Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On November 5, 2007, Thomas & Betts Corporation, a Tennessee corporation (the “Corporation”), announced the completion of the merger of The Lamson & Sessions Co. (“Lamson & Sessions” or “LMS”), an Ohio corporation, and its wholly owned subsidiary T&B Acquisition II Corp. (the “Merger”), pursuant to an Agreement and Plan of Merger dated as of August 15, 2007 (the “Merger Agreement”). As a result of the Merger, Lamson & Sessions became the surviving wholly owned subsidiary of the Corporation.
Under the terms of the Merger Agreement, each share of Lamson & Sessions common stock outstanding at the effective time of the Merger was converted into the right to receive $27.00 as Merger consideration. The total consideration paid, which was obtained by the Corporation through bank financing, was approximately $450 million.
Lamson & Sessions also declared a special dividend of $0.30 per share payable upon the closing of the Merger. Holders of each share of Lamson & Sessions common stock received the special dividend with the Merger consideration.
The unaudited pro forma condensed consolidated financial statements have been derived from historical financial statements of Thomas & Betts Corporation and from historical financial statements of Lamson & Sessions and adjust such information to give effect to the merger in accordance with the purchase method of accounting and other planned transactions.
The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2006 and six months ended June 30, 2007 assume that the merger occurred as of January 1, 2006. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2007 assumes the merger occurred on that date.
The unaudited pro forma information is not necessarily indicative of the results which would have actually occurred had the merger been in effect on the dates or for the periods indicated or which may occur in the future. The unaudited pro forma information should be read in conjunction with the notes thereto and the historical financial information of Thomas & Betts Corporation and Lamson & Sessions Co. The unaudited pro forma financial statements include preliminary estimates and assumptions which the Corporation’s management believes are reasonable. There may be further adjustments to these preliminary estimates for up to one year from the acquisition date.
THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2007
(In thousands)
(Unaudited)
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2007
(In thousands)
(Unaudited)
(l) | ||||||||||||||||||||
Planned | ||||||||||||||||||||
Disposition of | ||||||||||||||||||||
Historical | Discontinued | (a) | ||||||||||||||||||
Thomas & Betts | Lamson & | Pro Forma | Operations | Pro Forma | ||||||||||||||||
Corporation | Sessions Co. | Adjustments | of LMS | Combined | ||||||||||||||||
(“LMS”) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and marketable securities | $ | 338,391 | $ | 2,305 | $ | — | $ | — | $ | 340,696 | ||||||||||
Receivables, net | 261,946 | 76,246 | — | (36,580 | ) | 301,612 | ||||||||||||||
Inventories | 226,247 | 56,683 | 1,000 | (g) | (31,182 | ) | 252,748 | |||||||||||||
Other current assets | 66,371 | 10,712 | — | (2,158 | ) | 74,925 | ||||||||||||||
Assets of discontinued operations | — | — | — | 124,295 | 124,295 | |||||||||||||||
Total current assets | 892,955 | 145,946 | 1,000 | 54,375 | 1,094,276 | |||||||||||||||
Net property, plant and equipment | 264,321 | 52,513 | 28,000 | (c) | (54,375 | ) | 290,459 | |||||||||||||
Goodwill | 498,396 | 21,402 | 108,343 | (d) | — | 628,141 | ||||||||||||||
Other intangible assets | 16,325 | — | 200,000 | (d) | — | 216,325 | ||||||||||||||
Investments in unconsolidated companies | 115,178 | — | — | — | 115,178 | |||||||||||||||
Other assets | 73,783 | 22,520 | — | — | 96,303 | |||||||||||||||
Total assets | $ | 1,860,958 | $ | 242,381 | $ | 337,343 | $ | — | $ | 2,440,682 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current maturities of long-term debt | $ | 115,537 | $ | 15,104 | $ | — | $ | — | $ | 130,641 | ||||||||||
Accounts payable | 163,081 | 32,127 | — | (17,579 | ) | 177,629 | ||||||||||||||
Accrued liabilities | 111,421 | 27,159 | 26,000 | (i)(f) | (8,006 | ) | 156,574 | |||||||||||||
Liabilities of discontinued operations | — | — | — | 29,185 | 29,185 | |||||||||||||||
Total current liabilities | 390,039 | 74,390 | 26,000 | 3,600 | 494,029 | |||||||||||||||
Long-term debt | 272,359 | 6,870 | 454,000 | (e) | (3,600 | ) | 729,629 | |||||||||||||
Other long-term liabilities | 120,529 | 17,464 | 1,000 | (j) | — | 138,993 | ||||||||||||||
Shareholders’ equity | 1,078,031 | 143,657 | (143,657 | )(h) | — | 1,078,031 | ||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,860,958 | $ | 242,381 | $ | 337,343 | $ | — | $ | 2,440,682 | ||||||||||
See notes to unaudited pro forma financial information.
THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2006
(In thousands, except per share data)
(Unaudited)
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2006
(In thousands, except per share data)
(Unaudited)
(l) | ||||||||||||||||||||
Planned | ||||||||||||||||||||
Disposition of | ||||||||||||||||||||
Historical | Discontinued | (a) | ||||||||||||||||||
Thomas & Betts | Lamson & | Pro Forma | Operations | Pro Forma | ||||||||||||||||
Corporation | Sessions Co. | Adjustments | of LMS | Combined | ||||||||||||||||
(“LMS”) | ||||||||||||||||||||
Net sales | $ | 1,868,689 | $ | 561,270 | $ | — | (b) | $ | (299,935 | ) | $ | 2,130,024 | ||||||||
(21,677 | )(k) | |||||||||||||||||||
Cost of sales | 1,299,299 | 438,092 | (1,000 | )(c) | (246,908 | ) | 1,467,806 | |||||||||||||
Gross profit | 569,390 | 123,178 | 22,677 | (53,027 | ) | 662,218 | ||||||||||||||
Gross profit — % of net sales | 30.5 | % | 21.9 | % | 17.7 | % | 31.1 | % | ||||||||||||
21,677 | (k) | |||||||||||||||||||
Selling, general and administrative | 323,577 | 57,069 | 14,000 | (d) | (22,139 | ) | 394,184 | |||||||||||||
Earnings from operations | 245,813 | 66,109 | (13,000 | ) | (30,888 | ) | 268,034 | |||||||||||||
Earnings from operations — % of net sales | 13.2 | % | 11.8 | % | 10.3 | % | 12.6 | % | ||||||||||||
Interest expense, net | (14,840 | ) | (4,070 | ) | (22,700 | )(e) | 144 | (41,466 | ) | |||||||||||
Other (expense) income, net | 2,469 | — | — | — | 2,469 | |||||||||||||||
Earnings before income taxes | 233,442 | 62,039 | (35,700 | ) | (30,744 | ) | 229,037 | |||||||||||||
Income tax provision (benefit) | 58,312 | 22,896 | (13,566 | )(f) | (11,683 | ) | 55,959 | |||||||||||||
�� | ||||||||||||||||||||
Earnings from continuing operations | $ | 175,130 | $ | 39,143 | $ | (22,134 | ) | $ | (19,061 | ) | $ | 173,078 | ||||||||
Earnings from continuing operations per share: | ||||||||||||||||||||
Basic | $ | 2.90 | $ | 2.86 | ||||||||||||||||
Diluted | $ | 2.85 | $ | 2.82 | ||||||||||||||||
Average shares outstanding: | ||||||||||||||||||||
Basic | 60,434 | 60,434 | ||||||||||||||||||
Diluted | 61,447 | 61,447 |
See notes to unaudited pro forma financial information.
THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 2007
(In thousands, except per share data)
(Unaudited)
Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 2007
(In thousands, except per share data)
(Unaudited)
(l) | ||||||||||||||||||||
Planned | ||||||||||||||||||||
Disposition of | ||||||||||||||||||||
Historical | Discontinued | (a) | ||||||||||||||||||
Thomas & Betts | Lamson & | Pro Forma | Operations | Pro Forma | ||||||||||||||||
Corporation | Sessions Co. | Adjustments | of LMS | Combined | ||||||||||||||||
(“LMS”) | ||||||||||||||||||||
Net sales | $ | 981,790 | $ | 254,119 | $ | — | (b) | $ | (118,593 | ) | $ | 1,117,316 | ||||||||
(11,818 | )(k) | |||||||||||||||||||
Cost of sales | 682,361 | 202,306 | (500 | )(c) | (107,662 | ) | 764,687 | |||||||||||||
Gross profit | 299,429 | 51,813 | 12,318 | (10,931 | ) | 352,629 | ||||||||||||||
Gross profit — % of net sales | 30.5 | % | 20.4 | % | 9.2 | % | 31.6 | % | ||||||||||||
11,818 | (k) | |||||||||||||||||||
Selling, general and administrative | 171,861 | 28,467 | 7,000 | (d) | (10,361 | ) | 208,785 | |||||||||||||
Earnings from operations | 127,568 | 23,346 | (6,500 | ) | (570 | ) | 143,844 | |||||||||||||
Earnings from operations — % of net sales | 13.0 | % | 9.2 | % | 0.5 | % | 12.9 | % | ||||||||||||
Interest expense, net | (6,997 | ) | (1,237 | ) | (11,350 | )(e) | 74 | (19,510 | ) | |||||||||||
Other (expense) income, net | 723 | — | — | — | 723 | |||||||||||||||
Earnings before income taxes | 121,294 | 22,109 | (17,850 | ) | (496 | ) | 125,057 | |||||||||||||
Income tax provision (benefit) | 37,601 | 8,306 | (6,783 | )(f) | (188 | ) | 38,936 | |||||||||||||
Earnings from continuing operations | $ | 83,693 | $ | 13,803 | $ | (11,067 | ) | $ | (308 | ) | $ | 86,121 | ||||||||
Earnings from continuing operations per share: | ||||||||||||||||||||
Basic | $ | 1.44 | $ | 1.48 | ||||||||||||||||
Diluted | $ | 1.42 | $ | 1.46 | ||||||||||||||||
Average shares outstanding: | ||||||||||||||||||||
Basic | 58,191 | 58,191 | ||||||||||||||||||
Diluted | 58,980 | 58,980 |
See notes to unaudited pro forma financial information.
THOMAS & BETTS CORPORATION AND SUBSIDIARIES
Notes to Pro Forma Financial Information
(Unaudited)
Notes to Pro Forma Financial Information
(Unaudited)
Note (a): | The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2006 and the six months ended June 30, 2007 assume that the merger occurred as of January 1, 2006. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2007 assumes the merger occurred on that date. | |
The purchase price and purchase price allocation are summarized as follows: |
(in millions) | ||||
Purchase price paid | $ | 454 | ||
Allocated to: | ||||
Historical book value of assets and liabilities of LMS as of June 30, 2007 | $ | 122 | ||
Adjustments to: | ||||
Inventory | 1 | |||
Property, plant and equipment | 28 | |||
Pension and other postretirement benefit plans | (1 | ) | ||
Deferred income tax liabilities | (1 | ) | ||
Restructuring accrued liabilities | (25 | ) | ||
Fair value of tangible net assets acquired | 124 | |||
Identifiable intangibles | 200 | |||
Excess purchase price over allocation to identifiable assets and liabilities (goodwill) | $ | 130 | ||
Note (b): | There were no material transactions between Thomas & Betts Corporation (the “Corporation”) and Lamson & Sessions Co. (“LMS”) during the year ended December 31, 2006, during the six months ended June 30, 2007 or as of June 30, 2007. |
Note (c): | Reflects preliminary estimate of fair value for property, plant and equipment and the related impact on depreciation expense using straight-line lives of 1 to 13 years. The final purchase price allocation may result in different allocations for property, plant and equipment and different depreciation expense than that presented in these unaudited pro forma financial statements. |
Note (d): | For purposes of the unaudited pro forma financial information, the excess of the purchase price over the LMS book value of net assets acquired has been recorded as goodwill and other intangible assets. The unaudited pro forma financial statements reflect a preliminary allocation to other intangible assets. The final purchase price allocation may result in different allocations for other intangible assets and different amortization expense than that presented in these unaudited pro forma financial statements. Other intangible assets are assumed to consist of both infinite lived intangibles (trade/brand names) and amortizing intangibles of approximately $130 million (primarily customer relations with an estimated life of 12 years). For each amortizable intangible asset, we use a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed. If that pattern cannot be reliably determined, we use a straight-line amortization method. Amortization expense over the 5-year period following the acquisition is estimated to be approximately $67 million. No in-process research and development assets associated with the transaction were identified. |
Note (e): | Merger consideration paid was approximately $450 million in cash. The Corporation obtained the merger consideration paid through bank financing. Interest expense, net reflects increased interest expense from the acquisition based on an interest rate of approximately 5%, which was in effect as of the November 5, 2007 acquisition date. A substantial portion of the acquisition financing has a fixed rate of interest resulting from the impact of an interest rate swap. A change of 1/8% in interest rate would result in a change in interest expense and net income of $0.6 million and $0.4 million, respectively, for the year ended December 31, 2006 and $0.3 million and $0.2 million, respectively, for the six months ended June 30, 2007. |
Note (f): | Income tax adjustment reflects a 38% domestic statutory rate applicable to the pro forma adjustments. |
Note (g): | Reflects preliminary estimate of purchase accounting method inventory valuation. No first-in, first-out charges have been reflected in the pro forma statements of operations for this valuation step-up. |
Note (h): | Eliminates accounts associated with prior ownership. |
Note (i): | Reflects preliminary estimate of restructuring accruals which include primarily cash costs associated with terminating employees and to eliminate duplicate facilities of LMS. The final purchase price allocation may reflect additional restructuring accruals. |
Note (j): | Reflects preliminary estimate of fair value for pension and other postretirement benefit plans. |
Note (k): | Reflects reclassification of certain LMS costs to conform to the reporting practices of the Corporation. |
Note (l): | Reflects elimination of discontinued operations in the statements of operations and reclassification in the balance sheet to assets/liabilities held-for-sale for the planned disposition of the plastic pipe extrusion business of LMS. |