously mentioned $7 million pre-tax charge related to a legal settlement in the first quarter 2007. For both the second quarters and first six months of 2007 and 2006, SG&A expense was negatively impacted by charges of $2 million for expenses related to revised estimates for certain environmental remediation. These expenses are reflected in corporate expense and did not impact segment earnings.

Interest Expense, Net

Interest expense, net for the second quarter and first six months of 2007 was down slightly from the respective prior-year periods. Interest income included in interest expense, net was $4.1 million for the second quarter of 2007 and $3.8 million for the second quarter of 2006. Interest expense was $7.5 million in the second quarter of 2007 and $7.5 million in the second quarter of 2006. Interest income included in interest expense, net was $7.7 million for the first six months of

2007 compared to $8.0 million in the prior-year period. Interest expense was $14.7 million for the first six months of 2007 compared to $15.2 million in the prior-year period. The reduction in 2007 interest expense reflects lower average debt levels.

Income Taxes

The income tax provision in the second quarter and first six months of 2007 reflected an effective rate of 31% of pre-tax income compared to an effective rate in the prior-year periods of 29%. The increase in the effective rate over the prior-year periods reflects the effect of a net increase in U.S. income taxes on the Corporation’s overall blended tax rate. The effective rate for both years reflects benefits from our Puerto Rican manufacturing operations which has a significantly lower effective tax rate than the Corporation’s overall blended tax rate.

Net Earnings

Net earnings were $46.6 million, or $0.81 per basic share and $0.80 per diluted share, in the second quarter of 2007 compared to net earnings of $41.0 million, or $0.67 per basic share and $0.66 per diluted share, in the second quarter of 2006. For the first six months of 2007, net earnings were $83.7 million, or $1.44 per basic share and $1.42 per diluted share, compared to net earnings of $79.8 million, or $1.30 per basic share and $1.28 per diluted share. Net earnings for the first six months of 2007 include the negative impact of $7 million of pre-tax expenses related to a legal settlement in the first quarter of 2007 ($0.08 per share). Net earnings per share for the first six months of 2007 also reflects a benefit from lower shares outstanding due to the Corporation’s share repurchase activity.

Summary of Segment Results

Net Sales


	Quarter Ended June 30,								Six Months Ended June 30,
	2007				2006				2007				2006
	In		% of Net		In		% of Net		In		% of Net		In		% of Net
	Thousands		Sales		Thousands		Sales		Thousands		Sales		Thousands		Sales

Electrical	$	418,033		82.4	$	383,273		81.9	$	807,199		82.2	$	741,122		81.5
Steel Structures		57,082		11.3		51,457		11.0		110,112		11.2		104,185		11.4
HVAC		32,123		6.3		33,149		7.1		64,479		6.6		64,374		7.1

	$	507,238		100.0	$	467,879		100.0	$	981,790		100.0	$	909,681		100.0

Segment Earnings


	Quarter Ended June 30,										Six Months Ended June 30,
	2007					2006					2007					2006
	In			% of Net		In			% of Net		In			% of Net		In			% of Net
	Thousands			Sales		Thousands			Sales		Thousands			Sales		Thousands			Sales

Electrical	$	73,155			17.5	$	63,640			16.6	$	138,056			17.1	$	121,879			16.4
Steel Structures		8,880			15.6		7,013			13.6		17,782			16.1		15,345			14.7
HVAC		4,183			13.0		4,742			14.3		8,892			13.8		8,893			13.8

Segment earnings		86,218			17.0		75,395			16.1		164,730			16.8		146,117			16.1
Corporate expense		(15,943	)				(14,934	)				(36,919	)				(27,727	)
Interest expense, net		(3,446	)				(3,708	)				(6,997	)				(7,175	)
Other (expense) income, net		640					977					480					1,163

Earnings before income taxes	$	67,469				$	57,730				$	121,294				$	112,378

The Corporation has three reportable segments: Electrical, Steel Structures and HVAC. We evaluate our business segments primarily on the basis of segment earnings, with segment earnings defined as earnings before interest, income taxes, corporate expense and certain other charges. Corporate expense includes legal, finance and administrative costs.

Our segment earnings are significantly influenced by the operating performance of our Electrical segment that accounted for more than 80% of our consolidated net sales and consolidated segment earnings during each of the periods presented.

Electrical Segment

Electrical segment net sales in the second quarter of 2007 increased $34.8 million, or 9.1%, from the prior-year period. For the first six months of 2007, net sales for the Electrical segment were up $66.1 million, or 8.9%, on a year-over-year basis. The net sales increases reflect higher sales volume and price increases to offset higher material and energy costs. During the second quarter and first six months of 2007, the Electrical segment experienced solid demand in its key end markets of industrial maintenance and repair, utility distribution and non-residential commercial construction. Favorable foreign currency exchange accounted for approximately $7 million of the increase for the second quarter of 2007 and approximately $11 million of the increase for the first six months of 2007.

Electrical segment earnings in the second quarter of 2007 were up $9.5 million, or 15.0%, from the prior-year period. For the first six months of 2007, Electrical segment earnings increased $16.2 million, or 13.3%, on a year-over-year basis. The earnings improvements reflect the favorable

impact of higher net sales volumes, operating efficiencies and our continued ability to offset higher material and energy costs through higher selling prices. During both the second quarter and first six months of 2007, segment earnings were negatively impacted by approximately $2 million for costs related to the consolidation of a manufacturing facility and relocation of production lines to another company facility.

Other Segments

Net sales in the second quarter of 2007 in our Steel Structures segment were up $5.6 million, or 10.9%, from the prior-year period. For the first six months of 2007, net sales increased $5.9 million, or 5.7%, on a year-over-year basis. These sales increases reflect higher sales of tubular steel structures and lower sales of lattice towers, which we source from third parties. In 2007, lattice tower sales were $0.8 million for the second quarter and $3.0 million for the first six months, approximately $6 million lower than the prior year for both periods. Steel Structures segment earnings in the second quarter of 2007 were up 26.6% to $8.9 million, or 15.6% of net sales. For the first six months of 2007, segment earnings increased 15.9% to $17.8 million, or 16.1% of net sales. The earnings growth was driven by the higher net volume and a more favorable project mix versus last year.

Net sales in our HVAC segment decreased slightly to $32.1 million in the second quarter of 2007. For the first six months of 2007, net sales were $64.5 million, essentially flat compared to the prior-year period. HVAC segment earnings in the second quarter of 2007 were down $0.6 million to $4.2 million, or 13.0% of net sales. HVAC segment earnings for the first six months of 2007 and 2006 were $8.9 million, or 13.8% of sales. The first half 2007 results reflect relatively flat market conditions.

Subsequent Events

Liquidity and Capital Resources

We had cash and cash equivalents of $338.2 million and $371.0 million at June 30, 2007 and December 31, 2006, respectively.

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


	Six Months Ended
	June 30,
	2007			2006

(In thousands)
Net cash provided by (used in) operating activities	$	90,790		$	29,291
Net cash provided by (used in) investing activities		(17,332	)		269,496
Net cash provided by (used in) financing activities		(109,315	)		(261,339	)
Effect of exchange-rate changes on cash		3,041			1,248

Net increase (decrease) in cash and cash equivalents	$	(32,816	)	$	38,696

Operating Activities

We had strong cash generation in the first six months of 2007 with cash flow from operations increasing significantly from the prior-year period. Cash provided by operating activities during the first six months of 2007 and 2006 was primarily attributable to net earnings of $83.7 million and $79.8 million, respectively, depreciation and amortization and the impact of changes in working capital. Depreciation and amortization during the first six months of 2007 and 2006 was $25.1 million and $24.1 million, respectively. Cash used for working capital declined significantly in 2007 compared to 2006. The inventory increase in 2006 reflected in part higher commodity prices, while in 2007 inventory increases have been minimal.

Investing Activities

During the first six months of 2007, we had capital expenditures totaling $17.6 million, compared to $22.3 million in the prior-year period. Additionally, during the first quarter of 2006, we converted a substantial portion of our marketable securities into cash equivalents.

Financing Activities

Cash used in financing activities included the repurchase of approximately 2.5 million common shares for approximately $133.0 million during the first six months of 2007 and 3.0 million common shares for $166.6 million during the first six months of 2006. Financing activities for the first six months of 2007 and 2006 also reflect $18.8 million and $46.8 million, respectively, of cash provided by exercised stock options. In addition, financing activities in the first six months of 2006 reflect cash used for debt repayments of $150.3 million.

$300 million Credit Facility

We have a $300 million credit agreement that contains customary covenants which could potentially restrict the payment of dividends, investments, liens, issuing certain types of additional debt and the disposition of assets if the Corporation fails to maintain its financial covenants and certain minimum levels of total availability under the facility. We have the option, at the time of drawing funds under the facility, of selecting an interest rate based on the London Interbank Offered Rate (LIBOR), the federal funds rate, or the prime rate of the agent bank. The credit facility contains the following significant financial covenants:

Consolidated Interest Coverage Ratio. The Corporation must maintain a ratio, as defined in the agreement, of no less than 3.00 to 1.00 as of the end of any fiscal quarter.

Leverage Ratio. The Corporation must maintain a ratio, as defined in the agreement, of no greater than 4.00 to 1.00 as of the end of any fiscal quarter through March 31, 2008; 3.75 to 1.00 as of the end of any fiscal quarter ending June 30, 2008 and thereafter.

At June 30, 2007, outstanding letters of credit, or similar financial instruments that reduce the amount available under the $300 million credit facility totaled $22.4 million. Letters of credit relate primarily to third-party insurance claims processing.

Other Credit Facilities

We have a EUR10 million (approximately US $13 million) committed revolving credit facility with a European bank that has an indefinite maturity. Availability under this facility is EUR10 million (approximately US $13 million) as of June 30, 2007. This credit facility contains standard covenants similar to those contained in the $300 million credit facility and standard events of default such as covenant default and cross-default.

At June 30, 2007, outstanding letters of credit, or similar financial instruments that reduce the amount available under the European credit facility totaled $0.4 million.

Compliance and Availability

We are in compliance with all covenants or other requirements set forth in our credit facilities. However, if we fail to be in compliance with the financial or other covenants of our credit agreements, then the credit agreements could be terminated, any outstanding borrowings under the agreements could be accelerated and immediately due and we could have difficulty renewing or obtaining credit facilities in the future.

As of June 30, 2007, the aggregate availability of funds under our credit facilities was approximately $290.7 million, after deducting outstanding letters of credit. Availability is subject to the satisfaction of various covenants and conditions to borrowing. We currently do not have any borrowings under these facilities.

Credit Ratings

As of June 30, 2007, we had investment grade credit ratings from Standard & Poor’s, Moody’s Investor Service and Fitch Ratings on our senior unsecured debt. Should these credit ratings drop, repayment under our credit facilities and securities will not be accelerated; however, our credit costs may increase. Similarly, if our credit ratings improve, we could potentially have a decrease in our credit costs. The maturity of any of our debt securities does not accelerate in the event of a credit downgrade.

Debt Securities

Thomas & Betts had the following senior unsecured debt securities outstanding as of June 30, 2007:

Issue Date

Amount

Interest Rate

Interest Payable

Maturity Date

May 1998

115 million

6.63

May 1 and November 1

May 2008

February 1999

150 million

6.39

March 1 and September 1

February 2009

May 2003

125 million

7.25

June 1 and December 1

June 2013

The indentures underlying the unsecured debt securities contain standard covenants such as restrictions on mergers, liens on certain property, sale-leaseback of certain property and funded debt for certain subsidiaries. The indentures also include standard events of default such as covenant

default and cross-acceleration. We are in compliance with all covenants and other requirements set forth in the indentures.

Other

The Corporation does not currently pay cash dividends. Future decisions concerning the payment of cash dividends on the common stock will depend upon our results of operations, financial condition, capital expenditure plans and other factors that the Board of Directors may consider relevant.

We currently fund expenditures for capital requirements as well as other liquidity needs from a combination of cash generated from operations and existing cash balances. We used existing cash balances to fund the previously mentioned July acquisitions that had total purchase prices of approximately $300 million.

Going forward, we have the flexibility to meet our liquidity needs with a combination of cash generated from operations and existing cash balances, the use of our credit facilities, plus issuances of debt or equity securities. From time to time, we may access the public capital markets if terms, rates and timing are acceptable. We have an effective shelf registration statement that will permit us to issue an aggregate of $325 million of senior unsecured debt securities, common stock and preferred stock.

Off-Balance Sheet Arrangements

As of June 30, 2007, we did not have any off-balance sheet arrangements.

Refer to Note 10 in the Notes to Consolidated Financial Statements for information regarding our guarantee and indemnification arrangements.


Item 3.	*Quantitative and Qualitative Disclosures About Market Risk*

Market Risk and Financial Instruments

Thomas & Betts could be exposed to market risk from future changes in interest rates, raw material prices and foreign exchange rates. At times, we may enter into various derivative instruments to manage certain of these risks. We do not enter into derivative instruments for speculative or trading purposes. We currently do not have any derivative instruments outstanding.

For the period ended June 30, 2007, the Corporation has not experienced any material changes since December 31, 2006 in market risk that affect the quantitative and qualitative disclosures presented in our 2006 Annual Report onForm 10-K.


Item 4.	*Controls and Procedures*


(a)	Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to the Company is made known to the Chief Executive Officer and Chief Financial Officer who certify the Company’s financial reports.

Our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures as of the end of the period covered by this report and they have concluded that, as of this date, these controls and procedures are effective to ensure that the information required to be disclosed under the Securities Exchange Act of 1934 is disclosed within the time periods specified by SEC rules.


(b)	Changes in Internal Control over Financial Reporting

There have been no significant changes in internal control over financial reporting that occurred during the second quarter of 2007 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	*Legal Proceedings*

See Note 10, “Contingencies,” in the Notes to Consolidated Financial Statements, which is incorporated herein by reference. See also Item 3. “Legal Proceedings,” in the Corporation’s 2006 Annual Report onForm 10-K, which is incorporated herein by reference.


Item 1A.	*Risk Factors*

There are many factors that could pose a material risk to the Corporation’s business, its operating results and financial condition and its ability to execute its business plan, some of which are beyond our control. There have been no material changes from the risk factors as previously set forth in our 2006 Annual Report onForm 10-K under Item 1A. “Risk Factors,” which is incorporated herein by reference.


Item 2.	*Purchases of Equity Securities by the Issuer and Affiliated Purchasers*

Issuer Purchases of Equity Securities


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

July 2006 Plan
May 15, 2007 to May 31, 2007		500,000	$	56.26		500,000		—

Total for the quarter ended June 30, 2007		500,000	$	56.26		500,000		—

March 2007 Plan
May 31, 2007		700	$	57.89		700		2,999,300
June 7, 2007 to June 8, 2007		200,000	$	56.12		200,000		2,799,300

Total for the quarter ended June 30, 2007		200,700	$	56.13		200,700		2,799,300


Item 4.	*Submission of Matters to a Vote of Security Holders*

The matters which were voted upon at the Registrant’s Annual Meeting of Shareholders held May 2, 2007, and the results of the voting are set forth below.


1.	Nominees for Director	For		Withheld

	Ernest H. Drew		53,053,040		765,248
	Jeananne K. Hauswald		53,111,537		706,751
	Dean Jernigan		53,301,003		517,285
	Ronald B. Kalich, Sr.		53,300,427		517,861
	Kenneth R. Masterson		53,108,428		709,860
	Dominic J. Pileggi		53,043,917		774,371
	Jean-Paul Richard		53,101,947		716,341
	Kevin L. Roberg		53,284,049		534,239
	David D. Stevens		52,205,236		1,613,052
	William H. Waltrip		53,098,222		720,066


Item 6.	*Exhibits*

The Exhibit Index that follows the signature page of this Report is incorporated herein by reference.

SIGNATURE

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

Thomas & Betts Corporation

(Registrant)


	By:	/s/ Kenneth W. Fluke

Kenneth W. Fluke

Senior Vice President and

Chief Financial Officer

(principal financial officer)

Date: August 7, 2007

EXHIBIT INDEX


Exhibit No.			Description of Exhibit

	10	.1†	Approval of Incentive Payments (Incorporated by reference to Item 1.01 of the Current Report onForm 8-K dated February 6, 2007).
	10	.2	Purchase and Sale Agreement dated as of July 25, 2007, between the Corporation as Purchaser and Joslyn Holding Company, Danaher UK Industries Limited, and Joslyn Canada as Sellers (Incorporated by reference to Item 2.01 of the Current Report on Form 8-K dated July 25, 2007).
	12		Statement re Computation of Ratio of Earnings to Fixed Charges
	31	.1	Certification of Principal Executive Officer Under Securities Exchange ActRules 13a-14(a) or 15d-14(a)
	31	.2	Certification of Principal Financial Officer Under Securities Exchange ActRules 13a-14(a) or 15d-14(a)
	32	.1	Certification of Principal Executive Officer Pursuant toRule 13a-14(b) orRule 15d-14(b) of the Securities Exchange Act of 1934 and furnished solely pursuant to 18 U.S.C. § 1350 and not filed as part of the Report or as a separate disclosure document.
	32	.2	Certification of Principal Financial Officer Pursuant toRule 13a-14(b) orRule 15d-14(b) of the Securities Exchange Act of 1934 and furnished solely pursuant to 18 U.S.C. § 1350 and not filed as part of the Report or as a separate disclosure document.


†		Management contract or compensatory plan or arrangement.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg

For the proposal to ratify the appointment of KPMG LLP as the independent registered public accounting firm, received:

Abstentions

Broker non-votes